econintersect .com

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 21 October 2017

Race To Finance Asia's Infrastructure Heats Up

by John West, Asian Century Institute

Asian Development Bank (ADB) president Takehiko Nakao told the 50th Annual Meeting of ADB's board of governors last week:

"Asia will need $1700bn per year in investments in power, transport, telecommunications and water through 2030. This is more than double our previous estimate,"

And yet, as Mr Nakao reported, while ADB's total operations last year achieved record levels, they only reached $31.7bn: a drop in the ocean relative to the region's financing needs.

Please share this article - Go to very top of page, right hand side, for social media buttons.

Stepping into this financing gap over the past year or so has been China's motivation to create the Asian Infrastructure Investment Bank (AIIB). This new bank's lending may be only slowly getting off the ground, but it already has more members than the ADB, and its authorised lending limit is also higher than the ADB's. The new competition from the AIIB has seen the ADB streamline its lending procedures and rush to approve new lending.

While the rivalry between the ADB and the AIIB is capturing international attention, the biggest race to finance Asia's infrastructure is between Japanese and Chinese national institutions. Lending by the Japan Bank for International Co-operation and the Japan International Co-operation Agency dwarfs that of the Japanese-led ADB, while the China Development Bank and the Export-Import Bank of China together lend many times what the AIIB will lend when it hits cruising speed.

"This funding race has many upsides," says Robert Wihtol of the Manila-based Asian Institute of Management. "The competition is increasing the total financing available for Asian infrastructure. And having numerous financial institutions increases the scope for joint financing, which can spread the risk inherent in large projects."

Mr Wihtol cautioned however that the race to finance Asia's enormous infrastructure also has its downsides. He says:

"Geopolitical rivalries can see projects of questionable value get rapidly approved, without proper preparation or cost-benefit analysis, thereby saddling borrowers with burdensome debt, as we have seen in Sri Lanka. And there are many examples of lenders not taking sufficient account of sovereign risk, most notably in the case of Venezuela. In this context, the advantage of multilateral banks like ADB and AIIB is that they conduct thorough risk analysis and due diligence."

This article was first published by FDI-Intelligence, a Financial Times magazine.


- Race to finance Asia's infrastructure heats up. FDI-Intelligence, 10 May 2017.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Opinion Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Opinion

Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved