AIIB

Asian Infrastructure Investment Bank (AIIB)

Founding members ink agreement on AIIB

02/09/2015

• India along with 49 Prospective Founding Members (PFMs) signed the Articles of Agreement for the formation of the Asian Infrastructure Investment Bank (AIIB).
• The remaining seven founding members can sign the agreement till December 2015.

About AIIB

• Proposed international financial institution.
• The Bank, will be headquartered in Beijing.
• Will have an initial authorised capital stock of $100 billion.

When will it be operational

• The bank starts operation after the agreement enters into force, which requires 10 ratifications.
• Focus
• The AIIB is expected to focus on the infrastructure development in Asia-Pacific.

Regional domination

• Reflecting regional character of the Bank, its regional members will be the majority shareholders, holding approximately 75 percent of shares.

Prospective Founding Members

• Total 57 countries: 37 regional and 20 non-regional members.
• Countries with a large GDP that did not become PFM are the US, Japan (which dominated the ADB) and Canada.

How will one become a founding member

• The first eight countries to ratify the agreement will become the founding members.
• As of July 2015, 1 state (Myanmar) has ratified the agreement, formally becoming a founding member.

UN welcomes AIIB initiative

• The United Nations has addressed the launch of AIIB as "scaling up financing for sustainable development" for the concern of Global Economic Governance.

Shareholding Structure

• The shares are based on the size of each member country's economy.
• The number of shares determines the fraction of autorized capital in the bank.
• China has 20.06 percent of the voting share and India 7.5 percent.
• Russia has the third largest stake with 5.92 percent.

Will it be AIIB vs NDB or AIIB and NDB

• The China-led Asian Infrastructure Investment Bank (AIIB) and BRICS New Development Bank (NDB).
• NDb is intended to complement the World Bank and fund infrastructure projects within the group, while the pool would protect BRICS from currency volatility.

Criticism

• As the proposed bank has no management or approved loans, it has no environmental record.
• Several organizations have however expressed their concerns over environmental policy of the proposed bank because of the high stake of China in the bank's business.

How is it different from IMF or WB or ADB

• Unlike the existing International Monetary Fund (IMF), ADB and World Bank, AIIB is unlikely to restrict lending on political considerations.
• In WB, IMF and ADB, developed countries like USA, some European countries and Japan weild excessive power (Petty Zamindars). This excessive power is often misused to dominate the international financial scenario.
• They casuse a lot of trouble to poor nations which are in desperate need for capital.
• Neo imperialism: Powerful countries take advantage of these institutions to economically subjugate poor nations. They force the poor nations to take up reforms that facilitate them to gain undue advantage and influence over the laters economy.

About Unknown

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