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Is Chinese investment in Kenyan infrastructure helping or hurting?

11/29/2017

1 Comment

 
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Kenya Landscape, Pixabay.

China and Kenya first established diplomatic relations in December of 1963.

​Since then the two nations have maintained economic ties through bilateral agreements like the 1978
Agreement on Trade between the People's Republic of China and the Republic of Kenya. 


In recent years, there has been an increasing focus on infrastructure projects in Kenya that can likely be attributed to China’s One Belt One Road Initiative. One Belt One Road (OBOR), also known as the Belt and Road Initiative, is a Chinese foreign policy approach launched in 2013 that emphasizes infrastructure investment. In particular, OBOR focuses on nations China views as being of strategic interest, such as the Eurasian countries along the old Silk Road.

The most recent, and most ambitious, Chinese-led infrastructure project in Kenya is the Standard Gauge Railway (SGR) line, linking Kenya’s capital Nairobi to Mombasa, a major seaport. The original agreement signed in May 2014 by Kenyan and Chinese authorities stated that China was to provide 90 percent of the estimated 3.8 billion USD needed for the project. Most of the Chinese funds were provided by the China Export-Import Bank in the form of two separate loans, a 1.6 billion USD concessional loan and a 1.6 billion USD commercial loan, totalling 3.2 billion USD.

At first glance Chinese investment in Kenya seems like a good thing.

Take the SGR Nairobi-Mombasa Line project for example. The new train line cut the travel time between the cities of Nairobi and Mombasa down to 4.5 hours, whereas it used to take anywhere between 9 to 12 hours by bus or on Kenya’s old railway system.
With more efficient transportation between a major port and the capital, there are opportunities for commercial growth in Kenya as it is now easier to transport both people and goods through the country. Eventually, the plan is to extend the SGR through Kenya and through to other East African nations, increasing opportunities for cross-border economic cooperation as well. Furthermore, the loans provided by the Chinese Export-Import Bank do not seem designed to be predatory; the 1.6 billion USD concessional loan is good for 20 years, with a 7-year grace period and relatively low interest rate of 2 percent.


However, these Chinese loans to Kenya are often contingent on Chinese firms being contracted for the work. In the case of the SGR Nairobi-Mombasa Line, the China Road and Bridge Corporation (CRBC) built the railway. In theory, Chinese investment in Kenya should be generating more jobs for locals, but the reality is that large numbers of Chinese laborers are brought in by the Chinese firms. Furthermore, the locals that do get hired are not paid well. In 2016, Kenyan laborers working on the SGR Nairobi-Mombasa project protested and demanded a raise in salary from less than 2.50 USD to 5 USD a day.

It appears that Chinese infrastructure investments in Kenya are largely motivated by self-interest.

Better infrastructure gives Chinese firms more access to resources and new markets, and thus contributes to China’s continued economic growth. However, it is also apparent that Chinese investments are helping to the improvement of local quality of life, no matter how small the changes are; AidData classifies the intent of the Nairobi-Mombasa Railway project as “Mixed (Some Development).”
What this classification suggests is that despite Kenya’s financial struggles that appear to be related to the SGR and Chinese loans, the Nairobi-Mombasa railway project has still facilitated important infrastructure developments in Kenya by improving people’s access to transportation services.


Ultimately, it might be too soon to tell whether Chinese investment in Kenyan infrastructure is hurting or helping. The Nairobi-Mombasa Line only just launched in May 2017, with more extensions underway. Kenya has reportedly secured another loan from the China Export-Import Bank in May 2017 for roughly 14 million USD, to extend the SGR from Nairobi to the city of Naivasha. Although China currently owns more than half (57 percent) of Kenya’s external debt, perhaps the Kenyan government can pay off the debt using the revenue from increased levels of trade, as the new railways operate and more are built. This situation seems highly unlikely though, as Kenya seems to be accumulating debts faster than it can grow its economy; the Kenyan government has even resorted to using loans to cover government budget deficits. 

Devon Hsiao

Devon is a third-year undergraduate student studying Humanities and Korean at the University of Texas at Austin.

View my profile on LinkedIn
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WEEKLY DIGEST: November 14-November 28, 2017

11/28/2017

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The One Belt One Road grows, and grows more uncertain
 
At the Maritime Silk Road International Tourism Summit, UNESCO recognized Fujian Province as the starting point of the Maritime Silk Road. The province now builds a core area of the 21st Century Maritime Silk Route Economic Belt, integrating it into the One Belt One Road Initiative. At the summit, the World Tourism Organization and Asia Pacific Travel Association were invited to create a platform for exchange and cooperation in travel industries of countries along the Maritime Silk Road. Read more here
           
                                    
Japan
 
Although Japan agrees that One Belt One Road will be beneficial to the world economy, Japan still maintains an ambiguous attitude toward the OBOR initiative questioning its exclusivity. Responding to Japan's query, China has emphasized positive connotations, stating that OBOR has been an open and inclusive platform for cooperation from the very beginning. China sends an invitation to Japan to join.

