Chinese President Xi Jinping and Premier Li Keqiang announced the AIIB initiative during their respective visits to Southeast Asian countries in October 2013. The Bank was envisaged to promote interconnectivity and economic integration in the region and cooperate with existing multilateral development banks. October, 2014, 22 Asian countries signed a Memorandum of Understanding (MOU) to establish the AIIB and Beijing was selected to host Bank headquarters. Mr. Jin Liqun was appointed as the Secretary General of the Multilateral Interim Secretariat.
The AIIB didn’t attract much attention initially. For a period of time, the U.S. appeared to have put pressure on its allies not to join the bank, although President Obama went to great lengths to dismiss this notion in a joint press conference with Prime Minister Abe of Japan last month. Instead, President Obama stressed the U.S. concerns on the transparency in terms of how this multilateral lending institution is going to operate. Two months ago, heated discussions began when Britain, traditionally the closest ally of the United States, made the decision to join the AIIB. Three European nations–Italy, France and Germany–then followed in Britain’s steps, saying that they would join too.

Status.
Discussions among Prospective Founding Members (PFM) on the establishment of AIIB commenced in Kunming, China (27-28 November 2014), with a second meeting in Mumbai, India (15-16 January 2015) that launched discussions of the proposed Articles of Agreement. The third Chief Negotiators' Meeting took place in Almaty, Kazakhstan from 30 to 31, March 2015. It is anticipated the AOA would be finalized and open for signature by PFMs from June 2015. The AOA is expected to enter into force and AIIB to be fully established by the end of 2015. As of April 15, 2015 there are 57 PFMs.
Starting in fall 2013, President Xi Jinping has gradually unveiled several massive initiatives associated with the broader “One Belt, One Road” vision. The Silk Road Economic Belt calls for the integration of the region into a cohesive economic area through building infrastructure, increasing investment, broadening trade and adding to cultural exchanges. The massive Belt includes key areas in Central and West Asia, the Middle East and Europe, and over time even Africa.
The Maritime Silk Road is a complementary initiative that seeks to foster cooperation in Southeast Asia, Oceania and North Africa, through the South China Sea, the South Pacific Ocean and the wider Indian Ocean area – which naturally translates to closer proximity to India.
May 20-22 5th Chief Negotiator’s meeting in Singapore
Section I. AIIB: Mission and Rationale
Q1: What will be the mission of the AIIB?
The Asian Infrastructure Investment Bank (AIIB) will be a new multilateral development bank (MDB) designed to provide financial support for infrastructure development and regional connectivity in Asia. Building on the lessons of experience of the existing MDBs, AIIB’s members are jointly developing its core philosophy, operating platform, principles and policies. As a new MDB in the 21st century, AIIB’s approach will be "lean, clean and green", with a focus on efficiency, sustainability and transparency. The Bank will work in close cooperation with the existing multilateral development banks -- complementing, supplementing and enhancing their development efforts.
Q2: What is the rationale for the AIIB?
There is a significant gap between the region's infrastructure financing needs and the available pool of multilateral and bilateral financing resources. It is estimated by the Asian Development Bank that before the year 2020, the demand for infrastructure investment in the Asian region could reach up to 730 billion USD each year. This sum is well beyond the capacity of any one country or existing multilateral development bank -- the relatively high savings rate in many countries in the Asia region notwithstanding. Although the region is not short of savings, significant challenges remain as to how to more effectively mobilize both public and private sector resources.
Q3: What added value will the AIIB bring?
The AIIB will offer a new multilateral development financing platform committed to supporting infrastructure and interconnectivity development in Asia. It will increase the pool of multilateral development support resources available to regional economies significantly. The Bank will be in a unique position to benefit from the lessons of existing multilateral institutions and international good practices in developing its own policy and operational frameworks. It will benefit from the active involvement of members in its establishment. AIIB’s proximity to, and close interaction with its members and clients will provide a sound base for enhanced development effectiveness.
Section II. Background and Status
Q6: How will the AIIB engage with the existing MDBs?
The AIIB will collaborate closely with multilateral and bilateral development partners active in the region, including the World Bank Group and the Asian Development Bank (ADB). AIIB's support is intended to complement and supplement the efforts of the existing MDBs, thereby maximizing the overall effectiveness of the support provided by the international community. AIIB is expected to actively explore the co-financing opportunities with other MDBs.
MDB staffs are actively sharing lessons of experience and global good practices with the PFMS and the Secretariat to inform AIIB’s own policy development process.
Section III. Shareholding
Q7: Who are the current prospective founding members (PFMs) of AIIB?
As of April 15, 2015 there are 57 PFMs: Australia, Austria, Azerbaijan, Bangladesh, Brazil, Brunei Darussalam, Cambodia, China, Denmark, Egypt, Finland, France, Georgia, Germany, Iceland, India, Indonesia, Iran, Israel, Italy, Jordan, Kazakhstan, Republic of Korea, Kuwait, Kyrgyz Republic, Lao PDR, Luxembourg, Malaysia, Maldives, Malta, Mongolia, Myanmar, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uzbekistan, and Vietnam. almost all Asian countries and most major countries outside Asia had joined the AIIB, except the US, Japan (which dominated the ADB) and Canada. North Korea's and Taiwan's applications for Prospective Founding Member (PFM) were rejected.
North Korea had failed to obey a necessary principle: provide detailed information on the economic and financial market conditions of their country.
Q8: What will be AIIB’s capital base?
The authorized capital of AIIB is expected to be USD 100 billion. As a regional development bank, AIIB’s regional members will be the majority shareholders; non-regional members will hold smaller equity shares. This shareholding arrangement reflects the commitment and ownership of regional members while providing non-regional members the opportunity to participate actively.
Section IV. Areas of Engagement and Financial Instruments
Q9: In which sectors will AIIB engage and invest?
AIIB will focus on the development of infrastructure and other productive sectors in Asia, which may include energy and power, transportation and telecommunication, rural infrastructure, and agriculture development, urban development and logistics. All AIIB investments will be in line with the Bank’s business strategy and policies which would be approved by the Board.
Q10: What are AIIB’s key financial instruments?
The main financial instruments of the AIIB will include loans, equity investments and guarantees. It is anticipated that AIIB would have capacity to offer technical assistance. In addition to the capital subscribed by members, the AIIB will raise funds primarily through the issuance of bonds in financial markets across the globe as well as through the inter-bank market transactions and other financial instruments.
Q11: What is AIIB's country lending approach?
AIIB welcomes infrastructure investment project proposals that would generate positive financial and economic benefits. Projects that are able to bring benefits to more than one member in the region will be particularly welcome for consideration. Country borrowing will be reviewed, inter alia, in the context of country debt sustainability and alignment with the borrowers’ national development strategies.

