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Economy

World Bank loan rules to stress long-term effects

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  © Reuters

TOKYO -- The World Bank plans to introduce new bidding rules for infrastructure loans, attaching greater importance to the long-term effects of development projects on the environment and people, sources said Tuesday.

The new rules will take effect in July.

The shift in focus comes amid concerns that as demand for large infrastructure loans increases worldwide, safety and environmental concerns may get short shrift because existing bidding procedures are designed to favor low bids.

The change is also seen as a way to check the influence of the China-led Asia Infrastructure Investment Bank, which is set to begin full operation soon.

Japan has been calling on the World Bank to review its lending criteria, in part because quality-based rules could give a boost to the country's infrastructure exports, something Prime Minister Shinzo Abe is keen to see. Abe is expected to promote quality infrastructure investment at the upcoming Group of Seven summit in Ise-Shima, western Japan. Other developed countries also favor tweaking World Bank loan criteria.

Under the new rules, in addition to construction cost, the bank will take into account other criteria, including carbon dioxide emissions, the impact of projects on local communities and companies' technical expertise. Up to half the score for evaluating bids will come from such qualitative criteria.

In terms of price, the bank will also verify whether long-term maintenance and repair costs are properly priced into project estimates.

Under the current rules, bidders such as multinational consortiums place bids for projects to build dams, power stations and other large-scale infrastructure in developing countries. The bank offers long-term loans to successful bidders at low interest rates. Those who fail to meet the new criteria will no longer be eligible for bank loans.

The change in lending criteria appears to reflect the bank's concern about the AIIB's growing influence. Thanks to its swift loan screening, the AIIB has been gaining support from emerging and developing countries. That may lower the bar for credit at the expense of project quality.

The World Bank is eager to cooperate with the AIIB in making syndicated loans, for instance. By setting transparent bidding rules and loan criteria, the bank appears to be trying to curb the China's influence over development financing.

(Nikkei)

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