Even before the COVID-19 pandemic, multilateral development banks (MDBs) have seen an increase in their respective social sector portfolios as more developing countries reach middle-income status. These countries face an urgent need to enhance the productivity of their workforce and their ability to compete in global markets, progress in structural transformation and upgrade to the next level in the global value chains. A healthy and skilled population is critical in this transition to overcome the middle-income trap. As a result, MDBs find themselves facing increased requests for financing and technical assistance for these projects in order to address the financing gap.
As shown by the digitalization of society during the pandemic, technology has made the delivery of health and education services more effective and efficient, but only for those who have access. With the accelerating pace of structural transformation, the health gaps and digital divide are widening especially for the vulnerable groups who are unable to adapt to the rapidly changing society. On the other hand, modern health and education play a critical role in achieving the sustainable development goals (SDGs), in particular, for Good Health and Well-being (SDG3) and Quality Education (SDG4). The SDG goals remain, even as the unprecedented COVID-19 pandemic and ensuing economic crises have created new challenges to realizing them.
Thus, the Asian Infrastructure Investment Bank (AIIB) made a strategic decision to gradually expand its capacity, role and value-add in social infrastructure and other productive sectors, even as it continues to focus on core infrastructure, a decision that it enshrined in its Corporate Strategy.
In 2021, amid the COVID-19 pandemic, AIIB created a new department, the Social Infrastructure Department (SID). According to AIIB President Jin Liqun, “SID was created because it will help AIIB strengthen its technical capacity to delivery high quality social infrastructure projects as part of our mission to finance the Infrastructure for Tomorrow.” In its first year of operations, SID quickly formed a lean and agile team and successfully processed three projects, two in the health sector and one in the education sector. Other development partners welcomed AIIB’s entry into the health and education sectors, given the scale of pandemic-induced demands during and post-pandemic.
The mandate of the department is to promote human capital development in AIIB’s developing Member economies by investing in social infrastructure and related productive sectors. With the flexibility to provide both sovereign-backed-financing (SBF) and nonsovereign-backed financing (NSBF), SID is well positioned to help address the financing gap in the areas within its remit through the provision of project and corporate loans, direct and indirect equity participation, and guarantees.
AIIB’s Corporate Strategy identifies important megatrends, such as urbanization, changing demographics, sustainability, technological innovation, and regionalization, that will have significant implications for social infrastructure provisions, as well as for more inclusive and accessible social services.
In the health sector, SID works with all stakeholders, both public and private, to improve access to quality health care services and products. The pandemic has also demonstrated that health is a global public good as diseases can be transmitted without respect for national boundaries. Therefore, AIIB is working with governments and the international community to promote regional cooperation in health to enhance resilience and preparedness to respond to future crises.
In the education sector, AIIB is aligning with the other MDBs in their focus areas, while ensuring that AIIB’s own thematic priorities of technology-enabled infrastructure and green infrastructure are well integrated in the project design. The education priority would be to support students to receive more and better technical and vocational education and training. This can equip them with greater readiness for future job markets and provide them with updated or upgraded skills to re-enter the job markets.
AIIB is also exploring opportunities in its Members for early childhood development, elderly and long-term care, as well as social housing. To recapitulate, AIIB’s social intervention includes eight dimensions, namely: (i) Health care, (ii) Digital Health, (iii) One Health, (iv) Building Local Manufacturing Capacity of Drugs and Medical Devices, (v) Regional Health Cooperation, (vi) Modernization of School Infrastructure and Skills Training, (vii) Early Childhood Development, Elderly and Long-term Care, and (viii) Social Housing. To remain responsive and relevant, AIIB will adjust the focus of its interventions in social infrastructure from time to time through continuous consultations with clients, market players and development partners.
Health Care
Substantial growth in health care services is predicted over the next decade. AIIB, with its vision of Infrastructure for Tomorrow, is responding to the demand by partnering with other MDBs through either co-financing or stand-alone projects as it gains more experience in the sector. AIIB’s health care operations will be aligned with the policy and institutional reforms supported by other MDBs. AIIB’s contribution will be mainly through the creation of productive physical assets promoting digital and green technologies. Examples of health care-related investments include, but are not limited to, general and specialized hospitals and clinics, both private and public; diagnostic and testing centers; laboratories; and medical training institutions.
Digital Health
Medical technology, including digital health, represents a USD400 billion global market. This indicates an opportunity for AIIB with its strong focus on technology-enabled infrastructure. Strong demand for financing is expected in digital health, including e-governance, health data integration, artificial intelligence algorithms for pharmaceuticals in R&D and technology verification, and commercial applications of digital technologies in individual health care services. These services include telemedicine, which could play a critical role in improving social efficiency by reducing waiting time in public health care facilities and expanding services to people in remote areas.
In fact, the potential is unlimited both at the health system level and across the entire health care value chain. As an international intermediary, AIIB will assist Member economies and their private participants in achieving better e-governance through supporting the interoperability of health information systems by way of an agreed information architecture and adopting well-defined open data sharing solutions. This means that AIIB will support governments in building solid ICT infrastructures, promoting higher standards and establishing sound regulatory frameworks, in partnership with other MDBs that can provide capacity building and policy reforms support. AIIB will also identify, support, and finance innovative ways to apply digital and IT in developing countries and promote technology transfer among Member economies.
One Health
One Health investments start with soft activities. These can include technology and knowledge transfer, capacity building of public health and veterinary professionals, governance improvement at both national and local governments, strengthening institutional and regulatory frameworks. In addition, AIIB can collaborate with other organizations by adding value to the One Health approach through connectivity projects (e.g., port projects with strengthened inspection and quarantine systems) that can help manage the health risks that emanate from the cross-border spread of infectious diseases.
