Nepal became one of the founding members of the Asian Infrastructure Investment Bank (AIIB), a new multilateral lending institution founded by China, in June 2015. With this, Nepal has gained access to another multilateral institution which can extend loans at relatively lower interest rates to finance the country’s development process. Rupak D Sharma of The Kathmandu Post caught up with Jin Liqun, AIIB president and China’s former vice-minister for finance, on the sidelines of the Nepal Investment Summit 2017 to discuss how the AIIB intends to support Nepal. Excerpts: 

What is your outlook on Nepal?

Nepal has a promising future as the government is very keen on accelerating the pace of economic development. If the government, parliamentarians, civil society and others work together, meeting the objective of sustained and higher economic growth is not very difficult. This will improve the livelihoods of people. So, I’m very much upbeat about the future of this country. And I and the AIIB are certainly very proud to be associated with your people and the government to promote economic development in this country.

The AIIB approved $1.7 billion in loans for first batch of countries in 2016. However, Nepal’s name wasn’t on the list. Did it miss something?

We have 57 founding members, including Nepal. Quite a number of these members are developing member countries that want to borrow from us. So, it is not possible to extend loans to each and every country. What is important is the availability of development programmes and projects that are bankable. So, Nepal’s exclusion from the list of loan recipient countries doesn’t mean it will lag behind in getting our assistance. In fact, our staff have already started processing Nepali projects.

Will Nepal receive the AIIB’s loan assistance in 2017?

It is very likely that Nepal will receive our support in 2017, if not in 2018. I think Nepal is in need of infrastructure that can generate and transmit hydroelectricity. Urban development, drinking water supply and sanitation are other areas where we can work together. The AIIB was established to support infrastructure projects of these types. 

How much can Nepal expect from the AIIB?

Well, it depends on the availability and readiness of projects. Money is not an issue, as we have a capital of $100 billion. If Nepal proposes very good projects, we can finance them. But again we’ll have to strike a balance between countries and sectors. However, project readiness is crucial here.

Multilateral lending institutions working in Nepal frequently complain about lack of shovel-ready projects. What is your take on this issue?

You do have some feasible projects. This is the result of the Nepal government’s long partnership with multilateral lending institutions like the Asian Development Bank (ADB) and World Bank (WB). If we give the final push to these projects, they can be implemented. But the lending programme for any country depends on its ability to service the debt. That’s why we look at the debt sustainability level of any country. The AIIB intends to help its member countries like Nepal. But we do not wish to exert pressure on any country’s sovereign debt. 

Nepal’s public debt is sustainable, as it is below 30 percent in proportion to the GDP. Isn’t that a positive indicator?

That’s why much needs to be done in the private sector. You might say that private sector companies are responsible for their own revenues, and the credit they obtain is not factored in as sovereign debt. But even in the case of private sector borrowing, foreign exchange facility is required to repay debts obtained from abroad. So, debt sustainability of a country matters. That’s why generating foreign exchange through exports of say, surplus power and other goods, is important. And the private sector can play a crucial role here.

Are you trying to say that the AIIB would be more interested in supporting the private sector, instead of the government, through options like equity investment?

That option is also open. 

How does the AIIB intend to work in Nepal? You have partnered with multilateral lending institutions in other South Asian countries. Would you be partnering with the ADB and WB in Nepal too?

We are very open to co-financing. If the ADB and WB invite us to work on some of the projects that they are funding, we will be very happy to work with them. And when we take the lead in some projects, we will also invite them to join us. 

One of the problems faced by multilateral lending institutions is the Nepal government’s inability to spend funds on time. What is your take on this issue?

I have discussed this issue with some Nepali government officials. I think slow disbursement and implementation have a lot to do with a number of factors. For example, if projects are not ready, there will obviously be delays in implementation. Also, the implementing agency should have a very good team that can expedite project implementation. This, however, does not mean that Nepal lacks capacity to implement projects on time. You have people who are aware of these problems. What is important is to form a team of experienced people, preferably young. So, the problem is with deployment of human resources. And this problem can be tackled. Also, Nepal is eligible for AIIB grants. We want to allocate funds for project preparation and extend technical assistance as well. These efforts, we believe, will enhance the project implementation capacity. 

Lastly, do you have any plans to open a resident mission in Nepal?

No, not at the moment. But if the number of our projects here increases, we might appoint some liaison officers. However, I do not intend to open a full-fledged resident mission and hire a lot of staff.