China’s vision for Afghanistan

China’s vision for Afghanistan
Afghanistan has announced that the nation has officially become a member of the China-led Asian Infrastructure Investment Bank. China is the..

Afghanistan has announced that the nation has officially become a member of the China-led Asian Infrastructure Investment Bank.

Background

China is the second largest economy in the world after USA. According to certain forecasts, its GDP growth is slated to overtake America’s GDP in another 10 years. A hub for manufacturing industry, China is the fastest growing economy. Its economic growth has been over 10% for over 30 years.

The Asian Infrastructure Investment Bank is a multilateral development bank headquartered in Beijing, China. It has 56 member states while another 24 are prospective members for a total of 80 approved members. The bank was proposed by China in 2013 and the initiative was launched at a ceremony in Beijing in October 2014. It was officially open for business from January 16th, 2016. Japan and the United States are not members of this bank. The capital of the bank is $100 billion and serves a similar purpose as that of World Bank and the Asian Development Bank. In fact, there has been resistance from Tokyo (Asian Development Bank is led by Japan) over this development as it views AIIB as a challenger.

In 2017, AIIB announced that it had received a top-notch credit rating from Moody’s, the rating agency. In 2016, the bank lent US$1.7 billion worth of loans last year into nine projects. The current President of AIIB is Jin Liqun.

Landlocked and mountainous, Afghanistan is one of the most unstable nations in the world. Much of its economy and its infrastructure are in ruins and the nation relies heavily on foreign aid. The region is home to multiple terror groups such as ISIS, Taliban, al Qaeda and Daesh.

 

Analysis

In October 2017, AIIB formally granted Afghanistan full membership. Thus, the number of member-states part of the organization is now 80.

Currently, there are annual meetings of the International Monetary Fund and World Bank taking place in Washington this week. According to the Afghan Finance Ministry, it received the membership during a meeting that was held in the sidelines in Washington. Afghan Finance Minister Eklil Hakimi met with AIIB President Jin Liqun. The Afghan Ministry has said that due to this development, there will now be funds freed for multiple projects. There will be money for development in solar energy as well as for railway links between Afghanistan, Kyrgyzstan, Tajikistan, Iran and China. 

Experts have stated that AIIB has been a successful in terms of promoting Beijing’s economic diplomacy. The latest development could result in China exerting more influence in the region. The nation has been increasing its international diplomatic efforts in the recent years.

This could also be seen as a challenge to the soft power wielded by India in Afghanistan. India is the biggest regional donor to Afghanistan and fifth largest donor globally with over $3 billion in assistance. The nation has already built over 200 public and private schools, sponsors over a 1000 scholarships, hosts over 16,000 Afghan students. The two nations have even signed a strategic partnership agreement in 2011. India has significantly invested in a number of infrastructural projects in Afghanistan.

Assessment

Our assessment is that the creation of AIIB  is primarily in China's interest as the new regional power. We also now see a direct challenge to the Bretton Woods Institutions - the IMF, the World Bank and some extend the World Trade Organisation - that has been in place since the end of the Second World War, a world order is dominated by the United States. We also believe that we would soon have two blocs of economic influence in Asia, one led by China and the other by US and Japan. We feel that such competition is healthy as the demand for infrastructure investment is large enough to accommodate both.

Comments