YOKOHAMA, Japan – The Asian Development Bank (ADB) is cooperating with the Asian Infrastructure Investment Bank (AIIB), rather than competing with each other.
This is what ADB President Takehiko Nakao emphasized on Thursday, May 4, at the bank’s 50th annual meeting here, when asked by a journalist how ADB is different from the Beijing-based bank.
After he gave some examples of their differences – including ADB’s commitment to the social sector, its concessional fund, its policy-based lending, and its larger number of member countries – Nakao clarified the two banks have their respective strengths.
“I don’t mean to speak ill of AIIB,” he said, adding that a ADB has a “long history of experiences,” which contributes to it’s strengths.
“Media tries to make a rivalry of AIIB and ADB, as if we have a confronting relationship. But there’s no need for that,” he said.
The China-backed Asian Infrastructure Investment Bank (AIIB), viewed by some as a rival to the World Bank and the ADB, was formally established in late 2015. The United States and Japan – the world’s largest and third-largest economies, respectively – have notably declined to join the bank. China is also a member of the ADB.
Nakao said the two banks can cooperate despite its differences, since the need for infrastructure financing in the region is massive. He said that about 70% of ADB’s lending goes to infrastructure projects, and that $1.7 trillion is needed for infrastructure investment in Asia.
“We can play a certain role, but the financing needs are so large, so we don’t need to regard AIIB as a kind of rival because there is a very large need for finance, so we can cooperate,” he said.
“Of course we have different objecives and different kinds of ideas about management, but I think we can complement each other.”
Nakao said he met with with AIIB President Jin Liqun 9 times in the last two years, to discuss co-financing projects and already agreed on 3 projects of cooperation.
He said they also discussed how the two banks can use a local currency for financing, how expertise by the staff can be shared, and how enviornmental and social impact safeguards can be secured.
This year’s annual meeting is focused on the region’s growing need for infrastructure to achieve sustainable and inclusive development.
PH infrastructure lags
Also in Japan is Philippine Budget Secretary Benjamin Diokno, who is a member of the Philippine delegation attending the annual meeting. In an ADB-related summit, Diokno discussed the Philippines’ infrastructure gap due to years of underinvestment.
“[T]he Philippines has not spent more than 3% of its GDP for public infrastructure, and it’s not surprising why: the level of public debt was huge; the costs of servicing it was high; and its revenue-to GDP ratio was low. Of course, it did not help that it had a string of fiscal conservatives running its fiscal policy,” he said.
He also said that the country’s overall infrastructure rank has steeply declined from 94th in 2009 to 112th in 2017.
“The Philippines’ infrastructure indicators consistently result to dismal scores that pull down its overall competitiveness. For overall infrastructure, we lag behind our ASEAN-5 neighbors, especially Thailand, Malaysia, and Singapore,” he said.
Diokno said the Duterte administration will focus on infrastructure development, appropriating P847.2 billion, or $17 billion, for infrastructure in the 2017 national budget. He said this level of investment will be sustained, such that P8 to P9 trillion, or $160 to $180 billion, will be spent on public infrastructure for the next 6 years.
The Philippines is a member of both the ADB and AIIB.
Nakeo, in an interview with The Banker, said he was not concerned about the Duterte administration’s economic policy, despite the negative attention the Philippines has been getting due to president Rodrigo Duterte’s drug war.
“If I look at the secretary of finance or the secretary of NEDA (the National Economic and Development Authority), they are very competent and professional people. Our relationship with the Philippines remains smooth,” he said.
“There is a view that Mr. Duterte’s government is very pragmatic and has [the] capacity to implement reform.” – Rappler.com
ADB HQ photo from Wikimedia