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Peoples Convention on Infrastructure Financing: Concept Note

Peoples’ Convention on Infrastructure Financing

A response to AIIB Annual Meeting

June 21-23, Mumbai, India

Introduction:

Peoples Convention on Infrastructure Financing – A response to AIIB (Asian Infrastructure Investment Bank) Annual Meeting is the coming together of various groups working towards just and equitable society threatened by the massive infrastructure push resulting in displacement and dispossession of the marginalized and destruction of natural resources, on which their livelihoods depend.  There seems to be a consensus among the International Finance Institutions that infrastructure constitutes a primary element for pushing growth.  The IFIs have been perpetuating the assumption of a huge infrastructural gap in emerging countries. Such gaps could only be filled by diluting regulatory mechanisms that govern labour markets, environmental safeguards and land acquisition laws. The IFIs perceive such dilutions to improve investment climes and help improve ‘ease of doing business’ rankings.

Besides institutional and regulatory issues, lack of finance is often viewed as a major reason for the slow pace of infrastructure development in most of the developing and Less Developed Countries.

According to McKinsey, the world needs to invest the US $3.3 trillion annually (or about 4% of present annual global GDP of US $84 trillion) in economic infrastructure until 2030.  Asian Development Bank has also estimated an infrastructure gap of about $ 26 trillion over the 15-years from 2016 to 2030, or $1.7 trillion per year. It is estimated that India would require an annual infrastructure investment of US $230 billion (INR 14,95,000 crore) every year till 2020.  This is about 9% of India’s present GDP, and over 50% of the total annual budget expenditure proposed (of about INR 29,20,484 crores) in the Feb.2018 budget! Note that while the global infra investment needs are projected at about 4% of global GDP, for India, this is a huge 9% of its GDP. Over the last five years, India has been spending about 5% of its GDP on infrastructure. These huge estimates are served to propagate the need for Development Finance particularly the private finance for which nations will have to create the investment climate through deregulation and ease of doing business.

These estimates form the basis of the pitch by International Finance Institutions.  The new Development Finance Institutions like AIIB point out these infrastructure gaps to drive the point of needing more financing and financial institutions. AIIB claims its rationale in terms of focus sectors, modalities of financing for boosting economic activities in the southern countries.  While the traditional multilateral development banks were led by US, Japan, and northern countries, the emergence of AIIB with its headquarters in Beijing is seen as symbolic of the emergence of China as a major economic player in the world in the 21stcentury.

The new institution, AIIB, as opposed to traditional development finance agencies does not have well framed policies for lending particularly on the environment and social safeguards fronts.  Many of these safeguards got ingrained in the earlier agencies based on struggles from the ground including that of dam-affected, displacement affected communities.  With the emergence of AIIB, we are also witnessing a race to the bottom when the seemingly progressive policies which are based on universal frameworks are being overturned for country-based systems which absolve financial institutions from the responsibility of the destruction they are funding.  AIIB, for instance, started their lending without developing their key policies in place and adopting the policies of the financial institutions they co-finance with (either World Bank or Asian Development Bank).

AIIB 3rdAnnual Governors Meeting, June 25-26 Mumbai

AIIB has grown since its launch and currently have about 86 approved members from around the world and will hold its 3rdAnnual Governors Meet in Mumbai India, the financial capital of the second largest shareholder in AIIB.  The Annual Governors Meeting is expected to discuss policies apart from regular business. The theme of this year is “Mobilising Finance for Infrastructure: Innovation and Collaboration” and sets out to discuss the private sector’s role in infrastructure.

As a host country, India is organising eight lead up events in various parts of the country on various themes leading up to the Annual Governors Meeting. These host country seminars push for reorienting the economy in favor of the private sector, arguing for revisiting of the regulatory ecosystem which according to them dis-incentivises the private sector.  The positions which AIIB hold on private sector bring them close to the traditional multilateral development agencies rather than challenging their roles.  The renewed push for private sector investment is coming at a time when India is witnessing a huge fall in private sector participation in infrastructure from $55 billion in 2010 to $5 billion in 2015 as nonperforming infrastructure assets of the previous public-private partnership (PPP) investments increased.

