From the Blue Dot Network to the Blue Dot Marketplace: a Way to Cooperate in Strategic Competition

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From the Blue Dot Network to the Blue Dot Marketplace: a Way to Cooperate in Strategic Competition 11 FROM THE BLUE DOT NETWORK TO THE BLUE DOT MARKETPLACE: A WAY TO COOPERATE IN STRATEGIC COMPETITION Jerre V. Hansbrough The world is in massive need of infrastructure investment. China’s One Belt, One Road brought this issue to the forefront of the international community but is not living up to expectations. The Blue Dot Network, introduced by the United States and like minded partners to promote in- frastructure development, is seen as a counter to the Belt and Road. It is focused on encouraging quality infrastructure investment by holding projects to high standards of transparency and sustainability through a certification system. However, the Blue Dot Network does not include any funding or means to close the global infrastructure gap. To address this issue, this chapter proposes the idea of a Blue Dot Market. If the Blue Dot Network were to evolve into the Blue Dot Marketplace over the next five to ten years, it could serve as a platform to bring together numerous construction and financial vendors to increase the quality and quantity of global infrastructure investment. Collaboration in an Era of Strategic Competition: Enter the Blue Dot Marketplace Since the announcement of China’s One Belt, One Road in 2013, a very common question has been, “how will the United States and its partners compete with the Belt and Road?” One Belt, One Road did highlight a massive need for global infrastructure but attempting to directly “counter” this program may not be the best approach. 179 Hindsight, Insight, Foresight: Thinking about Security in the Indo-Pacific The United States should ask how it can best lead the next global infrastructure revolution. Infrastructure is the backbone of society, com- merce, and trade. The demand is high as the G20 Global Infrastructure Outlook estimated a need for US$ 94 trillion globally by 2040 to support economic growth and start to close infrastructure gaps.1 Based on current investment trends, the Outlook estimates a US$ 15 trillion gap over the same period. If fully realized, China’s commitment of US$ 1 trillion in global investment through the Belt and Road would be the largest stand- alone program to date. However, the Belt and Road is not without problems. From a simpli- fied geopolitical lens, the Belt and Road is a China-centric program to employ China’s excess industrial capacity, better connect and employ the Xinjiang province, and secure energy resources. Belt and Road projects are a means for China to gain leverage over participating nations and expand its power and security.2 Motivations aside, the United States and its partners have two primary concerns regarding the Belt and Road as a global infrastructure development program: debt sustainability and project quality.3 Many of the Belt and Road countries became more economi- cally vulnerable from high amounts of debt due to overly ambitious and underperforming infrastructure projects. Belt and Road projects generally lack transparency which makes them more prone to corruption and cost inflation. Corruption and cost cutting can lead to substandard construc- tion practices which can increase maintenance and operations costs, which further increase a nation’s debt insecurity. In November 2019, the United States, in collaboration with Australia and Japan, announced the Blue Dot Network (BDN) to certify major in- frastructure projects as “sustainable and not exploitative.”4 Even while the BDN is forming, India joined as part of the Joint Statement for a Com- prehensive Strategic Partnership in February 2020.5 This is an encouraging sign of a desire for quality infrastructure through regional cooperation. It is difficult to obtain balance between competition and cooperation, but the Blue Dot Network may provide a framework to make it a reality. If there is a way to get China to participate in the Blue Dot Network, many of the criticisms of the Belt and Road would be addressed. After all, the Belt and Road as described in China’s “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” (2015) is a good program. The “Vision and Actions” include following market rules and international norms, seeking mutual benefit, policy coordination, and unimpeded trade, among other activities.6 Unfortunately, many Belt and 180 From Blue Dot Network to Blue Dot Marketplace Road projects have not followed the spirit of the Belt and Road as laid out in that vision paper. One of the primary criticisms of the Belt and Road from the United States is that irresponsible lending can result in national instability.7 The inability to sustain debt reduces a nation’s ability to adapt to economic distress and increases its vulnerability to coercion. China owns external loan debt for seven countries that exceed 25% of their GDP.8 High debt and substantial investment in a country gives China significant economic coercive