Will the West's answer to China's belt and road lead anywhere?

A planned meeting of Quadrilateral Security Dialogue leaders in the autumn to discuss how the United States and its allies Australia, Japan and India can fund infrastructure projects is the latest effort towards a Western-led alternative to China's Belt and Road Initiative that has helped Beijing to grow its influence.

Since the start of the year, the European Union, US, India and Japan have in separate meetings pledged to cooperate more closely on international infrastructure projects, even as US President Joe Biden ramps up infrastructure spending at home. The topic is expected to feature at the upcoming G7 meeting hosted by Britain, after Biden, in a conversation several months ago with British Prime Minister Boris Johnson, proposed a collaboration that could counter the belt and road.

Analysts assessing the potential of a Western-led belt and road have mixed views. Some say the strong global demand for investment in infrastructure as developing economies struggle from the blows to their economy from Covid-19 and the determination of Western politicians to thwart China's worldwide ambitions could help the plan take off.

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Others say it will be an uphill battle given the US and its allies are also facing the fallout from the pandemic, including gloomy economic prospects. Previous efforts had failed, pointed out Suisheng Zhao, director of the Center for China-US Cooperation at the University of Denver.

Zhao pointed to former US president Donald Trump's attempt in setting up the International Development Finance Corporation in 2017 which was to provide and facilitate the financing of development projects in lower- and middle-income countries. European countries also tried to compete with the belt and road in 2017 by proposing an Asian infrastructure fund.

Their failure was mainly due to financial problems in host countries that made it impossible for funds to be allocated, he said.

"The US attempt was specifically aimed at countering, while the European attempt aimed to compete with, China's belt and road. But none of them have become credible programmes," Zhao said.

Still, Don McLain Gill, a resident fellow at the Manila-based International Development and Security Cooperation (IDSC) said the focus on economic issues by the US and its allies showed a realisation that "the root of China's global influence lies not in military arrangements but through its belt and road which encompasses mega infrastructure and connectivity projects".

Ramon Pacheco Pardo, an international relations lecturer at King's College London, said the US and the EU would need to cooperate with Japan and South Korea to be effective at infrastructure building in Asia, where these two countries, China and the Asian Development Bank were established players.

ROOM FOR NEW PLAYERS?

Since the belt and road, also referred to as the New Silk Road, was launched in 2013 to boost global connectivity through railways and ports from East Asia to Europe, more than 100 countries have signed on to its projects. According to recent estimates by Refinitiv, as of the middle of last year more than 2,600 projects valued at US$3.7 trillion could be linked to the belt and road.

But the belt and road has been accused of lacking in transparency, corruption, environmental damage, legal issues and labour problems. Some of the large-scale projects are even said to have created "debt traps" for low income countries.

W. Gyude Moore, a senior policy fellow at the Washington-based Center for Global Development, said the EU was likely to use its existing partnerships with Japan and India as an impetus for a Western alternative to the belt and road.

With Japan, the EU hopes to foster infrastructure projects that physically link transport networks and digital service connectivity between East Asia and Europe, while with India it hopes to build joint infrastructure projects in Africa, Central Asia and the Indo-Pacific.

Both initiatives came about partly as a result of concerns among Europeans about the loss of construction market share to Chinese firms in Africa, Moore noted.

But given the consolidation of "negative sentiment toward China" across the industrialised world, Moore expects more countries to come on board, including emerging economies that would welcome more sources of funding for infrastructure projects in the region.

Moritz Rudolf, an associate at the German Institute for International and Security Affairs, said the Western answer to the belt and road was unlikely to confine itself to infrastructure development.

"If a significant number of like-minded states were to join those efforts, I assume it would need to be about more than just infrastructure investments," Rudolf said, adding that these states were likely to share as policy goals values such as promoting the rule of law and sustainable development.

On how the Western belt and road might be funded, Moore said this would most likely be a combination of loans and grants since debt-fuelled infrastructure financing had led to criticism of the Chinese.

And if industrialised economies could convince their parliaments about the necessity to "counter China", they might receive authorisation for funding for this initiative, Moore said, adding that these funds were unlikely to rival those that China had already committed to the belt and road.

Pacheco Pardo said the US and the EU were likely to mobilise financing and expertise from global and regional multilateral institutions such as the World Bank, Asian Development Bank, International Monetary Fund, the European Bank for Reconstruction and Development and the European Investment Bank.

Belt and road projects are funded mostly through bank loans, led by China's three government policy banks, the large state-owned banks, and sovereign wealth funds such as the Silk Road Fund.

