The head of the Asian Development Bank has given a strong signal he sees a key role for the China-led Asian Infrastructure Investment Bank, fuelling speculation the two bodies have reached a tacit deal not to engage in turf wars.
ADB president Takehiko Nakao said that “additional effort” was needed, particularly in terms of addressing the region’s infrastructure deficit.
In an interview with Emerging Markets, Nakao indicated his belief that there was room for a new player on the Asian development scene.
“The $8tr infrastructure deficit we estimate for the period from 2010 to 2020 continues to be a defining development challenge for Asia and the Pacific,” he said.
Taken together, all existing source of finance would “help address this deficit, but additional effort is needed”, Nakao stressed.
When the ADB president paid a visit to Jin Liqun, president-elect of the AIIB, at the office of the AIIB Interim Multilateral Interim Secretariat in Beijing in September the two men were all smiles as they discussed the need to “deepen co-operation between [their] two institutions”.
This contrasted with the rather defensive statement that the heads of all the major regional development banks including the ADB — plus the IMF — signed last year urging their member countries to be wary of dealing with “new entrants”.
EURASIAN DEVELOPMENTS
The cordiality and closeness of the Nakao-Jin relationship now appears to reflect more than the fact that Jin was once a vice president at the ADB, insiders said.
It suggests that the AIIB’s geographic and sectoral emphasis will be different from that of the ADB.
The AIIB is expected to devote itself largely to supporting Chinese president Xi Jinping’s grand plan for building Eurasian infrastructure networks, rather than going head to head with the ADB on a full spectrum of development projects throughout Asia.
In fact, the AIIB is more likely to serve as a “platform for co-operation” between the AIIB and the ADB, Yuqing Xing of the Graduate Research Institute for Policy Studies (GRIPS) in Tokyo told Emerging Markets.
In other areas of Asian infrastructure provision, needs are vast, Nakao said. “About half of the estimated $8tr in infrastructure [needs are] in energy and electricity. The need in telecommunications and transport is over $3.5tr and the remainder in water and sanitation.”
The ADB’s priority is “cleaner and greener infrastructure projects, in clean energy, energy efficiency projects, sustainable transportation or urban and rural water supply”.
In the few public comments that he has made so far on the role of the Beijing-based AIIB, Jin has indicated the new lending institution, which is due to begin operations early in 2016 will also be a “clean and green” as well as administratively “lean” institution.
The claim by the AIIB that it is “leaner” — and therefore more efficient — than other multilateral lending institutions has struck a chord, if not exactly a nerve, with Nakao. “Since I became president in April 2013 I have been initiating [various] reforms” at the ADB, he said.
He cited as examples “streamlining procedures, delegating more authority to resident missions closer to the ground” than the ADB’s head office in Manila, as well as “expanding lending capacity, strengthening private sector operations”.