power. The watered-down version of a 2016 European Union (EU) statement intended to condemn China’s building of artificial islands in the South China Sea is one example. The final EU statement did not specifically mentionBeijing, in part, because Greece and Hungary did not want to upset their primary provider of foreign direct investment (FDI).9 Loans and FDI from China come with opaque lending practices that can include discretionary credit and terms not disclosed to the general popu- lation.10 Even the offer of loans connected with tentative Belt and Road projects coerce smaller nations to bend to China’s will. In September 2019, the small island nations of Kiribati and the Solomon Islands cut ties with Taiwan upon the promise of Belt and Road projects.11 Another example is the massive debt Djibouti owes to China. As of 2017, Djibouti owed China debt equal to 65% of its GDP and this debt is rising.12 Djibouti is also the only location China has a permanent military presence outside of its claimed territory, which opened in 2017. In addition, many of the Belt and Road projects are of a lower quality than accepted standards, reducing the ideal lifespan of major infrastruc- ture.13 Over time, it is generally less expensive to build a higher quality proj- ect with low operations costs than a less expensive project with frequent need for repairs or upgrades.14 The last criticism to address is that many Belt and Road projects include a technological component that the host nation is unable to operate or maintain. This again brings about a concern of dependency on a foreign power to sustain critical infrastructure within a nation. If the United States, China, and the European Union—the three major powerhouses on Earth—are able to cooperate for infrastructure development, the world would come out ahead. The world needs more in- frastructure to sustain growth. This is not just isolated to one region. The Asian Development Bank estimates US$ 26.2 trillion is needed in Asia by 2030 to sustain growth and adapt to climate change.15 The United States itself requires US$ 4.5 trillion just to repair existing infrastructure.16 It is 181 Hindsight, Insight, Foresight: Thinking about Security in the Indo-Pacific good to have China regionally and globally engaged in infrastructure de- velopment. Malcolm Turnbull, the Australian prime minister said, “Global infrastructure investment is a good example of where countries should work together.”17 The Blue Dot Network The BDN is primarily a vision of what global infrastructure should look like. Certification by the BDN means that a project is high quality and has transparent origins, much like the “organic” label for produce. The intent of the BDN is not to be a United States counter to the Belt and Road, but at least China sees it as such.18 A key difference is that the BDN does not include funding for infrastructure projects. The principles of the BDN does address two of the major concerns about Belt and Road projects through emphasizing quality, transparency, and life-cycle cost. The Blue Dot Network is starting to take form by encouraging re- sponsible construction and lending practices by consolidating interna- tional norms such as the G20 Principles for Quality Infrastructure Invest- ment, of which China is a signatory member.19 The Blue Dot Network is a means to review infrastructure projects from any private, public, or civic sector from any country and highlight quality construction and fi- nancing practices. The United States already has a variety of programs that fund foreign infrastructure development and encourage investment through the U.S. Development Finance Corporation (DFC) and the U.S. Trade and Development Agency’s Global Procurement Initiative (GPI). Japan’s International Cooperation Agency (JICA), Australia’s Infrastruc- ture Financing Facility for the Pacific (AIFFP), and the Asian Develop- ment Bank (ADB) are among the other major infrastructure investors that will participate in the Blue Dot Network. But what is the future of the Blue Dot Network? Can it increase the quality of global infrastructure development? This paper proposes that once the BDN establishes standards and successfully certifies projects for a few years, it could go a step further to become the “Blue Dot Mar- ketplace.” This venue could be where countries looking to meet specific infrastructure investment requirements could meet with vetted financial and construction entities to initiate sustainable and “bankable” projects. Presently, there are numerous bilateral and multilateral programs to sup- port infrastructure development, but there is no consolidated location for a country to evaluate and compare opportunities. 182 From Blue Dot Network to Blue Dot Marketplace The Blue Dot Marketplace The Blue Dot Marketplace (BDM) could provide apolitical quality assur- ance and advice to validate financial and technical aspects of proposed projects. The BDM would be a consolidated virtual location for the key sectors needed for infrastructure development to interact.
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