Peoples Convention on Infrastructure Financing

Peoples Convention on Infrastructure Financing will bring together groups and affected communities from across the country to discuss their vision of development and how they get affected by the infrastructure push by the dominant financial institutions.  The convention will share stories of resistance and alternate visions on development along with demanding constitutional guarantees regarding meaningful and informed consultations and rights of communities in planning and development.  The financial institutions, whether led by northern countries or southern countries could not absolve themselves from the impacts their projects inflict upon the people and environment.

AIIB currently goes by the policies of the co-funders like World Bank and Asian Development Bank in the absence of a policy of its own. Farmers affected by the land pooling scheme of  Amaravati Sustainable Capital City Development project has raised questions on AIIB and World Bank co-funded project and had to take up their grievances with the compliant mechanism of the World Bank, the co-financier of the project, in the absence of compliance mechanisms and policies of that of AIIB.

AIIB  has a co-financing model which serves AIIB well, particularly if other institutions, such as the World Bank and Asian Development Bank, do not charge the AIIB all the costs they incur for due diligence and oversight. With low-cost co-financing fees, the AIIB can make significant profits since its own loan charges can easily cover its low administrative expenses. The other institutions, with their full suite of safeguard policies, also protect the AIIB from reputational risks associated with infrastructure projects.    Two of the projects, one being the Transmission System Strengthening Project, which it is co-financing with ADB and one proposed project Amaravati CCP being co-financed with World Bank and Andhra Pradesh 24×7 – Power For All project being co-financed with World Bank; leaves AIIB absolved of any obligations. The policies, due diligence applicable are the responsibility of the lead financier and there is no clarity on the role and liability of AIIB

Concerns have also been raised regarding AIIB’s proposed investment in the National Investment and Infrastructure Fund (NIIF) as a financial intermediary which will further reduce the transparency of how this money will be spent in high-risk investments without taking proper accountability.  Various Indian groups have also joined their counterparts from across the world in raising questions on the energy policy as well as their concerns about shifting decision making power in approving projects from the Executive Board who are accountable to constituent Governments to that of the Bank Management.

The people’s convention on Infrastructure Financing organised by the ‘Working Group on IFIs’, an informal network of groups will discuss in length the policies of AIIB.  Various self-organised events will be held from June 21  – 23rdin Mumbai will bring groups working on urban development, transportation, coastal protection and coastal communities, sustainable energy, and equity, against privatisation along with groups monitoring financial institutions and their policies and projects in the country. The Peoples convention also aims to bring together political actors, social movements, activists and local communities, both from urban slum communities and rural pockets to plan future action.

It also seeks to deliver a firm message to development financial institutions, particularly to the AIIB on our resolution to watch their investments and demand accountability in their investments in the country and strengthen the forces fighting for a just and equitable development.  AIIB being a south-led multilateral development bank should have its ears and eyes close to the ground feeling the pain of displacement and dispossession rather than funding projects that go against their own said mandate of clean, lean and green.

The people’s movements will keep a close eye on AIIB’s priorities, policies and investments in the country and how they respond to peoples’ voices.

Peoples’ Convention on Infrastructure Financing: A Peoples’ response to AIIB Annual Meeting June 21-23, 2018

INVITATION

The Third Annual Governors Meeting of Asian Infrastructure Investment Bank [AIIB] will be held in Mumbai, India from 24-25 June 2018. This two-year-old multilateral bank is investing in all major sectors, including energy, without robust policies on environmental-social safeguards, transparent public disclosure and an accountability/complaint handling mechanism. Out of the total 24 projects, it has financed, USD 4.4 billion has already been approved.  India is the biggest recipient from AIIB with more than 1.2 billion USD supporting about six projects including Transmission lines, Capital City Development at Amravati, rural roads etc with another 1 billion USD in proposed projects.

These data are but a few from among the many that come out periodically which, we are aware, will straightaway affect our democratic systems, land, water, forests, food, livelihoods, structures and the very air we breathe on a daily basis. All these raise our concerns to an alarming level that we are forced to reflect and act on the rapid ‘reforms’ which happen in the guise of development. Unlike World Bank and ADB who claim their development agenda in the name of reduction in poverty and inequality, AIIB never conceals their huge interests in infrastructure financing.

