Asian Infrastructure Investment Bank News
The AIIB's first independent financing project has been officially launched in Bangladesh. The project is intended to expand and upgrade electricity service capacity in rural Bangladesh and will benefit more than 12.5 million of the rural population. In addition, the AIIB and ADB are providing project loans jointly to Bangladesh to increase production efficiency and expand gas transmission infrastructure.
The Manila flood control project starts construction this month and is estimated to finish in 2024. The AIIB approved the project in September 2017, and is co-financing the project with the World Bank and the Philippine’s government. The project will renovate and build new pumping stations. It will also support infrastructure such as garbage disposal and drainage pipeline maintenance, ensuring resident safety.
Internal praise for the AIIB
According to Kaixian news, the AIIB has exceeded expectations. The number of AIIB members increased from the original 57 to 84. The bank has provided more than 4.2 billion USD of loans to 24 projects and has raised more than 20 billion USD in capital. In 2017, the AIIB received AAA credit ratings from the major international evaluation agencies (Moody, S&P and Fitch Agency). As the AIIB president Jin Liqun said, only two-years have passed since the foundation of the bank and it has taken a solid spot in the international development field.
Skepticism of the AIIB
Last Friday, when asked about the AIIB during a meeting with members of the Japanese Diet, Prime Minister Shinzo Abe maintained a cautious attitude toward the investment bank. He noted that the AIIB has been in operation for less than two-years and stated that he wants to pay close attention to the bank's ability to establish governance, make responsible loans, and sustain both local societies and the environment.
Reasons to trust the AIIB?
Jin Liqun, President of the AIIB, attributes the AIIB ability to complete negotiations and begin operation, in just two-years, to the sincerity of the Chinese government. Jin also emphasizes the AIIB's approach, which is not to copy the structures and processes of existing international agencies, but rather to learn from their successful experiences to "forge a new path." Lastly, Jin points to the AIIB commitment to being ""inclusive, open and transparent"" as reason to trust in the bank.
The Asian Development Bank Updates
Cooperation with the AIIB
According to ADB Vice President Zhang Wencai, the ADB is expecting more cooperation with the AIIB in future development projects focused in the Asia-Pacific region. The two institutions signed a memorandum of cooperation in 2016. Since then, they have co-financed four projects, including a natural gas project in Bangladesh, road infrastructure projects in Pakistan and Georgia, and a power transmission project in India. To meet the needs for private sector development, climate change resilience, and regional cooperation in the area, the two lending groups are planning to further collaborate.
ADB at Davos
ADB President Takehiko Nakao and Prime Minister Karen Karapetyan of Armenia met at the 48th World Economic Forum Annual Meeting in Davos, Switzerland to reaffirm ADB assistance in Armenia. The two discussed ADB projects in Armenia and their positive results, and agreed to have Nakao visit Armenia this year.
China in Latin America and the Caribbean
The second ministerial meeting of China and the Latin America-Caribbean (CELAC) Forum was just held in Santiago, China. In recent years, Latin America has become the second largest destination for Chinese overseas investment. This China-Latin America Forum meeting reaffirmed both side's commitment to deepening bilateral ties and cooperation, particularly through China's One Belt, One Road initiative. Read more here.
The Chilean chancellor to the second CELAC-China forum, Heraldo Muñoz, said that China intends to be a reliable partner to Latin America and the Caribbean. Muñoz made it clear that China seeks multilateralism and open-dialogue with its Latin American and Caribbean partners. Muñoz pushed for more digital transpacific interconnectedness to add innovative value to the products of the international commercial partnerships. Muñoz also reported that Chancellors of CELAC countries expressed great interest in joining the One Belt, One Road initiative and contributed to passing the joint CELAC-China Action Plan 2019-2021, setting the agenda for the next few years. Read more here.
China looks to take Washington’s space in commercial coordination in Latin America. This shift is underscored as a product of the Trump administration and its way of "humiliating and undervaluing" Latin America. China seeks to extend its New Silk Road through South America. China has already established treaties with Peru, Chile, and Costa Rica. China has begun projects, such as the "Tropic of Capricorn Corridor," to increase the flow of goods with large markets in Latin America. This railway project seeks to connect the coast of Brazil with ports in Peru or Chile and could cost nearly 21 billion USD. Chinese investors also are currently building a bullet train connecting Querétaro and Mexico City in Mexico, and they are looking at the potential of extending the train to Rio de Janeiro, Brazil. The extension would cost an estimated 11 billion USD. Read more here.
