YOKOHAMA: The Japanese-led Asian Development Bank (ADB) will cooperate with China's Asian Infrastructure Investment Bank (AIIB) to address the region's massive infrastructure needs under Beijing’s ‘One Belt, One Road’ (OBOR) initiative, the bank’s chief said on Thursday.
"We don't need to regard the AIIB as a rival … there is a very large need to finance for the region’s infrastructure development, so we can cooperate,” ADB president Takehiko Nakao said at the start of the bank's four-day annual meeting in Yokohama. "It's a good idea to connect countries and to promote activities in this region."
Nakao’s remarks cool down widespread concerns that the Asian Infrastructure Investment Bank will pose a threat to the ADB's operations in the region, where two Asian giants are competing for influence through development finance.
The ADB has been led by Japan and the US since its founding in 1966, and China joined in 1986, while Japan and the US have not joined the Asian Infrastructure Investment Bank. "We can cooperate because we have similar ideas," Nakao told a news conference.
The ADB estimates Asia needs to invest $26 trillion from 2016 to 2030, or $1.7 trillion yearly, to meet its infrastructure needs. At present, only 2.5 percent of total infrastructure investment is funded by multilateral lenders.
The ADB, which commits about 70 percent of its spending to backing infrastructure development, issued loans totaling $31.7 billion in 2016, up 18 percent from the year before.
Nakao said the ADB and the AIIB have agreed to co-finance three projects - two last year and one this year. The two development finance institutions have jointly funded a highway project in Pakistan, a natural gas field upgrade in Bangladesh and a bypass road in Georgia since the Chinese-led multilateral development bank started operations in 2015.
“The vast need of infrastructure finance in Asia means that the ADB and the Asian Infrastructure Investment Bank can cooperate and complement each other, instead of considering each other as rivals,” Nakao added.
"Because we have different objectives and different kind of ideas about management, I think we can complement each other.”
Nakao noted that the two lenders have discussed how they can use local currencies for financing instead of dollars, how they can enhance expertise by their staff and how they can secure environmental and social safeguards.
Nonetheless, he warned that it was important for the Japanese lender to pay attention to the economic feasibility of some of the projects linked to China-funded ‘Belt and Road’ initiative, particularly in Central Asia.
The ADB, he said, will not need to change its business model because of the social-sector needs for funding. "We will continue to support the social sector, besides infrastructure.” Nakao said the protectionism in the US and European economies would hurt Asian growth in the near-term.
“Although Asia has achieved a lot, there are many challenge to tackle,” he said and added, “Rising protectionism has yet to affect Asia's growth outlook, the region should keep up efforts to lower trade barriers; negotiations on proposed free trade agreements must continue, along with bilateral arrangements.”
The ADB leader also addressed the threat posed by rising geopolitical tensions and the need for stability. “If we cannot keep the stability, we'll lose much. Leaders of Asia must make efforts to keep the stability in the region.”
More than 5,000 delegates from the ADB's 67 members, including finance ministers and cetral bankers, have flocked to Japan to tackle some of the region's most pressing development issues. The four-day (May 4-7) “50th ADB Annual Meeting Yokohama 2017”, being held in Japan, is aimedat addressing a wide range of challenges.
These include mobilising private-sector funds for infrastructure projects, coping with aging societies, addressing income inequality as the middle class continues to grow, sustaining the region's economic expansion, and making cities more resilient to the threat of climate change.
