Home International ADB and AIIB sign a major infrastructure deal for Pak

ADB and AIIB sign a major infrastructure deal for Pak

Frankfurt, May 03, 2016: In a landmark announcement, the Asian Development Bank (ADB) said here on Monday that it will partner with the newly formed Asian Infrastructure Investment Bank (AIIB) to finance a major highway project in Pakistan. The announcement sets the stage for joint projects between two regional banks, widely perceived to be as rivals, potentially benefiting even Nepal.

This is a big development and holds a strategic meaning given the suggestion that the two major Asian banks could have competing interests to fund infrastructure development in the world’s fastest growing region—the Asia-Pacific.

The agreement was signed on the sidelines of the ADB’s 49th annual meeting of its board of governors, which has a huge global interest. Though these annual meetings usually take place in ADB member countries in Asia-Pacific, the German business hub of Frankfurt has been the host this year.

The ADB-AIIB signing on Monday sets the stage for jointly financing projects and the two major players in the global stage are already talking about co-financing the road and water sectors, with Pakistan’s MF highway, a 64-kilometre stretch of
motorway linking Shorkot to Kahenwal in its Punjab province.

ADB and AIIB agree to strengthen cooperation, including co-financing, at the strategic and technical levels on the basis of complementarity, value added, institutional strengths and comparative advantages, and mutual benefit, said a joint statement released after ADB President Takehiko Nakao and AIIB President Liquan Jin signed a memorandum of understanding. “I am very pleased to have this framework of collaboration with a new and strong partner in Asia,” said Nakao. “ADB has been working closely with AIIB throughout its establishment process.”

When asked if the ambitious trans-Himalayan connectivity for Nepal and South Asia was a possibility ADB-AIIB partnership, ADB President Nakao said, “Regional connectivity has been ADB’s focus for a while.” He said that ADB considers regional connectivity in Nepal, India, Pakistan and Central Asia as important.

Though the Pakistan project was announced here early Monday, ADB and AIIB have kept short of spelling out other names as yet.

At its first annual meeting in Germany, 3,000 government officials, academics, business and civil society representatives and the media are present.

The theme for the meeting this year is “Cooperating for Sustainability.”

Frankfurt is a perfect fit given that it was named the world’s most sustainable city last year, said the ADB president.
Germany is also a founding member of ADB and one of its most important stakeholders and one of the largest donors of the Asian Development Fund.

The ADB president has expressed optimism at the region’s economic outlook, a fact not lost on the observers here, not least on Germany whose leader Angela Merkel is addressing the ADB gathering later Monday.

The Asia-Pacific region as a whole is projected to grow by 5.7 percent in 2016, with factors like young population and growing middle class giving it a strong long-term growth potential.

“The middle class is expanding, providing a basis for strong consumption,” said ADB President Nakao at the press conference. “There is still much scope to grow to catch up with advances economies.” This however does not mean that the growth will happen naturally in Asia.

Investment in infrastructure, human capital and technology and improvement in business climate remain key to achieving full growth potential.

With the merger of its Asian Development Fund lending operations and Ordinary Capital resources starting next year, ADB will be able to expand its annual loan and grant approval by 50 percent, from $13 billion in 2014 to more than $20 billion by 2020.

ADB is a major donor to Nepal.

The Melamchi Drinking Water project, Tribhuvan International Airport upgradation project, 140MW Tanahun Hydropower Project, transmission line projects under South Asia Sub regional Economic Cooperation Power System Expansion Project are among the key projects it has funded.