Singh pitches for fatter ADB purse

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Prime Minister Manmohan Singh and ADB president Takehiko Nakao in Greater Noida on Saturday. (PTI) New Delhi, May 4: Prime Minister Manmohan Singh today called for augmenting the resources of the Asian Development Bank to allow it to invest in the development of the Asia-Pacific region. "I understand the level of lending the ADB can sustain is projected to come down. At this juncture, ADB should take the initiative to find innovative ways to channelise global savings into infrastructure projects in Asia Pacific," Singh said at the opening ceremony of ADB's annual meeting here. Singh's prescription to ADB's lack of resources seems to be raising money directly from the retail market through bonds. "Pooling investments across various countries can mitigate risk which can be further reduced through credit enhancement by the ADB. Moreover, expanding infrastructure financing and investment through the intermediation of the ADB could help lower the cost of financing long-term infrastructure projects," Singh said. Singh's speech was preceded by finance minister P. Chidambaram's address to the ADB board of governors. "The financial position of ADB is sound at the moment, but is constrained. The prevailing low interest environment has resulted in low investment income and has limited the amount that can be ploughed back into equity for the bank," the finance minister said. The sustainable level of lending by ADB is expected to decline from $10.1 billion to $8.0 billion. "Thus, the support that ADB can deliver for economic development and poverty reduction in the region will be seriously constrained by the lack of adequate capital. We may hit the wall in about three years," Chidambaram pointed out. The problem for countries such as India, which is looking towards low-interest lending by multi-lateral banks such as the ADB, is that they are undertaking huge infrastructure projects where money will always be in short supply. India alone needs about $1 trillion for infrastructure development in the next five years. Countries are also dreaming of grand multi-nation projects for improving transport and energy corridors. Chidambaram called on the bank to "actively pursue the potential of a corridor linking India, Bangladesh, Myanmar, Asean and the People's Republic of China". Guangyao Zhu, China's delegation leader at the ADB meet, said the "immediate challenge to ADB is the weakening lending capacity, which will severely affect ADB's capacity to provide assistance to its developing members". He urged ADB to consult all members and put forward a package of solutions. However, the problem for shareholders is that any expansion of equity at this stage can see China gobbling up an incremental share of the additional equity holdings issued. Japan and the US head the list of shareholders with 15.7 per cent equity holding each. China and India hold 6.5 per cent and 6.4 per cent, respectively. Credit Rating Standard & Poor's today ruled out the possibility of a rating upgrade for India. The rating agency currently has a "negative" outlook on the Indian economy's BBB-minus rating. Elena Okorochenko, managing director of sovereign and international public finance ratings, Asia Pacific, said at the ADB meet that from India's "negative" outlook, the only changes possible were either a rating downgrade or an improvement in outlook to "stable." Okorochenko said a rating upgrade was "highly improbable." "An improvement in outlook would be a kind of an upgrade. But a rating upgrade at this point is not on the cards," she said. http://www.telegraphindia.com/1130505/jsp/business/story_16860624.jsp#.UYaTdaKBlA0