The Japan-led Asian Development Bank (ADB) unleashed measures that could help it hold its ground as a resource for regional economies, even as China’s Asian Infrastructure Investment Bank (AIIB) gains prominence.
The ADB overhauled a four-decade-old development fund to boost its annual lending and grant approvals by 50 percent, to as much as US$20 billion, the bank said at its annual meeting in Baku, Azerbaijan, that started on Saturday. It will also set aside money to support public-private partnership projects and work with the AIIB “for Asia,” the ADB said.
“Now that the China-led AIIB is becoming a reality, the Japan-led ADB wants to ensure that it will still remain a key funder for infrastructure programs in less-developed Asia,” said Wai Ho Leong, a Singapore-based economist at Barclays PLC. “Given the development needs across Asia, there is sufficient room for both players.”
For almost 50 years, Asian nations from India to Vietnam and Indonesia have benefited from funding from the ADB, which is dominated by Japan and the US. That relationship is set to change as the rise of the AIIB provides an avenue for China to strengthen its presence in the world’s fastest-growing region.
“Chinese authorities say AIIB will not compete, but complement ADB,” ADB president Takehiko Nakao said after meeting for an hour with AIIB interim head Jin Liqun (金立群) in Baku on Friday last week. “It’s good for Asian region to have more resources.”
Nakao reiterated ADB’s readiness to work with the AIIB, including cofinancing, as 80 percent of ADB projects are about infrastructure.
In a move it described as “groundbreaking,” the lender said it would combine the lending operations of the bank’s Asian Development Fund with its ordinary capital resources balance sheet, with the merger taking effect in 2017. The fund was established in 1973 to provide concessional loans and grants to poorer countries, while ordinary capital resources loans are provided to middle-income countries at market-based rates.
The initiative will increase ADB assistance to poor countries by as much as 70 percent, and together with cofinancing, enable the bank’s annual assistance to reach as high as US$40 billion in the coming years from US$23 billion last year, it said.
Separately, it said it would create a US$150 million fund by the end of this year to help members conduct feasibility studies for public-private partnership projects.
“The recent announcement by ADB over the weekend and the formation of AIIB suggest we are on the cusp of a sweet spot where infrastructure financing and political will for new infrastructure collide,” said Weiwen Ng, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd.
Japan holds the biggest voting power in the ADB, at 12.84 percent.
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