Australia is joining forces with the United States and Japan to pull more private infrastructure investment into poor countries in Asia and the Pacific in what will be a rival vision to China’s massive state-led Belt and Road Initiative.
While the Turnbull government provided little detail on the plan, it appears aimed at giving private investors greater assurance in buying into much-needed projects in countries they might otherwise deem risky, while persuading those countries that an economically open region is in their long-term interests.
Canberra, Washington and Tokyo have been watching with rising concern as Beijing embarks on an infrastructure-building spree across Asia and the Pacific under President Xi Jinping’s Belt and Road Initiative, or BRI.
The Chinese state-sponsored initiative has constructed billions of dollars worth of ports, roads, bridges, railways and communication networks but is regarded by critics as a strategic play that is not always in the interests of the countries receiving the infrastructure.
Stephen Kirchner, a trade and investment expert at the US Studies Centre at Sydney University, said the scheme announced on Tuesday was an “attempt to provide a private sector-led alternative to China’s BRI”.
“It becomes very tempting for countries in the region to access that [Chinese] finance rather than the much more demanding task of the attracting that [private] investment,” Dr Kirchner said.
“There’s a role for [Australia, the US and Japan] to explain to countries in the region that although China sets a lower bar, this comes with all sorts of geopolitical strings attached that can compromise your sovereignty.”
Australia has long been worried that some development projects under the BRI are murky and will leave poor countries saddled with unsustainable debts that make them vulnerable to Chinese coercion.
The rival vehicle, Dr Kirchner said, would aim to persuade countries needing infrastructure that while private investment imposed tougher standards in the short term, being part of a “free and open Indo-Pacific region” would be better for them in the future.
The joint statement between Australia, the US and Japan, issued by Foreign Minister Julie Bishop’s office, focussed strongly on the need for a “free, open, inclusive and prosperous Indo-Pacific” region and promoted their own values of “transparency … and avoiding unsustainable debt burdens”.
It stated the priority projects would be in energy, transportation, tourism, and communications technology”.
Because it aims to attract private capital, it is unlikely to cost Australian taxpayers.
Dr Kirchner said the plan was “very much a work in progress”.
“Are there any barriers to greater private sector participation in funding regional infrastructure that they can jointly address? This is very much a process for doing that.”
The US Overseas Private Investment Corporation, through which the US will be involved, helps American companies operate in emerging markets by giving the companies loans, guarantees and political risk insurance.
Rory Medcalf, who heads the Australian National University’s National Security College, said there was no sense in Australia and others trying to match China dollar-for-dollar in infrastructure spending – a view shared by Dr Kirchner.
“The value from advanced democracies is going to be in quality infrastructure, digital infrastructure and strategically picking countries to interrupt the continuity of the BRI to make sure China can’t dominate the region,” Professor Medcalf said.
By David Wroe