The heads of two Japanese corporations, Shoji Sojuoka, chairman of Nippon Steel & Sumikin, the world's second largest steel producer, and Yasuzo Kudo, the president of NYK, one of the world's largest shipping companies, met with officials from the Chinese Ministry of Commerce to discuss future cooperation with the One Belt One Road initiative. The Chinese Premier, Li Keqiang, welcomed Japanese cooperation stating, "Both economies complement each other and China welcomes investment by Japanese companies." This is a major development as many Japanese firms were skeptical of the One Belt One Road initiative in its early stages. Read more here.
 

Zimbabwe
 
Zimbabwe’s current political turmoil is one example of recent setbacks affecting the future of the One Belt One Road Initiative. Many nations on the OBOR lag behind in their political systems. The instability of these nations' governments heightens the possibility of China’s losing investments. As stated by the U.S. Foreign Affairs Magazine, though the One Belt One Road Initiative is ambitious, it will not be a smooth process.           


The Arctic
 
China's interest in the Arctic as part of its One Belt One Road economic initiative has created international tensions surrounding the uncertainty about its true intentions on the continent.
 

China in Africa                                                                                          
                                                                                              
The Chinese enterprise China Gezhouba Group Corporation signed a 5.8 billion USD contract with the Nigerian government to build a new hydropower station. In Eritrea, China's Exopt-Import Bank provided a 98 million USD loan to expand the Hirgigo power plant. The China SFECO Group Corporation carried out the Hirgigo expansion project. Lastly, the Longyuan Mulilo De Aar Wind Power Project in South Africa started operation. The project was a joint effort between Chinese firm China Longyuan Power Group Corporation and South African firm Mulilo Renewable Energy. Read more here.
 
China announced the creation of a strategic association with Djibouti, the only nation with a logistical Chinese military support base. The president of Djibouti, Ismail Omar Guelleh, travelled to Beijing where he and President Xi Jinping agreed to reinforce cooperation and oversee the work to apply the results of the Forum of African-Chinese Cooperation. Xi Jinping then invited Djibouti to become part of the construction of the One Belt One Road project. Some critics state that China is seeking to expand its military presence in Africa through Djibouti . While the Chinese Ministry of Foreign Affairs has told the media that the base is meant to contribute toward relief activities. Read more here and here.
 

Panama and China continue to increase relations 
                                                                                                     

When China and Panama signed 19 deals regarding future endeavors, Panama’s Minister of Economy and Finance and the Chinese Government also signed an agreement to open a study into the feasibility of a free trade agreement. The 19 agreements included promoting commercial exchanges and investments, and funding for energy transmission development. Read more here. 
 
Panama’s president Juan Carlos Varela announced that a direct flight from China to Panama would be introduced in March 2018, with only a technical stop in Houston, Texas. This news follows Panama’s announcement reversing its acknowledgement of Taiwan’s independence and the 19 trade deals that broadened the relations between the two nations. The new route will open commercial and tourist opportunities for Panama and Latin America in general. Read more here and here.
 

Chinese investment in Central and Eastern Europe

The Central Eastern European states and China are about to hold their 16+1 summit where the subject of Chinese foreign investment will undoubtedly arise. The Belt and Road Initiative is interested in this region and had set an objective of 100 billion USD. As of 2016, trade has increased to 58 billion USD. Read more here.
 
Under the One Belt One Road initiative, China recently opened up its first direct railway line to Slovakia. Read more here.
 
The Export-Import Bank of China will provide up to 80 percent financing costs for the construction of a coal fired power plant in Belgrade, Serbia. The plant is projected to cost a total of 713 million USD. Read more here.
 

The AIIB
 
The vice president and corporate secretary of the Asian Infrastructure Investment Bank (AIIB), Danny Alexander, spoke to Xinhua about the objectives of the AIIB and its dedication to operating at the highest international standards. He expands upon the bank's priorities in sustainable infrastructure, cross-country connectivity and the mobilization of private capital.
 

Investments in India and Russia
 
The Chinese New Bank of Development, established by BRICS, approved two infrastructure and sustainable development projects in India and Russia with loans totaling 400 million USD. In India, the loan will be used to rehabilitate the Indira Gandhi Canal. In Russia, the loan will be used to fund the construction of a transportation corridor that will connect Ufa, Russia with the federal M-5 highway.
 

