A two-day summit to unveil what China is portraying as the infrastructure project of the century concluded on May 15. The $1 trillion initiative is designed to vastly expand free trade in Africa, Asia and Europe. Realization of the plan will depend in part on the effectiveness of a newly minted development mechanism, known as the Asian Infrastructure Investment Bank (AIIB), according to EurasiaNet.org.
The summit, held outside the Chinese capital Beijing, celebrated the launch of China’s Belt and Road infrastructure vision. It brought together 30 world leaders, including Chinese President Xi Jinping, who expressed hope the project would promote growth and a new world order.
The financing needed to realize Belt and Road plans reportedly presents lots of challenges. EurasiaNet.org says Beijing will be looking to the AIIB, which began operations only in January 2016, to be a Belt and Road catalyst, including providing financing for projects in Central Asia.
Fifty-seven states are participating in the AIIB. China is the largest provider of start-up capital for the bank, injecting almost $30 billion, or roughly 32 percent of the bank’s overall funds. Beijing also controls almost 28 percent of the bank’s voting shares. Other major donors include India, which controls 8 percent of voting shares, and Russia, which has a 6 percent stake.
The AIIB's stated aims are to invest in and attract other long-term financing for transportation, telecom and energy projects throughout Asia. To date, the AIIB has approved loans worth US$1.73 billion to support 13 projects in eight countries, including the former Soviet states of Azerbaijan and Tajikistan.
Tajikistan stands to benefit from a project to improve roads, including a route connecting Tajikistan and neighboring Uzbekistan. In June 2016, the AIIB approved a direct loan for $27.5 million, alongside $62.5 million from the EBRD, for an upgrade of a key 5-kilometer section of the motorway.
China also shares a border with Tajikistan, and has in recent years extended credits to Dushanbe for roads, tunnels and power infrastructure.
The AIIB-financed highway project stands to improve China’s access to Central Asian markets, allowing for a freer flow of Chinese-made goods and products.
The AIIB’s participation in the overall financing is small, a factor that will limit any geopolitical influence from Beijing. Nonetheless, the project could create a template for further road and highway projects throughout the region.
With its proposed capitalization of $100 billion, and an initial target of $4-5 billion in annual lending, the AIIB is a relatively small player in comparison to China’s largest policy lenders, China Development Bank and the Export-Import Bank of China. Nevertheless, the AIIB has an important role to play in the Belt and Road project. Beijing is keen to gain geopolitical and geoeconomic influence through the creation of additional institutions, including the AIIB, the New Development Bank and the Silk Road Fund, according to EurasiaNet.org.
