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WEEKLY DIGEST: February 6-February 13, 2018

2/13/2018

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Picture
Kuala Lumpur, Malaysia. Pixabay.

The One Belt One Road in Malaysia 

President of the Asian Infrastructure Investment Bank (AIIB), Jin Liqun, announced that the AIIB and Malaysian Prime Minister Najib Razak have agreed to cooperate together for global infrastructure development projects. He highlighted transportation, seaport, and power plant projects as sectors both parties are interested in potentially working on together. The two states are looking to improve infrastructure in the ASEAN region. Read more here. 

The president of Malaysia's largest Chinese political party, MCA, expressed support for the OBOR by initiating a "One Belt One Road" 2.0 plan that formulates five targeted strategies. These strategies include creating a platform for OBOR education and training, actively promoting the initiative. Liao Zhonglai believes that OBOR initiative brings positive benefits to Malaysian economy, enterprises, and the general public. Read more here.

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Hong Kong in the Belt and Road Initiative

The Hong Kong government and the OBOR General Chamber of Commerce attended a seminar in Beijing to discuss Hong Kong's role in the OBOR. Zhang Dejiang, Chairman of the Standing Committee of the National People's Congress, expressed that Hong Kong will continue to play an important role in the China’s development despite the OBOR’s role as a new method of expansion. Hong Kong Chief Executive, Carrie Lam, pointed out the Hong Kong government will participate in the initiative by facilitating and promoting the OBOR.      

 
                        

News on Asian Development Bank
                                
India and Nepal

The ADB is supporting India and Nepal in a pilot project to implement an electronic cargo tracking system (ECTS). The system uses satellites, cellular communication, radio frequency identification, and other software to track cargo. The initiative comes from a June 2017 memorandum between India and Nepal to develop a tracking system to improve cargo security and efficiency, something especially valued by the landlocked country of Nepal. The project is part of the South Asia Subregional Economic Cooperation program, with ADB as the secretariat.

Bangladesh

The ADB signed an agreement with Eastern Bank Ltd (EBL) to loan 20 million USD to Bangladesh to support its textile and garment sectors. The loan will fund socially and environmentally sustainable projects in both sectors, namely in enhancing health and safety standards. The loan also brings Bangladesh's textile and garment sectors into the EBL lending portfolio.

Samoa

Samoa now has access to high-speed internet because of the completion of an extensive connection project. The project created a new submarine cable system that will help encourage low-cost broadband services, facilitate communications, and support e-health investment in the country. The ADB provided 25 million USD, the World Bank gave 16 million USD, the Samoa Submarine Cable Company provided 18.8 million USD in equity, the Government of Samoa covered 6.73 million USD in taxes and duties, and the Government of Australia provided 1.5 million USD.

ADB 2018-2020 Plans

According to ADB's 2018-2020 Country Operations Business Plan, commitments to member countries will total over 75 billion USD in the next three years. Most of the money will likely be issued through lending windows, less than 5 percent will be grants and technical assistance. A major portion of funding will cover transportation projects. Other important sectors include energy, governance and institutional development, and climate financing. Data is still incomplete and plans are subject to change, but these are the major trends from the plan.             


News from around the world

Belarus 

The Export-Import Bank of China is providing 
Belarusa loan from of 1.75 billion CNY for the implementation of an agriculture project.

The China-Pakistan Economic Corridor 

CHINA Power Hub Generation Company (CPHGC) has reached financial close on its Independent Power Project in Pakistan, one of the largest projects within the China-Pakistan Economic Corridor initiative.

Investigation in Ecuador 

The highest prosecutor in Ecuador questioned former President Rafael Correa about the ongoing investigation into a presale of crude oil to PetroChina that reportedly cost Ecuador 2.2 billion USD. The scandal was revealed by the former oil unionist Fernando Villavicencio, who recently gave his testimony.


Opinions on the AIIB  

Jin Liqun, the president of AIIB, argues that AIIB doesn't pose a threat on ADB for the following three reasons: First, after the AIIB’s founding, the Chinese government didn't withdraw from the WB and the ADB, but instead added soft donations to the banks; Second, in order to work within certain countries, the AIIB needs partners such as ADB and it's complementary capacity (such as co-financing) to better implement the program; third, the ADB has been AIIB's mentor during the AIIB’s foundation era, providing experiences on organizational structure, policy and business models.