Asian Development Bank Updates
 
On November 23, the ADB appointed Mukhtor Khamudkhanov to be the new country director for Nepal. Read more here.
                                                                                                           
The India Innovation Lab for Green Finance has launched two new financial instruments in partnership with the ADB to catalyze up to 1 billion USD for investment in green energy projects. Read more here.
                                                                                                           
Portugal, a founding member of the ADB, is seeking to establish Lisbon as a potential critical link in the Silk Roads maritime economic links. Read more here.

                                                                                   
An Opinion on China's Rise                     
                                                           
After comparing China’s rapid economic growth and its global influence to the U.S., some believe that the U.S. will soon become a “large-scale Australia,” an exporter of resources for energy and beef, yet this is not the case. It is true that China is rapidly developing, but China still has a lot to work on, like its politics. It is said that China never thought of a single dominant power, and the world leadership in the future will be diverse.           
 

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WEEKLY DIGEST: November 14-November 21, 2017

11/21/2017

2 Comments

 
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Turkmenbashi Ruhy Mosque in Ashgabat, Turkmenistan.
                                                                        
New ADB Country Plans

The ADB revealed the first country partnership with Turkmenistan for a 5-year plan lasting from 2017 to 2021. Due to the country's reliance on hydrocarbon exports, the plan will focus on three areas: hydrocarbon market diversification and energy trade promotion; infrastructure investment and private sector support to diversify non-hydrocarbon exports; and education on economic diversification. This new ADB country plan will support regional power interconnection projects, namely the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline. The main goal of the ADB will be modernizing institutions and reforming the economy for diversification, with the support of other groups like the Central Asia Regional Economic Cooperation (CAREC). Read more here.

The ADB revealed a new Pakistan country plan for 2018-20, allocating 4.7 billion USD for development. New investments in the energy sector will focus on renewable energy and climate change resilience, and includes a 1 billion USD program for hydropower. Transportation funding includes projects for highways, rails, and canals. Two social programs include the Sindh education project and Punjab workforce training. Public-private partnership projects will be strengthened to enhance public sector investment and management. The new plan aligns with the ADB-Pakistan country partnership strategy (2015-19) and the government's "Vision-2025" development plan. Read more here.
 
The ADB is loaning 260 million USD to Bangladesh for infrastructure investments, renewable energy projects, and public-private partnership funding. It is the first tranche of a 526 million USD investment in the Third Public-Private Infrastructure Development Facility (PPIDF 3). 500 million USD will go towards medium and large PPP infrastructure projects and 26 million USD to small and medium sized renewable energy projects. 750,000 USD will also be given as technical assistance to the state-owned enterprise Infrastructure Development Company Limited. Read more here.
 

Global Participation with the AIIB
 
The United Kingdom gave 72 million GBP to the Asian Infrastructure Investment Bank. This is part of the UK's commitment to spend 0.7 percent of income on foreign investment. Read more here.
 
India's participation in the AIIB illustrates Prime Minister Modi's belief that the bank is truly a multilateral organization. The Japanese government, however, has remained skeptical of the AIIB in solidarity with the US. However, pressure has increased for Japan to join with other traditional US allies applying for AIIB membership. Read more here.
 

News in Vietnam, Myanmar, and Indonesia
 
The President of Vietnam, Trân Dai Quang, met the President of China, Xi Jinping, in Vietnam during a State visit. He warmly congratulated Xi Jinping for the 19th Party Congress and thanked him for Chinese non-refundable aids and assistance during recent bad weather in the country. He asked to reinforce ties with China. Moreover, both leaders reasserted their will to develop the Steering Committee for Vietnam-China Cooperation and to link the One Belt One Road Project to the Two Corridors One Economic Belt Project. Read more here.  

In an effort to further enhance bilateral cooperation, China has proposed the creation of a new economic corridor between China and Myanmar. One of the key components of China's One Belt One Road Initiative is the creation of economic corridors that serve to facilitate comprehensive bilateral partnerships. Chinese Foreign Minister Wang Li expressed support for the economic corridor as a framework to tie together various Chinese projects in Myanmar. Read more here and here.                              
                     
Since the end of 2014, Indonesia's economic growth has been hovering around 5 percent. One reason for the slower-than-expected growth has been sluggish consumption rates. As consumption lags, Indonesian Vice President Jusuf Kalla points out that Indonesia's economy is shifting from being consumption-driven towards being driven by foreign direct investment.
 
