The infrastructure marketplace in the Indo-Pacific is being defined by competition. But given 21st century trends, this competition should be in the service of expanding choice, innovation, and effective delivery of sustainable infrastructure outcomes. Does the recently announced B3W offer positive contribution beyond engagement through its implicit contrast to the BRI?
China is the leading provider of infrastructure in developing countries, principally through its land and maritime Belt and Road Initiative (BRI). The spectre of a unipolar Asia has pushed other stakeholders to level the playing field through alternatives: Japan’s Expanded Partnership for Quality Infrastructure; India’s bilateral, subregional, and plurilateral outreach in recent years; the EU’s newly-finalised Globally Connected Europe strategy that will see the bloc’s existing connectivity work expand into the Indo-Pacific, including through formalised collaborations with partners like India and Japan. The US, it is seeking to compete with China by modernising its own infrastructure at home, courtesy Biden’s $2 trillion stimulus, as well as expanding private sector-led infrastructure investments via existing and new institutions and programmes.
These efforts will help fulfil crucial unmet infrastructure demand estimated at $26 trillion by 2030, even if individual contributions pale in financial scale, geographic scope, and project pace with respect to China’s infrastructure lending. Value propositions — sustainable financing, good governance, high standards, transparency — have become important components of alternatives in the face of problems and gaps witnessed on the ground in several Chinese projects in BRI partner countries.
What is more, individual constraints and strategic considerations are also spurring countries towards “like-minded” combinations and permutations. A number of bilaterals, trilaterals, and plurilaterals (e.g., the Quad) actively discuss cooperation on infrastructure, whether in terms of finance, capacity building, technical and/or policy coordination; interest is ripe in a number of potential Indo-Pacific partnerships — such as EU-Japan-India — that promote a role for infrastructure cooperation, including in third countries. There have also been a few misses: the US-Japan-Australia infrastructure trilateral, the Blue Dot Network (BDN), and the India-Japan-led Asia-Africa Growth Corridor have yet to bear much fruit.
As much as there is a tendency to view Indo-Pacific infrastructure in the context of a great power competition, the conversation on infrastructure is changing. The challenge will be to ensure that the infrastructure landscape is not beholden to zero-sum frameworks that will prevent adapting to a 21st century.
First, countries want choice. Countries across Southeast Asia, Middle East, and Africa are hesitant to choose exclusively between the US and China (or even, for the matter, between India and China in South Asia, and between Japan and China in Southeast Asia). The push towards multipolarity in the Indo-Pacific, clearly being witnessed in the infrastructure space, will allow smaller countries agency to pick and choose, hedge and balance, and diversify dependencies and partnerships according to their needs and priorities and who best meets in the infrastructure requirement (what Yuen Yuen Ang calls a “portfolio mindset”).
Second, China’s own infrastructure interventions are changing as it faces crises of credibility and viability. A combination of domestic pressures, international criticism, pushback from BRI partners, its own diminished appetite for risk, and greater attention towards its Digital and Health Silk Roads have left their mark: statistics indicate slower investments, smaller projects, a trend towards increasing investments in renewable energy as it simultaneously cuts back on coal projects. Even as China holds first-mover advantage, the BRI is not static.
Third, there is growing convergence on not just building more, but building right. Sustainability is the urgent priority in our world today — and it is (finally) increasingly being accepted across governments and finance institutions. A rising real-time climate challenge is exposing severe gaps in resilient infrastructure — from floods in China and Germany to heatwaves in the US Northwest to cyclones in India. What is more, post-pandemic recoveries are focusing on infrastructure to spur growth, but include a new stress on digital access and social assets (health, water, sanitation) to ensure equitable development. Climate-resilient, clean energy, digital, and social infrastructure have emerged as priority and competitive sectors, along with the standard-setting required. Newer tools, too, abound, such as green finance and ESG investing.
Enter the B3W. The launch of the Build Back Better World (B3W) initiative at the recent G7 summit signals potential new blood in the Indo-Pacific. The global initiative, “a values-driven, high-standard, and transparent infrastructure partnership led by major democracies,” seeks to mobilise “hundreds of billions of dollars,” in particular from private sources, towards climate, health, digital and gender sectors in low- and middle-income countries.
The G7 — and their collective 60% of total global wealth — is welcome as another source of infrastructure financing to meet acute demand, and for its focus on on critical infrastructure sectors especially in the context of the ongoing pandemic.
But Biden’s proposal pits itself against Xi’s in the context of US-China systemic rivalry, principally based on the bedrock of democracy (“democracies are the countries that can best deliver solutions for people everywhere”), as well as a values-based engagement built on criticisms levelled at the BRI, whether in terms of transparency, project planning and implementation, or environmental considerations. And indeed, most attention post its announcement has focused on exactly this angle of US-China competition (more often than not concluding that the B3W either is not, or does not yet, rival the BRI).
This very positioning of the B3W as first and foremost in contrast to the BRI threatens full realisation of a competitor that seeks to promote choice, innovation, and sustainable infrastructure outcomes. As one commentator noted, the B3W is currently “supply-driven” rather than being framed around developing country priorities. As another example — will the B3W remain open to China, or will there be pressure to buy American/European or drop Chinese contractors (such as Huawei) in a bid to constrain rival economic actors? Indeed, will local actors be sidelined to meet geopolitical objectives? Further, given the emphasis on mobilising private money, will the B3W be beholden to institutional finance preferences for low-risk, bigger, high-yield projects, or will the B3W propose a financial mechanism that matches host country demand and need with means? To not forget is a poor track record of engaging low- and middle-income countries, which may affect trust in and credibility of the B3W especially if it limits its vision to harmonising development finance across G7 DFIs and western MDBs.
The G7 has its work cut out if it is to sell itself beyond a normative rival to the BRI and as a viable, credible alternative to build infrastructure in the Indo-Pacific. It must play to its strengths — for instance in setting standards (e.g., finally operationalising the Blue Dot Network) and offering climate finance — to make itself a palatable option.
The opinions expressed are those of the author. They do not reflect the opinions or views of ISPI.