BackAIIB, ADB to finance $300 million highway project in Pakistan
The project is a 64-km stretch of motorway connecting Shorkot to Khanewal in Pakistan's Punjab province
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Frankfurt: Amid apprehensions about China pushing its own agenda through the new multilateral lending agencies that it is pioneering, the China-led Asian Infrastructure Investment Bank (AIIB) agreed to finance its first infrastructure project in Pakistan jointly with the Asian Development Bank (ADB).
ADB president Takehiko Nakao and AIIB president Liqun Jin signed a memorandum of understanding (MoU) in Frankfurt on Monday, on the sidelines of ADB’s 49th annual meeting of the board of governors, for the M4 highway project, a 64-km stretch of motorway connecting Shorkot to Khanewal in Punjab province.
What makes the project all the more puzzling is that it is yet to be discussed by the board of governors of either institution. An ADB official speaking on condition of anonymity clarified that the MoU does not need approval from the board of governors of the two institutions. “We expect the financing of the project to be approved by the board of governors of both agencies in June," the official added.
India is represented in the board of governors in the AIIB, being the second largest shareholder with 7.5% voting share in the institution. China is the largest shareholder with 26.06% voting shares, while Russia and Germany have 5.93% and 4.5% shares, respectively.
Nakao, in a press briefing, ruled out any link between China’s cordial relationship with Pakistan and finalization of the project. “We have so many projects in the list in many countries. It just happened that the Pakistan project was approved first because it could be done quickly," Nakao said.
The $300 million cost of the project will be evenly shared between the two agencies.
Nakao said ADB will be in charge of procurements and safeguards. “We will take more burden, but may ask for a fee to administer the project," he added.
ADB and AIIB agreed to strengthen cooperation including co-financing at the strategic and technical levels on the basis of complementarily, value-added institutional strengths and comparative advantages and mutual benefits, the MoU stated.
Through co-financing, knowledge work, and joint policy dialogue with member countries, the two institutions will work together in areas including energy, transportation, telecommunications, rural and agriculture development, water, urban development and environmental protection, a statement from ADB said.
India joined the Beijing-based $100 billion multilateral lender with some trepidation about the kind of infrastructure projects China may want to push through.
The New Development Bank (NDB) created by the five-member Brics (Brazil, Russia, India, China and South Africa) group and the AIIB were seen as the first credible challenge put to the 70-year-old Bretton Woods institutions of World Bank and the International Monetary Fund. NDB was created at the sixth Brics Summit in Fortaleza, Brazil in 2014 after India’s demand for equal shareholding was accepted at the summit.
But India’s attempt to host the headquarters of the bank was thwarted and China garnered the group’s support to locate it in Shanghai. India had to be content with the first presidentship of the bank.
Asked if a similar kind of co-financing arrangement is being looked at with NDB, Nakao said he had talks with its president K.V. Kamath on the issue.
“We had agreed that if there is opportunity for co-financing we will look at it," Nakao said, adding that at the moment, there is nothing in the pipeline.
Nakao said emerging economies must come forward for some capital infusion in ADB in exchange for higher voting rights. Though Nakao said at present only general discussions have been held in this regard, he added that he would like India to come forward and make such a capital infusion.
India’s finance minister Arun Jaitley and economic affairs secretary Shaktikanta Das are scheduled to attend the meeting later this week which is expected to focus on “Cooperation for Sustainability".
The writer is in Frankfurt on the invitation of ADB to attend its 49th annual meeting.
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