China’s flagship international development bank is hoping to pave a new Silk Road, with at least three of its initial projects focused on transport arteries in central Asia and Pakistan.
The Asian Infrastructure Investment Bank will help fund a highway in Pakistan, a road project in Tajikistan, and a ring road in Almaty, Kazakhstan, according to people with knowledge of the projects and tender documents.
The AIIB was formally launched in January after attracting dozens of Asian and European member countries, many of them US allies that ignored Washington’s concerns about the emergence of a Chinese rival to the World Bank and Asian Development Bank.
In an effort to counter the Obama administration’s initial criticism, the AIIB has said it will enforce governance standards on a par with those at the World Bank and ADB. Last week Jin Liqun, AIIB president, and his World Bank counterpart signed a framework agreement to work together on co-finance projects. The AIIB expects to approve about $1.2bn in financing this year, including about a dozen projects with the World Bank that have not yet been announced.
The AIIB will also co-finance projects with the Washington and Tokyo-led ADB, the European Bank for Reconstruction and Development and the UK Department for International Development. Japan was the only major US ally to refuse Beijing’s invitation to join the AIIB.
In Pakistan the AIIB will join the ADB and Dfid in funding a 64km stretch of motorway connecting Shorkot to Khanewal, according to a tender document.
The ADB-led project’s terms were recently revised to allow the AIIB to participate. Under its guidelines, the AIIB can only fund projects open to companies from all countries, while the ADB restricts participation to bidders from its member nations.
However, the ADB will not relinquish its lead role. “ADB is the lead financing partner for the project and administers it on behalf of the other co-financiers,” the tender document said, adding that “bidding shall be carried out in accordance with ADB’s procurement guidelines and procedures”.
In Tajikistan, the AIIB will join the EBRD in helping fund a road in the country’s capital, Dushanbe. The third transport link that the AIIB is expected to help fund is the Bakad Ring Road, a joint World Bank-EBRD project in Kazakhstan’s commercial capital, Almaty.
All three projects will receive preliminary approval from the AIIB’s investment committee before the end of this month, according to two people familiar with the process, followed by a formal go-ahead from the bank’s board in June. The AIIB declined to comment.
By initially focusing on projects led by other international development banks, the AIIB can build up an investment portfolio far more quickly than would be possible if it acted on its own. Meanwhile, the World Bank, ADB and other international development banks can tap into the AIIB’s $100bn in capital while saving their own money for additional projects.
“The World Bank projects they are looking at are ones where AIIB can make a difference by helping with additional financing and increasing their scale,” said one person familiar with the two banks’ discussions.
“The World Bank can get more results from less money,” the person added. “The benefit for AIIB is having something to show and establishing a project portfolio that will help them get a better credit rating.”