Covid-19 and the Development Banks: More of the Same

In the fight against the Covid-19 pandemic, the more established multilateral development banks – the World Bank and the Asian Development Bank – are still miles ahead of the Asian Infrastructure Investment Bank. The same applies to non-Covid19 related loans and grants.

Bayan Bayanihan to provide installments of food, estimated at $20 million, to support the most vulnerable. ADB has approved $5 million in grants for part of this need and created a team to rapidly lead implementation of the program. (Photo: Asian Development Bank, Flickr)

Malcolm Cook

18 May 2020

The World Bank and Asian Development Bank (ADB) have provided vital support for Southeast Asian states hit by the spread of Covid-19 from China to Southeast Asia. The Asian Infrastructure Investment Bank (AIIB), facing its first crisis, has not.

Table 1: Covid-19 response loans and grants approved as of 15 May 2020 ($m)

  World Bank ADB AIIB
Cambodia 50 0 0
Indonesia 250 1503 0
Lao PDR 18 0 0
Myanmar 50 0 0
Philippines 600 1708 0
Total 968 3211 0

Among the three main development banks, the loan and grant portfolios with respect to various Southeast countries are very different (see Table 1). As of 15 May, the China-led Asian Infrastructure Investment Bank (AIIB) in Beijing had approved no loans to Southeast Asian member states from its $10 billion Covid-19 Crisis Recovery Facility. Only China, in early April, and India, in early May, have had loans approved through this Facility. The Philippines and Indonesia are awaiting approval for their respective $750 million proposed loans. The Japan-led ADB in Metro Manila has provided the largest amount of pandemic response funding, while the US-led World Bank in Washington, DC has assisted the largest number of Southeast Asian states responding to the current public health and economic crisis. 

The role of the AIIB was comparatively much smaller before the pandemic hit, as has it been, so far, in response to the pandemic.

The limited role of the AIIB so far in assisting Southeast Asia’s Covid-19 response is consistent with its pre-pandemic one. Between 2018 and the arrival of the virus in Southeast Asia in March, the AIIB played a much smaller role in the region then either the ADB or World Bank, as shown in Table 2. Over this period, the World Bank had extended 26 times more dollars in bilateral sovereign loans and grants to Southeast Asian member states than the AIIB. The ADB had extended 12 times more. The ADB also has approved many regional loans involving Southeast Asian states that have not been accounted for here.

Table 2: Non-Covid19 related bilateral sovereign loans and grants approved 2018-2020 ($m)

  World Bank ADB AIIB
Cambodia 434 436 0
Indonesia 4161 1014 248
Lao PDR 336 50 41
Myanmar 260 798 0
Philippines 1853 804 0
Thailand 6 0 0
Vietnam 531 363 0
Total 7581 3465 289

The World Bank is the development bank of first resort for Southeast Asian states, while the ADB is the largest provider of crisis assistance to regional states. This was true before Covid-19 and remains so now. The role of the AIIB was comparatively much smaller before the pandemic hit, as has it been, so far, in response to the pandemic. Approval of the proposed Indonesian and Philippine loans from the AIIB Covid-19 facility would reduce this gap. The reality for now, however, is that the AIIB – which has high ambitions to be a multilateral development bank tasked to “improve social and economic outcomes for Asia” – has some catching up to do.

Dr Malcolm Cook is a Visiting Senior Fellow at the ISEAS – Yusof Ishak Institute.

ISEAS Commentary — 2020/64

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