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Private-sector players talk with the AIIB: Asian Infrastructure Investment Bank(AIIB) officials virtually joined Finance Minister Mohamed Maait, Deputy Finance Minister Ahmed Kouchouk, and a number of private sector players at the Finance Ministry’s new headquarters in the new administrative capital on Thursday to discuss how the Beijing-backed multilateral lender can benefit private-sector players ahead of the bank’s a nnual meetin g in Sharm El Sheikh later this month. Enterprise was in attendance.
AIIB and Egypt have some history: Egypt was one of the bank’s founding members, helping bring it to life in 2016. So far we have received nearly USD 1.3 bn in the funding from the bank, across five projects, the latest of which was a EUR 250 mn loan for the redevelopment of the Abu Qir railway in Alexandria. Maait is Egypt’s governor to the bank, while Kouchouk is the bank’s director for constituency six, which includes Egypt, Algeria, Argentina, Brazil, Morocco, Sudan, and Tunisia, among 12 other countries.
The beginning of a bigger conversation: Thursday’s discussion came in the lead-up to the bank’s 2023 annual meeting, which takes place on 25-26 September in Sharm El Sheikh. The meeting is the bank’s first post-covid, in-person event and the first to be hosted by an African country.
We need resilient infrastructure: “We can respond to climate change by improving the quality and accessibility of infrastructure services,” AIIB’s VP and Corporate Secretary Ludger Schuknecht (LinkedIn) said. “We have to enhance the resilience and adaptability of infrastructure systems to shocks and stresses such as natural disasters and climate change, and we need to increase the transparency and accountability of infrastructure governance and management such as procurement, financing, and monitoring.”
And that takes serious investment: “The world faces a roughly USD 50 tn gap between projected investment and the end amount needed to provide adequate global infrastructure by 2040,” Shucknecht said. “For Egypt alone, that figure is projected to be USD 675 bn between now and 2040 … this is an amount that cannot be met by governments and [multilateral development banks] alone,” he added.
Private-sector involvement is crucial: “Private equity is necessary to ensure infrastructure projects are being built,” Schuknecht continued. “The infrastructure gap is critically high for critical infrastructure such as energy, telecommunications, transport, and climate-resilient infrastructure.” AAIB is also “working with its members on transport and logistics projects to help bottlenecks and facilitate connectivity in cross border trade”, he said.
The AIIB de-risks projects: “AIIB can help member countries unlock leverage and catalyze private-sector finance for investment. The bank can provide policy guidance and financial support … to sufficiently change the risk-reward balance to attract private capital to infrastructure opportunities,” said AIIB board member Fabrizio Costa (bio).
Some 40% of the bank’s funded projects are in the private sector: “Today we have already financed 231 projects in 35 member countries, with a total approved funding of USD 44 bn, including 97 private sector projects … within this active portfolio, in one third of projects we mobilize capital to leverage our own investments,” said the bank’s VP of investment operations, Konstantin Limitovskiy (LinkedIn).
AIIB offers concessional financing: “It is important to support the private sector, we are very happy to do so. We are happy to take more risk for a longer tenor compared to the more commercially-oriented lenders. We can do this through USD financing, investments, capital market issuances, or selective equity investments,” said Director-General, Region 2 Banking, Najeeb Haider (LinkedIn).
What projects is the bank after? “When we work with the private sector we have several key goals: We want to selectively engage in transformative projects to have significant impact, particularly by investing in infrastructure in the private sector and increasing private capital mobilization. We want to support the private sector in developing high quality and resilient infrastructure. We want to promote a green economy to stimulate growth, and develop digital infrastructure to foster innovation,” Limitovskiy continued. “The top three sectors which we finance today are transport, energy, and multisector.”
It’s not all sunshine and rainbows: “We need to be aware that we are also facing some challenges when we work with the private sector. As a bank we have to be cautious of the country … aligning our financing approach with current market conditions. At AIIB we aim to provide competitive financing packages while avoiding underpricing or undercutting commercial lenders,” Limitovskiy said.