India is AIIB’s second-largest shareholder and is an adored destination for its investments. As many of us are aware, the Indian government, for past few decades, has stressed the need for large infrastructural projects for the country’s development and these projects are being seen as a stimulus to the growth of India’s GDP. These include power projects, dams, roads, urban projects, industrial zones/corridors, ports, smart cities and other mega projects, including the new super-expensive high-speed rail projects. Mega energy projects are perceived as one of the major components and enablers of these infrastructure projects.  This aggressive growth for the economic elite and the upper classes will come at the cost of displacing the lives of people who are dependent on land and natural resources for their livelihood and devastating the environment. This also often comes at the cost of displacing farming and pastoralist communities who are pushed to a life of poverty and whose life and livelihood cannot be commensurably compensated by money – in most cases, not even that. The huge projected increases in the energy infrastructure will also demand similarly massive financial investments.

It is critical that we situate the 3rd AIIB AGM within this global, regional and national context. The idea behind the People’s Convention on Infrastructure Financing is to provide a space for social movements, progressive trade unions, academia and civil society from various parts of the country working on urban development, transportation, environmental protection, coastal communities, sustainable energy and equity, against privatisation along with groups monitoring financial institutions and their policies and projects in the country.  The Convention will facilitate solidarity in the resistance against the infrastructural approach towards development causing displacement and destruction to the natural resources. It will also be a space to put forward and discuss alternatives for a just and equitable world that are emerging out of people’s struggles.

Peoples Convention on Infrastructure Financing – A peoples response to AIIB will be held in Mumbai, India from 21-23 June 2018. It will also organize a series of regional meetings in different parts of the country in the month of April and May to bring together civil society organizations for familiarising and updating on AIIB functions, investment policies, and initiating monitoring on AIIB projects in India, with a focused aim to strategize, campaign and demand transparency and accountability in their lending in India. It is an opportune moment to try and tackle the bank, and demand accountability in their financing in Indian projects, when this year India is hosting AIIB’s 3rd Annual Governors Meet [AGM]. Groups from Mumbai, along with other Indian organisations will jointly host the event which will include plenary, self-organised workshops, passing of resolutions, cultural events and press conference.

VENUE: Plenary at Y.B Chavan Hall and workshops at YWCA and YMCA.

We look forward to being with you in Mumbai on June 21-23, 2018!

With warm regards,

Peoples Convention on Infrastructure Financing – A peoples response to AIIB

For further details, please contact:

Working Group on IFIs | wgonifis@gmail.com

Maju Varghese | 8826249887

Mecanzy Dabre | 9665006429

Himshi Singh  | 9867348307

Huge Overlap in Investments by MDBs, ExIM Banks, and Bilaterals on Critical Sectors

By Joe Athialy

Ever since the first lending from World Bank in 1949 worth $34 million to Indian Railways and the bilateral credit India received from the erstwhile USSR and USA in the early 50s, India has been a recipient of significant funds from different multilateral and bilateral sources.

While each of these lendings came with baggage, and often conditionalities, much of it was justified in the name of nation-building, and critiques of the enormous social, environmental and even economic costs were shut their mouth by the oft-repeated rhetoric of ‘somebody has to sacrifice for greater common good’. This was true not just for lending from international sources, but any investments.

What the Multilateral Development Banks (MDBs) brought, along with its lending, was a host of policy changes in almost all critical sectors. They often influenced and changed the course of development agenda of the country, by providing ‘Technical Assistance’ to governments, being the knowledge provider and taking the role of a development finance gatekeeper with their Doing Business Reports, Investment Climate Reports and many such.

With India opening up her economy in 1991, India has been a destination of many foreign corporations and by late 90s, with all systems in place for their smooth landing, they started pouring, starting with companies like Enron and Cogentrix. With the foreign corporations, came in financial institutions, both private banks as well as Export-Import Banks (ExIm Banks). Some of the institutions operating here in the past have deepened their operations. What was witnessing the past decade or so is an influx of these investments majorly in energy, transport, steel, dams, roads, urban projects, industrial zones/corridors, smart cities and other mega projects. The number of financial sources coming in, the pace in which these investments are finalised and the quantum of money pouring in is alarming and often do not give the opportunity to see the investments in toto.

