The View | 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

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A worker walks on a structure representing the “golden bridge of the Silk Road” on display outside the National Convention Centre, the venue of the Belt and Road Forum for International Cooperation, in Beijing in April 2017. The US has sought to counter China’s ambitious Belt and Road Initiative with the Indo-Pacific Business Forum launched this week. Photo: AP

Published: 12:00pm, 2 Aug 2018Updated: 10:30pm, 2 Aug 2018

The battle for “spheres of influence” – economic, financial and geostrategic – in Asia has been joined afresh this week with the launch by the US government of its Indo-Pacific Business Forum. This appears at first to herald a battle royal between the US and China for domination of the region but the “war” has probably been lost before it has really begun.

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.

A key element of the US-led initiative (which also involves Japan, India, Australia, Indonesia and others) is to secure funding for massive infrastructure building in the Indo-Pacific region. But private funding for this key sector has proved very difficult to come by compared to the state resources available under China’s Belt and Road Initiative.

China uses part of its US$3 trillion official foreign exchange reserves, supplemented by borrowing from state-owned enterprises plus finance from the Asian Infrastructure Investment Bank, which is able to borrow on international capital markets, to fund the Belt and Road Initiative. Beijing may opt to sell more US Treasury securities, which could further boost the plan.

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.

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