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An Indian Perspective on New Development Bank & Asian Infrastructure Investment Bank

The Asian region has experienced the emergence of new MDBs over last few years. For many years, the Asian Development Bank was the only development bank in the region and has been dominated by the Japanese owing to the number of votes it has as compared to other members. However, the newly constituted NDB in 2014 has two key Asian members, India and China. The Asian Infrastructure Investment Bank (AIIB) led and initiated by China in 2015, and with a mandate to have at minimum 70% of shares allocated to Asian countries is sure to become another major player to support infrastructure development activities of the region as well as global south. The AIIB and NDB are two separate entities in their operations and constitution even though there are overlaps in memberships of the two banks.

AIIB and the Blue Economy

Skeletal of Himanshu Damle’s Presentation on AIIB and Blue Economy in Mumbai during the Peoples’ Convention on 22nd June 2018

Main features in AIIB Financing

  1. investments in regional members
  2. supports longer tenors and appropriate grace period
  3. mobilize funding through insurance, banks, funds and sovereign wealth (like the China Investment Corporation (CIC) in the case of China)
  4. funds on economic/financial considerations and on project benefits, eg. global climate, energy security, productivity improvement etc.

Public Sector:

  1. sovereign-backed financing (sovereign guarantee)
  2. loan/guarantee

Private Sector:

  1. non-sovereign-backed financing (private sector, State Owned Enterprises (SOEs), sub-sovereign and municipalities)
  2. loans and equity
  3. bonds, credit enhancement, funds etc.

—— the portfolio is expected to grow steadily with an increasing share of standalone projects from 27% in 2016 to 39% in 2017 and 42% in 2018 (projected)

—— share of non-sovereign-backed projects has increased from 1% in 2016 to 36% of the portfolio in 2017. The share of non-sovereign-backed projects is projected to account for about 30% in 2018

AIIB-Blue Economy

Why would AIIB be interested in the Blue Economy?

  1. To appropriate (expropriate) the potential of hinterlands
  2. increasing industrialization
  3. increasing GDP
  4. increasing trade
  5. infrastructure development
  6. Energy and Minerals in order to bring about a changing landscape
  7. Container: regional collaboration and competition

AIIB wishes to change the landscape of infrastructure funding across its partner countries, laying emphasis on cross-country and cross-sectoral investments in the shipping sector — Yee Ean Pang, Director General, Investment Operations, AIIB.

He also opined that in the shipping sector there is a need for private players to step in, with 40-45 per cent of stake in the partnership being offered to private players.

Blue Economy

Projects aligned with Sagarmala are being considered for financial assistance by the Ministry of Shipping under two main headings:

  1. Budgetary Allocations from the Ministry of Shipping
    1. up to 50% of the project cost in the form of the budgetary grant
    2. Projects having a high social impact but low/no Internal Rate of Return (IRR) may be provided funding, in convergence with schemes of other central line ministries. IRR is a metric used in capital budgeting to estimate the profitability of potential investments. It is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. IRR is sometimes referred to as “economic rate of return” or “discounted cash flow rate of return.” The use of “internal” refers to the omission of external factors, such as the cost of capital or inflation, from the calculation.
  2. Funding in the form of equity by Sagarmala Development Co. Ltd.
    1. SDCL to provide 49% equity funding to residual projects
    2. monitoring is to be jointly done by SDCL and implementing agency at the SPV level
    3.  project proponent to bear the operation and maintenance costs of the project
      1. importantly, expenses incurred for project development to be treated as part of SDCL’s equity contribution
      2. preferences to be given to projects where land is being contributed by the project proponent

What are the main financing issues?

Role of MDBs and BDBs for the promotion of the shipping sector in the country
provision of long-term low-cost loans to shipping companies for procurement of vessels
PPPs (coastal employment zones, port connectivity projects), EPCs, ECBs (port expansion and new port development), FDI in Make in India 2.0 of which shipping is a major sector identified, and conventional bank financing for port modernization and port connectivity

The major constraining factors, however, are:

  1. uncertainty in the shipping sector, cyclical business nature
  2. immature financial markets

Riding on Debt: Financial Assessment of Delhi Metro

Delhi Metro is the largest metro system in India and is also considered one of the most “successful” public transport projects. After nearly three decades of construction and operation in Delhi, the demand for creating metro systems in all million plus cities has grown despite being a capital intensive project. Few scholarly articles published in the last decade which have questioned the relevance of metro system in Indian cities have often been dismissed by the policymakers and popular media.

