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Research Report


Olin Wethington
Robert A. Manning
Copyright Date: Nov. 1, 2016
Published by: Atlantic Council
Pages: 31
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Table of Contents

  1. (pp. 5-6)

    Economic growth and infrastructure development remain at the top of the political agenda for Asian governments and political leaders. They are saying loudly that, notwithstanding the economic dynamism in the region over the past four decades, economic growth and infrastructure development remain at at the top of the region’s political agenda and are likely to remain there for the foreseeable future. In this context, whether the United States succeeds in sustaining and deepening a liberal, market-oriented economic order in the Asia-Pacific region will likely depend on the United States and its closest allies playing the major role in writing the...

  2. (pp. 7-10)

    There is broad consensus that both global and Asian infrastructure needs are enormous.⁴ One oft-cited Asian Development Bank estimate is that Asia requires some $8 trillion in infrastructure investment between 2010-20.⁵ A more recent McKinsey report concluded that, “From 2016 through 2030, the world needs to invest about 3.8 percent of gross domestic product (GDP), or an average of $3.3 trillion a year, in economic infrastructure just to support expected rates of growth.”⁶

    There is a large measure of guesswork in these estimates, as they include judgments as to the financial viability of projects and the willingness of governments to...

  3. (pp. 11-15)

    Financing through Chinese state-owned policy banks makes China the dominant source of global infrastructure finance. Amounts of capital larger than those provided on an annual basis by the World Bank and the ABD combined are now committed through Chinese state-owned policy banks and new China-centric finance mechanisms. This financing by China is, by and large, deployed outside established multilateral arrangements.

    Here are the statistics:

    During the three years 2013-2015, China committed to finance 192 infrastructure transactions totaling $135 billion, primarily through its state-owned policy banks.12 By comparison, the World Bank and the ADB provided $43.95 and $28.26 billion, respectively, for...

  4. (pp. 17-21)

    The earlier chapters in this report have set forth major challenges to the US economic position in Asia, including the need to reinvigorate the multilateral financing institutions that the United States and its allies have relied on for many decades. The sheer volume of new infrastructure lending in coming years will alter the dynamics of international finance and, in turn, will affect US geopolitical influence in the region. Though it is premature to judge how the new lending institutions anchored by China and China’s state-owned policy banks will transform the world of development finance, there is little doubt that they...

  5. (pp. 23-27)

    The MDBs should focus their mandate on the primary mission of financing infrastructure development where market failures persist and private investment alone is insufficient. Over time, the World Bank and the ADB moved away from their historic mandate, placing greater focus on poverty alleviation. However, poverty reduction in Asia has made substantial progress. By 2024, only two of the ADB’s borrowing member countries are expected to be eligible for concessional lending.40 Also, as indicated earlier in this report, there will be a significant reduction in IDA-eligible countries, particularly in Africa. The MDBs should give top priority to infrastructure investment, and...