Vietnam and AIIB: Meeting Infrastructure Needs

October 12, 2018 Posted by Vietnam Briefing Written by Koushan Das Reading Time: < 1 minute

In a recent meeting between the Vietnamese government and the Asian Infrastructure Investment Bank (AIIB), the country reaffirmed its commitment and pledged to be a reliable member of the multilateral development bank. Vietnam is one of the founding members of the AIIB.

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Capital requirements

Vietnam’s capital requirement for infrastructure projects in areas such as ports, expressways, urban development, and clean energy is huge. To achieve its social-economic development goals, government funding is not sufficient and would require private financing.

With growing public debts, private sector funding is the only option available to the government to meet its capital requirements. The government has been implementing investor-friendly reforms in the last few years to create the necessary conditions to attract financial institutions such as AIIB that can lend without any government guarantee.

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AIIB

The AIIB is a multilateral development bank that commenced operations in January 2016 and currently includes 87 approved members. The entity provides financing for infrastructure projects in Asia, as well as neighboring countries. Projects include transport systems, sewerage and waste treatment, broadband, ports and roads, and energy distribution.

As of now, the bank has financed 29 projects worth US$5.85 billion in 13 countries. The AIIB can provide financing for infrastructure projects without the need for government guarantees.

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Going forward

The Vietnamese government has asked the AIIB to work closely with the ministries and government agencies to provide financing for infrastructure projects. In addition, the government has asked AIIB to reduce interest rates and increase financing.

AIIB is focusing on important infrastructure projects that are currently being undertaken by private entities such as airports and expressways. The development bank has asked the government to strengthen the public-private partnership (PPP) legal framework, which can then lead to funding.

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