EBRD chief Chakrabarti downplays concerns over Central Asian debt trap
The headquarters of the European Bank for Reconstruction and Development in London. © Reuters
BEIJING -- The European Bank for Reconstruction and Development is doubling down on its partnership with the China-backed Asian Infrastructure Investment Bank, seeking to co-finance promising projects in Central Asia and elsewhere.
The relationship with the AIIB is "one of the strongest" partnerships that the EBRD has "with any multinationals," President Suma Chakrabarti said in a recent interview here with Nikkei. Chakrabarti added that he and AIIB Chairman Jin Liqun have known each other for three decades.
He explained that the European organization operates a joint unit with the AIIB at the latter's headquarters in Beijing, which looks for viable projects and helps with Chinese business development. About 15 current or former EBRD staffers work at the AIIB, which comes out to 7.5% of the roughly 200 staffers at the China-led bank.
The EBRD has helped the AIIB "from day one" because it was the last development bank created before the AIIB, and it wanted the AIIB to learn from its experience, Chakrabarti said.
"We think this is a longtime partnership," he said.
Suma Chakrabarti (Photo by Issaku Harada)
The two organizations so far have co-financed two separate projects in the infrastructure and gas pipeline sectors. In terms of future collaborations, Chakrabarti said he sees possibilities in renewable energy and municipal projects like water pipes, public transportation and even education. He mentioned their work regarding investment standards, "barriers to connectivity" and human resources policies to facilitate joint projects.
The EBRD says it is the single largest institutional investor in Central Asia and has committed many billions of dollars to more than 750 projects there. Investment in the region continues to grow as Kazakhstan and Uzbekistan adopt more open economic policies. Meanwhile, China is stepping up its investment there under its Belt and Road infrastructure-building initiative.
Chakrabarti, who was in Beijing to attend the Central Asia Investment Forum organized by the EBRD and the People's Bank of China, said that on top of two projects approved this year with Chinese entities in Egypt and Central Asia, "we have another potentially 25 joint projects, I think, in the pipeline with Chinese companies -- not only in Central Asia, of course, but some of them in Central Asia."
"We are also working very closely with China on what are the right policies in these countries" to "attract more investment," he said.
Asked about concerns that the Belt and Road initiative is trapping smaller economies in debt, Chakrabarti said that "there're huge investment needs in these countries ... so anyone who wants to push high investments is a good thing." He mentioned Chinese President Xi Jinping's words on the importance of the quality of investment.
"Each of these investments must reach the highest quality, and that means we have to, all of us, pay very strong attention to environment and social issues," he said. "We have to pay very strong attention to public procurement."
Chakrabarti also said that "the more private-sector projects there are, the better," since government-backed projects add to public debt.