AIIB praised for anti-corruption stance: more work required to encourage private investment

AIIB praised for anti-corruption stance: more work required to encourage private investment

02/11/17

Luke Foddy

Asia House hosts conference on private sector opportunities with the AIIB                                             

The Chairman of one of the world’s largest infrastructure firms has praised the Asian Infrastructure Investment Bank (AIIB) for its tough stance on corruption.

Gregory Hodkinson, Chairman of Arup Group, made the comments at a conference at London’s Asia House which focused on private sector investment opportunities with the AIIB.

Speaking on the role of multilateral development banks in introducing international standards, Mr Hodkinson said: “They keep corruption, which I’m very sad to say is alive and well in the infrastructure world… somewhat at bay. That can only be a good thing.”

He said the AIIB takes the issue very seriously, “and I applaud that.”

Sir Danny Alexander, Vice President and Corporate Secretary of the AIIB – which has positioned itself as taking a ‘Clean, Green and Lean’ approach – gave a keynote speech at the conference, in which he outlined the major opportunities the AIIB presents to corporates.

Where AIIB can make a difference

In a panel session on issues affecting investment with the AIIB, Mr Hodkinson added that countries should have a “strategic plan” for their infrastructure needs, proposing that it could be a requirement for all AIIB members.

Daniel Hanna, Global Head of Public Sector and Development Organisations, Standard Chartered Bank, identified guarantee products as a potential way to encourage greater investment. “For us, the big advantage for the multilaterals is the use of guarantees, because there you get cover, it provides assurance, it provides a halo effect, and the private sector can come in underneath,” he said.

“A guarantee product within the AIIB would be really useful.”

Mr Hanna also highlighted the overemphasis on dollar financing and the neglect of local currency needs. “That’s a huge market failure where AIIB can take a leadership position,” he said.

Regulation challenges

Despite the capital and appetite for investment existing, one issue that is proving a blocker is regulation, said Matt Cavanagh, Director of Group Government Relations, Prudential.  He said there is a willingness among the insurance sector to invest in infrastructure projects, adding that Prudential is funding power plants in ASEAN and India.

“The money is there, we would love to do more,” he said. However, regulation is deterring investment, according to Mr Cavanagh. “There are countries where it’s outright forbidden for life insurers to invest in infrastructure.”

Standards are another area where the AIIB can leverage effective influence, suggested David Sayer, Chairman, High Growth Markets, KPMG UK LLP. Countries “which meet standards and accelerate their growth,” will “hopefully become beacons that others will see,” said Mr Sayer.

Watch the panel discussion in full here