In November of last year, Australia, Japan and the US announced the so-called “Blue Dot Network” (BDN) at the 35th ASEAN summit in Bangkok, Thailand. More specifically, the consortium brings together Australia’s DFAT and the Japan Bank for International Cooperation and is headed up by the US Overseas Private Investment Corporation (OPIC).
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According to a statement released by OPIC at the time, the intentions behind the program are straightforward and genial.
"Blue Dot Network will evaluate and certify nominated infrastructure projects based upon adherence to commonly accepted principles and standards to promote market-driven, transparent and financially sustainable infrastructure development in the Indo-Pacific region and around the world," it said.
The obvious inference was that the program was a continuation of Australia’s ‘Pacific step-up’ program, and similar measures taken in partners countries to curb the growing influence of China in the region.
At the time the Bangkok Post, for example, put this point particularly succinctly; running a piece titled 'US counters China with Blue Dot Network'.
That same piece suggests that the announcement of the program at ASEAN received a chilly reception.
“The US had just removed millions of dollars worth of tariff exemptions from Thailand,” it states, “and some ASEAN leaders felt snubbed by the low-ranking envoy the US sent to the summit.”
The reaction in Australian circles was more of a mixed bag. Was this to be a meaningful step closer for the three members of the ‘Quadrilateral Dialogue’, or was it just a web of vague ‘commitments to consult’ and political doublespeak? Pessimists at the time suggested that China had (and continues to have) a strong lead over Australia, the US, and Japan in terms of hard-line influence in the region, such as investment in south Asian military assets and ports. Optimists would argue that it is precisely this sort of ‘debt diplomacy’ and mailed-fist follow-up that position the three as a more attractive business partner for Australia.
But what does any of this mean – firstly then, but more importantly now that the COVID-19 outbreak has reached pandemic levels, and is affecting supply chains and resource allocation around the world? Which projects have been allocated the mythical ‘Blue Dot’, and which stand to lose it?
"We have had global interest, including from the Thai government and civil society, as well as businesses wanting to be part of this network," David Bohigian, then-head of the OPIC, said at the time.
"It's not a funding mechanism, but a way for developing and developed countries to come up with a global standard that ensures that their taxpayers and project developers are getting value for their dollar."
So from the very outset, the project seems to stand in stark contrast to China’s Belt and Road initiative, which has Chinese investment companies (many of them state-owned or controlled) aggressively bidding to carry out projects in some of our closest or most important neighbours, such as:
- The Jakarta–Bandung High Speed Rail (Indonesia);
- The Vientiane–Boten Railway (Laos);
- The Magampura Mahinda Rajapaksa Port (Sri Lanka); and
- The Karot Hydropower Project (Pakistan).
The Chinese plan is backed by the US$40 billion development fund, the “Silk Road Fund”, which invests (rather than lends) into these strategically-sensitive assets. Though many of its Belt partners and key locations remain closed in response to the widening outbreak, Chinese industry has bounced back remarkably. One particularly illustrative yardstick of this is the country’s air cargo traffic levels – which have already surged back to pre-outbreak levels.
Though few road, port or bridge projects have been signed as certified under the Blue Dots project in the intervening months, it is even less likely to be able to identify strategic partnership opportunities in the wake of the outbreak, if rigorous Western certification standards are to be applied to projects in terms of health, safety, and stakeholder engagement. At the time of the program’s announcement, White House national security adviser Robert O'Brien likened it to the Michelin Guide for restaurants, which provides restaurants around the world stars for excellence.
Though relatively few partnership projects were actually identified in the run-up to the outbreak, the guidelines identified are likely to be those most affected by the outbreak. If no “stars” can be given out without comprising on the integrity of the program, how long can it last?
Matthew Goodman, senior VP at the Center for Strategic and International Studies in Washington, gave some insight into what criteria might be used over the life of the BDN project. Unfortunately, the factors that he cites are those that will take time to recover in the developing nations of south-east Asia and the Pacific, which are those the project is aimed towards.
“For example, what criteria should guide the BDN certifications?” he writes. “There are natural places to start, including the Equator Principles, the G20 Principles for Quality Infrastructure Investment, and work by the Organisation for Economic Co-operation and Development (OECD).
“Among other things, these call for open procurement practices in which project costs are assessed over their entire life cycle, robust social and environmental safeguards, and ensuring that the debt taken on by recipient countries is sustainable.”
Adding to these, one might also consider transparency, robust property laws, rule of law, and local labour rights. If we were to sample that countries we – meaning Australia – would most like to target with the BDN, we might choose Indonesia. Even prior to the outbreak, the country's government was considering relaxing labour laws in a bid to boost the economy, in a bill put before the Indonesian parliament in September. While the country has been less than forthcoming with COVID-19 infection rates, several measures reported in the international press suggest the government is scrambling to stave off a recession.
The government has introduced reforms which allow the central bank and state-owned enterprises to buy bonds directly, and the value of the national currency (the rupiah) is spiralling downwards at an alarming rate. If these trends continue, we are likely to see Indonesia continue to loosen employment regulations, and distance itself as a potential BDN partner.
Writing in The Strategist, ASPI's Bradley Wood suggested that China may step in to fill the void. Like we have seen in Spain and some other parts of Europe, he reasons, so too might we see Indonesia grow dependent on emergency supplies and medical equipment from China. Low-level shipments have been delivered in recent weeks – but as the wheels of Chinese industry begin to turn once again, we might see more and more projects outside of the Jakarta-Bandung line. This would further bring the country into the fold of the 'Belt and Road' initiative.
If one thing is for certain, the current trajectory of world events is beyond prediction. However unlike the US and Japan, Australia has managed to avoid a significant internal outbreak. While our partners in the BDN project may spend months, or even years, refocusing inwards on their own economies, we may have to ask ourselves hard questions about our role in the region over the course of 2020.