By Sophie Edwards, Michael Igoe
From the article:
NUSA DUA, Indonesia — Thousands of delegates and development professionals are on their way back home after a week of discussions about the future of human capital, climate change, infrastructure, and finance at the World Bank Annual Meetings in Bali, Indonesia.
While these meetings lacked the late-hour drama that accompanied World Bank President Jim Yong Kim’s effort to secure a capital increase for the bank during the Spring Meetings in April, they nonetheless bore witness to some significant moments that will have implications for how the world’s largest multilateral development institution positions itself amid the world’s most pressing challenges.
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China and debt sustainability
As concerns about debt sustainability in developing countries mount, China’s massive infrastructure finance effort, the Belt and Road Initiative, is under increasing scrutiny. The initiative holds enormous potential to help fill an infrastructure gap that inhibits trade and transport in dozens of countries. It also holds significant — though less well understood — risks.
The World Bank, which has signed on as a partner to the Belt and Road Initiative, is currently undertaking a study to better understand where those risks and opportunities lie so that the latter might be maximized while guarding against the former. The results of that study should be released in the spring, said Caroline Freund, the bank’s director of trade, regional integration and investment climate, during a highly anticipated session on the Belt and Road Initiative on Saturday.
While the World Bank team acknowledges that BRI carries risks — including potential debt problems in some countries as well as environmental and social harm — their preliminary conclusions suggest that the bank does not yet consider these to be above and beyond the concerns that would be associated with any major infrastructure project.
“These are the concerns that would come in any such project, and there’s a big opportunity for growth,” Freund said.
That position has some wondering whether the bank, as both a partner to BRI but also a standard-bearer for development finance safeguards, is asking tough questions of its Chinese counterparts.
“They’re doing some very good detailed data work, which will ultimately be helpful to the Chinese and to the countries that are participating. At a higher level, their overarching framing of it leans toward being too friendly to the initiative and isn’t playing the role of constructive critic as much as I would like them to be,” said Scott Morris, senior fellow at the Center for Global Development.
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