In it's latest report, the ADB points out that China's rapid stabilization makes it an attractive source of investment and opportunity. Chinese companies like Tencent and Didi Chuxing have rapidly expanded investment in Indonesia's transportation industry. The director of the Mandiri Institute in Indonesia even said that China has overtaken the U.S. in its influence on Indonesia's economy. Read more here.
 

Chinese partnerships in Latin America

Since Panama broke diplomatic ties with Taiwan, China is reaffirming its offer to be involved in Panama's development. The leaders of China and Panama signed 19 memorandums of cooperation, including several agreements regarding maritime, railway, and air transportation.  A possible trade deal is speculated, as the countries secured a strategic cooperation between Chinese Development Bank and the Ministry of Trade and Finance of Panama. The agreements are intended to support The New Silk Road and mutually increase industrial capacities. China claims that financial interests are not the reason for the new partnership. Read more here and here.
 
Bancomext, Mexico’s state-owned bank and export credit agency, and the Chinese Development Bank seek to expand projects in Mexico with funding from China. The agreements involve co-financing projects in important sectors such as technology, equipment, tourism and renewable energy. In the coming decade, the countries plan to increase investment to over 250 billion USD. This was announced after the Forum for Economic and Commercial Cooperation China-Latin America and the Caribbean, where 120 businesses participated. Read more here and here.
 
The Export Import Bank of China will finance a 400 million USD solar energy project in Cauchari, Argentina. The project will be the second largest solar park in the world. Cauchari I, II, and III, will construct a solar park with 1.2 million solar panels and the potential for 300 MW of generation. Power China will be responsible for the constructing the plant, and Talensun will construct the solar panels. The project will create an estimated 1,600 jobs and generation will power around 100,000 homes in the region. Read more here.

Venezuela is the seventh largest oil exporter in the world, and the leading exporter of oil to China from South America. Venezuela cooperates with China on economic, technological, educational, and military fronts. In 2016, Venezuela exported 5.5 billion USD worth of goods to China and imported roughly 2.5 billion USD worth of Chinese goods.  Venezuela has been the most significant recipient of Chinese investment in Latin America. Through the Chinese Development Bank and the Export-Import Bank, China has invested 141 billion USD over the past decade to maintain its political and commercial interests in Venezuela. Read more here.


China and Europe 
 
Growing trade and investment between China and European countries part of the Belt and Road Initiative has resulted in a rail boom, with over 3000 freight trains traveling on a total of 57 railroad systems between China and various European cities. Under the Belt and Road Initiative, freight rail routes connected China to Europe, opening up transcontinental transportation, improving cost and logistics management, and promoting sustainable development. Two projects currently under development include a transcontinental expressway linking Lianyungang to St. Petersburg, and linking Harbin to several European cities. Read more here.
 
The President and Vice-President of the Chinese National commission for Development and Reform held a meeting with the European Commission, represented by Margrethe Vestager. They reasserted the importance to cooperate in the field of concurrence and especially in terms of control of the State aids. The European Union warmly welcomed China’s initiative to adopt an analytical system to guarantee the free circulation of goods and the role of the state in the market. This meeting took place in a broader movement of cooperation between China and the EU. Read more here.
 

Chinese investment in Africa                                                                  
                                                                                                           
Chinese company Future Group plans to expand its business in Africa by setting up five industrial parks. The first park will be built in Mozambique starting next year. The General Manager of Future Group, Yin Yiqiao, estimates that each industrial park will employ up to 1000 people and cost about 50 million USD. Having conducted business in Africa for 20 years, Yin's effort is a part of a growing trend of private Chinese enterprises investing in Africa, particularly in the manufacturing of industrial materials. Yin has previously invested in the production of aluminum alloy for furniture, and the planned industrial parks will produce items like batteries and small-scale electronics. Read more here.
 
Morocco and China signed a Memorandum of Understanding regarding China’s One Belt One Road Initiative. Morocco is the first African country to join the project. Read more here.
 

Green Finance and Internship Programs

The European Investment Bank (EIB) and the China Green Finance Committee (CGFC) are working together to create a common taxonomy to discuss initiatives for green finance. The Chinese Development Bank (CDB) is one of the biggest issuers of green bonds. Read more here.
 
The Asian Development Bank’s Trade Finance Program (TFP) launched its first Bank Internship Program on 13 to 16 November with TBC Bank from Georgia, CitiBank and Bank Eskhata from Tajikistan. The program seeks to improve the capacity for investment and development in Asia through the sharing of expertise. Read more here.
                                                                          
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WEEKLY DIGEST: November 7-November 14, 2017

11/14/2017

1 Comment

 
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APEC Economic Leaders' Meeting with members of APEC Business Advisory Council. Credit: http://en.kremlin.ru/events/president/news/56041
​
​President Trump in Asia

 
While in Japan, President Trump thanked Prime Minister Abe for his Asia "security diamond" strategy and pronounced it more favorable for creating a "free and open Indo-Pacific" than President Obama's Asia-Pacific Rebalancing Strategy. The U.S. and Japan will jointly implement the necessary framework and will invest in infrastructure in the Indo-Pacific region. The biggest challenge will be China’s increasing regional influence with its One Belt One Road Initiative and the AIIB. Read more here.
 
