The projects funded by AIIB along One Belt, One Road

The projects funded by AIIB along One Belt, One Road

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From our office IC&Partners Asia

 

The big infrastructure plan called One Belt, One Road, by which China intends to improve the connectivity and cooperation between countries of  Eurasian area, includes two main components that connect China to Europe:

  • the first component (One Belt) is the land-based “Silk Road Economic Belt” that from China reaches Europe after passing through Central Asia, Middle East and Russia;
  • the second component (One Road) is the oceangoing “Maritime Silk Road” that arrives in the heart of the Mediterranean after skirting Southeast Asia, East Africa and the Middle East.

 

Many of the investments for infrastructures included in the plan One Belt, One Road will be funded by the new multilateral development bank, the Asian Infrastructure Investment Bank (AIIB), that aims to provide financial support to the development of infrastructure in Asia, promote a sustainable economic development, improve connection, and enhance regional cooperation as well as partnership with other multilateral and bilateral development institutions.

 

56 founding States have accepted China’s proposal to set up AIIB (Italy has ratified the AIIB Agreement in June 2016). AIIB will focus on specific investment projects and will be able to carry out its operations:

  • financing, co-financing or participating in direct loans,
  • investing in the capital of an institution or company,
  • securing loans for economic development,
  • engaging the resources of special funds in accordance with the agreements defining their use,
  • providing technical assistance.

 

Since the establishment of AIIB until now, 13 projects have already been approved; many of them will also receive co-financing from other international institutions (such as the Asian Development Bank, the World Bank and the European Bank for Reconstruction and Development).

The following is a short  description of the projects financed.

 

  • Pakistan: construction of the M-4 highway (Shorkot-Khanewal)

This project involves the construction of the M-4 highway in Pakistan: 64 kilometers in length, connecting Shorkot to Khanewal, in the province of Punjab (one of the poorest and most turbulent place in the country). AIIB’s funding was approved in April 2016: this is one of the first co-operation projects between AIIB and Asian Development Bank, the Asian branch of the World Bank.

 

  • Bangladesh: Development and modernization of the electricity distribution system

The implementation of this project, whose funding has been approved by AIIB in April 2016, will provide electricity access to approximately 12,500,000 inhabitants in rural areas and will improve the quality and safety of the electricity distribution system in Bangladesh.

 

  • Tagikistan: construction of the Dushanbe-Uzbekistan highway

This project, funded by AIIB in May 2016, will increase mobility in Tajikistan with the construction of a highway from the capital of Tajikistan, Dushanbe, to the border with Uzbekistan: this highway section is part of the larger program of motorway linkage that will cross central Asia, favoring economic cooperation between the countries of this area.

 

  • Indonesia: Urban requalification project

The general objective of this redevelopment project is to improve infrastructure and services in the less-developed areas of Indonesian cities. The beneficiaries of the project are about 10 million Indonesian citizens, the residents in the less-developed districts of 154 cities: thanks to this project, the people in the poorest districts of these cities will be able to know a significant improvement in their life by modernizing infrastructures and gods services. AIIB approved the financing of the project in June 2016.

 

  • Pakistan: Hydropower production capacity development Tarbela 5 (T5HEP)

The aim of this project was to increase Pakistan’s ability to generate electricity in a sustainable way, favoring low-cost, clean and renewable hydroelectric production. Its realization will also help reduce the blackout and pollution problems associated with the use of gasoline and diesel generators. Furthermore, the production of clean hydroelectric power will bring about a significant reduction of greenhouse gas emissions.  The project will expand the Tarbela dam, which was built in 1974 on the Indus River, in the north of the country, aiming to allocate large amounts of water for irrigation and hydroelectric power generation.

 

  • Myanmar: realization of a combined cycle thermoelectric power plant (CCGT)

This project (whose funding was approved by AIIB in September 2016) provides for the construction of a combined cycle 225 MW (CCGT) thermoelectric power plant in Myanmar. The power plant will be one of the main source of energy in Myanmar, increasing the country’s ability to produce clean energy and helping to fill the country’s energy deficit.

 

  • Oman: building a new rail system

The aim of the project is to build a new rail system in the Sultanate of Oman in order to promote the country’s development, the diversification of its economy (now strongly linked to the production and export of oil) and the development of a logistics pole in this area. The financing of the project was approved by AIIB in December 2016: AIIB will fund $ 36 million US dollars of the $ 60 million US dollars (total cost of the project).

 

  • Oman: modernization of Duqm harbor

The goal of the project is to support Duqm’s port in developing its commercial potential through the realization of adequate infrastructure that will improve Oman’s maritime trade links with other countries, favoring the development of the sultanate’s economy. Project funding was approved by AIIB in December 2016; AIIB will finance $ 265 million US dollars of 353 million USD (total cost of the project).

 

  • Azerbaijan: TANAP, Trans-Anatolian gas pipeline

The TANAP project (Trans-anatolian pipeline, the gas pipeline that will cross Turkey from east to west) is part of the so-called Southern Gas Corridor along with TAP (Trans-Adriatic Pipeline, the pipeline that from the Greek-Turkish border will cross Greece and Albania to reach Apulia region, in Italy) and SCP (South Caucasus Pipeline, the gas pipeline that will transport natural gas to the Turkish border from the Shah Deniz area, located in the Caspian Sea, Azerbaijan). The Southern Gas Corridor will allow access to the European market for Azerbaijan’s natural gas reserve. AIIB funding ($ 600 million USD) for the TANAP project was approved in December 2016. The total cost of the project is $ 8.6 billion USD and will also be funded by the Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB); the project will be managed by the TANAP Natural Gas Transmission Company.

 

  • Indonesia: Fund for regional infrastructure development

The objective of this project is to improve access to infrastructure funding at regional level with the creation of a financial intermediary, the Regional Infrastructure Development Fund – RIDF, which will use funds from AIIB, the Bank World and central government to finance regional governments in the realization of modern infrastructure. The total cost of the project is $ 406 million, of which $ 100 million will be funded by AIIB (funding approved in December 2016).

 

  • Indonesia: Improved operational of Indonesian dams

Indonesia has considerable water availability but rainfall precipitation occurs irregularly in the territory. This project includes studies for the improvement of dam operation and studies for the safety of water structures; it will also support dam-strengthening works such as sedimentation management, instrument repair, and recovery of downstream water systems. Strategic studies, emergency plans, maintenance plans, dam management plans and tanks will also be implemented.

 

  • Bangladesh: improvement of infrastructure for the supply of natural gas

Natural gas is the main source of energy in Bangladesh. Despite its importance, gas supply infrastructure in the country is unable to cope with rising gas demand: currently, gas production is 2,700 million cubic meters per day against gas demand equal to 3,150 million cubic meters per day. The aim of this project is to improve the efficiency of gas production in the Titas Gas Field and to expand gas transfer capacity between Chittagong and Bakhrabad. After its completion, the project will help improve the production level and make the gas transmission network more efficient by increasing the operational flexibility of the gas supply.

 

  • India: Andhra Pradesh 24×7 – Energy for everyone

AIIB approved in May 2017 a funding of USD 160 million for a project co-financed by the World Bank to strengthen electricity in the state of Andhra Pradesh (India) through the modernization of the transmission and distribution system Of energy (total cost 571 million USD). The aim of the project is to increase the supply of electricity and to improve the operational efficiency and reliability of the electricity distribution network. About half of the investments will be used to improve energy supply in rural areas that will improve the economy and the living standards of local populations.