Evaluating the Blue Dot Network: A Critical Analysis
On 4th November 2019, the US, Japan, and Australia jointly announced the Blue Dot Network (BDN) at the Indo-Pacific Business Forum in Thailand during the 35th ASEAN Summit. This initiative seeks to employ a multi-stakeholder approach to provide assessment and certification to development and infrastructure projects like ports, bridges and roads from all over the world with the main focus on Indo-Pacific. Assessment and certification will be done on the measures of environmental sustainability, impact on economic development and financial transparency. The main thrust area would be on mobilising private investment from the partner countries towards the developing third world countries. The initiative will be led by Department of Foreign Affairs and Trade (DFAT), Japan Bank for International (JBIC) Cooperation and the US International Development Finance Corporation (DFC) from Australia, Japan and the US respectively. It is to be noted here that Congress created DFC in 2019, replacing the US Overseas Private Investment Corporation (OPIC) which was “the official development finance institution of the US. The financial firepower of DFC has been increased by two times that of its predecessor, OPIC and has been stocked at $60 billion. Several changes in the functioning of DFC has also been introduced to ensure that its working aligns with the US foreign policy objectives and other international developments.
The BDN aims to ensure transparency, quality and sustainability in infrastructure development projects through a gradation process and ensure the engagement of local communities without any corruption activities. It will imbibe in itself, certain international values and practices like the Equator Principle, the G20 principle for quality infrastructure investment and the G7 Charlevoix commitment on innovative financing for development. It seeks to aid the developing countries in getting the required investment for the infrastructure development by ensuring quality and without compromising the sovereignty of the recipient country. It will create a common multilateral platform for governments, private companies, citizens and other stakeholders to work in synergy to certify and rate the infrastructure and developmental projects on the different measures mentioned above.
The strategic importance of BDN
BDN has the potential to become a gamechanger for Japan. First of all, it is in line with the economic diplomacy of the former PM of Japan, Shinzo Abe which aimed at the rejuvenation of Japanese economy in light of the predatory economic policies followed by China. In 2015, Japan announced its Partnership for Quality Infrastructure campaign which is directed towards Asia. In 2016, it was modified as the Expanded Partnership for Quality Infrastructure during the Group of Seven Ise-Shima Summit. It accorded the global status to this initiative which was largely a part of the Abenomics. The BDN initiative aligns with the Expanded Partnership for Quality Infrastructure campaign of Japan. It also complements the commitment of Japan to the Vientiane Declaration which was announced during the 11th “East Asia Summit. 2016. In the declaration, Japan committed to enhancing the cooperation in infrastructure and developments projects in India, China, Australia, New Zealand, Russia, Japan, South Korea, and the US.
There is a massive need for infrastructure development in the world which is estimated to be around $94 trillion, which is to be spent over the next twenty years. The US Pension Funds and insurance companies handle a huge sum of long-term assets which are estimated to be in trillions of dollars. With the introduction of BDN, the US wants to involve them along with the private investors to provide money for the infrastructure development projects. The US is sceptical about the predatory economic policies of China in the Indo-Pacific. It views the increasing stature of China in the Indo-Pacific as a direct challenge to its authority. At many instances, the US President Donald Trump has openly criticised the Belt and Road Initiative of China and its debt-trap strategies. One such example is of Sri Lanka. When Sri Lanka could not repay its debt to China, the strategic port of Hambantota was given to a Chinese company for 99 years of the lease. So, with this initiative, the US wants to indirectly mobilise a huge sum of capital investment towards the region which will be sustainable.
Before the launch of BDN, Australia was already moving forward with the Pacific Step-up program which deploys the elements of both soft and hard power to strengthen the position of Australia in the regional and global order. This initiative of Canberra was directed towards its Pacific Island Family with the focus on addressing social, cultural, economic and political needs and development of this region. Although Australia is engaging proactively with the regional countries, Beijing’s huge financial fire-power has enabled it to increase its influence in the region, thus, leaving Australia and other regional stake-holders behind in the race. China has deployed the state-owned and state-backed companies which keep on jockeying for the desirable deals to support China’s growing ambitions in the Indo-Pacific. So, the BDN is in line with Australia’s Pacific Step-up initiative. It will allow Australia to play a more vital role in the affairs of Indo-Pacific which was earlier somewhat constrained due to the lack of financial deep pockets, unlike China.
Japan has a great reputation in providing quality infrastructure that ranks high in sustainability, safety and innovation. So, the presence of Japan as a major stakeholder in BDN will provide it with an edge over BRI because BRI focusses more on the growth led by the quantity. Moreover, Japan and Australia have already deepened and diversified their partnerships with different countries of the region, including the ASEAN nations. It can be said that the US is dependent on its allies like Japan, Australia & South Korea, as it is relatively inexperienced in the investment environment of the Indo-Pacific nations, especially the South-East Asian region. For instance, Japan has good ties with the Philippines and Vietnam. This trust factor will aid in the easy acceptance of the BDN among these nations. This already established mechanism can provide a head-start to the BDN.
The global economy is ravaged by the COVID-19. The BDN has the potential to engage with the regional stakeholders in order to revive the economic growth and infrastructure development in the post-COVID-19 world.
