US and Taiwan promote alternative to China’s Belt and Road Initiative
- Taiwanese finance minister Su Jain-rong says private sector’s role in funding infrastructure projects will ensure transparency
- Initiative will fund infrastructure projects in Asia and Latin America and is designed to counter Beijing’s growing influence
An informal US-led alliance to provide an alternative to China’s Belt and Road Initiative will provide greater transparency to countries seeking funding to develop their infrastructure, Taiwan’s finance minister has said.
Taiwan and the US are moving ahead with a plan to finance infrastructure and energy projects in Asia and Latin America, using capital raised from the private sector to ensure greater transparency, Su Jain-rong said in an interview on Wednesday. He said he hopes to see the first projects start within the next year or two.
The plan, initiated with the signing of an agreement between the US and Taiwan in September, aims to raise funds through bonds aimed at Taiwanese banks, insurers and other private capital.
It is an opportunity for both Washington and Taipei to counter China’s global infrastructure spree amid concerns about Beijing’s commitment to international projects and worsening finances among developing countries.
The Belt and Road Initiative relies heavily on loans from Beijing to governments and typically involves Chinese state-owned enterprises.
The Taiwan-US plan, however, “strongly emphasises the participation of the private sector, while also stressing that funds should be raised via the market, which makes it highly transparent,” Su said.
In May, World Bank President David Malpass urged Group of 20 countries to ensure greater transparency on government debt contracts, saying it is the only way to “balance the interests of the people with the interests of those signing the debt and investment contracts”.
Taiwan’s infrastructure lending is intended to be more transparent through the greater disclosure of information, such as amounts raised, yields and intended use, as part of the bond-sale process.
Belt and Road Initiative explained
Taiwan is the latest addition to an expanding roster of US partnerships on infrastructure investment in third countries.
Sixteen countries have reached similar agreements with Washington, according to Su, under which companies from those countries work with the US International Development Finance Corporation to fund infrastructure projects. Japan, South Korea and Australia announced a partnership with the US in 2018.
One major benefit of the financing framework for Taiwan lies in offering its cash-rich insurers the opportunity to find greater yields than are typically available at home, backed up by political support from the US.
President Donald Trump’s administration has made backing Taiwan a key pillar of the White House’s efforts to counter Beijing’s influence, and Su said he doesn’t see the financing collaboration changing much after Joe Biden takes office in January. He attributed that to shared values and strong bipartisan support for Taiwan in Washington.
“After he takes office, Biden should maintain the basic framework” of the plan, Su said. “It’s unlikely that there will be an about-face.”
Taiwan has found itself in something of an economic sweet spot in the escalating battle for global dominance between the US and China, with exports to the world’s two largest economies surging over the past year.
Taiwan’s exports to the US are to continue their strong growth with an end to the trade war nowhere in sight, Su said. Taiwan’s economy should also continue to benefit from Taiwanese companies bringing investment back from the mainland, he added.
Taiwan’s economy grew 3.3 per cent in the third quarter, government figures are expected to show, according to the median estimate of a Bloomberg survey of 12 economists. The government’s official full-year GDP forecast, last updated in August, is for 1.6 per cent growth.
“This year’s economic growth is going to exceed what we had expected,” Su said, without elaborating.