There have been many struggles – small and big – against these investments and the devastation, which caused to the people – their livelihood and natural resources, and the environment. While the yardstick of measuring the successes and failures of these struggles could vary depending on who does it, the reality remains that the struggles have forced MDBs to relook the way they conduct business in this country, compelled them to adopt safeguard policies and compliance mechanisms and didn’t shy away from confronting them on the ground, on the streets and even at their doorsteps.

The Indian government, for past few decades, has stressed the need for large infrastructural projects for the country’s development and these projects are being seen as a stimulus to the growth of India’s GDP. This aggressive growth comes at the cost of displacing the lives of people who are dependent on land and natural resources for their livelihood and devastating the environment. This also often comes at the expense of displacing existing dwelling communities who are pushed to a life of poverty and whose life and livelihood cannot be commensurably compensated by money – in most cases, not even that.

This document is an effort to compile data of investments coming into India from MDBs, ExIm banks and other bilateral investments, to help understand the landscape of financing from these institutions and helping to understand the overlaps of international financial institutions in certain key sectors.

The data provided in this document is not comprehensive. While information from MDBs is comparatively easy to access, that of ExIms and bi-lateral sources are difficult to compile. Despite our best efforts, there are many we missed. We will keep this as a work in progress and will update the data as and when we get it.

We hope that this data and the broader understanding this document may help provide will strengthen the struggles on the ground as well as critical voices demanding transparency and accountability in financial institutions.

Tentacles-of-International-Finance-in-India

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CSOs Call for Accountability and Disclosure from AIIB on its FI Investments

By Tani Alex

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Representatives from civil society organizations from all over the world have written a letter this week to the AIIB, drawing urgent attention to rising concerns of AIIB’s investments through Financial Intermediaries (FIs). This is in context of AIIB developing its strategy to invest more in equity and funds, without formulating robust policies and systems around FI investments regarding transparency, accountability and efficient channels of communication with all stakeholders. FI investments mean a “hands-off” or third-party lending, with which comes potential risks – the clients of FIs are not held accountable for the environmental and social safeguards.

The letter urges AIIB to learn from International Finance Corporation’s (private lending arm of World Bank Group) lessons on FIs from the recent past. The Compliance Advisor Ombudsman (CAO), which is IFC’s accountability mechanism, and various CSOs had submitted their own findings regarding the high risk of lending through FIs. Accordingly, the CAO addressed the highly problematic relationship between IFC and the FIs’ clients, wherein it is not assured whether the FIs’ clients ESMS is leading to the implementation of the Performance Standards (of IFC) at the subproject level. IFC’s CEO has already announced that IFC has cut its high-risk lending from 18 to just 5 investments, and has committed such projects to climate mitigation and women-owned SMEs.

Studies carried out by CSOstracking IFC investments in FIs support these findings. The letter explains that the study examined a small segment IFC’s FI portfolio, wherein more than 130 projects and companies funded by two dozen FIs are causing/likely to cause critical environmental harms and human rights violations. The projects spread over 24 countries come from a range of high-risk sectors which includes private military contracting, mining, infrastructure, energy, industrial agriculture, transport and infrastructure. Few of the demands put forth in the letter to AIIB on policy, investment decision-making and contracts with FIs include: high scrutiny on project portfolio, track record of ESF policy, aligning with AIIB’s own ESF even for sub-projects, monitoring FIs’ clients’ ESF due diligence and ensuring project-affected communities have access to redress including the AIIB’saccountabilitymechanism. Moreover, FIs should also adhere to disclosure of its investments, which should reflect in AIIB’s website. A provision for this should also be included in AIIB’s upcoming Public Information Policy. The letter concludes reminding AIIB of its promise delivered by its VP DJ Pandian to CSOs during the AGM Meet at Jeju in 2017, that AIIB will disclose high-risk sub-projects supported by equity funds.

