AIIB and ADB ink $300m Pakistan highway as first project

Wednesday, 4 May 2016 00:00 - - {{hitsCtrl.values.hits}}

ADB President Takehiko Nakao and Asian Infrastructure Investment Bank President Liqun Jin signed an MOU on joint project work at ADB’s 49th Annual Meeting in Frankfurt.

China-backed bank set to roll out co-financing with World Bank following pledge to uphold governance standards

By Uditha Jayasinghe in Frankfurt

China-backed Asian Infrastructure Investment Bank (AIIB) formally kicked off its first project to build a $300m highway in Pakistan on Monday in partnership with the Asian Development Bank (ADB).

ADB President TakehikoNakao and AIIB President Liqun Jin signed a Memorandum of Understanding (MOU) on the sidelines of ADB’s 49th Annual Meeting of the Board of Governors.

The agreement sets the stage for jointly financing projects though details have not been revealed. ADB and AIIB are already discussing projects for co-financing in the road and water sectors. The first of these projects is expected to be Pakistan’s M4 highway project, a 64-km stretch of motorway connecting Shorkot to Khanewal in Punjab Province.

The AIIB was formally launched in January after attracting dozens of Asian and European member countries, many of them US allies that ignored Washington’s concerns about the emergence of a Chinese rival to the World Bank and Asian Development Bank. Sri Lanka too is a member of the AIIB and Japan was the only major US-ally to abstain from membership.

ADB and AIIB agreed to strengthen cooperation, including co-financing, at the strategic and technical levels on the basis of complementarity, value added, institutional strengths and comparative advantages, and mutual benefit, the MOU states. Nakao denied that the Pakistan project was picked because of close relations between China and Pakistan insisting the project was already the “most mature” in the list and therefore ready to begin construction. He also stressed that the ADB would carry out most of the procurement and feasibility work on the ground as AIIB is still recruiting staff and would adhere to international best practices.

In an effort to counter the Obama administration’s initial criticism, the AIIB has said it will enforce governance standards on a par with those at the World Bank and ADB. In April the AIIB President, and his World Bank counterpart signed a framework agreement to work together on co-finance projects. The AIIB expects to approve about $1.2b in financing this year, including about a dozen projects with the World Bank that have not yet been announced.

“I am very pleased to have this framework of collaboration with a new and strong partner in Asia,” said Nakao. “ADB has been working closely with AIIB throughout its establishment process. We will further strengthen our cooperation in promoting sustainable growth, reducing poverty, and combatting climate change in the region.”

Through co-financing, knowledge work, and joint policy dialogue with member countries, the two institutions will work together in the areas including energy, transportation, telecommunications, rural and agriculture development, water, urban development, and environmental protection.

The two institutions will undertake regular high-level consultations and joint data collection to promote the implementation of the Sustainable Development Goals and the COP21 climate agreement.