AIIB outlines 5 core areas for investment

The China-led Asian Infrastructure Investment Bank will invest in five major areas during its initial stages－energy, transportation, rural development, urban development and logistics－a top official said on Thursday.

The bank will later expand the investment to other areas such as education and healthcare to promote social development, said Chen Huan, chief officer of the Multilateral Interim Secretariat of AIIB, during the 6th China-South Korea Banking Development Forum in Shanghai.

The scale of project investment and bond issuance will not be huge at first. The bank is planning to issue bonds worth $100 million to $500 million in the first year of operation and is still waiting for approval by the board of directors. It is likely to issue nonrated bonds at the beginning.

Chen told the forum that AIIB is expected to meet the requirements for operation by the end of this month. Twelve of the 57 founding members have approved the bank's charter so far and they account for more than 40 percent of the total capital. India and Russia are likely to approve the charter by the middle of this month.

The mission of the AIIB is to mobilize social capital. The size of investment for an infrastructure project is so huge that the bank has to share the risk with others, he said.

"The policy framework and investment environment is fairly poor in underdeveloped countries and needs improvement. That's why it is necessary to set up an international financial institution like the AIIB. We will go to these countries first to handle the risk and solve the problems associated with government policies, thus guiding commercial banks to participate in the region's infrastructure projects," he said.

Cao Honghui, vice-president of the research institute at China Development Bank Corp, who played an active role in the preparation of the AIIB, said loans will be the major form of investment. However, the lender will not rule out the possibility of setting up investment funds or providing guarantee services and equity investment services at a later date.

Suh Jae-hong, director general for international cooperation of the Financial Services Commission, South Korea's top financial regulator, said it is hard to assess the risk and profitability of infrastructure projects in Asia's emerging markets. Therefore, the Chinese and South Korean banks need to build a strategic cooperative partnership.

Last month, Premier Li Keqiang proposed the establishment of an Asian financial cooperation association at the 18th ASEAN Plus Three Summit in Kuala Lumpur.

Yang Zaiping, executive vice-president of the China Banking Association, told the forum on Thursday that the CBA is authorized to lead preparations for the founding of the Asian financial cooperation association, in the hope that Asia will have a bigger say and greater influence in global finance.