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President Trump’s Indo–Pacific Economic Investment Initiative: Good, But Not Enough

Veerle Nouwens
Commentary, 6 August 2018
United States, International Security Studies, Asia, New Silk Road, Pacific, Central and South Asia
US Secretary of State Mike Pompeo has laid out a new vision for American economic engagement in the Indo–Pacific, announcing the rollout of a new US regional infrastructure initiative, which, while not explicitly targeting China’s growing economic power in the region, attempts to provide Indo–Pacific countries with US financial and technical alternatives to China. The funds may be modest, yet they remain important; the key question is whether the strategy will be sustained, and whether it will succeed in engaging other US allies as well.

Secretary of State Mike Pompeo has announced the launch of ‘America’s Indo–Pacific Economic Vision’, which will focus on digital economy, energy, and infrastructure investments to the tune of $113 million. While the initiative indicates that the US’s Indo–Pacific Strategy is gaining substance, more will need to be done to convince the region that the US is committed to sustained engagement and that Washington is determined to create a power balance that will allow countries to make the best choices for themselves.

The initiative encompasses three main project funding strands: $25 million to expand partner countries’ digital connectivity and US technology imports; $50 million to develop sustainable and secure energy markets across the Indo–Pacific; and $30 million to launch an Infrastructure Transaction and Assistance Network for infrastructure development in the region. It is a not a great deal of money, but it is a significant start and a symbolic gesture.

The concept of the Indo–Pacific as a geopolitical region bridges the Indian Ocean with the Pacific, reflecting a strategic region where major power competition is coming to a head; at stake is whether the American-led liberal order will be pushed out by a rising China and all that Beijing’s ascendancy will entail. The region’s importance lies in its young demographic profile and economic potential, which make it the world leader in GDP growth according to a 2017 IMF report. However, the Asian Development Bank estimates that Asia will need $1.7 trillion in infrastructure investment per year until 2030 to sustain its growth. China’s ambitious trillion-dollar Belt and Road Initiative (BRI) attempts to meet that deficit, with investment projects strewn across the region. In doing so, Beijing has also raised concerns over the economic and political leverage it may have over recipient states through ‘chequebook diplomacy’ or debt-for-equity deals.

Officially, the US economic initiative seeks to help meet the investment deficit by ‘mobilis[ing] investment in projects that drive economic growth, create opportunities, and foster a free, open, inclusive and prosperous Indo–Pacific’. As such, Indo–Pacific Strategy partners Japan and Australia have joined the US in announcing a trilateral infrastructure investment partnership in the region, which will place priority on ‘transparency, open competition, sustainability, adhering to robust global standards, employing the local workforce, and avoiding unsustainable debt burdens’. Unofficially, though glaringly obvious, this investment initiative seeks to offer Asian countries an alternative to BRI investments and the contractual obligations that come with accepting such investments from Chinese state-owned banks.

This increase in investment initiatives is certainly part of a geopolitical competition over which regional order will prevail, but it is one where all recipient countries stand to benefit. Whether it falls under the banner of ‘Belt and Road’ or ‘Indo–Pacific Strategy’ is largely irrelevant for most countries who simply want to be able to manage and control their inward foreign direct investments. Having options to choose from helps, and there are other similar projects in Asia, like the Australia–ASEAN commitment to strengthen infrastructure cooperation, Japan’s Partnership for Quality Infrastructure, and the Asia–Africa Growth Corridor initiative between Japan and India. These initiatives should not be seen as a zero-sum game, as they help countries ensure that inward investments will truly benefit the domestic economy, environment and population. Indeed, the plurality of investments could raise the overall bar of their standards. A true win-win scenario, to paraphrase China’s well-worn expression.   

The US economic initiative is also a reassurance to the region that the US’s Asia policy does not consist only of unleashing trade wars with China and dealing with North Korea’s nuclear weapons. However, it will not be enough to address the myriad of challenges that the region faces. There is a need for greater assistance in the maritime domain, given continued Chinese militarisation of man-made islands in the South China Sea, and intimidation and harassment of, for example, Philippine fishermen and coast guard operating in their national Exclusive Economic Zone. The US Navy and regional allies have also recently observed an increase in Chinese radio warnings being issued to foreign ships and planes operating in the South China Sea to leave the area immediately or ‘pay the possible consequences’.

The Obama administration’s Southeast Asia Maritime Security Initiative (MSI) sought to help enhance regional maritime domain awareness and ultimately establish a common operating picture among maritime law enforcement in the region. However, the US Department of Defense Appropriations Bill for 2019 proposed that MSI funding should be reduced by half, to around $50 million. Still, the 2019 National Defense Authorisation Act has extended the MSI for a period of five years and renamed it the ‘Indo–Pacific MSI’ to reflect the extended geographic scope of the programme. The new MSI will include training and assistance for Bangladesh and Sri Lanka, and India as a covered country. Be that as it may, a larger geographic scope should be matched by a larger budget, for any dip in funding will send a confusing signal to the region. This has been noted, with Pompeo pledging on Saturday on the sidelines of the ASEAN ministerial meetings to provide the Indo–Pacific with ‘nearly $300 million in new funding to reinforce security cooperation … especially to strengthen maritime security, develop humanitarian assistance and peacekeeping capabilities, and enhance programs that counter transnational threats’. Hopefully, the National Defense Authorisation Act’s requirement for the US Secretary of Defense to submit to a  five-year plan for an ‘Indo–Pacific Stability Initiative’ will be the next step in the strategy and a renewed opportunity to address the need for continued US defence cooperation and capacity-building.

For Secretary Pompeo’s recent Indo–Pacific Strategy to have a lasting effect, it will need a consistent, comprehensive and cooperative approach. There seems to increasingly be more substance to the concept – in both economic and, hopefully, defence policy. However, while cooperation with the Indo–Pacific partners Japan and Australia continues to strengthen through joint initiatives like the trilateral Infrastructure Initiative, India’s comparatively reticent presence is glaringly obvious. The next challenge in the Indo–Pacific Strategy may well be how to ensure full participation of all the major players involved.

BANNER IMAGE: US Secretary of State Mike Pompeo speaks with Burmese Foreign Minister U Kyaw Tin at the ASEAN 2018 Ministerial Meeting in Singapore. Courtesy of US Department of State/Flickr

The views expressed in this Commentary are the author's, and do not necessarily reflect those of RUSI or any other institution.

Author

Veerle Nouwens
Research Fellow

Veerle Nouwens is a Research Fellow at the International Security Studies Department of the Royal United Services Institute, focusing on... read more

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