Among the FIs, AIIB has approved and invested in India is India Infrastructure Fund, targeting investments in infrastructure, energy and transport sectors. This project is partnered with the General Partner and its investment team, a global infrastructure investment and management platform, for a period of eleven years. AIIB has approved 150 mn USD, out of the total project cost of 750 mn USD. Another FI project in the pipeline for India is the National Investment Infrastructure Fund(NIIF), considering to invest in roads, airports, ports, power and urban infrastructure. NIIF is established by the Government of India (GoI) who owns 49% stake. Out of the target project fund of 2.1 bn USD, AIIB is considering to invest 200 mn USD, over an implementation period of 19 years, while GoI invests 1 bn USD.

Budget Session of Parliament: An Overview

By Maju Varghese

The Constitution of India has accorded the Parliament the supremacy among the three organs of the Union government viz legislature, executive, and judiciary. Parliament not only makes the laws but also enables the citizens to participate in controlling the government. The Parliament applies various oversight mechanisms to ensure transparency and accountability in the system. The two mechanisms available in our country are questions and debates on the floor of the house and various committees which scrutinise the public finances and policies.

The budget session of the Parliament was held between January 31 and April 12, 2017. The session had a recess between Feb 10 and March 8, 2017, during which the standing committees examined the demand for grants from various ministries. The session was convened in the context of upcoming assembly elections and also of post demonetisation distress.

This session was important for many reasons. The budget was introduced on February 1 instead of the last working day of February as per the tradition.  The government claims that advancing the presentation will result in necessary legislative approval for annual spending plans and tax proposals could be completed before the beginning of the new financial year.  According to eminent economist Arun Kumar, early presentation of Budget will help the entire exercise to get over by 31 March, and expenditure, as well as tax proposals, can come into effect right from the beginning of new fiscal, thereby ensuring better implementation.

Besides advancing the date, the government decided from this year to merge Union Budget and Railway Budget.  Earlier, Railway budget was presented first followed by the general union budget.  Another interesting development this year is doing away with the distinction of the plan and non-planned expenditure in the budget-making monitoring difficult on capital infusion in developmental planning.

The budget session held 29 sittings for 178 hours in total in which 24 bills were introduced, and 23 bills were passed.  Members raise 560 starred questions and 6440 un-starred questions during this session.

Some Major debates in the Parliament

The budget session saw the introduction of some major bills and discussions around those.  These are: The Finance Bill, 2017; The Specified Bank Notes (Cessation of Liabilities) Bill, 2017; Bills related to Goods and Service Tax; The Payment of Wages (Amendment) Bill, 2017; the Maternity Benefit (Amendment) Bill, 2017; the Mental Health Care Bill, 2017; and the Employee’s Compensation (Amendment) Bill, 2017.

Analysis of Questions in Parliament

During the budget session, about 6440 un-starred questions and 560 starred questions were admitted in the parliament.  However, the lack of interest in the functioning of the IFIs was evident as just 7 questions asked on the topic in Lok Sabha out of 5203 questions, and 7 in the Rajya Sabha from the total 5064 questions.  The break-ups of the questions are given below.

IFI Name Lok Sabha Rajya Sabha
World Bank 6 3
ADB 1 2
AIIB 0 2
NDB 0 0

Rising NPA’s and Parliament

The debate on Non-Performing Assets continued to be debated in the parliament with many parliamentarians raising the issue through questions. There were about 18 questions asked in the Rajya Sabha and 21 questions in Lok Sabha. K.V Thomas, then chairman of the standing committee on public accounts, said that the current non-performing assets stood at 6.8 lakh crore or 6.8 trillion of which 70% are those of big corporate houses. There were debates on the bad bank and how the banks could be cleared of the mounting NPAs. Interestingly, the same bankers who were asking the state to take care of their bad debts came against debts being waived off for farmers who are facing an acute crisis due to a variety of reasons leading to suicide deaths.

New trend of undermining  democratic institutions

The Parliament is witnessing a new trend of bypassing Rajya Sabha in important matters including amendment of acts where both Lok Sabha and Rajya Sabha is responsible. The introduction of the Finance Bill[1] first with 10 amendment of acts and later to change 40 different acts including Reserve Bank of India Act as well as the Representation of the People Act was according to opposition first in the history of Parliament itself.  This act has robbed the Parliament its right to refer the bill to a standing committee or to scrutinise it clause by clause as to every amendment and the power of Raja Sabha to discuss, propose and incorporate amendment.