The One Belt One Road
A Polar Silk Road?
China created a policy paper that outlines its vision of a "Polar Silk Road," mirrored after its Belt and Road Initiative. China's underlying strategic goal is to facilitate sustainable economic and social development of the Arctic, working with a variety of countries that hold territory in the Arctic region. While China is eyeing the development of oil, gas, mineral resources, fishing and tourism, it has also stated that current laws on global governance in the Arctic will be respected and upheld.
Disputes on the Belt and Road?
China's Belt and Road Initiative has led to a surge of economic activity and connections across the world as more countries partner with China on international development. However, one of the consequences of this has been increased commercial, trade, and investment disputes between China and partner countries and firms. Foreign Minister Wang Yi expressed a desire to facilitate dispute resolution following the principles of consultation, contribution, and mutual gains.
Internal growth because of the Belt and Road
China's lesser developed provinces like Gansu have experienced economic and industrial growth as a result of the Belt and Road Initiative. The province capital, Lanzhou, now links with Singapore through a rail-sea transport route, and it is expected that a rail-highway route to Gwadar Port in Pakistan will be created later this year. Trade between Gansu and Belt and Road member states increased by 32 percent and the city now has 33 industrial projects.
China increases tension between Pakistan and India
Pakistani Prime Minister Shahid Khaqan Abbasi praised the China-Pakistan Economic Corridor as promoting economic growth, financial sustainability and environmental conservation in Pakistan. Chinese investment projects include highways, railways, pipelines and optical cables, and have resulted in more international investment in Pakistan, greater corporate confidence, more efficient power generation, and lower transport costs. The Prime Minister expressed his support for continued economic and security ties with China under the Belt and Road Initiative. Read more here.
India's ambassador to China, Gautam Bambawale, said in a statement that Beijing should take New Delhi's concerns about the China-Pakistan Economic Corridor (CPEC) more seriously. A major consequence of the CPEC is the ever-increasing presence of China in South Asia, which has created economic and security concerns for Indian policymakers. Most importantly, China's proposed projects pass through disputed territory, which Bambawale referred to as a violation of India's territorial integrity. Read more here.
At the invitation of China, British Prime Minister Teresa May will pay an official visit to China from 31 January to 2 February 2018. At a press briefing, British Ambassador Barbara Woodward said that Britain hopes to deepen the economic and trade relations between China and Britain to establish a "golden era." Woodward also expressed hopes for more British involvement in China's One Belt One Road initiative. Read more here.
China and Drugs in the Philippines
A new Chinese-funded regional Dangerous Drug Abuse Treatment and Rehabilitation Center (DDATRC) will be built in the Philippine province of Sarangani. The DDATRC is part of a China-Philippines aid agreement made in October 2016. The center will help address the continuing drug abuse issue in the Philippines. The facility will have 150 beds and be completed in 21 months. Read more here.
The Chinese Perspective
Yan Pengcheng, spokesman of The National Development and Reform Commission of the People's Republic of China, spoke on China’s foreign investment direction, focusing specifically on how China wants to maintain its previous investments. For the past year, outward investment has been important for both pushing forward the One Belt One Road construction and allowing domestic enterprises to optimize the allocation of resources. Read more here.
Controversies have arisen regarding Confucius Institutes that have been established overseas by China. At a Central Leading Group for Comprehensively Deepening Reforms meeting, leaders highlighted the necessity to strengthen the construction of Confucius Institutes, as it is a key for diplomacy between China and foreign nations. Xi Jinping presided over the second half of this meeting and promoted the creation of the One Belt One Road Initiative as a mechanism for settling disputes. Read more here.
President Xi sent out positive signals in Davos 2018. He claimed that China is eager to be a part of an open, inclusive and equal environment with other countries. The establishment of AIIB and the initiation of the One Belt One Road are important elements to participating with the rest of the world in development. He said that China’s role is not as hegemonic leader, but as an equal participant. China hopes all countries to work together in building a peace, friendly, and equal system for development. Read more here.
Western fears of Chinese development finance
Western-based group are worried that Chinese development aid efforts poses a threat to their role of promoting social change. Western-backed lenders have historically encourage countries they work with through investments and financing to elicit greater consideration for human rights or environmental regulation . China, on the other hand, takes a more "hands-off" approach and doesn't demand similar changes in return for aid. Naturally, this makes Chinese offers more attractive and lessens the influence of Western groups and their abilities to operate. While more assistance for development from any source is welcomed, and cooperation with the Chinese can be beneficial, many are still worried about this new dynamic. Read more here.