Asian Infrastructure Investment Bank - AIIB


 
 
Concept Explanation
 

Asian Infrastructure Investment Bank - AIIB

ASIAN INFRASTRUCTURE INVESTMENT BANK

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that aims to support the building of infrastructure in the Asia-Pacific region. The bank currently has 56 member states while another 24 are prospective members for a total of 80 approved members, and was proposed as an initiative by the government of China. The bank started operations after the agreement entered into force on 25 December 2015, after ratifications were received from 10 member states holding a total of 50 % of the initial subscriptions of the Authorised Capital Stock. Major economies that are not members include Japan and the United States.

The United Nations has addressed the launch of AIIB as having potential for "scaling up financing for sustainable development" for the concern of global economic governance. The capital of the bank is $100 billion, equivalent to two-thirds of the capital of the Asian Development Bank and about half that of the World Bank.The bank was proposed by China in 2013 and the initiative was launched at a ceremony in Beijing in October 2014.Need for Development of AIIIB:

(a) Western dominance:The presence of western dominance in the IMF, the World Bank and the Asian Development Bank (ADB) has been considered as the major factor behind formation of AIIB. It is a set norm that the  president of WB will be a person chosen by the US, whereas the IMF chief would be a European.

(b) Lack of reform in IMF and World Bank:This means that there is no reflection of current economic situation in the quota politics that dominates economics. The World Bank violated its Articles of Agreement in denying India fresh loans after India tested nuclear weapons in May 1998, As per its Articles, political issues should not influcnce its decisions.

(c) Huge demand of infrastructure fund in Asia:According to report by ADB, till 2020 Asia needs $800 billion per annum  for infrastructure projects.

Global Impact of the Initiative:(a) It will catalyse the reforms in global financial institutions as more competition among these banks will catalyse the long awaited reform in Bretton wood twins.(b) According to ADB, Asia needs $8oo billion of investment every year. AIIB can play a significant role in providing funding for it.(c) Economic and political power may shift to Asia as key European members and allies of the USA have joined the Bank.

Relevance for India:(a) India is a founding member of the AIIB and is expected to have the second-largest shareholding after China.(b) Establishment of the AIIB will help India and other signatory countries to raise and avail resources for their infrastructure and sustainable development projects.

It is expected that with membership in AIIB, India would be able to raise and obtain more resources for much needed infrastructure development. As per 12th FYP, India needs $1 trn for infrastructure funding:thus, India can leverage its membership in AIIB to avail cheap loan

Sample Questions
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Question : 1

AIIB stands for which of the following?

Right Option : D
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