Japan, the ADB’s biggest shareholder, is ramping up its support for Asian infrastructure with commitments totalling US$6.5bn from the Japan International Cooperation Agency.
JICA will sponsor a major new fund focusing on “quality and sustainable” infrastructure, named Leading Asia’s Private Infrastructure, or LEAP, which will go towards supporting private sector investments. The ADB will manage the fund, and expects to mobilise a total of US$6bn, once the usual leverage and co-financing multiples are applied.
JICA is also providing another US$5bn over the next five years to support long-term infrastructure projects through co-financing to sovereign borrowers. The ADB has pledged to match that commitment with another US$5bn of its own resources.
Some inside the bank say the Japanese initiative is a response to the arrival of the Asian Infrastructure Investment Bank and to China’s growing presence in Asia’s infrastructure arena. Japan and the US, who between them control over 31% of the ADB’s subscribed capital, are the highest-profile holdouts from the AIIB, the new multilateral conceived by Chinese President Xi Jinping.
Even before the AIIB becomes fully operational, China beat a Japanese bid for a US$5bn high-speed rail project in Indonesia, using finance from China Development Bank to support China Railway International and a consortium of Indonesian companies. Japanese contractors had long been considered the favourites for the project before the Indonesian government’s decision late last year.
With that in mind, support for “quality” infrastructure could be read as a way to promote Japanese exports in future projects over the lowest-cost solution.
Others see the Japanese investment as effectively a capital raising for the ADB that avoids placing the burden on other member governments. The LEAP fund will be structured as an ADB trust fund and managed by the bank’s private sector operations department, allowing the ADB to scale up its support.
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