The very fact that the finance bill is a money bill gives the option of not incorporating Rajya Sabha view in the bills. All the five amendments passed in the Rajya Sabha was not incorporated into the finance bill, and it was passed as such.  Centre has got 22 Money bills passed in Lok Sabha ignoring the Rajya Sabha, and this has kept a bad president for the functioning of the democracy as such.

Executive legislation through Ordinance rather than legislation

The ordinance is an independent legislation brought out by the Executive; it is the wisdom and authority being exercised by the Executive. An Ordinance can only be done in extraordinary situations when the houses are not in session or a critical condition.  The Ordinance encroaches the right of the parliament in law making.

The government seems to issues ordinance after ordinance despite the fact that this could be brought before the parliament for legislation in the first instance. According to the PRS Legislative, the government in the last three years has promulgated 27 ordinances, including the ones on land acquisition, demonetisation, payment of wages bill, etc. Many of the ordinances were promulgated multiple times. It is interesting to read the observation of the Constitution Bench of the Supreme Court observation in Krishna Kumar Vs State of Bihar delivered on January 2, 2017, that promulgation of ordinances is a fraud on the Constitution and a subversion of democratic legislative processes. The latest subversion is the Banking Ordinance, on which the finance minister refused to share details of the ordinance before Presidential assent.

While there were interesting debates in the parliament this session, it seems some of the issues are not being captured in the discussions.  This includes life and livelihood issues of people who are getting displaced/ affected by development projects, investments of bilateral and multilateral agencies including World Bank, Asian Development Bank, IFC and new development banks like New Development Bank, Asia Infrastructure Investment Bank, etc.  A point to make in this regard is about New Development Bank, a multilateral Bank initiated by BRICS nations.  There seems to be no real engagement of the Parliament in influencing the nature of the Bank given that Mr K. V. Kamat is the chief of the Bank.  The Bank is in the process of developing its policies with regards to the environmental and social framework, disclosure policy, etc in their lending.

The other major lack of oversight is on negotiations in the trade policy.  India is Negotiating a free trade agreement, Regional Comprehensive Economic Partnership – RCEP [2] in the Asia Pacific region.  According to India FDI Watch, “In the past four years and to this day, no text has been made available to members of the public, parliamentarians, civil society or media,”. The trade negotiations are happening under a veil of secrecy where Parliament and parliamentarians are kept in the dark.

Parliament does not have an institutional space like Standing Committee where trade negotiations, Indian investment abroad and Multilateral and Bilateral investments to India and its effects on Indian policy environment is being discussed.  The failure of the Standing Committee to come out with a report on the demonetisation in this session with full facts and figures were a let down on the process particularly when it was announced that it would come out before the end of the budget session.

[1]          The finance bill is for ordinarily introduced to give effect to financial proposals of the Government of India for the following fiscal year and not to make permanent changes in the existing laws unless they are consequential upon or incidental to the taxation proposals.

[2]          RCEP is a 16-nation trade pact that includes the Association of Southeast Asian Nations (ASEAN), along with China, Australia, India, Japan, South Korea and New Zealand, a region that accounts for 46 percent of the world’s population and that produced nearly 30 per cent of global GDP in 2016.

 

A first-hand​ report from the AIIB’s Second Annual Board of Governors Meeting at Jeju

By Anuradha Munshi

Asia Infrastructure Investment Bank (AIIB) recently concluded its Second Annual Board of Governors’ meeting in Jeju, South Korea.  The three-day-long meeting, during June 16-18, 2017, saw the participation of Board of Governors, representatives from the finance ministry of various countries, banking industry, corporates, and civil society organisations.

The three days also provided an opportunity for the CSOs to have a discussion with the Jin Liqun, Bank’s President in one of the sessions. In this session, Liqun’s address was followed by a discussion in which about 120 CSOs were present. Liqun said that AIIB is ready to listen, open to criticism, and willing to correct itself. He stated that the Bank ensures that three basic criteria are met before making any investment—financial sustainability, environmentally friendliness, and acceptance by the locals. He further said that the Bank would follow Paris Agreement to support low carbon projects.