The BDN can help the regional countries to diversify their investment sources and can help in reducing their dependence on China. Such a move is the need of the hour because China’s stance is getting more and more aggressive due to its growing ambitions and stakes in the region. This will ensure the preservation of the Flexi-nodal and multi-polar nature of the region rather than a Bi-polar one. Moreover, the BDN provides the partner countries with a pathway to play a major role in the geopolitical arena of the region which is mainly dominated by China. The platform will enable the partner countries to strengthen the regional partnerships with the help of defence, security, diplomatic and economic cooperation. This will allow them to balance China’s strategic posturing in the region.
Integration of the Quad and the BDN
India can be seen as a natural partner in the BDN network. India has high stakes in the region and the South Asian nation is investment-hungry due to its large population and a growing economy. India needs a huge chunk of private investment to sustain the growth of the economy and to provide jobs to its large population. This can provide the desired access to India to a pandora box of opportunities to fire up the infrastructure development projects in the country. Moreover, India is a major regional stakeholder in the Indo-Pacific and faces a belligerent China at its doorstep. Also, India has warm relations with almost all the countries in the region. This will provide a significant boost to the BDN.
The BDN also compliments the joint vision of India and Japan to create an Asia-Africa Growth Corridor. It was announced in May 2017, during 52nd Annual Meeting of the African Development Bank summit which was being held in Gandhinagar. AAGC is an economic partnership between India and Japan which aims to provide quality infrastructure and digital connectivity in the African region. It is aimed to work in the domains of pharmaceuticals and health, energy, disaster management, agriculture, skill-augmentation and agro-processing. AAGC seeks to connect Africa with India, Oceania and South-East Asia. It plans to improve maritime connectivity by revamping existing sea routes and creating new ones to connect the port near Madurai to the ports of Mombasa and Zanzibar. Port of Jamnagar will be connected with the Gulf of Eden via Djibouti. Similarly, the Kolkata port will be linked to the anchorages at Sittwe. The AAGC was a response to Beijing’s BRI through which China seeks to connect the geopolitical landscapes. Hence, the AAGC naturally compliments the BDN and has the potential to exponentially increase the success probability of the BDN.
Moreover, India has launched several maritime initiatives like SAGARMALA, SAGAR, IORA, Spice Routes and Cotton Routes which can be interlinked with the BDN in order to cover a large spatial area.
Comparison between the BRI and the BDN
It is quite difficult to compare both initiatives. This difficulty can be attributed to the two facts. Firstly, both the initiatives are quite different in their natures. The BRI directly provides the funds for infrastructure development activities while the BDN is going to provide grading and certification to different infrastructure projects which will then attract investors to invest their funds in those projects. Secondly, Chinese policies regarding the BRI are quite opaque and sufficient and reliable data is not available in the public domain. On the other hand, the BDN is in its nascent stage and not much has been known about its structure, working etc.
Although all the concerned leaders of the BDN countries have clarified numerous times that the BDN is not a reaction against the BRI, there are speculations among the cynics that the BDN is a direct response by Washington against Beijing. As per them, the ‘blue’ colour in the BDN is in contrast with the ‘red’ colour of the BRI. But at this point, the BDN neither has the financial firepower nor the required infrastructure to pose a direct challenge to the BRI. Till now, China has invested a huge chunk of $575 billion via the BRI and involves more than 70 corridor economies and 150 governments from all over the world. So, the size and vastness of China’s BRI are quite evident. If seen in contrast with Chinese investment in the BRI, Japan’s High Quality Infrastructure Initiative has $110 billion in its bag which is almost five times less than the Beijing’s investments. Similarly, the US has reserved $17 billion for the BDN which is quite miniscule when compared to China’s stakes in the BRI. The BDN countries were aware of the prodigiousness of the Chinese investments and have focussed on the value-addition only instead of providing direct capital investments to the recipient countries.
The Way-Forward
The infrastructure investment needs of the world can not be satisfied by the government funding alone. The private capital can fill this gap in the cycle. This is also the central idea of the BDN. Moreover, the BDN can additionally provide security against health, environmental and social and safety risks; foreign exchange, inflation and other macro-economic risks and other political and legal risks. Governments can easily attract private investments if they can reduce the above-mentioned risks and can make the projects more viable by introducing their partnerships in the projects either through acquiring equity in the projects or through the PPP model.
Though the project seems very promising from the available details, certain questions remain to be answered about the funding, grading system and the required framework of the BDN. Only time will tell that whether this is a serious step towards addressing the growing global needs of the infrastructure development or this is again a strategic tool of the US and its allies to counter the swift rise of China in the Indo-Pacific.
Notes:
1. https://asiatimes.com/2020/07/shinzo-abes-infrastructure-diplomacy/
2. https://www.japantimes.co.jp/opinion/2019/11/13/editorials/michelin-guide-infrastructure-asia/
3. https://www.mof.go.jp/pri/research/seminar/fy2019/tff2019_s1_01.pdf
4. https://thediplomat.com/2020/04/blue-dot-network-the-belt-and-road-alternative/
5. https://www.csis.org/analysis/connecting-blue-dots
6. https://www.airuniversity.af.edu/JIPA/Display/Article/2278057/india-the-blue-dot-network-and-the-quad-plus-calculus/
7. https://timesofindia.indiatimes.com/readersblog/psychologicalcousins/blue-dot-network-9152/
8. https://isdp.eu/publication/asia-africa-growth-corridor-aagc-india-japan/
9. https://diplomatist.com/2020/06/27/an-aisle-of-opportunity-the-asia-africa-growth-corridor/
Pic Courtesy- Alexandre Debieve at unsplash.com
(The views expressed are personal.)
