The inaugural meeting of the Asian Infrastructure Investment Bank's (AIIB) Board of Governors was held on Saturday and Sunday in Beijing. Thirty governors, representing the institutions that supplied more than 74 percent of the AIIB's allocated capital, attended the meeting. Jin Liqun was elected as the first AIIB president, and the bank was declared open for business. At his first press conference as the bank's president on Sunday, Jin highlighted the AIIB's core values and innovative governance. Unlike other multilateral development banks (MDBs), the AIIB pledges to be lean, clean and green. While introducing new operating mechanism, the bank is expected to come up with more precise ideas about how to work with different sectors to improve its lending business in the future.

Jin Liqun, founding president of the Asian Infrastructure Investment Bank, speaks to journalists at a press conference in Beijing on Sunday. Photo: CFP

It was a jam-packed weekend for the founding members of the Asian Infrastructure Investment Bank (AIIB), which opened for business on Saturday.

At a registration desk at the Westin Hotel in Beijing's Xicheng district, staff members were busy welcoming representatives from all over the world who came to witness the opening of a new, China-initiated multilateral development bank (MDB).

Mohammad Ishaq Dar, Pakistan's Minister of Finance, was one of them. After arriving in Beijing on Friday, Dar spent time attending meetings with officials from different banking and financing institutions, and with the AIIB's board of governors.

Dar said he was pleased to see the AIIB become a reality.

The bank will play a complementary role with the aim of bridging the gap between money supply and the need for infrastructure projects in Asia, Dar told the Global Times on the eve of the AIIB's opening ceremony.

Other officials from foreign governments and financial institutions had a lot nice things to say about the AIIB.

 "I am proud to welcome the start of a new 21st century multilateral institution on behalf of New Zealand," Gabriel Makhlouf, New Zealand's Treasury Secretary, was quoted in an announcement published on the New Zealand government's website on Monday.

And there are large opportunities to make a real difference in the lives of people in the Asian region, he said.

Suma Chakrabarti, president of the European Bank for Reconstruction and Development, said on social media that he is looking forward to working with the AIIB in the future.

As the first MDB that will primarily focus on infrastructure development in Asia, the AIIB will follow three core principles: to be lean, clean and green, Jin Liqun, the bank's president, said at a press conference in Beijing on Sunday.

And the bank will play a complementary role and cooperate with other existing MDBs, Jin said.

"We have been working closely with the members of the AIIB and the Multilateral Secretariat by sharing our policies and guidelines, particularly on issues such as the environment and social safeguards, and procurement, and even a number of administrative issues," the Asian Development Bank (ADB) spokesperson said in an e-mail sent to the Global Times on Monday.

Focused on infrastructure

The AIIB initiative was announced during respective visits by Chinese President Xi Jinping and Premier Li Keqing to Southeast Asia in October 2013. The bank was envisioned as an institution to promote connectivity and economic integration in the region.

By 2030, $60 trillion to $70 trillion of additional infrastructure capacity will be needed around the world, but under current conditions only $45 trillion would be built, with most of the shortfall in Asia, according to a report published by financial service provider HSBC Global Connections in October 2015.

Sound infrastructure development is a "foundation for robust economic growth" and infrastructure investment is also important for the reduction of poverty, Jin said at a press conference on Sunday.

He also noted that all 57 prospective founding members have signed the AIIB's Articles of Agreement (AOA), which took effect on December 25, 2015. About 30 have ratified the agreement, representing more than 74 percent of the total stake in the AIIB.

With $29.78 billion as the capital subscription, China holds 297,804 shares in the AIIB, which makes it the bank's largest shareholder, according to the AOA published on the bank's website.

China has never pursued predominant voting power, nor the largest stake in the AIIB, said Zhou Qiangwu, chief executive of the Asia-Pacific Finance and Development Center, a think tank under China's Ministry of Finance.

"China is ready to be diluted in its shares when new members joining the bank in the future," Zhou told the Global Times on Monday.

Innovative ways

The bank will have a "division of power and responsibility between its board and its members," Jin said at the press conference.

The board will exercise oversight of the AIIB's members, and a special unit will be set up to report directly to the board.

The AIIB has a board of governors, a board of directors, a president and one or more vice presidents. Each member country is represented on the board of governors. The board of directors is responsible for the direction of the AIIB's general operations, while exercising all the powers delegated to them by the board of governors.

However, the AIIB, unlike other MDBs, has a non-resident board of directors, which will save on "operating costs," Zhou said, noting that the special unit set in the AIIB will keep the board informed about the bank's daily operations.

Existing MDBs have been influenced by developed countries in decision-making processes such as selecting and evaluating projects, said Zhang Jianping, a research fellow at an institute under the National Development and Reform Commission.

"The AIIB is likely to better understand the infrastructure needs of developing countries with more targeted projects," Zhang told the Global Times on Monday.

The AIIB will offer US dollar-denominated loans totaling $10 billion to $15 billion over the next five or six years. The first batch of projects will be launched in the second quarter of 2016, and the lending will reach $1.5 billion to $2 billion.

The AIIB is going to set up a benchmark for its project selection, and it will learn from the experiences of other MDBs, such as the World Bank and the ADB, Zhang said.

The bank will carry out its operations in different ways, such as making loans, co-financing loans, guaranteeing loans and investing funds in the equity capital of an institution, according to the bank's AOA.

"The AIIB needs to figure out more efficient ways of tapping into private capital in the Asian region," Zhang said.
Newspaper headline: Banking on innovation