In a bid to attract more Asian investments, Egypt hosted the eighth annual meeting of the Asian Infrastructure Investment Bank (AIIB) in Sharm El-Sheikh this week.
Over two days on 25-26 September, AIIB leaders, members of the government, and private-sector representatives discussed paths for mobilising and securing the finance required for climate-related projects, particularly for Africa, amid today’s global economic challenges.
The AIIB meeting was the first to be held in an African country and the first in-person event to be organised since the Covid-19 pandemic.
The AIIB was formed in 2016 by Chinese President Xi Jinping as a multilateral development bank and international financial institution that aims to collectively improve economic and social outcomes in Asia and beyond. It finances projects that contribute to green developments and has 109 members .
Egypt is a founding member of the bank and is the largest contributor to its capital in Africa with a share valued at $650 million.
“The infrastructure financing gap continues to yawn ever larger. There is an ever-growing need to support our members as they grapple with ever more frequent natural disasters, such as the recent tragedies in Morocco and Libya,” said Jin Liquin, president of the AIIB and chair of its Board of Directors, at this week’s meeting in Sharm El-Sheikh.
He added that the multilateral development banks (MDBs) have a key role to play in terms of helping countries overcome the impacts of ongoing economic challenges.
Liquin praised the developmental impacts of Egyptian investments in infrastructure, saying that they aim at creating green and smart infrastructure in sectors such as energy, transportation, and water.
In his address to the attendees, President Abdel-Fattah Al-Sisi highlighted some of the measures Egypt has adopted to create an attractive investment environment.
He noted that one of the goals of the State Ownership Policy Document, a plan to encourage the private sector by widening its role in the economy as well as accelerating the privatisation process, is to eliminate the preferential advantages of public-sector companies and government entities in order to level the playing field between the public and the private sectors.
He urged the international institutions and MDBs to provide the African countries with low-cost financing that would enable them to tackle the threats of climate change, especially amid the ongoing challenges the continent is facing such as Covid-19 and the repercussions of European geopolitical tensions.
Speaking to Al-Ahram Weekly, Minister of Finance and Governor for Egypt at the AIIB Mohamed Maait said there was a wide gap between the cost of the needed infrastructure investments and the available resources for governments in the developing countries, emerging markets, and low-income economies, which require the private sector to invest massively in these projects.
He said that the MDBs and international financial institutions have a role to play by providing the private sector with financing in order to encourage it to invest in green and climate-related projects, particularly those related to infrastructure.
AIIB Vice President for Policy and Strategy Danny Alexander told the Weekly that by holding its eighth annual meeting in Egypt the Bank aims to bring more partners on board to extend the funding needed for climate-action efforts in Egypt and in all 106 member countries of the AIIB.
He added that the bank’s largest investment portfolio outside Asia is in Egypt, with an ongoing portfolio worth $1.3 billion, and said that the bank is willing to invest more under its Climate Action Plan (2024-2030) launched during the event.
Since becoming a founding member of the AIIB in 2016, Egypt has benefited from significant financing from the AIIB for a number of projects in line with Egypt’s strategic priorities in order to promote sustainable and comprehensive economic development.
As part of its Egyptian portfolio, the AIIB has provided $360 million in soft loans, including $210 million in financing for the 11 private-sector companies that contributed to the implementation of the Benban Solar Energy Park in Aswan, the first green energy project the bank has invested in outside the Asian market.
The AIIB made $150 million available in credit lines to banks to re-lend to small and medium-sized enterprises (SMEs) to stimulate comprehensive and sustainable growth and provide job opportunities.
It has provided soft development financing worth $300 million to Egypt’s water sector as a means to implement the sixth UN Sustainable Development Goal (SDG) of Clean Water and Sanitation.
In 2022, the bank provided development policy financing worth $360 million to support development efforts in Egypt by enhancing overall sustainability, opening horizons for private-sector participation in development, and stimulating women’s empowerment efforts.
This includes improving the management of state-owned companies by enhancing transparency.
Moreover, the bank is one of the MDBs contributing to the financing of the Abu Qir Metro Project in Alexandria, providing concessional development financing worth €250 million.
Rania Al-Mashat, the minister of international cooperation, delivered a speech at the round table of the AIIB’s board of governors.
She said that the bank has expanded its support for the green, flexible, and sustainable infrastructure sectors, and as a founding member from outside Asia, Egypt has launched comprehensive, strong, and unique partnerships with the AIIB over a period of eight years.
She gave the example of the AIIB contribution to implementing the energy pillar of the Nexus for Water, Food, and Energy Platform (NWFE) programme, which is expected to mobilise at least $10 billion in investments for the installation of 10 GW of solar and wind energy by 2028.
She stressed that the alignment between the objectives of the AIIB, Egypt’s Vision 2030 Strategy, and its sectoral strategies have resulted in advancing on the path of joint development towards compatibility with the Paris Climate Agreement of 2015 through influential partnerships to promote the SDGs and climate action.
The development cooperation portfolio includes investments in the areas of water management, energy efficiency, sustainable transportation, and small and medium-sized companies, she said.
She added that the AIIB plays a pivotal role alongside the MDBs in providing and mobilising the capital that developing and emerging countries are most in need of, not only at the level of providing soft development financing to governments, but also of stimulating private-sector investment.
She pointed out that justice in the distribution of funds was a pivotal factor for creating an effective and efficient global financial structure. Egypt had therefore launched the “Guidebook for Just Financing” at the UN COP27 Climate Conference in Sharm El-Sheikh last year, with the aim of setting clear definitions and motivating principles for fair financing, both qualitatively and quantitatively, in a way that supports development paths and ensures that “no one is left behind.”
Through just and innovative financing modalities, the unique capabilities and interests of different pools of capital can be unlocked to support, replicate, and upscale impactful development and climate projects, Al-Mashat said.
Also at this week’s event, the AIIB launched its Climate Action Plan (CAP 2024-2030) bringing together the principles governing the bank’s climate financing while identifying crucial action areas that will steer AIIB’s investments in support of its members.
The CAP outlines certain principles that include meeting member needs for just access to climate finance, as the AIIB will tailor climate solutions to individual client needs and circumstances and recognise the diverse impacts of climate change across Asia and variations in member countries’ income levels, development pathways, and capacities to address climate change.
Under the plan, the AIIB will concentrate on solutions that simultaneously mitigate climate change, build resilience, enhance adaptation, and offer co-benefits for biodiversity and nature conservation.
Additionally, the plan aims to leverage AIIB’s robust financial position and strengthen financing partnerships to mobilise capital for climate projects, as well as promote innovation for both mitigation and adaptation efforts.
In this respect, the AIIB announced the allocation of at least 50 per cent of its annual financing approvals as climate finance by 2025. In 2022, the bank attained a 56 per cent rate. By the second quarter of 2023, the bank had achieved a cumulative $11.75 billion in climate finance and had financed 107 projects with climate components.
Al-Mashat underscored the importance of the bank’s expansion of investment guarantees and development grants, which stimulates countries’ efforts to achieve development efforts and align with the CAP.
Representatives of the private sector from Egypt, Turkey, and the Philippines called on the MDBs and the international financial institutions to provide soft loans and low-cost blended finance to encourage them to invest in climate projects that may have a high level of risk.
They also called for levelling the field between the private sector and the public sector in order to increase the private sector’s share in the investment scene, especially in the African countries and including Egypt.
* A version of this article appears in print in the 28 September, 2023 edition of Al-Ahram Weekly