April 9, 2018 Read More →

‘China’s Answer to the World Bank’: Clean Energy Infrastructure

Bloomberg News:

Jin Liqun may not be a household name (yet), even though he has one of the most challenging and important jobs in global finance. Jin, 68, is the inaugural president and chairman of the Asian Infrastructure Investment Bank.

The AIIB, a Beijing-based multilateral development bank that opened for business in January 2016, is an embodiment of China’s aspirations to play a major role in the international financial system. Because the Chinese government is the bank’s biggest shareholder, policymakers in Washington, Tokyo, and elsewhere question whether China is trying to displace the longtime heavyweights in the field—the World Bank and the Asian Development Bank—and pursue its own geopolitical interests in Asia. Jin insists the AIIB is independent.

This interview appears in the April / May 2018 issue of Bloomberg Markets.

BLOOMBERG MARKETS When you’re making the rounds at global finance meetings, what misconceptions about the AIIB drive you crazy?

JIN LIQUN “Why do we need the Asian Infrastructure Investment Bank?” Sometimes the question can even be more blunt: “What is China up to? The World Bank and Asian Development Bank have been serving this region well over the last seven decades. Why would China set up a new institution? Isn’t this a waste of resources? Wouldn’t it be more cost-effective to put money into existing institutions? Does China have an ax to grind? Is China hoping the AIIB will help it achieve geopolitical objectives?”

I’ve had to deal with all of those questions. And the difficult part is that I’m a Chinese in the first instance. I don’t think it’s possible for me to tell the whole world I’m really neutral. I cannot say that.

On the other hand, if I just represent China’s ideas, without doing my part to incorporate the ideas, comments, concerns, observations of all the people who are supposed to be part of this work, I don’t think it will be successful.

BM What sets the AIIB apart from the World Bank or Asian Development Bank?

JL The strongest possible argument for setting up a new institution is its new features. It’s not intended to be a clone or a copy of existing institutions. The concept of a development bank is not abstract expressionist art, such as Jasper Johns’s ­paintings—the less comprehensible, the more charming. The world should have something different compared to the existing institutions, but with special features grounded in the learning and experience of those institutions.

BM And what are those special features?

JL The AIIB will resist being tied down by bureaucracy. We will not create fancy, flamboyant, and mostly redundant titles and positions. And we will fight against staff working in silos or bogged down in interdepartmental squabbling.

BM How do you make the AIIB corruption-proof?

JL We take care of two important aspects, namely procurement through international competitive bidding on our projects and our own internal corporate procurement.

I have empowered the chief internal auditor to check the expenditures of the bank to make sure that nothing irregular happens. No resistance or obstruction will be tolerated. Minor problems must be nipped in the bud so that they will not fester. We must guard against any callous disregard for cost-effectiveness or intentional misuse of financial resources. A Chinese sage said thousands of years ago, “Felonies thrive where misdemeanors are tolerated.”

BM What can you tell us about the AIIB’s loan portfolio and projects?

JL First of all, by agreement we cover infrastructure and private-sector projects. So right now, much of our loan portfolio is focused on power, energy, and transportation.

India is the biggest borrower at this stage. This is a country with strong capabilities and big needs. In India, Pakistan, ­Bangladesh, there is an acute shortage of power. In Myanmar, where we are involved in the development of gas-firing power plants, two-thirds of the people have no access to electricity.

BM Have you set your sights beyond Asia?

JL We’ve done our first project in a non-Asian country: Egypt [where the AIIB is providing up to $210 million for a renewable-energy project involving 11 greenfield solar power plants]. Oman has an idea to move away from excessive dependence on fossil fuels. They want to develop a port and alternative sources of energy. We helped Oman to develop broadband so they would have better access to modern telecommunication service. I think it’s so important to help middle-income countries in the Gulf area to be prepared for a low-carbon global economy.

BM Is there pressure on the bank to make sure the basic infrastructure projects it funds are environmentally friendly?

JL To be green is of critical importance to our mandate. Promoting sustained economic development through infrastructure investment without leaving an environmental footprint is our sacred mission.

A green approach will ultimately contribute to long-term growth of those developing countries which are grappling with poverty and other economic and social challenges. They need a helping hand. A stitch in time saves nine. People in dire poverty have to survive.

Conserving natural resources is crucial, but being green does not conflict with growth. For instance, there is an ever-increasing demand for electric power. Power outages, blackouts, or brownouts, are very common, and a large segment of the population in low-income countries has no access to power at all.

Wherever possible, instead of building greenfield dams or power plants, we will make a big push for upgrading the existing power grid and thus helping to reduce systemic loss in transmission and distribution. This is equivalent to building numerous new power plants.

We will help with construction of mass transit systems to reduce the traffic of individual cars on the road. Adopting new technologies in constructing infrastructure facilities also contributes toward a green economy. We’re proactively working with our members to help them reach their commitments in implementing the Paris Agreement.

More: China’s Answer to the World Bank Wants Green, Clean Asian Infrastructure

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