The Asian Development Bank must find new sources of
co-financing if it is to maintain its current levels of
lending, ADB managing director Rajat Nag said in an interview
with Emerging Markets.
The banks role as a catalyst of external funds to help
finance Asias massive infrastructure needs has been
beefed up during the annual meeting through a series of
On Friday, the bank signed a deal worth around $2 billion
with the Eurasian Development Bank to help fund infrastructure
projects, and a public-private partnership (PPP) deal with
International Enterprise (IE) Singapore.
The ADB is currently lending around $10 billion a year from
its ordinary capital resources plus $3 billion of soft loans
from the Asian Development Fund. Last year the ADB arranged
co-financing totalling $8 billion making $21 billion in
However the challenge of closing the funding gap still
remains huge, according to Nag. One curve that is going
straight up is co-financing but it is nowhere near where we
have to get it, he told Emerging Markets.
The European Investment Bank (EIB) has doubled its
allocation to Asia and we are working with them much more
closely and aggressively than we have in the past, said
Nag. The ADB also co-finances with institutions such as the
Japan Bank for International Cooperation (JBIC) among
But I still think that the bulk of [co-financing] will
have to come from the private sector, such as
public-private partnership [deals] because in a way the
official [contributions] are a zero sum game because if we did
not do it someone else would, said Nag.
ADB president Takehiko Nakao told Emerging Markets
that the banks investment income was falling short of
target as a result of low interest rates and that co-financing
must be stepped up if the ADB is to maintain its own lending
Regional development banks and other institutions find
co-financing with the ADB attractive due to the Manila-based
banks close knowledge of Asian countries, Sergei
Shatalov, deputy chairman of one of the Eurasian Development
Banks funds told Emerging Markets.
It is always valuable to partner with an institution
which has longer experience, which is present [in a country]
and with which you can allocate risk more efficiently,
The ADB also signed a letter of commitment with
International Enterprise in Singapore under which the two will
launch a PPP scheme to catalyze infrastructure development
The ADB has already become an equity partner in the ASEAN
Infrastructure Fund (AIF) and it may be possible in time for
investors to buy infrastructure bonds backed by the ADB and
AIF, said Nag. But I think we are still some distance
away [form that] because we first have to establish a track
record for the fund, he said.
Sovereign wealth funds are a major potential source of
co-financing for infrastructure projects. But Nag said: I
sense reluctance for them to step in yet. Everyone is waiting
for a track record and of course you cant build a track
record until you get started.
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