Quick Take: ADB still has more muscle than the AIIB

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Quick Take: ADB still has more muscle than the AIIB

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It has been almost a year since the Asian Infrastructure Investment Bank (AIIB) was formed, but the Asian Development Bank (ADB), the institution pundits say the AIIB was set up to
usurp, has had a much busier year investing in China and across Asia.
Since it was launched in January 2016, the AIIB has approved eight projects in Oman,
Myanmar, Pakistan, Bangladesh, Tajikistan and Indonesia totalling just over $1 billion. This
compares to the 126 projects the ADB has approved over the course of 2016, with latest
annual figures showing total investments (loans and grants, technical assistance, and co-
financing) at a record $27 billion in 2015.
In 2015 the ADB approved just two projects in China worth $250 million. By contrast 2016
was a completely different story – the Bank approved 15 projects worth over $2 billion. The
heavily Japan-funded ADB’s investments in China are possibly part of Japan’s efforts to
market its infrastructure investments as superior to China’s under its “Partnership for Quality Infrastructure Initiative,” of which the ADB is a key partner.
The two largest ADB-funded projects were worth almost $1 billion alone and were approved
in December. They include an air quality improvement scheme in the Greater Beijing-
Tianjin-Hebei region and a project aimed at strengthening economic integration between
Guangxi province and ASEAN nations. The Bank approved more projects in China than in
any other country and more than twice as many as in second-placed Vietnam.
In other words, the ADB is still far larger in scale and ambition than the AIIB. It has a capital base of $160 billion, compared to the AIIB’s $100 billion. It aims to increase its total annual
loans and grants (not including technical assistance and co-financing) from $13 billion in
2014 to $20 billion in 2020, whereas the AIIB intends to lend between $10 billion and $15
billion a year in its first five to six years.
Under its president Takehiko Nakao, the ADB is pushing a “stronger, better and faster”
strategy by devolving to its resident missions in Asian countries more authority over
managing projects, The Economist has reported. Last year the ADB also announced that it
was lowering the interest it charges on loans, making it a cheaper lender than the AIIB, which charges more commercial rates. In this way, the ADB is challenge the AIIB’s stated aim of
making loans with less strings attached.
The ADB and AIIB reached a deal in May 2016 which paves the way for co-financing of
projects, but the ADB’s increased investments are likely to be part of Japan’s efforts to
compete with China on funding infrastructure projects in Asia. Japan’s Prime Minister
Shinzō Abe this year pledged $200 billion to fund infrastructure projects in Asia and Africa
over the next five years and has personally secured deals in Central, South and South-East
Asian nations.
The ADB celebrated its 50-year anniversary this year. So far at least, 2016 looks set to prove
the AIIB will not easily eclipse the Japan-backed ADB, which is loath to give up its position
as one of the key investors for economic development in the wider Asia region.

- Matt Lomas