AIIB pivotal in promoting Asia-Pacific connectivity

TOKYO - The Asian Infrastructure Investment Bank (AIIB) that is scheduled to start operations in January is expected to fund its first batch of projects in as early as the second quarter next year, fulfilling its commitment to supporting Asia's infrastructure development and connectivity.

As the AIIB and the Asia-Pacific Economic Cooperation (APEC) share a similar goal to enhance connectivity and improve regional infrastructure development, there's no reason why the two multilateral frameworks should not work together to contribute to regional prosperity. Some major regional economies also value the benefits to be gained from membership in both entities.

Huge shortfall in regional infrastructure development funds

Kate Carnell AO, CEO of the Australian Chamber of Commerce and Industry, has highlighted the importance of infrastructure development for boosting growth in Asia, which is home to a number of emerging economies with a large appetite for new infrastructure. Asia's combined economy accounts for one third of the global GDP, making it the most dynamic economy with a large growth potential.

"If Asia is to realize its potential as a major driver of global economic growth in the coming decades, it will need to build trillions of dollars in new infrastructure," she said in a recent editorial published by the Australian Institute of International Affairs.

According to World Bank President Jim Yong Kim, however, the vast majority of a trillion U.S. dollars of infrastructure spending a year goes to developed countries, rather than emerging markets. Meanwhile, the Asian Development Bank (ADB) estimated that the financial deficit in infrastructure building in Asia would hit 800 billion U.S. dollars per year from 2010 to 2020.

Analysts here believe gaps in infrastructure may lead to disparity in the amount of outside investment regional countries receive.

Laurent Sinclair, a Pacific affairs research analyst, told Xinhua that the region will see uneven infrastructure development as such development is largely based on technical know-how and, perhaps most importantly, foreign investment.

"As the returns on investment are based on projects for a certain country' s economic future over another' s, this has created a hierarchy in the region, based on growth projections," he said, highlighting the link between infrastructure development and foreign investment.

Time for aiib to lend a hand

As the existing multilateral development banks (MDB) like the World Bank or the ADB can not meet the needs of the prodigious market for infrastructure development in Asia, the AIIB provides a new source of funding for the projects pursued by regional countries.

The AIIB "will complement and cooperate with the existing MDBs to jointly address the daunting infrastructure needs in Asia," the new bank said on its official website, noting that it "is built on the lessons and experience of existing MDBs and the private sector."

The AIIB's President-designate Jin Liqun said the bank will absorb the development experience from various countries and regions, especially China's experience.