JAKARTA (TheInsiderStories) – The Beijing-based Asian Infrastructure Investment Bank (AIIB) has approved a US$75-million investment into the Asia Investment Fund (AIF), a closed-end private equity fund established in Hong Kong, China that focuses on telecommunication, transportation, and energy, the bank announced on Friday (07/12) on sideline 4th annual meeting in Luxembourg.
In addition to AIF, the multilateral development bank investing in infrastructure in Asia and beyond also approved temporary loan facilities to support renewable energy in India, agreed on funding for the first project in Cambodia to help improve the fiber optic communication network, then gave a $100 million loan to increase Bangladesh’s water and sanitation supplies.
For AIF, the investment aims to mobilize private capital for infrastructure and other productive sectors by investing in minority equity stakes in Asian companies via a private equity fund. The AIF’s target size is $3 billion with a 10-year term from the final closing date.
“With this investment, AIIB will be able to construct a well-diversified equity portfolio across AIIB members,” said AIIB Vice President and Chief Investment Officer D.J. Pandian. This aligns well with AIIB’s strategy on investing in equity. Participating in the AIF will progressively develop our equity capacity while benefiting from a market risk-adjusted return for our long-term financial sustainability, he adds.
AIIB currently is the only multilateral investor in the AIF, which pitches to other global institutional investors. The investment presents a good opportunity for AIIB to influence positively the investment processes of a sizable fund by contributing to the environmental, social and governance management system of the fund manager.
AIIB’ Director-General Dong-Ik Lee said investing in the AIF also helps the banks gain access to both debt financing and equity co-investment opportunities with the portfolio companies of the fund.
For India, AIIB provides a $100-million loan to L&T Infrastructure Finance Company Limited (LTIF), a subsidiary of L&T Finance Holdings Ltd and a leading non-bank financier of renewable energy in India. The financing marks AIIB’s first loan to a non-banking finance company (NBFC).
The loan proceeds will be used to on-lend to wind and solar power infrastructure projects throughout India. The loan mobilizes private capital from sponsors, other financiers, and LTIF’s own sources.
India is committed to reducing its carbon intensity by 30 to 35 percent of 2005 levels by 2030 under the Paris Agreement. The country will need to increase the share of non-fossil fuels in its energy mix if it is to achieve this target. Investment in renewable energy is an efficient way for India to reduce its carbon intensity while meeting its growing energy needs.
NBFCs play a crucial role in broadening access to financial services, enhancing competition and diversity in the financial sector, and has emerged as key financiers of renewable energy.
LTIF’s collaboration with AIIB will also help the company develop its environmental and social capabilities which will in the future enable it to tap the international market for green finance.
Also, Cambodia will see a major improvement in internet speed and quality following a $75-million investment by the AIIB into the country’s largest independent fiber-optic network provider.
AIIB’s loan to Cambodia Fiber Optic Communication Network Co., Ltd is the Bank’s first project in Cambodia. It will be invested in approximately 2,000 kilometers of metro and regional fiber optic backbone networks to provide wider coverage within major cities and across suburban and rural areas.
The project is expected to support the government’s information and communications technology (ICT) development plan, which aims for 100-percent urban and 70-percent rural broadband coverage by 2020.
While Cambodia has a higher mobile subscription rate than most of its neighbors, services that require high broadband—such as mobile money services—are used at rates well below the average for lower-middle-income countries and for the world. Faster and more reliable internet access is expected to increase economic efficiency by raising the productivity of digital activities and streamlining business systems.
Finally, AIIB has approved a $100-million loan to Bangladesh to accelerate the country’s efforts to deliver improved water supply and sanitation services to underserved communities.
The Bangladesh Municipal Water Supply and Sanitation project will support government investments in water, sanitation and drainage infrastructure in 30 municipalities, where households continue to rely on public standpoints and shallow-tube wells.
Once completed, about 600,000 people are expected to be connected to new piped water supply systems and benefit from improved sanitation services. In particular, women and girls, often responsible for water collection, are expected to directly benefit from the project.
Key components of the project also include capacity building at the national and local levels and project implementation and management support.
The Bangladesh Municipal Water Supply and Sanitation project, which is co-financed with the World Bank, is AIIB’s fifth investment in Bangladesh, all of which are aligned with the country’s top priority development plans and the sustainable development goal.
Written by Lexy Nantu, Email: email@example.com