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WEEKLY DIGEST: October 31-November 6, 2016

11/2/2016

1 Comment

 
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India Resentfully Needs China's Investment

Despite distrust of China and Chinese made products in India, the country avoids boycotts or bans due to the need for the kind of infrastructure investment the AIIB could provide. India also has a major trade deficit with China, and has tried to diminish it through the "Make in India" campaign, which was aimed at increasing domestic production. However, the trade deficit with China has risen to over $51 billion. 
​​

Warming Relations between China and Smaller Neighbors 


In Beijing this week, Malaysian prime minister, Najib Razak, is echoing the stance of the Philippines President, Rodrigo Duterte, by publicly praising China and enhancing their military partnership. Tuesday, the two countries signed a 34.4 billion dollar deal that includes Malaysia's purchase of littoral mission ships from China, and China's commitment to build a railway and other infrastructure in Malaysia. 


More projects from Indonesia 

AIIB vice president and chief administration officer, Luky Eko Wuryanto , talks about goals, criteria a project must fulfill before possible financing, and current projects. The AIIB wants to become a efficient organization by only hiring only the most competent staff. It currently has four projects: a power plant in Bangladesh, a road in Tajikistan, an urban project in Indonesia, and a toll road in Pakistan, with total financing of around $500 million. The AIIB's ability to finance is limited and well prepared projects have a higher chance of approval. Eko Wuryanto "specifically wish[s] that Indonesia could recommend projects that are both ready to be executed and fulfill the standards set by the AIIB."


Cooperation with Belgium

On an official visit to China to celebrate the 45th anniversary of their diplomatic ties, Belgian Prime Minister Charles Michel and Chinese President  Xi Jinping agreed to expand cooperation in investment, energy, and the Silk road. President Xi Jinping also welcomed Belgium to join the AIIB as a member country and to take advantage of the resources provided by the Belt and Road Initiative to boost development of Asia-Europe logistics and e-commerce. 


Transparency Vital to Success

China will have to balance its goal of rapid growth and transparency, politics, public consultation, and accountability in order to achieve its development goals in Asia. An example of this would be the conflicting goals between the AIIB and the One Belt One Road. The AIIB is making a set of internal operational policies similar to that of other development banks, one of which includes a policy that can address potential issues regarding with politically sensitive projects. The AIIB has been criticized for lack of transparency and willingness to consult like its international peers.


On Track

AIIB president Jin Liqun says that the AIIB is on track to meet its first-year targets. One of these targets is to lend $1.2 billion by the end of 2016. So far, the bank has lent $829 million to six projects in Pakistan, Tajikistan, Indonesia, and Bangladesh. Since June, it has started two batches of funding projects in energy and transport. 


Sino-Malay Relations

On October 20, the Malaysian parliament approved participation in the AIIB. Malaysia has shown a tilt towards China in recent developments. Ever since China announced the One Belt One Road, which is partially funded by the AIIB, Malaysia has been enthusiastic about it. Through the economic prominence gained by the AIIB and OBOR, China's image in ASEAN countries as a player in boosting Southeast Asian economies could improve.



Can  the AIIB Meet it's Transparency Claims?

The article sheds light on several aspects concerning the first four approved projects from the AIIB:

First of all, there is the observation that Pakistan, Tajikistan and Uzbekistan (all of which will be commencing infrastructure projects funded by the AIIB) are members of the Shanghai Cooperation Organization, a China-led initiative. Furthermore, there is Pakistan, another recipient of AIIB funding. Being a recipient of funding doesn't pose a foreseeable threat despite Pakistan's tensions with neighboring India. What's more, 3 of the 4 projects will be joint financed with other multilateral financial institutions. This is a good sign of cooperation on the AIIB's part with other players in the game.

In the realm of transparency, the AIIB is drafting its Operational Policy on International Relations. This document will outline the bank's guidelines when it comes to addressing certain "potentially complex issues arising in connection with politically sensitive projects, including those based in a disputed land area or an international waterway.”

Several documents to keep an eye out for in the article include the following: Good signs: The Energy Strategy Issue Note The not-so-great:The AIIB's Public Information Interim Policy It is mentioned that there isn't any reason for concern at the present concerning the AIIB's actions. The author echoes the sentiments of other analysts when she states that the bank has a good opportunity to "provide additional forums where China can engage with regional neighbors and forge international infrastructure linkages."




Check back with our blog next Monday for another weekly update.

Interested in other IPD updates? Check out our all-team IPD BLOG 
as well!

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1 Comment
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