Asian lending bank sees no need to compete with China’s AIIB

May 04, 2017

The Himalayan Times, 4th May 2017,Associated Press, Yokohama

The massive needs for spending on infrastructure and support for poverty alleviation mean the Asian Development Bank can work with, not compete against China’s new infrastructure lender, ADB President Takehiko Nakao said Thurday.

Speaking as the ADB began its annual meeting Thursday in Yokohama, Japan, Nakao told reporters he hopes for more cooperation with the Beijing-backed Asia Infrastructure Investment Bank.

We can complement each other,” Nakao said. “The financing needs are so large so we don’t need to regard the AIIB as a kind of a rival in that regard. We can cooperate,” he said, noting that the two lenders have already agreed on three co-financing projects.

The ADB has been led by Japan and the US since its founding in 1966, and China joined in 1986. Japan and the US have not joined the AIIB, and some critics question China’s motives, concerned it may use its financial heft to further its geopolitical influence without enough regard for the benefit or financial health of countries that may borrow from it.

Nakao said it was important for the projects supported by AIIB to be economically sound.

As a developing country, China still borrows from the regional lender, though these days much of that financing goes to mitigating the impacts of climate change, Nakao said.

The ADB has worked for a half-century to fight poverty and support the Asia-Pacific region’s ascent as a global center of growth, but poverty remains a daunting problem for such lenders. The more than 5,500 bankers and other leaders gathered in Yokohama are assessing how they can support growth as income inequality grows in both rich and poor countries.

In the early days, the Manila, Philippines-based ADB leadership sought a role as a “family doctor” in supporting its members, who now number 67, mostly in the farm sector.

These days the bank is more focused on lending for a wide range of projects, promoting good policies and supporting social sector projects, including clinics and schools — in addition to infrastructure such as bridges and roads.

The ADB, which commits about 70 percent of its spending to backing infrastructure development, estimates more than $26 trillion will be needed by 2030 for such projects. In 2016, it issued loans totaling $31.7 billion, up 18 percent from the year before.

Among many other projects, the ADB over the years has financed maternity clinics in Bangladesh, flood-control work in Chinese cities, tuna fishing in Indonesia, irrigation repairs in Nepal and fiber-optic cable connecting Tonga to the rest of the world.

The past 50 years have seen Asia’s share in global commerce more than double to nearly a third of the total in 2015. Meanwhile, average lifespans have growth to 74 years in East Asia and the Pacific and to 68 in South Asia, from 49 years and 45 years, respectively.

But about 60 percent of the 1.5 billion people living in extreme poverty, on less than $1.90 a day, are in Asia.

Nakao emphasised the need to maintain stability and keep trade open, though he said he did not think trade is suffering from backtracking on agreements such as the US withdrawal from a Pacific Rim trade pact, the Trans-Pacific Partnership.

“Of course free trade is important, but it’s too early to say that protectionism is harming Asia,” Nakao said.

“Even if some countries want to adjust arrangements I don’t think it will have a major impact on trade flows,” he said.