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China-led AIIB to begin lending in baht, rupiah and rupee

President wants to safeguard 'any market' from forex swings

Local-currency financing starts this month, initially covering India, Indonesia, Thailand, Turkey and Russia. (Nikkei montage)

LUXEMBOURG -- The Asian Infrastructure Investment Bank will offer local-currency financing in certain emerging markets, President Jin Liqun told Nikkei on July 11.

The program, which would shield borrowers from the swings of foreign exchange markets, is believed to be aimed at private-sector companies working on large-scale projects. The initiative starts this month and will initially cover India, Indonesia, Thailand, Turkey and Russia, with more to come later.

This financing is "in response to the need of the borrowing countries," Jin said. This could be done by issuing local-currency bonds or through swaps, he said.

The AIIB chief spoke on the eve of the lender's annual meeting here on July 12, the first to be held outside Asia since the lender began operations in 2016. "Luxembourg has been very keen on working with Asian countries, on setting up this bank, from the very beginning," he said. "Luxembourg was the first to decide to join this bank among the European countries."

The AIIB made its global bond market debut in May with a $2.5 billion float. Jin indicated that it could consider issuing bonds in yen, yuan or euros as well.

"We are open to any market," he said.

The Asian Infrastructure Investment Bank and China's Belt and Road Initiative "share the same objective of promoting connectivity," AIIB President Jin Liqun said July 11. (Photo by Jun Ishikawa)

The lender has 70 member countries, with another 27 expected to join later -- more than the 68 participating in the much older Asian Development Bank, which counts the U.S. and Japan as its top shareholders. Yet the AIIB has approved only about $8 billion in funding so far, and some critics say it has few experts on staff.

Many projects so far have involved cofinancing with the ADB and World Bank, and Jin said the lender is grateful for the "support and experience" they provided.

"Now we are developing our in-house capability," he said, adding that the AIIB's stand-alone financing will increase as it adds more personnel. The organization aims to expand its staff by more than 20% to 280 by year-end.

But "cofinancing will remain an important field of endeavor" for development banks, Jin said. He noted that the lender has worked closely with the ADB and stressed his "very good personal relationship" with ADB President Takehiko Nakao.

Though Japan is not an AIIB member, "my understanding is that the Japanese government encourages Japanese institutions to work with us," Jin said.

He again encouraged Tokyo to join -- something that could help the lender bring in talent with much-needed expertise. "The door forever remains open," he said.

The AIIB chief recently likened the lender and China's Belt and Road Initiative to two engines on the same airplane, alarming critics that have accused the massive international infrastructure development program of loading down developing countries with debt.

Asked to elaborate on the metaphor, Jin said the two are different in terms of function and governance but "share the same objective of promoting connectivity." The aircraft is the international community, he said.

As for the pilot, Jin emphasized the broad international membership of the AIIB and its staff. "International cooperation never ever has one pilot, represented by one country," he said.

"Nobody dictates," Jin said.

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