Andrew attended the Financial Times’ Asian Infrastructure Investment Bank summit in HK on 1 November, hosted by the FT’s Asia editor Jamil Anderlini and the AIIB’s President Jin Liqun (pictured).
It was a grand event because it had a grand story to tell. The AIIB was established by China, of course, and has been seen in some quarters as riding to the rescue of some of the more colourful Belt & Road deals. No way! It now has 58 members and China’s stake is down to 32%. Its mantra is “lean, clean and green”. But most importantly, President Jin reiterated that it will finance only deals which are commercially viable. As such, it promises to be a nimbler and hopefully more courageous version of the Bretton Woods’ ADB and World Bank / IFC, lending in accordance with best international practice when it comes to environmental, social and governance standards and signing up to terms and conditions expected to yield reasonable returns.
What was left open was what host governments need to do to make their projects commercially viable. Whether financed at the sovereign or project level, Projects need to be Properly Prepared (the other PPP) which takes a lot of thought and effort:
- Building legal and regulatory frameworks which can handle not just bids but also unsolicited bids and contracts negotiated where there is realistically only one counterparty;
- Enabling the compulsory purchase of land at a sensible price and in a sensible time frame then being able to clear it of legal and illegal occupiers;
- Establishing a PPP Centre with appropriate seniority within the host government to lead the development of a pipeline of deals, coordinate across ministries, synchronise approvals and terms and much more;
- Capacity building / training, not just for the MOF or the PPP Centre but across all involved line ministries too.
In particular, it requires appropriate government support to individual projects and to State Owned Enterprises when acting as offtakers to projects.
The AIIB is currently putting together a strategy paper on how it should best engage with the private sector. Andrew has submitted his suggestions.
