From Drawing Board to Reality: The First Four Years of Operations at the Asian Infrastructure Investment Bank and New Development Bank

Abstract

The Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB) launched operations at the start of 2016. This study assesses their performance in four areas: membership and governance, project operations, environmental and social sustainability and finances. Both banks have quickly designed operational policies and administrative procedures, begun building their staff expertise and successfully ramped up operational financing. At the same time, AIIB and NDB are charting different paths. The AIIB is, in many ways, following the template of the existing major MDBs, although with a more streamlined, “borrower-friendly” approach and an emphasis on private sector engagement. China is the dominant shareholder and has been joined by 75 member countries from around the world by end-2019, including five of the G7 nations. NDB, on the other hand, is controlled equally by the five “BRICS” nations and thus far has no other members. NDB policies are closely aligned with borrower country views, including use of national systems to address environmental and social risks, a highly streamlined project review process and a focus on engaging with government borrowers rather than the private sector. AIIB appears better positioned financially with a AAA international bond rating, although NDB’s access to China’s growing capital market and focus on local currency lending could be beneficial to borrowers. Both banks show considerable promise in supporting sustainable infrastructure, but with significant gaps in definitions and firm commitments. A series of institutional reform options can help AIIB and NDB to better achieve the goals of their shareholders in the coming years.