Solomon Islands has joined the China-backed Asian Infrastructure Investment Bank (AIIB) days after its leader snubbed an invitation to meet U.S President Joe Biden at a Pacific summit.
Solomon Islands joins the bank alongside the Central American nation of El Salvador, which deepened its relationship with Beijing a few years after switching ties from Taipei.
Tanzania, another key Beijing ally and where China has vast interests, has also been admitted as a prospective member.
The new admissions to the AIIB push the total number of countries that have joined to 109. While most are in Asia, the bank also has members outside the region, such as Britain, France and dozens of African countries, including Algeria, Ethiopia, Rwanda and Egypt.
The AIIB’s board of governors approved the applications during the bank’s eighth annual meeting in the Egyptian city of Sharm el-Sheikh on Tuesday – its first in-person annual gathering since 2019.
AIIB president and board chairman Jin Liqun said the members now “collectively account for 81 per cent of the world’s population and 65 per cent of global gross domestic product”.
“The addition of El Salvador, Solomon Islands and Tanzania strengthens the AIIB community and supports our collective mission to finance infrastructure for tomorrow,” Jin said.
“Together, we will work on priority projects within our clearly defined thematic priorities to drive long-term sustainable growth.”
The three prospective members will officially join the AIIB once they complete required domestic processes and deposit the first capital instalment with the bank.
“Our journey began with 57 founding members,” AIIB vice-president and corporate secretary Ludger Schuknecht said.
He said the growth in membership to 109 showed “that many believe in our mission to achieve sustainable infrastructure development and economic growth, as well as our commitment to actively support infrastructure projects that contribute to climate change mitigation, adaptation and resilience”.
China holds a 30 percent stake in the bank, which started operating in 2016 as the brainchild of Chinese President Xi Jinping. It was billed as Asia’s answer to the World Bank to provide infrastructure finance for its members.
China had expressed frustration at its lack of influence at the World Bank, which is dominated by the United States. The Asian Development Bank is dominated by Japan and the US.
But in June Bob Pickard, a Canadian citizen who resigned as global head of the AIIB’s communications, claimed the Beijing-headquartered lender was infiltrated by the Communist Party.
Following the allegations, Canada said it would “immediately halt all government-led activity” with the AIIB.
The bank said Pickard’s comments were “baseless and disappointing” while Beijing, through its foreign ministry, said the bank had “acted as a truly international, rule-based and high-standard institution”.
David Shinn, a China expert and professor at George Washington University’s Elliott School of International Affairs, said the three newest members hoped to obtain some of the infrastructure financing offered by the AIIB, which had a wide membership of countries representing various political persuasions.
“”There is no significant downside to joining and the motivation is probably more practical than geopolitical,” Shinn said.
However, Aly-Khan Satchu, a geoeconomic analyst, said Solomon Islands had decisively pivoted towards the East, with Honiara recently describing development cooperation with China as “less restrictive, more responsive and aligned to our national needs”.
“Solomon Islands has made the geoeconomic calculation that a singular alignment with China at this time will have potentially an outsize pay-off, versus trying to balance the U.S and China, or pivoting towards the U.S. That signal is an overarching one and interesting for that,” Satchu said.
Solomon Islands’ Prime Minister Manasseh Sogavare signalled that shift when he declined to attend the Pacific nations summit at the White House on Monday and Tuesday. Before the snub, he praised China for its development model in his speech at the UN General Assembly last week.
The Solomons’ top export to China is timber but it also sells products such as processed fruit and nuts and in return buys mostly iron products from China.
Last year, China signed a security deal with Solomon Islands allowing Sogavare to request China’s police and military officers, if required, to protect “Chinese personnel and major projects” in the Pacific nation.
The decision has raised concern in the U.S and Australia about Beijing’s growing interests in the region, where Washington is also making inroads.
In July, Sogavare accused the U.S of interfering in the Pacific nation’s “internal affairs2 after Washington raised concerns about Honiara signing a security deal with Beijing.
In Central America, El Salvador, under President Nayib Bukele, has been thumbing its nose at Western financial architecture and probably feels the AIIB will be more receptive to its development needs, according to Satchu.
And Tanzania sought to straddle both sides – the U.S and China, with whom it has a long-standing relationship – but appeared to be seeking the potential for options.
“What all three countries affirm is China’s meaningful pull effect, and that a security partnership [which remains the U.S’ main offering] is one dimensional versus China’s more multidimensional offering,” Satchu added.
Cumulatively, the AIIB has financed more than 200 projects worth US$44 billion since 2016. It is positioning itself as the key financier of climate-related projects, promising in its newly launched climate action plan to allocate at least half of its annual financing approvals to climate finance.
Sultan Al Jaber, president designate for the UN’s coming climate change conference, welcomed the AIIB’s pledge on Tuesday, saying “it is a crucial step in the right direction and is in line with the objectives of our COP28 presidency”.
“Bigger and better development banks, working together, are critical for closing the financing gap, especially when it comes to adaptation and operationalising the loss and damage fund,” Al Jaber said.
However, a report released by civil society groups on Tuesday said that in seven years the AIIB was yet to accept a single complaint from people adversely affected by its investments.
The study released by Recourse, Inclusive Development International and Accountability Counsel, said nearly half of all AIIB projects were found to be ineligible for the accountability mechanism. Of 219 projects funded by the end of June, 46 per cent (101 projects) were not eligible for consideration.