Under pressure from the newly-formed Asian Infrastructure Investment Bank (AIIB), the Asian Development Bank (ADB) has announced plans to reform its lending programme.
Speaking at the ADB annual meeting in Baku, Azerbaijan, its Japanese Chairman Takehiko Nakao announced plans to combine the lending operations of the Asian Development Fund with those of its ordinary capital resources (OCR) balance sheet.
OCR will triple in size, to some US$53bn, from US$18bn currently, while the merger will see a bigger roll-out in concessionary loans to poorer countries. It will see the bank boost lending to poorer members by up to 70%, or from around US$6.5bn to up to US$11bn.
Nakao said that the merger, due to be completed in January 2017, would allow the development bank to boost its total annual lending and grant approvals to US$20bn – a 50% increase on current lending and guarantee levels.
Nakao said: “This initiative is a win-win-win situation because it increases financial support for poorer members, expands capacity for operations in middle-income countries and the private sector, and reduces the burden for ADF donors.”
The ADB may be based in Manila, but is viewed as being dominated by Japan, which alongside the US, is the bank’s largest shareholder. China, the regional superpower, has just a 6.5% stake in the ADB, a fact which analysts say has directly helped lead to the formation of the AIIB.
The announcement over reforms will be seen as an effort by the ADB to reassert its relevance on a region, at a time at which its influence appears to be waning.
And while the ADB is keen to push a collaborative future with its new rival – the first multilateral development bank to challenge the hegemony of the World Bank-led Bretton Woods outfits – the announcement over reforms will be seen as an effort by the ADB to reassert its relevance on a region, at a time at which its influence appears to be waning.
Also speaking at the ADB meeting was Japan’s Deputy Prime Minister and Finance Minister Taro Aso, who used the opportunity to announce plans to expand Japan’s support for infrastructure development.
Alongside the US, Japan was a high-profile absentee from the founding members of the AIIB, despite the presence of allies including Germany, the UK, South Korea and Australia. Aso, however, was keen to champion Japan’s plans for regional development.
He said that the country would harness the private sector along with the resources of the Japan International Co-operation Agency (JICA – a public sector body), which will collaborate with the ADB in offering syndicated loans.
He said: “We’re going to promote a new initiative to encourage investments for quality infrastructure. We’ll also aim to expand investments in infrastructure quantitatively.”