On Oct. 24, China and 20 other nations formally launched their version of the Asian Development Bank, possibly a replacement for the World Bank. Named innocuously as the Asian Infrastructure Investment Bank (AIIB), the formal launch was conducted in Shanghai and was attended by a host of nations who sent their finance ministers and central bank representatives.
It is fascinating to observe that the United States and the G7 nations are not hiding their fear of what AIIB could mean to their future. In a rather blatant and open move, the United States strong-armed its allies in the region — Australia, Indonesia and South Korea — to not attend the launch and withdraw from supporting the venture. While AIIB formally invited Asian leaders, the United States, United Kingdom and Europeans were not even invited to the launch.
Australia was asked to be a founding member, but it declined after open pressure from the U.S. when Secretary of State John Kerry met Prime Minster Tony Abbott in Jakarta two days before the launch day.
Australia buckled and has decided to stay out of the AIIB, a move that could cost it dearly, since the primary source of Australian growth is China. China will not take this snub graciously.
Same goes for South Korea, which was also pushed by the U.S. to stay out of this alliance. They have deferred joining AIIB, but the writing is clearly on the wall.
The U.S. and its Western allies are quite nervous about a true challenge to the World Bank and the Asian Development Bank stranglehold and strong-arm tactics employed to force nations to do their bidding. When any underdeveloped nation requests funding from the World Bank or the Asian Development Bank, they are forced to allow trade with the U.S. and its allies, economic principles are forced on them and terms that might not be practical to the borrower are often imposed. Now with an alternative source of funding, the dominance of the World Bank and the Asian Development Bank could soon end.
The AIIB will be headquartered in China but the first president will be from India. So we see the two powers of Asia take a very keen and active role in the running of the bank.
It will be interesting to see how the Bank develops.
On another front, being from India, I am watching the progress of the new government under Prime Minister Narendra Modi. Not only is the new government serious about economic progress and development, it seems to show great courage and strength in geopolitical ambitions. It is flexing its muscle at all opportunities, which is a clear sign of attempted dominance.
In Arunachal Pradesh, a disputed border area with China, India has started strengthening its military presence. In recent weeks, they strongly pushed back the Chinese Army that was attempting to occupy small pieces of Indian land. On the other side, they have very strongly responded to the terrorist incursions from the Pakistan border and ridiculed Pakistan as they ran to the United Nations to get mediation, which the United Nations has refused.
Just this week, India disclosed more than 600 names of people in India who have stashed illegal wealth in tax-haven countries like Lichtenstein, Switzerland and other countries. The Indian Supreme Court has forced the government to take action and it is complying, albeit reluctantly as it wants to move slowly and deliberately while the masses want blood. Yet this is the first time in decades that we have some real and tangible action taken to punish the criminals.
I see a lot of good changes and bold moves emanating out of India. This will result in strong growth and significant improvements in the next few years. I would allocate investments to Indian businesses and the Indian rupee, as they will benefit from a confident government poised to take large strides toward improvements.
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