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Banking & Finance

ADB may let emerging countries raise stakes

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Takehiko Nakao   © Kyodo

FRANKFURT, Germany -- The Asian Development Bank appears open to allowing emerging countries to boost their stakes when the bank's capital is increased, potentially shifting the balance of power at an institution now led by Japan and the U.S.

Emerging economies can play a bigger role, ADB President Takehiko Nakao told reporters Monday on the first day of the bank's annual meeting here. Nakao indicated that a capital increase is a possibility if funds run short, noting that emerging economies have contributed greatly to the China-led Asian Infrastructure Investment Bank and can do so for the ADB.

While Nakao did not specify the timing or scale of a capital increase, negotiations are expected for 2017 or later. This would mark the first increase since 2009.

Japan is the ADB's current top shareholder, with a 15.6% stake. The U.S. comes in second at 15.5%. China and India have stakes of just 6.5% and 6.3%. Emerging countries have pushed to be allowed to contribute more, seeking a greater say reflecting the size of their economies.

While the ADB estimates infrastructure demand in Asia at $800 billion a year, its lending capacity amounts to just $20 billion. Emerging countries have thus expressed high hopes for the AIIB, whose charter took effect in December.

Nakao and AIIB President Jin Liqun signed Monday a memorandum of understanding for collaborating on infrastructure development in Asia. The two banks also agreed to co-finance a highway project in Pakistan to kick off lending operations by the AIIB.

Nakao expressed hopes of capitalizing on the ADB's experience, noting that the Pakistani project is expected to cost $300 million and that the two banks will contribute equal amounts.

Separately, the ADB will expand aid to developing economies. It will provide $3.8 billion in grants between 2017 and 2020 to such low-income countries as Afghanistan, Tajikistan, Laos and Myanmar. Of this, $3.3 billion will go into the Asian Development Fund, with Japan providing about 35% of new funding. And $500 million will be set aside for technological assistance.

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