However, in spite this being an open session, not much time was provided to the CSOs to adequately keep their points as a few questions were reserved for the representatives of the industries. This left very little time for the CSOs to interact with Liqun, who had to leave early.

The primary concern put forward by CSOs was about the deficiencies in the environmental and social framework, especially regarding the projects funded by financial intermediaries. There were questions on the manner in which consultations have been planned for the AIIB’s complaints handling mechanism. Also, questions were raised on AIIB’s support for the hydropower plant in Georgia despite facing local resistance, which is a violation of a core value Liqun had just enunciated. There were also serious concerns about the recklessness with which AIIB is clearing projects without even having most of its systems in place. It was observed that the answers to most of the questions asked in this session were evasive.

India at AIIB

The meeting saw the participation of Indian Finance Minister Arun Jaitley, senior representatives of the Ministry of Finance, financial institutions, and industry, during the India Seminar on June 16. Jaitley in a seminar on Indian Policy, Progress and Prospect in Infrastructure Development spoke about the infrastructure deficit in the country and the need to focus on it before investing in the manufacturing industry. He mentioned India’s national highway program as a successful model of infrastructure building in the country and based its success on easy exit policy, flexibility, and hybrid policy for revenue. The minister termed success of national highway program as a success of Public Private Partnership (PPP) model in India.

Jaitley also insisted upon the need for additional resources for the functioning of 71 airports and building 32 to 35 airports in new cities to promote regional connectivity. He advocated the provision of tax concessions and subsidies as an incentive to the airlines to fly to these cities.

While referring to the railways, the minister said that much investment is required for the upgradations. He emphasised the need of privatisation of some of its services by citing an example of the redevelopment of 400 railway stations by private companies.

On the infrastructure front, he said that the creation of smart cities and industrial corridors have an enormous potential to generate infrastructure, which he saw as a quintessential factor to bring in investment for the manufacturing industry in the country. He also spoke about the problem of surplus capacity in the power sector; and electrification as a focus area for the Modi government. He emphasised the need to invest in the improvement of distribution systems and electrification and mentioned AIIB’s approval of Transmission System Strengthening Project as an example to highlight the government’s focus on electrification.

The Modi government’s current priority is to invest in the infrastructure sector for which the government is also looking at PPPs as a successful model.  Towards achieving this goal National Investment and Infrastructure Fund (NIIF) will be the mother fund under which sub-funds are located. Sujoy Bose, CEO, NIIF, who was also present at the AIIB meetings, spoke on setting up of NIIF to raise debt to invest in the equity funds of infrastructure finance companies in India. He emphasised on the need to focus on the infrastructure development to attract international capital as it is mostly interested in investing in constructed assets, and not on infrastructure development. AIIB will consider its USD200 million investment to NIIF as a financial intermediary in the fourth quarter of 2017.

Apart from this, the AIIB is also funding India Infrastructure Fund,  which was cleared by the AIIB Board a day ahead of the Annual Board of Governors Meeting. Likewise, the controversial Amaravati Sustainable Capital City Development Project will be soon considered up by the Board.

These investments indicate the direction in which AIIB is heading on the three core values reiterated by the Bank’s president. If one looks alone at India Investment portfolio of AIIB, two of the projects, IIF (approved) and NIIF (under consideration for approval), will be implemented by financial intermediaries. There is no transparency on who will get these funds for infrastructure development and for what projects in particular. Amravati Project which is up for consideration has been marred by large social and environmental issues like displacement and diversion of forest land in India. From hydropower project in Georgia to the Amaravati Capital City Project, the Bank has neither shown much respect for the environmental and social concerns. The core values mentioned in front of the CSOs are far away from what is being pushed in the country investment open discussions, where the investment is speedy and profitable as the respective governments take care of the land and environmental issues. There are serious concerns about the manner and speed at which both India and AIIB are heading on their investments with priorities centred on the projects and not on environment and people.

Risky Business: Will the Asian Infrastructure Investment Bank choose to avoid funding coal in India?