Japan 

Jiang Yuechun, the director of the Department for World Economy and Development Studies, China Institute of International Studies (CIIS) points to the voices in Japanese scholars and officials urging the government to join AIIB, or they will be left out in the competition on deeper engagement in Asian economics. The reason behind their opinions comes from the overlap on the programs that the ADB and the AIIB fund. Russian scholars also predict that American lobbyists will further push this effort.

In his op-ed, Fujiyoshi Yukimura, a Japanese professor of economics, questions whether the AIIB has sufficient financial and human resources to carry out their current projects. Yukimura cites the AIIB's recent co-financing of projects with the World Bank and the Asian Development Bank as signs that there may be a shortage of talent. Yukimura cautions that the may encounter unexpected pitfalls despite good intentions. Read more here.

Iran 

Mohammad Khazaei, the Deputy Minister of Finance and Economy of Iran, holds a positive attitude towards the AIIB and the BRIC Bank, due to their capacity on structural reforms, including the implementation and monitoring of monetary policy, as well as financial investment. Iranian economics is moving towards a more open market. Following the successful reduction of inflation and with crude oil production rising, the country will likely to achieve a 8 percent GDP growth in the coming year.


Concerns and praise for the Belt and Road

A recent study by the Center for Strategic and International Studies, an D.C.-based think tank, concluded that 89 percent of the 34 New Silk Road projects are executed by Chinese firms, despite Chinese rhetoric claiming that the projects would vastly benefit foreign firms. The largest Chinese firms report growths of over 21 percent. Coal and metallurgical corporations have seen benefits grow by 290.5 percent and 177.8 percent, prompting concerns of deregulation among those industries.

Sri Lanka 
 
Former Ambassador and Permanent UN Ambassador to Sri Lanka, Dr. Palitha Kohona details how other countries, notably Sri Lanka, can have a mutualistic economic relationship with China via China’s One Belt One Road (OBOR) initiative.  Compared to the United States’ post World War Marshall Plan, China’s OBOR will contribute the equivalent of 4-8 trillion USD to the regional economy.  As a member of the Asian Infrastructure Investment Bank, combined with the island’s desirable geographical location along the Maritime Silk Road, Sri Lanka has the opportunity to propel its’ lagging economy forward by becoming an ideal place for investment, assuming this opportunity is leveraged properly by policy makers.


Afghanistan 

China is negotiating to build a military base in Afghanistan near the shared border in order to foster security for the commercial interests of the One Belt One Road project. Chinese militants also supposedly performed recent joint patrol exercises with Afghan soldiers in the Wakhan Corridor. This has been denied by Chinese and Afghan officials, but confirmed by surrounding neighbors. Over the past three-years, China has paid Afghanistan over 70 million USD in military aid.                        

Estonia                      

An advisor from the Estonian Investment Agency praised China's Belt and Road Initiative for its influence and impact on global economic development. Estonia is interested in furthering cooperation with China under the Belt and Road framework because of the country's desire for new markets. Estonia sees China as a potential major economic partner. In particular, Estonia hopes to strengthen economic ties in fields such as smart technology, energy, materials, and telecommunication.


The US Perspective 

The U.S. has become increasingly aware of China's growing influence in global affairs, and the Trump administration has begun to formulate a strategic framework for engagement with China and the Indo-Pacific. President Donald Trump's national security strategy outlines goals including strengthening quadrilateral cooperation with Australia, India, and Japan, as well as stepping up cooperation on foreign investment and bilateral trade. Secretary of Defense James Mattis outlined in his national defense strategy that China is a growing geopolitical adversary and that the United States must continue to leverage its hard power in the region. A recent Congressional hearing on China concluded that certain steps must be taken by the U.S. in order to ensure that China does not reorder the geopolitics of the Asia-Pacific. These steps include alternative models of trade and investment, increasing military and economic ties with partners, and putting the pressure on China to follow international norms.                            

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