May 12, 2016 4:08 am JST

AIIB teams with European development bank in Central Asia

SAM NUSSEY, Nikkei staff writer

Jin Liqun of the AIIB, left, and Suma Chakrabarti of the EBRD signed a memorandum of understanding on May 11.

LONDON -- The Beijing-based Asian Infrastructure Investment Bank has agreed to co-finance a road project in Tajikistan, the fledgling bank's second such project on China's strategic Silk Road route.

The China-led bank will partner on the effort with the London-based European Bank for Reconstruction and Development. EBRD President Suma Chakrabarti welcomed the deal, saying he hopes the joint project will be "the first of many."

"We have been working closely with AIIB since its earliest days," Chakrabarti told attendees at the bank's annual conference, where this week he defeated Poland's central bank governor to secure a second four-year term.

The Tajikistan deal quickly follows an agreement between the AIIB and Manila-based Asian Development Bank to co-finance a road project in Pakistan, with the China-led bank and World Bank also having pledged to work together.

The EBRD was created to promote private enterprise and democracy in former communist states. Last year China became the 25-year-old bank's newest shareholder. The bank's investment in Central Asia has grown to almost 10 billion euros ($11.4 billion). Further co-financing with the AIIB in Kazakhstan is also in the cards.

Central Asia has suffered from the collapse in oil and gas revenues since commodities prices began to fall two years ago. The EBRD expects the region to continue to slow, forecasting 3.3% growth this year. Countries such as Tajikistan and the Kyrgyz Republic with heavy reliance on Russian remittances have been hit the hardest, the bank said.

Rejuvenating the ancient Silk Road route has become a strategic priority for Chinese President Xi Jinping. Though the "One Belt, One Road" initiative focuses on infrastructure, Chinese investment is "very broad-based, going beyond infrastructure and logistics," said Agris Preimanis, Central Asia economist at the EBRD.

In contrast to some strategic infrastructure projects, deals in areas such as agriculture are required to "make sense from a commercial point of view," Preimanis said. Chinese investment also can provide a welcome shot in the arm, he said. "It is certainly helping some of the countries in the region ... to get through the crisis."

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