The head of the Asian Development Bank yesterday insisted that he was not “scared, threatened or cornered” by the emergence of a slew of new infrastructure banks and alliances that are springing up around the world.
The Brics grouping of Brazil, Russia, India, China and South Africa is setting up what it calls the New Development Bank and China is leading plans for an Asian Infrastructure Investment Bank (AIIB). Meanwhile, this week saw the G20 endorse a plan for a Global Infrastructure Initiative (GIA) and the World Bank launch its own Global Infrastructure Facility (GIF).
But ADB president Takehiko Nakao told Emerging Markets that his bank and the other long-established multilateral institutions had a “comparative advantage” against the new upstarts.
“We do not feel scared, or threatened or cornered” by these proposed new institutions, Nakao told Emerging Markets in an interview. “We are happy that people are paying more attention to the importance of infrastructure.”
Some observers have claimed that these various institutions, along with the World Bank and a plethora of multilateral regional development banks, could end up falling over each other in a scramble to find attractive projects — with a consequent drop in lending standards.
Standards and “safeguards” must be maintained in the face of this onslaught, Nakao insisted. “Any institution should adhere to these standards and if they are [committed to doing that], the ADB is prepared to consider appropriate co-operation,” he said. “I don’t want to predict whether these [standards] will be good enough or not.”
POVERTY REDUCTION
The ADB’s most immediate potential new competitor is the AIIB, which will be headquartered in either Hong Kong or Delhi. “Advocates of the AIIB are saying that the ADB is for poverty reduction and the AIIB is for infrastructure but this is not true,” said Nakao.
The majority of ADB lending “is for poverty reduction but the purpose of infrastructure is poverty reduction,” Nakao stressed while emphasising the social as well as economic impact of providing developing countries with transport, power, communications and other basic infrastructure.
“Our position on the AIIB is that it is understandable given the need for infrastructure,” he said. But he pointed out that “the ADB has been in existence since 1966 and has a long track record of discussion with national authorities and adherence to high standards”.
Some have argued that new development banks will be more nimble and effective than existing development bureaucracies and will be able to implement projects faster and at lower cost. But projects approval has to be sought from national parliaments and other authorities and that takes time, Nakao said.
He acknowledged, however, that the ADB and other existing development institutions needed “to pay even greater attention to the efficiency and relevancy” of their institutions in the face of increasing competition.
He declined to comment on the Brics Bank and was cautious also on the World Bank’s GIF and the G20’s GIF, both of which aim to pool information and resources on infrastructure projects.
“Sharing of information on bankable projects is good but sometimes people don’t want to share information if there is a really good project,” he said. “How people can share information [may be an issue]. It is easy to say it is better to share information but how to do it. The modus operandi has still to be worked out.”