The China-backed Asian Infrastructure Investment Bank (AIIB) is to combine with the Islamic Development Bank (ISDB) to address infrastructure issues in their respective member states.
The pair are set to sign a memorandum of understanding this year, the ISDB group president Bandar Hajjar said in an interview with Turkish media. This confirmed reports from earlier in the year, which indicated that the development banks would combine on the co-financing of infrastructure projects.
The AIIB is capitalised to the tune of US$100bn, with the ISDB having capacity of US$150bn. There is much overlap among their 86 and 57 respective member nations. Just this week, the AIIB added Papua New Guinea and Kenya as the newest members of its roster.
“There are about 650 million people in Africa without access to electricity, this specific partnership jointly with other international partners, including the World Bank and French Development Agency, will help solve these issues.” Hajjar said.
Since its inception in 2015, the AIIB, which has been billed as China’s rival to the World Bank, has been working extensively in tandem with existing multilateral financiers, such as the Asian Development Bank (ADB), the International Finance Corporation (IFC) and the World Bank itself. It has also recruited extensively from other multilaterals – president Jin Liqun was formerly a vice-president at the ADB.
All of these have suggested that the AIIB is seeking to complement existing development finance institutions, rather than compete with them. The future memorandum with the ISDB suggests that further collaboration will be taking place in majority Islamic countries. This would tie in with some of the existing work the AIIB has done in Central Asia, where it has been very active in Pakistan and former Soviet republics.
The AIIB has also been very active in Southeast Asia, another area in which the ISDB has member states. It is reported to be considering financing the Kuala Lumpur-Singapore high speed rail project, while earlier this year, Jin voiced his interest in funding other infrastructure projects in Malaysia, including expressways, railways, airports and seaports.
In Indonesia, the world’s most populous Islamic country, the AIIB has committed to a series of financing packages, including a trio of co-lending projects with the World Bank to support infrastructure there.