ADB and AIIB

Why in news?

• The Government of India has applied for loans from the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) to procure as many as 667 million doses of COVID-19 vaccines

About Asian Development Bank:

• The Asian Development Bank (ADB) is a regional development bank established in 1966 as a result of Conference on Asian Economic Cooperation held by the United Nations Economic Commission for Asia and the Far East.
• It is headquartered in Manila, Philippines.
• ADB is an official United Nations Observer.

Objectives of ADB:

• The ADB defines itself as a social development organization that is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.
• As a multilateral development finance institution, ADB provides Loans, technical assistance and Grants.
• The ADB offers "hard" loans on commercial terms primarily to middle income countries in Asia and "soft" loans with lower interest rates to poorer countries in the region.
• ADB also provides direct financial assistance to private sector companies, for projects that have clear social benefits beyond the financial rate of return.
• ADB maximizes the development impact of its assistance by facilitating policy dialogues, providing advisory services, and mobilizing financial resources through co-financing operations.

Members of ADB:

• ADB is composed of 67 members, 48 of which are from the Asia and Pacific region.
• The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and non-regional developed countries (I.e. even non-Asian countries can be members.)
• Japan and United States hold the largest proportion of shares at 15.607%.
• China holds 6.444%, India holds 6.331% and Australia holds 5.786%.

Where does ADB get its funding?

• ADB raises funds through bond issues on the world's capital markets.
• ADB also rely on members' contributions and retained earnings from lending operations, and the repayment of loans.

About Asian Infrastructure Investment Bank:

• The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia.
• The bank was proposed by China in 2013. It is established by the AIIB Articles of Agreement with 57 founding members. It began operations in January 2016 and is headquartered in Beijing.

Members:

• Membership is open to all members of the World Bank or the Asian Development Bank and is divided into regional and non-regional members.
• Currently it has 102 approved members.
• America and Japan have been the largest contributors to the ADB but have both chosen not to apply for AIIB membership.
• On the other hand, Russia is a founding regional member of AIIB, its third-largest contributor and not an ADB member.

Functions:

• Promote investment in the region of public and private capital for development purposes, in particular for infrastructure and other productive sectors.
• Utilize the resources at its disposal for financing such development, including those projects and programs which will contribute most effectively to the harmonious economic growth of the region.
• Encourage private investment in projects, enterprises and activities contributing to economic development in the region.

PRACTICE QUESTION:

With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements:

1. AIIB has more than 80 member nations.

2. India is the largest shareholder in AIIB.

3. AIIB does not have any members from outside Asia.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Answer