Infrastructure Imbalance, Financial Investment and AIIB’s Role: Non-state Actor in Regional Governance

What is the potential solution when facing the imbalance of infrastructure financing beyond national boundaries? How do non-state actors function in regional and global governance? As an international multilateral financial institution, Asian Infrastructure Investment Bank(AIIB) plays a momentous role in Asia’s mega-scale planning and governance. To answer the questions above, this paper is divided into three main aspects: (1) International Context: economic attributes of infrastructure investment, regional imbalance in Asia and China’s domestic overcapacity; (2) Role and Innovation: taking the lead in mega-scale development through international network and non-state governance; (3) Finance and Case: classification of investment from a megacity perspective. The first part provides both background and review in the form of theory explanation, statistical analysis and case study. According to the theory from public economics, infrastructure, as the public good, has both non-excludability and non-rivalry in consumption. Investment for infrastructure is mainly reliable on public investment rather than private and social origins for its attributes of large amount and long return cycle, and the financing scope is usually limited within borders. Data from World Bank indicates that national governments worldwide have been caught in debt crisis after the global financial crisis in 2008, which leads to a trend in reducing public investment. Less developed countries and regions along “Belt and Road” are also suffering from severe fund gaps and imbalance in infrastructure fund, while China is confronted with domestic overcapacity. All of these background conditions provide a fundamental context for the establishment of AIIB. The second part starts with the comparison of development stages and operational features between AIIB and World Bank, with open documents and reports released on official websites. As Multilateral Development Banks(MDBs), AIIB and World Bank both establish international financing networks to participate in regional planning and governance, in the capacity of non-state governors and in the form of spatial production of sustainable infrastructure. But AIIB has innovations in the aspects of developing countries’ dominance and decision-making process. Finally, from an urban-rural coordinated development perspective, this paper focuses on the 35 approved and 23 proposed financing projects with the method of classification, graphical description and distributional regularity analysis. We select three investment frontiers– urban, transport and energy- to describe the functions that financial investment has on development of megacities. And in each frontier we select typical cases, which are National Slum Upgrading Project in Indonesia(Urban), Rural Roads Project in India(Transport) and Beijing Coal Replacement Project in China(Energy). The results show that: (1) Planning for future requires global deployment of international private and social capital to compensate for the unbalanced and inadequate public investment, which also applies to other issues related to governance; (2) As a non-state entity in regional governance system, AIIB is a significant capital pool that locates Belt and Road Initiative into physical space; (3) Projects of AIIB will create positive externalities for city regions in developing countries, in the aspects of spatial equality, accessibility, economic connection and regional environmental coordinated improvement. The study is generally applicable because all the statistics, annual reports, basic documents and project reports of AIIB and World Bank are open to public and quite detailed, which means we could focus more on the analysis of connection between them.