Projects by the Asian Infrastructure Investment Bank (AIIB) are initially funded with capital provided by Beijing, but subsequently through bonds and private sector investments, and co-financed loans with other development institutions.

IDSC's Gill noted that the Asia Africa Growth Corridor, which was set up by India and Japan to serve as a counterweight and a more transparent balance to the belt and road, did not proceed as planned.

"It slowly lost momentum due to implementation issues and domestic policy constraints," Gill said, referring to the grouping that focuses on development projects, infrastructure and institutional connectivity, capacity building, and people-to-people cooperation.

Countries in Central, Southeast and South Asia were likely to welcome the Western belt and road since these countries' infrastructure development needs could "not be met from a single source", said Pacheco Pardo, adding: "These countries could play China against a US-led coalition."

According to the Asian Development Bank, Asia would need to invest US$1.7 trillion per year in infrastructure until 2030 to maintain its growth momentum, tackle poverty, and respond to climate change. It noted that infrastructure needs across Asia and the Pacific far outstrip supply.

IDSC's Gill said the timing of the Western belt and road could not have come at a better time as around 20 per cent of China's belt and road projects had been significantly affected last year due to the pandemic and resistance from Indian Ocean countries to the high costs and lack of transparency of the projects.

"The establishment of a counterweight to the belt and road may significantly provide an alternative to small and middle income countries that seek infrastructural development beyond the parameters of what China offers," Gill said, adding that creating a global infrastructure competition could also provide small and middle income countries with a better deal and a greater choice.

"This will compel the competitors to create better and more attractive deals," Gill added, but warned that some countries might not be keen to engage with the Western belt and road if it rigidly adhered to liberal values such as human rights and democracy.

"This has been the advantage of China as it does not require countries to abide by certain norms before providing investments," Gill noted.

The German Institute's Rudolf said having an alternative belt and road might provide high-quality dispute resolution and offer greater legal certainty.

"This has been an important weakness of the belt and road and one of the issues the Chinese are still working on. The West continues to have a significant advantage in this field," Rudolf said.

However, Pacheco Pardo said that Beijing had strengthened its game with the AIIB as the standards of projects financed by the bank were the same as those used by other development banks. This, he said, was due to the presence of Western countries, as well as Australia and South Korea in the AIIB.

"So I do not think that the presence of Western countries in the infrastructure game will have that much of an impact on China boosting the quality of its infrastructure investment, because it already has had to do so," Pacheco Pardo said.

COOPERATION IN SPITE OF COMPETITION?

In revealing plans for the Quad leaders meeting in the autumn, Biden's Indo-Pacific policy coordinator Kurt Campbell said on Wednesday that other countries were welcome to work with the grouping, noting in particular those that shared the same "operating system" that the US had helped build in Asia but was now coming under pressure from China.

Pacheco Pardo was among analysts who said China would not necessarily be excluded from a Western-led belt and road, noting that the EU was likely to present its initiative as open and transparent. But competition would be tense, he said.

"There is potential for tension between China and the Western-led initiative, in the same way that there have been tensions between Beijing and Tokyo in the area of infrastructure building across Asia," Pacheco Pardo said, referring to China's belt and road and Japan's Partnership for Quality Infrastructure, both of which are aimed at providing infrastructure support for countries in the region.

Zhao of the University of Denver said the existing set-up of international development funding already meant that there was some form of "complementary" competition.

For example, there were US-led institutions such as the World Bank and the International Monetary Fund on one hand, and the AIIB and the New Development Bank, also known as the BRICS Development Bank, on the other.

The latter was set up in 2014 to mobilise resources for infrastructure and sustainable development projects in the BRICS (Brazil, Russia, India, China and South Africa) and other emerging economies.

While there were problems with the belt and road, Zhao of the University of Denver said that given the huge demand for infrastructure within the US and domestic problems faced by Western countries, any efforts to counter China's belt and road appeared doubtful, even "suspicious".

"The US global leadership has not been restored and the credibility of the US among its allies is still a question mark," Zhao added.

The German Institute's Rudolf said the rival belt and road would put China into a Catch-22 situation because according to the official Chinese narrative of its belt and road, the Chinese leadership would need to welcome similar efforts aimed at promoting connectivity.

"If the Chinese side were to criticise these efforts it would implicitly reveal the geopolitical nature of the belt and road," Rudolf added.

But more importantly, Gill said, recipient countries would need reassurance that they would not be caught in the middle of an infrastructure financing competition that would fuel further differences between China and the West. The "new competitors" would need to do some convincing, he said.

"This, I believe, will be the most daunting task," Gill said.

This article originally appeared on the South China Morning Post (SCMP).

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