President Trump announced that the U.S. is committed to reforming its development finance institutions to support Asia. A complete shift from past rhetoric, he said the U.S. would be dedicated to incentivizing private sector investment in Asia for mutual benefit. The promise might expand the Overseas Private Investment Corp (OPIC) to include the US Trade and Development Agency and the US Agency for International Development. President Trump also called on the World Bank and the ADB to collaborate on Asian infrastructure investment. Reports say this shift is in response to Chinese dominance in Asian aid through the One Belt One Road initiative. Read more here.

The US Overseas Private Investment Corporation (OPIC) signed a Memorandum of Understanding with the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI). This announcement is part of President Trump's 'Indo-Pacific' development plan and can be seen as a response to the One Belt One Road initiative. Read more here.
 

The Asia-Pacific Economic Cooperation Summit
 
This year’s Asia-Pacific Economic Cooperation (APEC) summit was held in Vietnam, and this past week the Economic Leader’s Meeting discussed deepening regional economic integration, promoting sustainable development, innovation, and growth in inclusiveness, strengthening micro small/medium enterprises, and enhancing food security and sustainable agriculture in response to climate change. During the meeting, the U.S. proposed open trade to be added into the APEC Leaders' Declaration, while China asked for One Belt One Road initiative to be added. Read more here.
 
Chinese President Xi Jinping and Russian President Vladimir Putin announced plans to strengthen strategic and economic ties between the two countries at the APEC Summit. Xi announced that China was willing to join Russia in promoting bilateral ties in security and development. Specifically, the two countries agreed on the importance of expanding trade, implementing major projects in energy, high-tech, aviation, aerospace, and infrastructure, and furthering integrating Russia and the Eurasian region into China's One Belt One Road Initiative. Read more here. 

During the APEC summit, Jin Liqun, president of AIIB, stated that AIIB gives full support to Asia infrastructure construction to promote interconnectivity and economic growth in the region. He pointed out APEC as a good platform for Asia Pacific leaders to work together to develop interconnected policies. Jin pointed out that the AIIB is working with the World Bank and the ADB to address under-investment for infrastructure construction and economic development in the Asia-Pacific region. As of now, the AIIB has approved 21 investment projects with a total investment of 3.5 billion USD. APEC members like the Philippines and Indonesia have benefitted from AIIB investment, and the bank is gearing up to begin work in Vietnam. Read more here.
 
Jin expressed also a desire to combat poverty and global warming through responsible infrastructure development. Especially as the U.S. pulls out of the Paris Climate Agreement, the AIIB's push for environmental sustainability calls into question Japanese and American efforts to fight climate change, even in the eyes of Japanese observers.  Read more here and here.
 

Updates on the ADB           
 
The ADB and the Alliance for Financial Inclusion (AFI) signed a memorandum of understanding for the promotion of financial inclusion in Asia at the Second Asia Finance Forum. The agreement will have both groups work together to increase technical abilities, administrative capacities, gender gap equality efforts, climate-sensitive policy making, and private sector cooperation in economies across the region. A special focus will be placed on unbanked and under banked areas to bolster their financial markets. The ADB will specialize in digital finance and disaster risk aid. Read more here.
 

Chinese cooperation agreements

Vietnam and China signed 12 cooperation pacts and seven documents for collaboration. The pacts include memorandums of understanding and plans concerning Vietnam's place in the Chinese One Belt One Road initiative, commerce zones, health collaborations, economic development, and border agreements. The documents include agreements on scientific exchanges, nuclear cooperation, press exchange, and investments including plans for an Agricultural Bank of China in Hanoi. Read more here.
 
The Commerce Ministers of China and Cambodia signed a Memorandum of Understanding at the APEC Summit in Vietnam, pledging increased cooperation on the development of online business operations. The two countries agreed to focus on policy communication, capacity building, joint research, and other initiatives as a part of a new comprehensive strategic partnership between the two countries and China's overarching One Belt One Road Initiative. Read more here.
 
During Chinese President Xi Jinping's state visit to Laos, the two countries pledged to "promote sub-regional development and bring more benefits to countries and peoples in the region.” Read more here.
 
