The Asian Infrastructure Investment Bank or AIIB is exploring opportunities to fund projects in Bangladesh, encouraged by the country's keenness to be among the first borrowers of the newly established institution, its chief said yesterday.
Jin Liqun, president-designate of the China-led bank, said two experts, who are experienced in working in development support, would stay in Bangladesh for three more days to look at the potential projects that might be financed by the AIIB as soon as possible.
Asked whether Bangladesh has approached the AIIB for any specific project, he said: “We are working on it.”
Liqun is now in Dhaka to attend the Bangladesh Development Forum 2015 -- a two-day gathering of government high-ups and development partners at Bangabandhu International Conference Centre.
The former vice finance minister of China is aware of the huge pent-up demand for infrastructure in Bangladesh, which needs roads, bridges, railways, electricity and water supply.
“It is not possible for one or two development institutions and bilateral donors to meet all the needs. If some other institutions give you funds at a little bit higher cost you should take it because it is very important to complete these infrastructures projects as soon as possible, rather than waiting for concessional funding.”
Bangladesh is a too big an apple for the AIIB to bite, according to Liqun.
“We will certainly try our best. We will be cooperating with the World Bank, the Asian Development Bank, German development bank KfW and some of the Chinese development banks. We are also willing to work with the US and Japan. We are willing to work with anybody who will do a great job in your country.”
Bangladesh deserves support in case of developing institutional capability, he said.
However, with the economy's gradual growth, Bangladesh will not require such support and it is not far off, according to Liqun. By 2030, the country may even donate money to other poor countries, he said.
Liqun praised Bangladesh's robust economic growth in the last seven or eight years. “This is remarkable. The credit goes to the government who has provided strong leadership and also to your great people.”
He said he is certain Bangladesh would be a middle-income country by 2021 and a developed country by 2041.
Bangladesh is one of the 57 founding members of the Beijing-based bank when it was launched in the Chinese capital in June this year. The bank will, however, be formally inaugurated at the end of the year.
Liqun, who previously worked at the ADB, the China International Capital Corp and the China Investment Corp, said the AIIB would provide adequate support to all borrowing countries by treating all of them fairly.
Sceptics see the AIIB as China's bid to create a rival to the WB and the ADB. But Liqun said the new bank would complement the efforts of the Washington-based and the Manila-based lenders.
About the plan to roll out its lending programme, he said the bank's officials have already started to prepare a pipeline.
The bank will not provide any concessional lending. In terms of non-concessional lending, the lending charges will be -- more or less -- in line with the charges levied by the WB's the International Bank for Reconstruction and Develop-ment (IBRD) or the ADB's Ordinary Capital Resource (OCR).
The IBRD carries interest rates of LIBOR plus 1.35 percent and the OCR about 4.5 percent.
“Even though we do not give you the so-called concessional funding the terms and conditions are far more favourable than you can possibly get from the market,” he said, adding that the maturity period will be up to 30 years and the cost is much lower.
About the AIIB's focus on infrastructure, Liqun said the bank believes infrastructure investment is most important for sustainable development, which in turn reduces poverty.
From the experiences from Bangladesh, China and many other developing countries, the AIIB believes that infrastructure development is crucial for the region, he said.
The AIIB aims to be a lean institution, in terms of organisational structure, and will try to create only those positions which are absolutely necessary for smooth operations, he said.
A lean structure would help keep the red-tape to a minimum, allowing faster project approval processes and disbursement, he added.
“We believe efficient processing of the project will be very good for the client country.”
“On the other hand, we have to make sure that the bank is free from corruption and bureaucracy. We are designing the bank in such a way the bank will be very efficient.”
In the early years of operations, the bank will not open country offices in order to retain cost effectiveness, and decision-making will be centralised, he said.
With expansion in programmes it will gradually become necessary for the bank to put in place regional hubs for some countries, but it will not take too long to set up liaison offices and for them to coordinate with the headquarters, Liqun said.
The bank will also set up departments to balance the available resources for fair allocation across all countries, and an independent department will oversee allocations to make sure that no countries are neglected.
Liqun said professionals will monitor and assess the progress of each project's implementation, disbursement and procurement processes even if there is no country office.
However, it is very important for multilateral development banks not to be nannies and do micro-management, he added.
He said the AIIB would encourage project sponsors, local government agencies and communities to play a big role in implementing projects.
“If you keep people in the field it costs the borrowers and project sponsors a lot. It also looks like you do not trust these people and they cannot do the job without your nanny. I don't like that way.”
“If you do a good job we would minimise this checking on spot. I think we need to encourage project sponsors and owners to do their job on their own to the extent possible.”
There will however be post-implementation assessment to see whether development objectives were achieved, Liqun said.
He said there will be no over-lapping of lending activities with other development partners. “We need co-financing as infrastructure projects cost a huge amount of money normally.”
Co-financing will become the norm in the future, when all development partners try their best to promote infrastructure investment, he said.
Meanwhile, at a meeting with Liqun, Finance Minister AMA Muhith has sought financing from the AIIB for the government's large and transformative infrastructure projects.
“In such projects billions of dollars will be required which is difficult to finance from within the regular budget,” Muhith told reporters after the meeting with Liqun on the sidelines of the BDF conference.