People Vow to Resist Attempt to Usurp Natural Resources & Livelihood in the Name of Development

Press Release | June 21, 2018

Peoples’ Convention on Infrastructure Financing Challenges AIIB’s Reckless Lending: People Vow to Resist Attempt to Usurp Natural Resources & Livelihood in the Name of Development

Mumbai: Political and social activists, academics and financial analysts included, a large number of people gathered at the inaugural of Peoples’ Convention on Infrastructure Financing in Mumbai, ahead of the Annual Meeting of Asian Infrastructure Investment Bank (AIIB), decried investments of AIIB and other international financial institutions (IFIs), causing displacement, dispossession loss of livelihood and propelling inequality and social unrest.
Speaking at the occasion eminent economist Professor Arun Kumar, questioned the development model pushed ahead by IFIs in the pretext of ‘development for all’ as their only aim is profit-oriented growth at any cost.  He raised the pertinent question of ‘development for whom’.
“AIIB has created a superstructure, an ecosystem which acts as a complex web of shining terminologies and projects to attract investments, which actually is a smoke screen to hide the fact that there’s no human development happening” senior activist Medha Patkar said in her speech.
Raising concerns at the crackdown of activists by the government, she lamented, “Show us one state where the people opposing the projects have not been jailed to raise their concerns about the environment, and right to life and livelihood. Recently, people were fired upon in Thutthokodi, Tamil Nadu, when they demanded a pollution free environment to live”.
Financial analyst and journalist Sucheta Dalal said that the Indian banking system is at the verge of crisis, reeling under the mounting bad loans, caused by unfettered corporate loans. Referring to government’s announcement in the Parliament that Rs. 2.4 lakh crore bad loans are written off, she said that “ if farm loan waiver was proposed the world would have gone on a spin, while the loans of big corporations are written off and there isn’t a whimper.”
The inaugural ceremony of the three-day Convention started with the music of resistance by cultural groups. Other speakers included Sreedhar, Environics Trust; Shaktiman Gosh, General Secretary, National Hawkers Federation; Leo Colaco National Fishworkers Forum / World Forum of Fisher-people; Roma, National Secretary, New Trade Union Initiative (NTUI).
Senior activist Ulka Mahajan asked, “Is land a commodity to sell to forcefully silence farmers by giving them some compensation to build infrastructure project?” She added “the land feeds generations of people by providing food,” while reminding that it will be difficult to bring back the fertility of the land. “If raising issues of the marginalised is sedition, then we will continue to do it,” she emphasised.
The Peoples’ Convention on Infrastructure Financing is a 3-day confluence of people’s movements, civil society organisations and concerned citizens to deliberate about international financing and strategise a collective voice to hold these financers accountable for their impacts the lending is causing.
Background:
Asian Infrastructure Investment Bank, the 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.
About Us: 
WGonIFIs, a network of movements, organisations and individuals to critically look at and evaluate the policies, programmes and investments of various International Finance Institutions (IFIs), and joining the celebration of the people and communities across the world in resisting them. A list of the network is available here.
Last year, when the Asian Development Bank completed 50 years, the WGonIFIs observed it by holding actions of protests in over 140 locations spread in over 21 states in India against the investment policies of ADB and other International Financial Institutions.
For further details, please contact: 
Working Group on IFIs | wgonifis@gmail.com
Co-ordinators:
Maju Varghese | 8826249887
Mecanzy Dabre | 9665006429
Himshi Singh | 9867348307
Media Contacts:
Mukta Srivastava | +91 99695 30060
Shweta Tambe | +91 98693 40816
Anil Tharayath | +91 96500 15257

इंफ़्रास्ट्रक्चर निवेश: विकास या विनाश

एशियन इंफ़्रास्ट्रक्चर इन्वेस्टमेंट बैंक और भारत का नेशनल इन्वेस्टमेंट एंड इंफ़्रास्ट्रक्चर फ़ंड के निवेश संकट की और एक इशारा

Smart Cities and Urban Governance

Gaurav Dwivedi explains how the Smart Cities would be funded and implemented, and how the project would impact the functioning of the Urban Local Bodies.

Blue Economy, Its Impact on the Coastal Economy, and the Role of IFIs

Siddharth Chakravarty of The Research Collective explains the Blue Economy, its impact on the coastal economy, and the Role of IFIs.