Chinese Premier of the State Council, Li Keqiang, announced plans to expand bilateral relations with the Philippines, as well as multilateral relations with the member states of ASEAN. China plans to participate in the Regional Comprehensive Economic Partnership, a proposed free trade agreement between ASEAN and other states. Chinese involvement in Southeast Asia will also extend to subsidizing several development and cooperative projects, covering areas including connectivity, infrastructure, poverty alleviation, trade, and anti-corruption. Read more here.
     
                                                                                                      
The One Belt One Road:
 
As of June 2017, the China Export-Import Bank's Shanghai branch has contributed to over 100 projects in more than 20 regions under the One Belt One Road initiative. The Shanghai branch has provided 22.6 billion CNY in loans supporting One Belt One Road projects, which account for 21 percent of the total loan balance of Export-Import Bank branches. Additionally, according to statistics from the Shanghai Development and Reform Commission, the city of Shanghai has invested 5.49 billion USD in 246 projects in One Belt One Road regions. Read more here.
           
                                                                                    
Poland and Russia
 
The One Belt One Road initiative is one of the most important topics of this year’s Warsaw Security Forum.  The “OBOR will bring win-win results for China and the European Union,” says Professor Wang Yiwei, director of the Center for European Studies at Renmin University of China. Dominik Mierzejewski, a professor at the University of Lodz in Poland, also says the OBOR has greatly contributed to Poland’s economic development. Read more here. 
 
During the “Russia-China: challenges and outlooks for global integration” conference, Russia predicted a boost of Chinese tourism in Russia, since business traveling has doubled in the past two-years. This implies that Chinese government has interest in local Russian investment. Russia has come out of recession, with a large market and cheap resources; the only hindrance for Russia to benefit from One Belt One Road is the Moscow-Kazan high-speed railway. Read more here.
 

The case for more One Belt One Road financing

Former President of People's Bank of Chin, Jun Ma discusses the need to mobilize global capital to better facilitate infrastructure programs in the One Belt One Road. The OECD has estimated the OBOR countries need for infrastructure building is 5.5 trillion USD. However, the gap is currently filled mostly by Chinese investment and is not nearly closing the gap. On the other hand, global investment capital is over 100 trillion USD, but only a few percent is used on infrastructure. Therefore, he hopes to enhance transparency and develop better financing tools in order to draw that capital into infrastructure investment.
 
Jun Ma urges the need to devise a safe net for the high risks of PPP, especially for political risks. He cites MIGA, set up by World Bank in the 1998, as it guarantees 4.3 billion USD for political risks. But just like other institutions providing these kind of services, they are limited in terms of insurance, and avoid can’t incidents like war or terrorism attacks. He also touches on the topic of sustainable development in OBOR countries as most of them have not been careful regarding this, and have relatively fragile environments. Read more here and here.
 

The AIIB: green projects and railways
 
The AIIB is currently reviewing a number of green projects in Malaysia, and abroad with Malaysian firms. These projects focus mainly on renewable energy and green technology. AIIB senior economist, Dr. Thia Jang Ping, stated that the AIIB has been watching the green tech scene in Malaysia for some time, especially since the government announced their intent to partner on a massive solar plant. Read more here.
 
The AIIB will be lending the Bangalore Metro Rail Corportation a 300 million USD loan needed to fund the Namma Metro project, a new transportation infrastructure project in India. The project is co-financed with the European Investment Bank (EIB), who is providing a 500 million dollar loan. The EIB and AIIB are funding implementation of Phase 2 of the project, which is expected to take 5-years. Read more here.
                                                                                                           
A 23-member Chinese delegation, led by China’s National Railway Administration, met in Nepal and started preliminary research on possible railroads. Nepal will receive China’s technical support and the AIIB's financial support for its railway project. However, the visit has lead suspicion in India. Some Indian media sources think that China’s real purpose is to invade South Asia. Read more here.
 

Chinese investment in Latin America and Africa
 
The Bolivian Space Agency outlined plans to construct a second telecommunications satellite. The satellite will cost 250 million USD and will use experiences from the first satellite's launch in 2013 by the Chinese Academy of Space. The Chinese Development Bank funded 85 percent of the initial project’s funding, while the Bolivian government funded 15 percent. Read more here.
 
The Argentinian government approved a loan contract for a solar energy park in Juyjuy, Argentina. The China Export-Import Bank financed 85 percent of the project, estimated to cost 331.5 million USD. Read more here.

