AIIB focuses on fostering hard digital infra

Reported by: |Updated: October 8, 2020

AIIB gears up for playing a catalyst’s role in financing the growth of digital infrastructure in Asia:

Paul Lam

Amid the COVID pandemic, the Asian Infrastructure Investment Bank (AIIB) is discovering new ways to increase connectivity and strengthen economies. Paul Lam, Strategy & Policy Officer (Digital & Technology) at AIIB, gives insights and updates on the digital strategy:
Mehul Dani: How has AIIB implemented its digital strategy in recent times? Paul Lam: According to the World Economic Forum, in 2019, technology applications across sectors have fundamentally changed how modern economies function and how citizens live. Infrastructure has traditionally been lagging behind other sectors in terms of innovation. However, this is expected to change. Digital infrastructure is becoming more central to the economy as remote work, health, and education arrangements are turning into a norm. How the application and commercialization of technologies can enhance the productivity and resilience of infrastructure will be more widely recognized. New technologies (eg, artificial intelligence and cloud technology) will give rise to further changes in user expectations and behavior, which will impact infrastructure demand. Given the impact of the digital economy and the role it will play in the future, AIIB sees a clear need to support its development, and with it, the required underlying digital infrastructure. The bank’s journey has just begun, though.

In alignment with the AIIB’s mandate to foster sustainable economic development, create wealth, and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors, AIIB’s Board of Directors very recently approved the ‘Digital Infrastructure Strategy’. The strategy maps out AIIB’s vision for playing a catalyst’s role in financing the growth of digital infrastructure in Asia, with the objective of supporting the efforts of AIIB. As per this strategy, digital applications are successfully lowering barriers posed by geography, solving market imperfections, and connecting people both for trade and social purposes. It is estimated that the digital economy footprint represents 6-15% of global gross domestic product. AIIB’s coverage of digital infrastructure will include both hard and soft infrastructure.

How has been AIIB’s response in terms of digital outreach in the current FY so far? Why is it important?

Massive digital divides exist not only between countries but also between different regions and demographic groups. With the increasing rate of digitization, the requirements for digital infrastructure will grow exponentially and so will the gap of financing, which is expected to go up to $500 billion in Asia by 2030.

On the other hand, the Infratech Report 2020Rs survey conducted by the Infrastructure Investor magazine (July/August 2020) shows that infrastructure stakeholders are increasingly aware of the rise of smart infrastructure, which is the second most important megatrend for infrastructure.

AIIB has mapped all the potential technology applications to infrastructure sectors, and some of them could reduce operating expenses up to 25% and improve performance.
However, the infrastructure sectors are lagging behind others to harness the benefits digital technologies bring due to the complex ecosystem, split incentives, status quo mindsets, and lack of collaboration. Changes are needed.

What are your targets and plans for IT, digital initiatives?

AIIB will focus on investing and fostering the development and enhancement of hard digital infrastructure to bridge the digital divide and on investing and fostering the adoption of technology in traditional infrastructure sectors, including transport, energy, water and cities, and other productive sectors, to increase efficiency and sustainability.

AIIB will continue to grow its knowledge base by conducting research on technology mapping and the landscape for all infrastructure subsectors. AIIB will also build its capacity by engaging with industry stakeholders and building strong partnerships, as AIIB believes it is important to bring technology solution providers closer to infrastructure sponsors and facilitate dialogues. AIIB will also collaborate with other multilateral development banks to facilitate discussions on the future development of digital infrastructure, related regulatory considerations, and financing practices, through building information-sharing platforms and initiating roundtables.

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