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AIIB to Strengthen Singapore’s Reputation as Financial Hub

Asian Infrastructure Investment Bank (AIIB)According to an executive from the financial industry, Singapore’s reputation as the world’s financial hub is bound to get a boost when the Asian Infrastructure Investment Bank (AIIB) starts functioning.

Peter Garber, a senior adviser in issues related to the global market at Deutsche Bank, stated that the AIIB is likely to issue bonds to finance projects just as the Asian Development Bank (ADB) and the World Bank had done. Recently, he said at AIIB’s roundtable conference, “This could open up more options for investors here.”

China is developing the AIIB is a key lender capable of financing major infrastructure projects all over Asia. Among the bank’s 57 founder members are India, Singapore, South Korea, France, Britain, and Iran and it is believed to have as much as US$100 billion in capital.

According to Garber, the AIIB represents a rise in capital that can be used for the development of infrastructure; more than what was available previously. Noting the fact that the AIIB is all set to enable an increased number of “higher-quality investment projects,” Garber said that “there has been a deficit in this amount of capital over the past year.” In 2010, the ADB had announced that Asia is likely to require investment worth $8 trillion for infrastructure projects between the years 2010 and 2020. A resident of the US, Garber said that the AIIB’s initial size made up just a small part of this amount because it had to “maintain itself as a triple A financial institution.”

Simultaneously, he stated that the lending ability of AIIB would increase if the bank turns out to be successful and it is “identifies sufficient projects for it to expand its capital.

Since the ADB had stated that a large number of infrastructure projects will require financing in the next 10 years, Garber feels that the AIIB will be able to choose from a wide range of projects. He further said:

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 has already begun for the establishment of the AIIB. Last week, the bank’s founding members met in Singapore to draft agreement articles and discuss the bank’s operational policies. Shi Yaobin, the vice minister of the finance ministry of China, and Yee Ping Yi, the deputy secretary of the finance ministry of Singapore, chaired the meeting.

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