ADB takes stock as US policy shifts
Japan, China to boost financial ties amid protectionist tensions
YOKOHAMA:
Accelerating growth in Southeast and South Asia can help make up for slowing momentum in China but it requires smart investments in infrastructure and technology, the president of the Asian Development Bank said yesterday as the regional lender started a meeting of its board of governors.
ADB President Takehiko Nakao and other leaders of the regional lender said investments should concentrate on high-quality projects and technology should be made available to all as countries stretches to make up for shortfalls in needed spending, they said. Nakao said he was optimistic about the outlook for Asia, which contributes about half of world economic growth. Overall growth is forecast at 5.7 percent in 2017 and economies in India, Bangladesh, Indonesia, Myanmar, the Philippines and Vietnam are gaining momentum. The unstated backdrop to the meeting is Japan’s continued strong role in the ADB at a time when the administration of US President Donald Trump has adopted an “America first” stance and China is pushing ahead with its own infrastructure initiatives.
Opening the meeting in the port city of Yokohama, Finance Minister Taro Aso said Japan, the biggest donor to the ADB, would contribute $40 million to a fund promote use of high technology. Aso said that as the Manila, Philippines-based ADB marks its 50th year it should adopt a “strong strategy” to ensure it remains a “highly relevant institution at a time when needs for investment in infrastructure such as power generation, sanitation, roads and ports are growing in both “quantity and quality.”
The ADB estimates more than $26 trillion is needed for ports, power, water and other infrastructure in the region by 2030, or over $1.7 trillion a year. The current level of spending is below $900 billion.
Aso said the regional lender should generally prioritize poorer countries in allocating its financing while helping “upper middle income” countries with expertise in such areas as environmental protection. Aso welcomed moves to reform purchasing procedures to “put more emphasis on quality.”
“I encourage the bank to continue to move in this direction,” he said. The policy shift under Trump is raising questions over the strength of the US commitment to multilateral organizations like the ADB, raising questions about how to increase financing and make it as effective as possible.
Nakao, the ADB president, said the lender was working to find ways to streamline its operations and deepen collaboration with local governments and the private sector. Co-financing with other banks, including the China-backed Asia Infrastructure Investment Bank, and with the private sector has become an increasingly important source of support, involving $13.9 billion of the total $31.7 billion in funds allocated last year by the bank.
Japan-China talks
Japan and China agreed to bolster economic and financial cooperation, Japanese Finance Minister Taro Aso said yesterday, as US President Donald Trump’s protectionist stance and tension over North Korea weigh on Asia’s growth outlook. Chinese Finance Minister Xiao Jie, who missed a trilateral meeting with his Japanese and South Korean counterparts on Friday for an emergency domestic meeting, had flown in for the talks with Aso, seeking to dispel speculation his absence had any diplomatic implications.
“We actively exchanged views on economic and financial situations in Japan and China and our cooperation in the financial field,” Aso told reporters after the meeting, which included senior finance ministry and central bank officials.
“It was significant that we reconfirmed the need of financial cooperation between the two countries while sharing our experiences in dealing with economic policies and structural issues,” he added. The two countries agreed to launch joint research on issues of mutual interest - without elaborating - and to report the outcomes at the next talks, which will be held in 2018 in China.
They did not discuss issues such as currencies and geopolitical risks from North Korea’s nuclear and missile program during the dialogue, held on the sidelines of the Asian Development Bank’s (ADB) annual meeting in Yokohama, eastern Japan, Aso said.
Relations between Japan and China have been strained over territorial rows and Japan’s occupation of parts of China in World War Two, though leaders have recently sought to mend ties through dialogue. Still, China’s increasing presence in infrastructure finance has alarmed some Japanese policymakers, who worry that Beijing’s new development bank, the Asian Infrastructure Investment Bank (AIIB), may overshadow the Japan-backed ADB.
Shortly before the bilateral talks on Saturday, Xiao voiced hope that the ADB will boost ties with China’s high profile “One Belt One Road” infrastructure development initiatives.
“China hopes the ADB ... strengthens the strategic ties between its programs and the One Belt One Road initiative to maximize synergy effects and promote Asia’s further development,” Xiao told the ADB’s annual gathering. Japan and China do agree on the need to respect free trade, which they see as crucial to Asia’s trade-dependent economies.
Finance officials from Japan, China and South Korea agreed to resist all forms of protectionism in Friday’s trilateral meeting, taking a stronger stand than G20 major economies against the protectionist policies advocated by Trump. China has positioned itself as a supporter of free trade in the wake of Trump’s calls to put America’s interests first and pull out of multilateral trade agreements. Japan has taken a more accommodative stance toward Washington’s argument that trade must not just be free but fair. —Agencies