Editorial: Financing Asia's infrastructure is a team sport
Public-private partnerships are the way to drive the region's development
Half a century has passed since the Asian Development Bank was established under the primary leadership of Japan and the U.S. The Manila-based multilateral development bank held its 50th annual meeting on May 4-7 in Yokohama.
Hopes are high that the Asia-Pacific region will continue to serve as a global economic growth center, and the ADB's role in making this happen is a big one. It is also imperative that the China-sponsored Asian Infrastructure Investment Bank becomes a true multilateral development bank. We want to see both the ADB and the AIIB contribute more than ever to developing infrastructure and reducing poverty in the region by joining hands with private financial institutions.
Japan was the first in Asia join the club of developed economies after World War II, with South Korea, Singapore, Taiwan and others following its lead. China, which has shifted decidedly toward reforms and open-door policies, has grown to become world's second-largest economy, trailing only the U.S.
Asia's share of the global economy surged from just over 10% in 1960 to more than 30% in 2015. Along with that growth came a marked fall in the number of people living in poverty. The ADB -- which counts Japan as its biggest source of capital -- and its investment and loan programs deserve credit for helping fuel that development.
A number of challenges confront Asia. The first is improving its infrastructure. The ADB estimates that the region's investment needs for building power, road and other systems will total $1.7 trillion a year between 2016 and 2030.
That is far more than what the ADB and the AIIB can support by themselves. That is why forming public-private partnerships is crucial. These initiatives will use funds provided by the multilateral banks as pump primers to attract loans from private lenders.
The ADB should not hesitate to deepen its cooperation with the AIIB. The Chinese-led lender is projected to eventually have more member countries and territories than the Japan-backed bank, but competing over membership numbers alone is meaningless.
The ADB has a staff of over 3,000 people, far more than what the AIIB employs. By sharing, even partially, their know-how in lending and expertise in assessing the potential of proposed projects with their counterparts at the AIIB, Asia's infrastructure can be developed much more efficiently.
INTANGIBLE SKILLS The election of Donald Trump, who promises to implement an "America first" doctrine as U.S. president, has made it difficult for the ADB to win Washington's consent for a capital increase for the bank. Under these circumstances, it is all the more important for the lender to display its intangible skills, such as the ability to apply sophisticated financial technology in devising solutions to such challenges as urban problems and climate change.
The AIIB has even greater challenges ahead. It may be Beijing's brainchild, but if it is to be trusted as a truly multilateral organization, it will have to maintain a certain distance from the Chinese government, have a solid system of governance and ensure a high level of transparency in its management.
In the more than one year that the AIIB has been operating, it has cultivated the image of a lender that has managed its business carefully, as many of its deals have been syndicated loans arranged together with the ADB or the World Bank. But because the AIIB has not yet been assigned credit ratings, its ability to reliably raise funds for lending remains uncertain. Its test is just beginning.