The new ‘Great Game’ in infrastructure lacks a game plan

Infrastructure has become the new front line as superpowers manoeuvre for economic and geo-strategic influence, writes Anthony Rowley

PUBLISHED : Sunday, 07 October, 2018, 11:03am
UPDATED : Sunday, 07 October, 2018, 11:03am

The new “Great Game” being played in and beyond the Eurasian continent by the world’s major powers is ostensibly about competition in infrastructure building. But it is also about manoeuvring for economic and geo-strategic influence as “infrastructure wars” become a proxy for wider battles.

Europe’s entry into the game with a plan called “The European Way to Connectivity” may or may not represent a challenge to China’s Belt and Road Initiative but the fact is that China’s pioneering effort has woken the world up to the full economic and strategic implications of infrastructure.

It has exposed the fact that neither state nor market capitalism as they operate at present can hope to secure the huge resources needed for the financing of infrastructure investment, and that a new model is needed. In this sense at least, the contest among great powers promises to be salutary.

Unlike the 19th century contest between Britain and Russia for control over Central and Southern Asia, the China-initiated Great Game has drawn in the US, Japan, India and Australia as well now as the European Union. It is thus a global challenge that requires global solutions.

It all began in 2013 when President Xi Jinping announced what was known at first as the One Belt, One Road plan (later renamed Belt and Road Initiative) to link China with Europe via Central Asia and through a Maritime Silk Road extending the network to North Africa and the Middle East.

For a while China appeared to have the field to itself as it began signing bilateral deals with some of the 60 or so countries that could be included eventually in the belt and road plan. But then in 2016 Japanese and Indian leaders came up with a plan for an Asia-Africa Growth Corridor (AAGC) as a counter to the belt and road strategy.

The Trump administration in the US responded later with plans for an “Indo-Pacific Business Forum” which proposes infrastructure and other investments across much of the region covered by the AAGC and in which Japan along with Australia among others are supposedly going to participate.

This added to the complexity of the Great Game which was shown to be a battle not only for control over key land and sea corridors in and beyond the Eurasian continent but also a clash between China’s state enterprise -driven economic model and the market-driven models of the US and elsewhere.

Adding, it seemed, to the scrum of players, the European Commission last month announced its own “connectivity” plan to be discussed at an EU leaders meeting later this month. This was immediately tagged a “rival” to the belt and road although EU and Chinese officials have insisted that it is not.

It is logical that Europe should insist on having a say on how road, rail, energy and communications networks envisaged under the belt and road will be handled once they cross borders from China into Europe (via central Asia). Standards, gauges, operating regulations etc all need to be harmonised.

A weakness of the belt and road project right from the start has been its lack of a regional coordinating body where the interests of participating states are represented. In the case of Europe, China can now talk to the EU but in Asia there is no equivalent body for China to negotiate with.

This problem is being brought sharply into focus (even if unwittingly) now by China’s bold and “visionary” (as Northeast Asia guru Kent Calder at Johns Hopkins University in the US has termed it) Belt and Road scheme. A pan-Asian response is needed to match the Chinese and European moves.

The belt and road initiative (and by extension China) have been subjected to repeated attacks from critics who claim that it is unaccountable, encourages small states to go deep into debt, its projects do not meet global standards and that they are designed to help China export its surplus construction capacity,

What critics do not acknowledge is that China has been prepared to put its money where its mouth is so far as financing infrastructure projects is concerned. Those who push alternative plans, not least from Tokyo and Washington, need to be much more open about their own sources of funding.

The weakness of their arguments is that while China seems prepared to put up a big slice of its US$3 trillion reserves to back the belt and road project (and can expect the Asian Infrastructure Investment Bank to chip in more) market economies cannot force their institutional investors and banks to do likewise.

Governments in market economies will thus need to take a lead in guaranteeing private investment in infrastructure on a scale matching the multi trillion dollar needs of the sector, and even China’s state-dominated economy will need to attract more private sector funding.

This is an enormous challenge and one that should motivate those involved in the new Great Game to stop using infrastructure as a proxy for their geopolitical ambitions and get down to solving the basic financing problem. This is the only “game plan” that will work at the end of the day.

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs