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ADB, AIIB sign MoU to co-finance M-4 Section of motorway

By Mehtab Haider
May 03, 2016

FRANKFURT: The Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) on Monday signed a Memorandum of Understanding for co-financing mutually agreed projects and both sides selected the first project from Pakistan to provide financing in the range of $200 to $300 million to build a road in Punjab from Shorkot to Khanewal as M-4 part of the motorway.

The AIIB will co-finance $100 million and the remaining amount will be financed by ADB, other donors and government of Pakistan.“Pakistan’s road project was more mature so it happened in that way. Both ADB and AIIB will do cost sharing of $300 million road project in Punjab province that will contribute to ensure connectivity of South Asia with the Central Asian States,” the ADB’s President Takehiko Nakao said in the opening press conference of the three-day 49th annual meeting of ADB here on Monday.

The ADB’s president refused to disclose other projects identified for co-financing by the ADB and AIIB and said that the mature projects would be disclosed in months ahead. The ADB, he said, possessed expertise on managing projects at ground in terms of technical preparation and putting in place safeguard measures to finalise bankable projects. The AIIB has also adopted the same policies so co-financing will help to meet more financing requirement of the poor Asia, he added.

He said that Pakistan has achieved stability in terms of security concerns and macroeconomic stability has also been restored. Pakistan, he said, used to face a balance of payment crisis in the past that resulted into obtaining the IMF loan programme. “But now I am encouraged Pakistan has achieved macroeconomic stability but now there was a need to generate more revenues to spend on education and health and other social sectors,” he added.

To a query on arranging annual meeting outside Asia, the ADB’s president said that it was first time that their annual meeting was held in Germany. Earlier, the ADB organised its annual meeting within and outside Asia and there was nothing unusual. He said that under the influence of socialism in some countries of Asia, the state controlled policies did not work so there was need to consider the private sector as an engine of growth.

To another query, he said that the ADB financed coal based power project in Pakistan known as Jamshoro power project but there was no other project in coal being financed by ADB in another country. But this project was using super critical technology to protect environment. In future, he said that the ADB would think about its policy whether to continue financing coal projects or abandon it for future.

The ADB, he said, would seek more financing from emerging markets as they decided to expand their operations by 15 percent after replenishing the existing ADF and finalising new one for 2017-20 and grants operation would be increased by 17 percent.

To another query regarding the ADB’s cooperation with new development bank BRICS (Brazil, Russia, India, China and South Africa), he said that both sides agreed to finance feasible projects but currently BRICS membership was restricted to China and India only so if they extended to bring more countries or they find out mutually feasible projects, then they were ready to extend cooperation.

Meanwhile, Asian Development Bank (ADB) President Takehiko Nakao and Asian Infrastructure Investment Bank (AIIB) President Liqun Jin signed a memorandum of understanding (MOU) here on Monday on the sidelines of the ADB’s 49th Annual Meeting of the Board of Governors.

The agreement sets the stage for jointly financing projects. 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 M-4 highway project, a 64-kilometer stretch of motorway connecting Shorkot to Khanewal in Punjab Province.   

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.