Chief Negotiators have held 5 rounds of Meetings since the Signing of Memorandum of Understanding on Establishing the AIIB in Beijing in October 2014.

Why AIIB * The Asian Development Bank has been dominated by the US and Japan since its creation in 1966. China is the largest economy in Asia, while only the third-largest shareholder in the Asian Development Bank. * it has been custom that the president of the ADB is Japanese, Chinese attempts to gain influence within the bank commensurate with its economy’s size have been blocked. * If the US congress had agreed, as Obama has wanted to give China greater voting power in the IMF this (establishment of the AIIB) might never have happened,” * The ADB is a regional development bank established in 1966 to facilitate economic development in Asia. In 2010, the ADB published a report saying that the region requires $8 trillion to be invested from 2010 to 2020 in infrastructure for sustainable economic development. Recently, the Japanese led bank has only loaned about $10,000 million per year according to its annual financial profile, however, for the construction of Asian infrastructure. * the US controls 16.75% of voting rights in the IMF, while China, the world’s second largest economy, has 3.81%. Even France, with a GDP in nominal US Dollar terms around one-third the size of China’s in 2013, has 4.29% of IMF voting rights, slightly more than China’s. _e share of IMF * Currently important decisions require a supermajority of 85 per cent of votes, and the US has a 17 per cent share.

Why Infrastructure
09638… (pg 4) South Asia has become one of the fastest growing regions in the world. As nearly a quarter of the world population and 40% of the world’s poor reside here, South Asia needs to maintain its growth momentum in a sustainable manner to improve the overall standard of living and reduce poverty. Infrastructure development, both economic and social, is one of the major determinants of economic growth, particularly in developing countries.
Further, investment in physical and social infrastructure positively affects the poor in multiple ways (Estache 2004, 2006; Jones 2004). Infrastructure development is one of the major factors ontributing to overall economic development for example: (i) a direct investment in infrastructure creates production facilities and stimulates economic activities; (ii) it reduces transaction costs and trade costs improving competitiveness; (iii) it provides employment opportunities and physical and social infrastructure to the poor.
In contrast, lack of infrastructure creates bottlenecks for sustainable growth and poverty reduction. Therefore, infrastructure development contributes to investment and growth through an increase in productivity and efficiency as it links resources to factories, people to jobs and products to markets. * 1067….China natural resource * S5(3)… Availability of infrastructure determines the level of efficiency and effectiveness of economic activity. Given the vital infrastructure for economic development, it is the duty of government infrastructure development entirely.
Challenges:
* LSE pg. 9 * establish governance structures and decision-making systems having a high degree of transparency, integrity, and independence from political influence in making lending decisions.

new development institutions will be an important counterbalance to the political weight of the West, giving China a greater voice in global development _nance. _is will become more important politically and economically for China as it becomes the world’s largest economy, given that its participation in the World Bank and IMF belie its stature in the global economy.

ADB: At the end of 2013, Japan holds the largest proportion of shares at 15.67%. The United States holds 15.56%, China holds 6.47%,India holds 6.36%, and Australia holds 5.81%.[6]

* Total quotas: US$362 billion (as of 3/13/15) * Additional pledged or committed resources: US $885 billion