The proposed Asian Infrastructure and Investment Bank (AIIB) – to be opened with major share of China – has the potential to stimulate growth in emerging Asia and boost lingering global recovery.
This was stated by Pak-China Joint Chamber of Commerce and Industry (PCJCCI) President Shah Faisal Afridi, adding that the new bank would provide rich resource capital base for infrastructure financing, which is good for regional development.
“It will help bridge infrastructure deficit by playing a complementary role along with other financial institutions like the Asian Development Bank and International Monetary Fund and work for good governance in Asia,” he added.
Afridi said the idea of the AIIB was put forward more than a year ago and was not meant to undermine either the World Bank or the ADB but to take an initiative for sustained growth in emerging Asia.
Left purely at the hands of World Bank and the ADB, the populous nations of emerging Asia would not be able to compete with industrialised nations. However, the proposed AIIB could stimulate their growth in a decade, he maintained. The World Bank can lend around $50 billion per year, which barely covers the annual financing gap of a single country.
“The new multilateral institution would help fund infrastructure projects in Asia,” Afridi said.
The PCJCCI president said South Asia needed to spend $2.5 trillion on infrastructure by 2020 to bring its power grids, roads and water supplies up to the standard needed to serve its growing population.
While, Pakistan required investing up to 0.71% of its GDP in telecom every year, 1.23% of GDP in transport and 0.83% of GDP in irrigation but all that required financing which was higher than the country’s total tax revenues, he added.
Afridi appreciated the proposed strategy of the AIIB, which was a combination of investment in infrastructure stock and implementing reforms that would allow the South Asia region to close its infrastructure gap.
He said that China proposed doubling the registered capital of the bank from $50 billion to $100 billion, with half from Beijing and the rest from the other founding members.
Although Pakistan was not a contributing member, he said, in the sense that the country would not be contributing any funds to the bank’s capital base, it would be able to draw resources from the bank once it becomes operational.
This would give Pakistan an alternative to the World Bank and ADB that had been traditional partners for financing infrastructure initiatives here since the 1960s.
Published in The Express Tribune, October 28th, 2014.
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