A proposed Chinese-led regional bank is a potential partner for the Asian Development Bank (ADB) rather than a rival, and the ADB is talking with Beijing to share its experience, the head of the Manila-based lender said.
ADB president Takehiko Nakao’s comments came after Washington softened its opposition to the Chinese-proposed Asian Infrastructure Investment Bank (AIIB) and suggested it work together with existing entities such as the World Bank.
ADB is ready to collaborate with the AIIB if it meets environmental, social and other standards for lending, Nakao said in an interview ahead of yesterday’s release of the bank’s regional economic outlook.
Photo: EPA
US officials worry the bank might become an instrument of Chinese foreign policy and undermine the World Bank or other institutions by offering credit with few conditions.
“I think we can complement each other,” Nakao said.
China proposed the bank in 2013 to finance construction of roads, ports and other infrastructure. It has pledged to put up most of its initial US$50 billion in capital.
Britain broke with Washington last week to announce it wanted to join the Chinese-led bank. France, Germany and Switzerland followed.
The ADB has talked with Chinese officials to share its “knowledge and experience” based on its 50-year history and staff of about 3,000 throughout the region, former deputy Japanese minister of finance Nakao said.
In its economic outlook, the ADB said this year’s overall growth in developing Asia-Pacific countries should hold steady at last year’s 6.3 percent.
China is forecast to slow to 7.2 percent from last year’s 7.4 percent as the government tries to steer the economy to a more sustainable expansion and reduce reliance on trade and investment, the bank said. It said growth should decline further to 7 percent next year.
Growth in India, the region’s other economic giant, is expected to accelerate to 7.8 percent from last year’s 7.4 percent following regulatory changes aimed at removing “structural bottlenecks,” the bank said.
It said that should rise further to 8.2 percent next year.
The ADB says developing Asia-Pacific economies need about US$7 trillion in investment in roads, ports and other infrastructure in the decade through 2020.
The bank plans to step up its lending to as much as US$18 billion a year from the current US$13 billion.
Nakao said plans call for increasing credit for the poorest countries, such as Cambodia and Afghanistan, by about 70 percent, and lending and investing more in industries such as renewable energy.
On Sunday, the Wall Street Journal cited a US Department of the Treasury official, Nathan Sheets, as proposing that the new bank work in partnership with Washington-backed development institutions such as the World Bank.
“The US would welcome new multilateral institutions that strengthen the international financial architecture,’’ Sheets was quoted as saying.
JAPAN HESITATES
Japanese Minister of Finance Taro Aso yesterday said it would be desirable if the AIIB could work with the ADB in meeting growing demand for infrastructure financing in Asia.
However, Aso said that Japan was not ready to decide to join the Beijing-based bank by next Tuesday’s deadline, citing lack of transparency in the bank’s management.
“As demand for an absolute quantity of [infrastructure] financing is growing ... it’s not a zero-sum” game between the AIIB and ADB, Aso told reporters after a Cabinet meeting.
The problem is “that the AIIB is not transparent and nothing has been decided as to who is [involved], where to decide an executive board and who will examine” loans for each project, Aso said.
“It would be the most desirable that it will work together with the ADB to develop infrastructure in Asia, but it is hard to see it happen as rules are totally different,” he said.
Aso reiterated Japan’s concerns over the AIIB’s ability to sustain debt and respond to the environmental and social impacts of infrastructure development, which could affect existing loans by ADB, World Bank and other lenders.
“I don’t know how my previous remarks were taken, but Japan has been cautious all along,” Aso said. “As these conditions are not met at all now we cannot give the answer by March 31 unless we receive responses.”
Additional reporting by Reuters
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