Kathmandu: The Asian Infrastructure Investment Bank (AIIB) has said it accords top priority to Nepal. A visiting high-level delegation from the AIIB said this during a meeting with Finance Minister Barshaman Pun, according to the Minister's Secretariat. On the occasion, Finance Minister Pun urged the AIIB to increase its investment in Nepal's infrastructure development and other projects. In reply, AIIB Director RMP Rathnayake, who leads the delegation, praised Nepal's endeavours for investment policy reforms and their enhancement. He pledged to adopt a policy of increasing investment in Nepal in the days to come based on the availability of resources.

The Minister also urged the AIIB for a partnership with Nepal's private sector as per its policy of mobilizing its 50% capital in partnership with the private sector. In response, the delegation chief suggested the possibility of collaboration with Nepal's private sector by selecting multi-year projects.

On the occasion, the Finance Minister of Nepal invited the AIIB to the Third National Investment Summit that Nepal is scheduled to host on April 28-29. Director Rathnayake said a high-level participation will be there from the AIIB at the Summit. The Minister utilised the forum to call on the AIIB to ensure provisions to provide a concessional loan to Nepal and middle-income developing countries. He shared with the delegation that Nepal has been deprived of leveraging on expected benefits from the AIIB due to its relatively high interest rates.

"Despite being the AIIB founding member, Nepal has failed to take expected benefits from its investments due to a high interest rate," he said. Stating that multiple infrastructure development projects are to be carried out in Nepal, he insisted on the concessions on AIIB borrowings to Nepal. As he said, the government accords top priority to infrastructure development, and it is required to source out the funds due to its limited internal resources.

The Minister also advised the AIIB to invest in Nepal's infrastructure development, hydroelectricity, tourism and information technology sectors, and the areas of relative benefits. He apprised the delegation that an agreement has been reached to supply 10,000 megawatts of electricity and added that there is no market issue for power to be generated in Nepal.

Likewise, as per the power trade agreement between Nepal and Bangladesh, Nepal will soon export 40 megawatts of electricity to Bangladesh. Sharing about Nepal's process to graduate from the least developed to a developing country by 2026, the Minister sought diversifications of AIIB investment in Nepal.

Previous Investments by AIIB

In 2019, the AIIB approved a loan of up to USD 90 million for the 216-megawatt Upper Trishuli-1 Hydropower Project, AIIB’s first project in Nepal. In the same year, the AIIB also approved a USD 112.3 million loan to Nepal to increase access and improve the quality and efficiency of electricity supply across the country’s western regions.

The Distribution System Upgrade and Expansion Project is AIIB’s first sovereign-backed financing project in Nepal. This is not only the first project to receive approval but also AIIB’s technical assistance under the Special Fund, enabling comprehensive project preparation from the very early stage.

In 2018, Nepal received a USD 1 million grant under AIIB’s Special Fund to assist the government in preparing the electrification programme in western Nepal, in terms of the feasibility study, technical design, and environmental and social management.

Headquartered in Beijing, the AIIB began operations in January 2016 and has now grown to 100 approved members worldwide.

About the Asian Infrastructure Investment Bank

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank and international financial institution that aims to collectively improve economic and social outcomes in Asia. It is the world's second largest multilateral development institution.

Headquartered in Beijing, China, the bank currently has 109 members, including 14 prospective members from around the world. The breakdown of the 109 members by continents are as follows: 42 in Asia, 26 in Europe, 22 in Africa, 9 in Oceania, 8 in South America, and 2 in North America. The bank started operation after the agreement entered into force on 25 December 2015, after ratifications were received from 10 member states holding a total number of 50% of the initial subscriptions of the Authorized Capital Stock.

The United Nations has addressed the launch of AIIB as having the potential for "scaling up financing for sustainable development" and to improve global economic governance. The starting capital of the bank was USD 100 billion, equivalent to 2⁄3 of the capital of the Asian Development Bank and about half that of the World Bank.

The bank was first proposed by China in 2013 and the initiative was launched at a ceremony in Beijing in October 2014. It has since received the highest credit ratings from the three biggest rating agencies in the world and has been seen since its inception as a potential rival or an alternative to the World Bank and the International Monetary Fund (IMF).