In terms of building infrastructure, One Health projects can expand the networks of health surveillance centers through the adoption of the latest technologies. The experience during the pandemic supports the need to set up or upgrade laboratory and cross-border public health facilities to examine the interface of bacteria and hosts to reduce microbe-mediated diseases in humans and animals. Improving the hygiene standards related to agribusiness and forestry is another area where there is need to mitigate the potential health risks. For instance, slaughterhouses, wet markets, food processing facilities, animal breeding and quarantine centers, inspection facilities at customs’ laboratories, and wildlife rescue centers should be upgraded to reduce contact with humans or livestock.
For AIIB, a regular infrastructure project could also have One Health characteristics if it promotes biodiversity, improves urban and rural sanitation and public hygiene, or reduces potential health hazards affecting human health directly or indirectly (e.g., sewage and waste management projects). AIIB is also open to nonsovereign lending or equity investments in agribusiness and forestry supporting modernization to improve food value chains for greater quality, variety, and safety.
Building Local Manufacturing Capacity of Health Care Products
AIIB is also looking at opportunities in the pharmaceutical and medical device industry as the sector will continue to experience strong growth with the region’s aging population, increasing noncommunicable diseases, and soaring health care expenditures. Also, the growing participation of developing countries in advanced pharmaceutical products (e.g., APIs, complex generics, biopharmaceuticals and biosimilars, precision medicine, AI-based drug development, IVD products, surgical equipment, etc.) will create opportunities for AIIB to support companies that have the potential to develop these technologies. But it will also require a higher risk appetite to finance less established but more dynamic and innovative players in the sector.
Supporting established manufacturers in Asia venture abroad into overseas markets can provide AIIB with an additional opportunity to promote connectivity and technology transfer among Member economies. The development of a regional market for pharmaceutical and medical devices can help address the challenges facing a small domestic market in overcoming the supply-demand mismatch at the national level. All these efforts would require industry and market analyses, technology transfer, and capacity development.
Regional Health Cooperation
The COVID-19 pandemic has emphasized that pandemic preparedness is a public good. Regional cooperation, through coordinated policies and actions, resources mobilization and financial cooperation, information exchange and knowledge sharing, has the potential to lead to better and more sustainable regional health outcomes.
Improving infrastructure connectivity in Asia and promoting regional cooperation is one of AIIB’s four thematic priorities under its Corporate Strategy. In this respect, SID’s operational priority includes regional healthcare infrastructure improvement, the promotion of knowledge sharing and technology transfer in health care products, and the strengthening of global and regional health care supply chain infrastructure. One focus will be to help build regional capacity for Pandemic Prevention, Preparedness and Response and strengthen key global Pandemic Prevention, Preparedness and Response functions, for instance, through initiatives for surveillance coordination, standardization of health data, harmonization of regional pharmaceutical regulatory framework, and promotion of health technology transfer.
Modernization of School Infrastructure and Skills Training1
In the education sector, AIIB is exploring opportunities at the start and end points of the learning cycle, namely, early childhood development, tertiary education and technical and vocational education and training (TVET). These stages are critical in the acquisition of skills for the new economy. Early childhood is an optimal phase for learners to acquire foundational cognitive skills. On the other hand, tertiary education and TVET provide people with opportunities to consolidate basic knowledge and competencies and equip them with greater readiness for future job markets. In addition, they assist people by updating their skills and enabling them to re-enter the job market. The pandemic has resulted in a huge interest in distance learning and solutions using education technology. AIIB is investing in projects that improve the delivery of education outcomes and enhance the learning experience, as well as promote the use of digital technology as a supplementary tool to ensure access, effectiveness, and connectivity.
For its investments in education infrastructure, AIIB follows the following principles: (i) focus on infrastructure that does not require recurring cost-financing, (ii) promotion of new technology, especially IT for students at all levels, and (iii) integration of green and disaster-resilient features in the design of school facilities.
Early Childhood Development, Elderly and Long-term Care
Early childhood development includes early childhood care and early childhood education, but often, the current policies and services are fragmented in many countries and among different stakeholders. The market alone is unlikely to yield a solution unless there is public intervention and financing. Governments should ensure that child care is available, affordable, and of decent quality. AIIB’s investments in this area are expected to be across health and education sectors.
AIIB is looking at opportunities that involve the provision of appropriate facilities to the different elderly groups, noting that palliative care is one of the urgent needs. Fully dependent elderly people who require medical attention will require nursing homes (institutional or home-based), rehabilitation centers, communal living, and wellness centers. These represent a larger infrastructure investment. Assets for less dependent aging persons will include daycare centers, community centers and the establishment of effective home care services. Independent living facilities with 24/7 nursing care on-demand are becoming common in developed countries to respond to the need of a specific segment of the elderly population requiring occasional care services. Other opportunities to address the shortage of care workers can be explored, for instance, through digital solutions such as home sensors and wearables, remote care and mobility aids for elderly.
Social Housing
Social housing, an important response to the housing inequality, is regarded as an important dimension to promote health and wellbeing, as it has direct impacts on physical and mental health. In general, governments own and manage properties which can be made available to low-income groups. Sovereign lending in social housing can provide financial support to governments to build housing to resolve immediate needs. In the markets with mature institutional environments and public-private partnership frameworks, investment models can also be through a public-private partnership modality. Projects in low-income areas can be made bankable for private sector investors if the government guarantees the minimum financial return for operations or provides low-cost financing.
1 For more information, see AIIB. 2022. Education and Skills Training during Post-COVID-19 Pandemic Era. https://www.aiib.org/en/news-events/media-center/blog/2022/Education-and-Skills-Training-during-Post-COVID-19-Pandemic-Era.html.
