Focus: GS-III: Indian Economy (International Institutions), GS-II: International Relations
Why in News?
Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman attended the 7th Annual Meeting of the Board of Governors of Asian Infrastructure Investment Bank (AIIB).
Every year at the Annual Meeting, the Board of Governors meets to take key decisions on important matters relating to AIIB.
The theme of this year’s Annual Meeting was “Sustainable Infrastructure Toward a Connected World”.
About Asian Infrastructure Investment Bank:
- The Asian Infrastructure Investment Bank (AIIB) is an international financial institution proposed by China. The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia-Pacific region.
- It is headquartered in Beijing.
- It commenced operations in January 2016.
- By investing in sustainable infrastructure and other productive sectors today, it aims to connect people, services and markets that over time will impact the lives of billions and build a better future.
Membership of AIIB
Membership in the AIIB is open to all members of the World Bank or the Asian Development Bank and is divided into regional and non-regional members.
- Regional members are those located within areas classified as Asia and Oceania by the United Nations.
- Unlike other MDBs (multilateral development bank), the AIIB allows for non-sovereign entities to apply for AIIB membership, assuming their home country is a member.
- Thus, sovereign wealth funds (such as the China Investment Corporation) or state-owned enterprises of member countries could potentially join the Bank.
- The China-led Asian Infrastructure Investment Bank (AIIB) has officially approved 57 nations as prospective founding members, with Sweden, Israel, South Africa, Azerbaijan, Iceland, Portugal and Poland the latest to be included.
- Countries accepted as AIIB founding members include China, India, Malaysia, Indonesia, Singapore, Saudi Arabia, Brunei, Myanmar, the Philippines, Pakistan, Britain, Australia, Brazil, France, Germany and Spain.
- Founding members have priority over nations that sign up later because they will have the right to set the rules for the bank.
- As of May, 2020, the bank currently has 78 members as well as 24 prospective members from around the world.
Financial Capital of AIIB:
- The AIIB’s initial total capital is USD 100 billion divided into 1 million shares of 100 000 dollars each, with 20% paid-in and 80% callable.
- Paid-Up Share Capital: It is the amount of money that has already been paid by investors in exchange for shares of stock.
- Called-Up Share Capital: Some companies may issue shares to investors with the understanding they will be paid at a later date.
- This allows for more flexible investment terms and may entice investors to contribute more share capital than if they had to provide funds up front.
- China is the largest contributor to the Bank, contributing USD 50 billion, half of the initial subscribed capital.
- India is the second-largest shareholder, contributing USD 8.4 billion.
- Voting Rights:
- China is the largest shareholder with 26.61 % voting shares in the bank followed by India (7.6%), Russia (6.01%) and Germany (4.2 %).
- The regional members hold 75% of the total voting power in the Bank.