The Asian Infrastructure and Investment Bank Debate: A Perspective from Russia

Sergey Drobyshevsky & Alexandra Morozkina

Russia’s G20 Expert Council

28/04/2015

On 14th April Russia joined Asian Infrastructure Investment Bank (AIIB) – the new institution proposed by China. AIIB is expected to serve as a platform for infrastructure development and improvement in Asia and therefore it seems justified for Russia to join it as a founding member.

Since 2012 Russian policy was aimed at development of Far East region on the base of industries oriented to Asia-Pacific region and attracting FDI from eastern partners. The Government combines different measures to encourage investment and enhance social and economic development of the region: creation of territories of accelerated development and special economic zones with preferential tax regimes, introduction of incentives and preferential regulation. Lack of transport infrastructure is one of the most important issues in the region and therefore the bank could become a source of new projects with Asian partners in this sphere.

Development of infrastructure is a priority both for Russia and AIIB. Russia is actively developing its national policy in infrastructure and also is engaged in various international initiatives in this field. Thus, Russia added infrastructure as one of the priorities to G20 agenda during its Presidency in 2013. This year a working group on Investment and Infrastructure within G20 is expected to develop investment strategies of each member country. Also Russia is actively involved in the process of establishing the New Development Bank within BRICS agenda. This bank is also aimed at financing of infrastructure projects in developing countries including BRICS. As for national infrastructure strategy in Russia, there is an ambitious long-term transport strategy up to 2030. Government plans to commission around 62 thousand km of auto roads and 4.4 thousand km of railroads by 2030. To fulfill this ambition Russia could attract investment from multilateral development institutions including AIIB.

Joining AIIB is not only a question of economic benefits but also a political issue. There is a widely accepted opinion that the role of the developing countries, especially BRICS, in the global financial architecture is not corresponding to its role in global economy. Developing countries could not influence activities of the most important existing international organizations such as IMF and the World Bank. Such new institutions as the New Development Bank and AIIB could change the situation as they have a potential to change the current system of financing for development. However, whether they could realize this potential or their founders will follow the traditional path remains an open question.

Sergey Drobyshevsky is a member of Russia’s G20 Expert Council and Academic Director of Gaidar Institute for Economic Policy.

Alexandra Morozkina is a member of Russia’s G20 Expert Council.