China has been Brazil’s largest trade partner for eight consecutive years. State Governor of Mato Grosso, Pedro Taque’s visited China to attract more Chinese companies to invest in the state. At the forum, he introduced the state's investment and economic environment, and the status of multiple projects. Most of the projects he introduced are infrastructure projects, including road construction, network construction, and airport construction. He believes that these projects correspond to the One Belt One Road initiative and the goal of strengthening infrastructure construction.  Read more here.
                                                                                                           
The completion ceremony of the new Soubre hydroelectric power station in Soubre, Cote d'Ivoire, was held on 2 November 2017. Sinohydro, a company under the Power Construction Corporation of China, built the power station. As the largest power station in the country, the project took 56-months to finish and a total investment of 572 million USD, with the China Export-Import Bank providing  500 million USD. Read more here.

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WEEKLY DIGEST: October 31 - November 7, 2017

11/7/2017

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Reflecting pool in Hanoi, Vietnam.

​"Climate-resilient infrastructure is very important."

– Jin Liqun, AIIB President at the inaugural Financial Times - AIIB Summit 
 
The ADB focuses on environmentally conscious projects

The ADB is loaning 170 million USD to Vietnam for urban climate change resilience through the Secondary Green Cities Development Project. The loan will focus on urban areas that lag behind other more developed urban centers like the capital Hanoi. The project will fund water and wastewater infrastructure, green spaces, and road enhancements. Read more here.
 
The ADB and the UN-backed Green Climate Fund (GCF) are funding 1.5 billion USD to develop Chinese green business. The funds will focus on logistics sector efficiency in a "sharing economy" and alternative energy development. Corporate money, along with public investment, will fund the project with big supporters like the ADB, GCF, and other large Chinese banks. The project stems from growing environmental concerns in China to meet standards for the 2022 Winter Olympics and the 2035 "beautiful China" concept. Read more here.
 
The Green Climate Fund is granting 12 million USD in additional support to the Cook Islands Renewable Energy Sector Project. Backed by the ADB, European Union, and the Cook Islands, the project has been working to lower the Cook Islands' reliance on fossil fuels. The funds plan to build five solar power plants. Read more here.
 

The ADB funds power lines from Turkmenistan to Pakistan
 
ADB Bank officials will provide 150 million USD in funding and technical assistance for power transmission lines running from Turkmenistan to Pakistan through Afghanistan. 
 

China funds fossil-fuel projects in Pakistan and Bangladesh
 
A consortium of Chinese banks led by the China Development Bank and the Export-Import Bank, will fund a 1.5 billion USD project to provide coal-powered energy in Balochistan, Pakistan. Read more here.
 
Bangladesh signed a project framework agreement with China to build a 220-kilometer oil pipeline, along with other infrastructure. The project is expected to cost 5.5 billion USD. China believes the project is significant to China-Bangladesh-India-Myanmar Economic Corridor. Read more here.  
 

One Belt One Road updates: a digital Silk Road and Iran as a transport hub

The Chinese One Belt One Road (OBOR) framework has typically been centered on land and maritime infrastructure networks. However, China's advances in cyber technology and digital infrastructure mark a new component to the OBOR strategy.
 
The Belt and Road Digital Economy Alliance was established in Ji'nan, with plans to integrate information technology as a part of a new Digital Silk Road. The alliance features major Chinese firms, such as the Export-Import Bank of China and the China Development Bank, as well as large foreign firms, including Cisco and IBM.
 
The goal of this new alliance is to create new opportunities in technology for Belt and Road countries, including new datacenters, cloud services, smart finance, smart home, smart taxation, smart cities, and other total technology solutions. The alliance already has plans for projects in a variety of countries in Asia and Africa. Read more here and here.
                                                                                                           
China supports Iran's plan to build a network of rail transportation. This support has the potential to transform Iran into a Eurasian transport hub, critical to China's OBOR policy. Read more here.
 

Why the One Belt One Road?
 
China's One Belt One Road Initiative is a signal of the country's transition into a more market-based economy, and that China's macroeconomic policy has been embracing free trade and economic globalization.
 
Chinese President Xi Jinping has praised the idea of creating an Asia-Pacific free trade area, and this policy has become even more likely after the withdrawal of the United States from the Trans-Pacific Partnership. China hopes to create new bilateral and multilateral trade and development initiatives under the OBOR Initiative. This has lead China to engage in dialogue with a variety of countries and international organizations regarding potential opportunities. China's goal is to export its industrialization to other developing countries, and to consolidate its political-economic centrality in the Asia-Pacific region. Read more here.
 
The AIIB's investments extend far beyond China and the Asia region into areas such as North Africa. Despite claims that the OBOR initiative is meant to solely benefit China, the AIIB continues to make commitments far outside of China to the benefit of people all over the world, not just the Chinese. Read more here.
 

