AIIB 'good for Singapore as a financial hub'

China's President Xi Jinping (fourth from right) meeting with the guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing in Oct 24, 2014. - PHOTO: REUTERS
China's President Xi Jinping (fourth from right) meeting with the guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing in Oct 24, 2014. - PHOTO: REUTERS

Bank likely to issue bonds, giving investors more options: Expert

Singapore's role as a financial hub should enjoy a boost once the Asian Infrastructure Investment Bank (AIIB) is up and running, said a finance industry executive yesterday.

Mr Peter Garber, senior adviser in global markets research at Deutsche Bank, said the AIIB will likely finance its projects by issuing bonds, similar to what other financial institutions such as the World Bank and the Asian Development Bank (ADB) have done.

"This could open up more options for investors here," said Mr Garber, who was speaking at a roundtable discussion on the AIIB yesterday.

The AIIB is being developed by China as a lender that could finance large-scale infrastructure projects across Asia.

The bank has garnered 57 prospective founding member states - including Singapore, India, Britain, France, South Korea and Iran - and is expected to have capital of US$100 billion (S$133 billion).

Mr Garber said the AIIB represents "an increasing amount of capital that will be devoted to infrastructure development in the region over and above what has been made available in the past".

"There has been a deficit in this amount of capital over the past years," he said, noting that the AIIB is poised to set the stage for more "higher-quality investment projects" to take place in this part of the world.

The ADB said in 2010 that it expects Asia to require US$8 trillion in infrastructure investment from 2010 to 2020.

Mr Garber, who is based in the United States, noted that the initial size of the AIIB constitutes only a small part of that amount, as it needs to "maintain itself as a 'triple-A' financial institution".

But he added that the bank's lending capacity could quickly pick up "if it is successful and if it identifies sufficient projects for it to expand its capital".

"The ADB has said that there is a huge number of infrastructure projects to be undertaken in the coming years, so I doubt there will be a shortage of projects for AIIB to choose from.

"I think AIIB's problem will be which ones to do first - which are the best ones to start as demonstration projects for the quality of the work they will be doing."

Work towards making the AIIB a reality has already begun.

Representatives from prospective founding members gathered in Singapore yesterday for a three-day meeting to discuss its operational policies and the draft articles of agreement.

The meeting, which ends tomorrow, is chaired by Mr Shi Yaobin, vice-minister of China's Ministry of Finance, and Singapore Ministry of Finance deputy secretary Yee Ping Yi.

tsjwoo@sph.com.sg