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Indonesian Finance Minister Sri Mulyani Indrawati says the Japan-backed ADB and the China-led AIIB can play off each other's strengths.
Economy

Indonesia minister: Japan, China rivalry good for Asian infrastructure

Finance head says cooperation needed between ADB and AIIB

YOKOHAMA -- Competition between Japan and China to build infrastructure in the region is healthy and will help the development of Asian countries, Indonesia's Finance Minister Sri Mulyani Indrawati told Nikkei Asian Review on Thursday.

Japan is advocating the construction of "high quality infrastructure" in Asia and is keen to push through such initiatives with the backing of the Asian Development Bank, with which it has a close relationship. On the other hand, China is offering an alternative to Asian nations with funding from the Asian Infrastructure Investment Bank, the formation of which Beijing spearheaded.

"This is a good competition," said Indrawati, who was in Yokohama to attend the annual ADB meeting. "You do not want to build infrastructure, high quality but [that the] people cannot afford and [the] country cannot afford ... With the combination of pressure which is coming from China, [and] many other players, that creates a competition that will reduce the cost."

The minister also noted that the high standards set by Japan in terms of the impact of infrastructure on the environment and society, as well as governance, will also serve to pull China and the AIIB in line.

"I really appreciate the Japanese infrastructure ... I know that they are using a social environmental standard as well as procurement standard which [is] very strong. We don't want to compromise that," she said. "This creates a pressure also for the AIIB to not say I can deliver you with fast, cheaper but then less quality or pollute the air. I think that is not the way that we as ASEAN [is trying] to establish," referring to the 10-state Association of Southeast Asian Nations.

Ultimately though, the minister said that cooperation between the ADB and AIIB would be crucial in meeting the vast infrastructure needs in Asia. The ADB estimates that Asia will need to invest over $26 trillion in infrastructure by 2030 if it wants to keep economic growth momentum.

Indrawati said that despite the AIIB's deep pockets, it was still new to the game and not yet "fully staffed" and "skilled in preparing" projects. The minister said that these aspects were where the two multilateral development banks could cooperate, pointing to previous examples.

"Sometimes [a] project has been designed and developed by the World Bank, and it is only providing 10% [of the financing] and ADB provided the rest of it," Indrawati said. "AIIB is going to continue to look for potential projects which are ready enough for it so they can just lend the money without thinking or preparing the project themselves. This [will be] a good [chance for] collaboration [with] ADB who have more experience and project preparation."

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