Connectivity projects in Indo-Pacific could compromise nations’ sovereignty: US

In an apparent dig at China's Belt and Road Initiative (BRI), the US voiced its concern over the financing structure of connectivity projects, cautioning nations may compromise their sovereignty if they could not sustainably pay back their loans.

By: PTI | Washington | Published: April 3, 2018 9:28:36 am

US President Donald Trump with China’s President Xi Jinping. (Reuters/Damir Sagolj/File)

In an apparent dig at China’s Belt and Road Initiative (BRI), the US voiced its concern over the financing structure of connectivity projects, cautioning nations may compromise their sovereignty if they could not sustainably pay back their loans.

“We’re concerned, with the financing structures for connectivity projects,” Alex Wong, Deputy Assistant Secretary of State for East Asian and Pacific Affairs told reporters during a news conference here when asked how the Trump administration is going to really propose the alternative for the infrastructure support as against those by China.

“Because if they’re not structured in a way in which the nations of the region can sustainably pay them back, over time, you will see that tends to compromise their sovereignty,” Wong said.

“We’re concerned with how projects are conceived of and implemented because we want these projects to be economically feasible. We want them to be connected with the economies of these nations in a smart way that increases their GDP, truly drives regional integration, and doesn’t weigh them down,” he said.

The American interest, he said, is in infrastructure and connectivity throughout the Indo-Pacific.

“We’re less concerned with where the financing or from which country financing for infrastructure across the region comes from. We are more concerned with how that financing for infrastructure is structured, and how the particular infrastructure projects are conceived of and implemented,” he said.

For decades, the US has been advocating for strong connectivity principles, facilitating good connectivity projects, preparing the investment frameworks and the investment environments in the region to drive private capital to these types of projects, he said.

“In the Indo-Pacific, the Asian Development Bank says that there’s about a USD 1.7 trillion per year investment gap for infrastructure, what they truly need to encourage the type of GDP growth been seen for a number of years in the Indo-Pacific. But that gap won’t be filled by only state-backed financing, he said.

“It can only be filled by getting private sector money off the sidelines,” Wong said. Currently, there is USD 50 trillion in private sector capital and cash instruments that are uninvested around the world.

“If we can get that into the Indo-Pacific to invest in quality best-value infrastructure, that’ll be to the benefit of many of the countries in the region, to our benefit, as the GDP of the region grows and our trade and our investment grow,” he said.

But there is a problem right now in the Indo-Pacific, Wong said. In the developed world, for every one dollar in state financing that goes to infrastructure, one gets two dollars in private capital. But in the Indo-Pacific, for every one dollar in state financing, one only gets 30 cents of private capital into these projects.

“There’s a gap there, and we need to help the nations of the region ensure that they can access that private capital, craft the projects in a way that does attract investment money, ensure that their regulatory environments and their bidding processes are attractive to private capital.

“Then if we can do that, we can fill that infrastructure gap, provide the alternatives that are needed by the nations of the region, so that infrastructure is done right and truly ensures economic growth,” Wong said.

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