China woos India with AIIB’S first-ever equity investment

The Asian Infrastructure Investment Bank (AIIB), a Chinese initiative that began operating last year, has approved its first equity investment: $150m to boost infrastructure projects in India.

The move is seen as a signal that the AIIB is about more than financing China’s ambitious One Belt, One Road global infrastructure strategy, which causes India concern.

At the same time the AIIB also announced a loan of $114m for a road scheme in the country of Georgia and a loan of $60m for a hydropower project in Tajikistan, for a total disbursement of $324m.

"Approving our first equity investment is another milestone for the Bank and will enhance our potential to source and fund high quality, private sector projects," DJ Pandian, the bank’s vice president and chief investment officer, said.

The bank added that the three projects "demonstrate a growing sophistication in our ability to support our member countries across different regions and sectors".

Wary of China’s growing influence in the region, India has been critical of its Belt and Road initiative, also referred to as the New Silk Road. By developing ports, airports, railways and power schemes, the initiative aims to expedite the flow of goods between China and Europe and the Americas. Its current flagship scheme is the multi-billion-dollar China-Pakistan Economic Corridor (CPEC) which cuts across disputed Kashmir.

India, a member of the AIIB, has countered by teaming up with Japan – another US ally that did not join the AIIB – to promote infrastructure projects of their own across Africa, Iran and southeast Asia.

But China seems keen to soothe its neighbour over its infrastructure diplomacy. On top of the equity investment, the bank announced that its third annual meeting of the board of governors would be held in Mumbai in June 2018.

"We appreciate the strong support provided by the Indian Government," said AIIB vice president & corporate secretary, Sir Danny Alexander, former chief secretary to the UK Treasury (2010-2015). "It’s fitting that we bring the meeting to India next year, where we can deeply engage with local business and draw on the infrastructure expertise that India can offer."

The $150m equity investment will go into the India Infrastructure Fund, which aims to invest in mid-cap infrastructure companies in India, and to expand the Bank’s equity and loan deal sourcing pipelines in the private sector. The AIIB says it will benefit local infrastructure development by enhancing private capital inflows from global long-term investors, such as public pension funds, endowments and insurance companies.

In Georgia, the $114m loan is for the Georgia Batumi Bypass Road Project, co-financed with the Asian Development Bank. The project sees a new, two lane road 14.3km long skirting the port city of Batumi.

The $60m loan is for the Tajikistan Nurek Hydropower Rehabilitation Project Phase I, co-financed with the World Bank. The project aims to rehabilitate and restore the generating capacity of three units of the Nurek hydropower plant, improve their efficiency and strengthen the safety of Nurek dam operations.

Headquartered in Beijing, AIIB started operating in January 2016 and has now grown to 80 approved members from around the world. Its mission is to improve economic and social development in Asia by investing in infrastructure projects.

Image: Indian Prime Minister Narendra Modi, left, and Chinese President Xi Jinping at the Shanghai Cooperation Organisation Council in June 2016 (Wikimedia Commons/Presidential Press and Information Office/ BY 4.0)

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