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WEEKLY DIGEST: January 24-30, 2016

2/1/2016

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Thailand’s cabinet approves budget of 52.82 billion baht ($1.47 billion) in order to join the AIIB.

Temphairojana reports that Thailand decided to join the AIIB in July 2014, just two months after civil unrest caused the Thai military to seize power. Since then, Thailand’s junta, known as the National Council for Peace and Order, has “sought to counterbalance the country’s ties with Washington and launch a charm offensive towards China.” Temphairojana concludes that Thailand will pay the $1.47 billion investment in the AIIB over five installments, which will end in 2019. 


Is Cooperation in the Cards the AIIB and World Bank?


Vice President of the World Bank, Axel vanTrotsenburg takes a rather positive view of the AIIB after his recent visit to the Republic of Korea. Van Trotsenburg expressed his welcome for the AIIB, and stated his desire that the World Bank and AIIB will be able to address the massive infrastructure gap in Asia (estimated at $1 trillion). Van Trotsenburg further praised South Korea's strong economic relationship with China, and further expressed his admiration of how South Korea was able to remain rather unaffected by the 2008 global economic crisis.

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Infrastructure and Cooperation are Key for a  More Secure Asia

An outline of several key factors to keep in mind concerning East Asia in the next coming years. The author notes that "security pluralism" is a way in which East Asia might be able to proactively address its regional security. The security pluralism strategy holds “economic interdependence, stability in the balance of power, multilateral institutions, and ideological tolerance” as its main principles. Security pluralism recognizes that “national identities and competition remain,” but are controlled by an interdependence of between institutions and a “shared imperative for avoiding system collapse.” The article asserts that this form of security governance is accommodating amongst unequal powers, as it deters hegemony and preserves the autonomy of each regional nation. The article emphasizes several specific acts in order to implement security pluralism. First, Asia should maintain openness in its regional economic arrangements, such as the AIIB and Trans-Pacific Partnership (TPP). Second, the article declares that the region should avoid policies that prioritize offense over defense. Lastly, Asia should promote the practices and norms of pluralism in order to foster cooperation amongst Asian and Western civilizations.


Papua New Guinea urges AIIB to Shift Focus
 
A warning comes to the AIIB from Papua New Guinea's Opposition Leader, Don Pomb Polye, who states that the AIIB should focus less on trying to "mimic" project types like the ADB. He furthermore states that these types of infrastructure projects are best left in the hands of the IMF, ADB, and World Bank. He instead suggests that the AIIB should branch out into the realm of following industries: solar energy, hydro energy, bio-fuel, geo-thermal power, wind power and other renewable power energy systems. He does, however, welcome the bank's establishment.



UK Nominates Former Politician to AIIB, to the Disappointment of Beijing

Chinese officials disappointed with UK's decision to appoint former minister Sir Danny Alexander to a position within AIIB. He has been assigned to a top communications position. Chinese discontent stems both from Alexander's history as a politician and his lack of experience with international finance. 


Japan and China Compete for Lead in Infrastructure Development

Japan and China have been vying for the high demand infrastructure projects throughout their region. China seems to have won the battle in Indonesia for a transportation project due to intimidating repercussions of denying the Chinese Government, according to one official from Japan's ruling Liberal Democratic Party. 


The "One Belt, One Road" Initiative will have Immense Positive Spill Over Effects

The "One Belt. One Road" initiative will bring more than infrastructure development; it will spark outside investment and will improve the local currency bond markets throughout the region. Enhancing the diversity and liquidity of the bond markets will increase financing opportunities for the private sector, improve capital allocation, and decrease China's reliance on bank lending. 


Former Treasury Minister of the UK candidate for on of the AIIB's vice-president positions.

The Financial Times forecasts that Sir Danny Alexander, the UK’s former Treasury minister, is set to join the leadership board of the AIIB. Alexander is purportedly one of five “Beijing-based, resident vice presidents” of the bank. Fellow EU and AIIB member, Germany, possesses a vice-chair role, as well as two vice chairs on the AIIB’s board of governors. However, the Financial Times reports that different countries will become eligible to take turns holding the vice-chair role, and that while Germany will represent the euro currency in the bank, the UK will represent a “wider Europe,” non-eurozone constituency. The UK treasury is yet to confirm Alexander’s appointment.


Turkey's outlook as part of the AIIB

An announcement by the Esin Attorney Partnership, outlining the structure and focus of the AIIB. Esin Attorney partner, Muhsin Keskin, discusses the founding of the bank and its regional composition, with 37 member countries belonging to the Asia Pacific, and another twenty composed of non-regional countries. Keskin emphasizes that the bank aims to fill the multi-trillion dollar infrastructural gap in the Asian region, and that it is currently composing its environmental and social policies. Keskin posits that as Turkey has previously drawn the interests of other multilateral banks, so too, is the AIIB likely to provide a new source of financing to Turkey.


Bangladesh seeks loans from the newly established AIIB.

Bangladesh’s Finance Minister, AMA Muhith, asserts that the country expects AIIB funding for major infrastructure projects in the country. Muhith also noted that Bangladesh serves as a model for other developing nations, as it has posted “6 per cent GDP growth in the last years” following a global recession. Muhith further asserted that Bangladesh will focus more on sectors such as education, health, and employment.



Several precautions for the AIIB.

Despite initial successes, Cainey warns that “knitting the AIIB together as an organization with a common international culture” will be a major leadership and management challenge. He also reiterates the need to keep watch over the bank’s promises to uphold “clean and green” principles throughout its project implementation. Cainey posits that as the AIIB develops, it should adjust its practices, and that potentially, such adjustments could go on to benefit other multilateral institutions throughout the globe.
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