THE ROLE OF THE NDB AND AIIB IN CATALYZING PRIVATE INFRASTRUCTURE FINANCING

• Main Author: Andrei Vladimirovich Shelepov
• Format: Article
• Language: English
• Published: Peoples’ Friendship University of Russia (RUDN University) 2018-12-01
• Series: Vestnik RUDN International Relations
• Subjects: multilateral development banks; New Development Bank (NDB); Asian Infrastructure Investment Bank (AIIB); infrastructure financing; mobilizing private investment
• Online Access: http://journals.rudn.ru/international-relations/article/viewFile/20110/16410
• ISSN: 2313-0660; 2313-0679

The article is focused on the activities of two recently established multilateral development banks (MDBs) - the BRICS New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB) - in mobilizing private infrastructure investment. Unlike other MDBs, these banks specialize exclusively on sustainable infrastructure projects and are currently creating mechanisms to attract private investment. These factors, as well as Russia’s leading role in both banks, make it necessary to study the mechanisms used by the NDB and AIIB to mobilize private sector funds and make recommendations for their further expansion and development. To achieve this goal, this article presents an analysis of both banks’ documents providing for their engagement with the private sector and mobilizing its resources, and compares qualitative and quantitative characteristics of practical cooperation between private investors and the two MDBs. Based on the analysis, the author makes recommendations on improving and expanding the list of mechanisms used to mobilize private financing. In particular, the AIIB, following the NDB example, should start attracting capital in the member countries financial markets as soon as possible. The NDB needs to ensure the prompt launch of its Project Preparation Fund operations, while the similar AIIB’s fund should focus on raising funds from private investors to finance its activities. It will also be instrumental for the NDB to clearly formulate a strategy for financing loans without sovereign guarantees. In addition, both banks should expand the set of tools used for mobilizing private investment and consider provision of guarantees, expert work and support directly to borrowing countries, as well as exchange of experience and participation in joint projects.