Karl Friedhoff says while the US cannot compete with China on the Belt and Road Initiative in infrastructure building, it must capitalise on its strengths – by coordinating with its allies to develop services in Southeast Asia
China’s Belt and Road Initiative has created widespread hand-wringing in the United States. Concern over China’s political and economic goals in target countries has prompted calls for Washington to compete with, or offer an alternative to, the programme. Neither of these approaches are feasible.
Instead, the US, and its allies and partners, should seek to co-opt the infrastructure funded and built by China to project US strengths throughout the region. Road and rail may get people and goods from place to place, but the longer-term value remains in building services, equipping those services and training domestic populations in their sustainable operation: build, equip, train (BET).
Much of the coming US-China competition for influence will play out in Southeast Asia. The most recent US national security strategyidentified the region as the centre of gravity by identifying the Indo-Pacific as a key pillar in US strategy. Militarily, competition and tension is on the rise in the South China Sea.
Economically, the region is on the upswing. By 2020, the Association of Southeast Asian Nations states will collectively be world’s fifth largest economy. These factors will bring China and the US into increasing contact along all dimensions of national power – diplomatic, informational, military and economic.
An effective US policy response to the Belt and Road Initiative requires understanding the gaps and opportunities that it presents. Current analysis focuses on China’s ulterior motives – seeking increased political and economic influence in target countries while displacing the US. While it has had some success with governments in the region, Beijing has not won over public opinion. Sentiment across Southeast Asia is negative.
Education, health and financial services all provide opportunities to transform static transport corridors into dynamic economic corridors
China’s infrastructure investments in Southeast Asia are best framed as an attempt to create transport corridors that can then be transformed into trade facilitation corridors. Both of these phases of corridor development are “narrow” – any benefits derived from the Belt and Road Initiative are directly tied to the actual infrastructure itself.
This focus on narrow corridor development fits with China’s investment profile – many of its businesses in Southeast Asia are extractive in nature. Improving transport and lowering trade barriers will allow China to more efficiently and cheaply access the vast natural resources in Southeast Asia.
China’s focus on the narrow phases of corridor development provides an opportunity for the US and its partners to focus on the “broad” phases by developing capacity in areas where the US holds a clear competitive advantage – services. Education, health and financial services all provide opportunities to transform static transport corridors into dynamic economic corridors, allowing them to attract their own investment and deliver wider economic benefits to target populations.
As US businesses further establish themselves in the fastest growing region in the world, an increased US presence will bring added reach and influence throughout the region.
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The US is not positioned to make major investments in infrastructure projects in the region. Seeking support for infrastructure projects abroad, when US infrastructure earns failing grades, would be politically impossible.
However, broad corridor development would still require some infrastructure building – primarily aimed at connecting hinterlands to main nodes – and this is why the US cannot implement the BET framework alone. For the US to truly compete in Southeast Asia, it must enlist the help of its allies and partners. This kind of cooperation is already being discussed between the US and Japan. But others are highly active in the region – South Korea, in particular. A trilateral partnership could prove helpful in enacting the BET framework.
Given the aid patterns and expertise of all three countries, a coordinated effort to build and improve health care programmes in Laos is one potentially fruitful area. There is a real lack of access to health care across the country, leading to new outbreaks of polio, a high maternal mortality rate and one of the world’s highest infant mortality rates.
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Laos may seem like an unlikely place to begin such an effort. It is small, poor, landlocked and not well-connected to the region. But change is on the way. The US$6.7 billion Laos-China Railway, a belt and road project, will connect Vientiane to Kunming, and eventually to Bangkok and Singapore. Laos may have a population of just 7 million but sits in the middle of 275 million people and US$800 billion in gross domestic product from the countries it borders.
Japan provides roughly US$100 million annually in overseas development assistance to Laos and Korea has invested US$750 million since 1989. That amount is quickly increasing. The US focus in Laos is in health care and nutrition – the Obama administration committed US$4 million to build a nutrition institute in Vientiane to train a new generation of doctors and nurses.
Both Japan and South Korea continue to fund hospitals in the country but have not coordinated those efforts. A scenario where Japan and Korea divide responsibilities for building and equipping a single hospital, with the US responsible for training the staff, could see vast improvements in health services and efficiency. Such a coordinated effort could bring real benefits to the target populations and make it a more attractive destination for US, Japanese and Korean businesses.
If the US is serious about remaining committed to Southeast Asia, it must come up with a new strategy. The belt and road should serve as a foundation for the US and its partners on which to build. If a strategic competitor is willing to expend capital to lay that foundation, the US should encourage it. Then, when the time is right, it must deploy its full range of national power to co-opt that investment.