AIIB bonds 
                                                          
The AIIB's first international bond investment is imminent, says AIIB President Jin, without specifying any details. Countries with projects ready for investment will likely be the recipients. Additionally, Jin encouraged both the US and Japan to join the AIIB, which are the only two countries from the Group of Seven that have not committed as members. Read more here.
 

China and Russia cooperate for aerospace technology, shipping, and subways
 
Last week in Beijing, the Chinese Prime Minister, Li Keqiang, and the Russian Prime Minister, Dmitri Medvedev, met to discuss future cooperation between their nations. The meetings produced 20 new bilateral agreements, in areas as diverse as agriculture, energy, and aerospace technology. Read more here.
 
President Xi Jinping met with Russian Prime Minister Medvedv to discuss a new facet to the One Belt One Road initiative, which would utilize Arctic-shipping routes to connect Europe and Asia. President Putin initially proposed the plan in May, and is looking to capitalize on the possibility of new Arctic shipping routes as previously frozen waters melt. The plan is expected to benefit Russia by bringing in Chinese capital to develop Arctic-shipping routes. In return, China will benefit by gaining access to these new routes. Read more here.
  
China's state-owned China Railway Construction Corporation will be financing a subway infrastructure project in Moscow. This is the first time Russia has established such a joint venture with a foreign firm, and the first Chinese subway project in Europe. The project is expected to open at the start of 2018 with China investing 500 workers and 2.25 billion CNY to construct the approximately 4-kilometer long subway. Read more here.
 

China in Latin America

New interactions between Latin American governments and the Chinese government have increased growth in the rapidly expanding Latin American region. This growth is partly prompted by Chinese investment in the region. Read more here.
 
At a press conference in Zhuhai, China, the China-Latin America International Exhibition was announced. This expo will bring together executives from nearly 500 Chinese and international companies. The expo will feature a main forum titled China-Latin America Economic and Trade Cooperation Forum. There will also be three parallel forums revolving around Chinese corporate cooperation with Latin American firms. China views the expo as a way to build friendly relations that will support the One Belt One Road initiative. Read more here.
 
Nextel Brazil reached an agreement that redefines the terms for payment of loans from the China Development Bank, the Bank of Brazil, and the Federal Economic Fund. Sinosure, a local export credit insurance agency, must review the terms before 31 December 2017. The loans contributed to Nextel’s goal of upgrading cellular coverage to 4G and eradicating 3G broadband networks. Nextel’s ultimate goal of the agreements is to significantly reduce its debt. Read more here.
 

China increases economic cooperation around the world
 
China and Greece held the second meeting of the three-year China-Greece Action Plan in Athens. Chinese and Greek state officials, and representatives of enterprises signed a series of agreements in transport, energy, and telecommunications to promote economic cooperation between the two countries. Read more here.
 
At the Third China PPP Financing Forum in Shanghai, China, the China-Africa Development Fund CEO, Jiyang Shi iterated the importance of Africa to China's One Belt One Road initiative. According to Shi, China-Africa cooperation is mutually beneficial because China lacks the natural resources of Africa, but can provide the financial investment African countries need. By 2020, bilateral trade between China and Africa is expected to reach 400 billion USD, and bilateral investment to reach 100 billion USD.  Read more here.
 
Construction on the China-UAE Capacity Cooperation Park is expected to begin in January 2018. The park will be located in the Khalifa Industrial Park in Abu Dhabi, UAE, with an initial size of 2.2 square kilometers. However, up to 10 square kilometers of space have been reserved for the park's expansion. Thus far, 10 enterprises have signed agreements expressing intentions to enter the park, with an initial investment of 3.4 billion RMB. Read more here.
   
According to W. Wicklein, the Country Director for the ADB Indonesia delegation, China's economic stabilization is a positive factor for maintaining a steady and balanced growth in Indonesia. The ADB and the World Bank forecast the Indonesian economy to achieve 5.1 percent and 5.3 percent growth in the next two years. Chinese investment is rapidly expanding Indonesia's e-commerce sector. As an example, the Chinese firm Alibaba invested 1.1 billion USD in the Indonesian e-commerce company, Tokopedia. Read more here.
 
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President Donald Trump's Asia tour 
                                                                                        
Japanese observers expect President Trump to strengthen his position on China, ahead of his Asia tour this week. This expectation is partly due to Secretary of State Rex Tillerson's remarks in October criticizing the Chinese for funding the creation of a port in Sri Lanka only to create a debt forgiveness deal.  The deal forgives Sri Lanka of 1.1 billion USD of debt in exchange for Chinese rights to the port. President Trump is expected to announce his push for a free and open "Indo-Pacific" region, aiming to bolster cooperation with allies such as Japan, Australia and India.

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