An increasing number of Pacific island nations are turning to the Beijing-backed Asian Infrastructure Investment Bank (AIIB) and the Chinese government for financing, Reuters observed this weekend.
The Cook Islands, Fiji, and Vanuatu have all accepted loans from either the AIIB or the Chinese government in recent months to help their ailing economies weather pandemic-induced hardship. The tiny island nations rely almost entirely on international tourism for revenue, an industry that has been effectively halted since early last year due to the ongoing Chinese coronavirus pandemic.
“Vanuatu, with a population of 300,000, … announced last week that it had accepted a US$12 million grant from the Chinese government,” Reuters reported on January 24.
“The Cook Islands, a tiny country of around 20,000 people in the South Pacific, turned to … AIIB late last year after loans from the U.S. and Japanese-led Asian Development Bank (ADB) and [a] grant from close ally New Zealand fell short,” the news agency added, noting that this followed a few months after AIIB granted a similar first-time loan to Fiji last summer.
“The … AIIB recently approved a USD 20-million financing to the Cook Islands—one of the world’s most tourism-driven economies—to provide social and economic assistance to the country to mitigate economic disruption and support economic resilience. The loan is AIIB’s first project in the Cook Islands and is funded by AIIB’s COVID-19 Crisis Recovery Facility (CRF),” the AIIB announced on December 17.
The AIIB is considered a rival to the ADB and the U.S.-led World Bank. It is closely linked to China’s Belt and Road Initiative (BRI), by which Beijing offers developing nations deceptively cheap loans from Chinese banks to finance infrastructure projects. The dubious deals often create a “debt trap” for already struggling nations thereby cementing their economic dependence on China.
AIIB announced a $50 million loan approval to Fiji in late August for Chinese coronavirus-related work, the Fiji-based Islands Business news site reported at the time. The deal marked the first time Fiji had accessed AIIB’s loan facility since becoming a member of the multilateral development bank in 2017. AIIB confirmed that the loan was its first financing project in Fiji and in the Pacific region in general in an email to Islands Business.
“AIIB is working to engage with the Pacific. We try to be attuned to the specific needs of the region. The Covid-19 [Chinese coronavirus] pandemic has taken a heavy toll on their economies, in particular on tourism. We will try to work with these members to help mitigate the negative impact,” senior AIIB Press Officer Alice Lo wrote.
“As of August 13, 2020, AIIB’s Board of Directors has approved a total of 19 projects under the CRF [AIIB’s ‘COVID-19 Crisis Recovery Facility’], amounting to over USD 6.16 billion to support 15 members in navigating the challenges of these highly uncertain times. AIIB is reviewing additional projects from its clients,” the Beijing-backed bank said when announcing its loan to Fiji.
Chinese leader Xi Jinping called on the AIIB to “grow into a new platform that promotes development for all its members and facilitates the building of a community with a shared future for mankind,” at the bank’s Board of Directors annual meeting on July 28.
“Under the principle of extensive consultation, joint contribution and shared benefits, the AIIB needs to respond to adjustments and changes in the global economic landscape and engage more development partners in cooperation,” Xi said from Beijing at the virtual event.