Trump’s infrastructure dream for the Indo-Pacific lacks one crucial element – money
Anthony Rowley says the US’ recently launched Indo-Pacific Business Forum pales in comparison to China’s Belt and Road Initiative because of its lack of funding and vague institutional structure
Washington’s initiative aims at marshalling US and other public and private investment into Asian energy, infrastructure and digital economy projects, and is an attempt to reassert the primacy of private enterprise over (China-style) state capitalism. However, securing sufficient resources to finance the programme is likely to prove highly problematical.
By contrast, governments in most market economies have relatively fewer funds at their disposal for infrastructure finance. And while private institutional investors in these countries hold an estimated US$120 trillion of savings, the risk-reward ratio of infrastructure investment is not perceived as attractive by pension funds, insurance companies and the like.
Announcing the Indo-Pacific forum at the US Chamber of Commerce in Washington, US Secretary of State Mike Pompeo said developing countries in the region will need to attract nearly US$26 trillion in capital to fund their infrastructure needs. Beyond pledging a nominal US initial contribution of US$113 million, he made no mention of where such money can come from.
Pompeo’s aides claim that the US approach to development of the Indo-Pacific region is not aimed at countering China’s initiatives. But at the same time, they deplore the alleged tendency by (unidentified) sponsors of infrastructure and other-projects to lure borrowers into debt, and to disregard international standards and the “rule of law” in their approach.
“Our way of doing things is to keep the government's role very modest and is focused on helping businesses do what they do best,” Pompeo’s senior policy adviser Brian Hook has said, implying that this is preferable to China’s state sector-led approach. Yet, in China where the government’s role has been central, progress on infrastructure has been dramatic compared to that elsewhere.
All this adds up to a divided Asia. What is clear from the latest development involving the Indo-Pacific forum is that it is an ideological as well as strategic divide. The TPP was designed to limit the power of state-owned enterprises and now that it is dead (in its original form), the US is reprising bilaterally the idea of private enterprise-led development.
So far the US has been unwilling or unable to show evidence that the private sector shares its official vision of Indo-Pacific development, beyond mentioning a couple of international corporations that might participate in infrastructure ventures. The corporate or institutional structure of the Indo-Pacific Business Forum meanwhile remains vague.
Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs