What Is The “Blue Dot” Infrastructure Network?

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Op/Ed by Chris Devonshire-Ellis

A US/Australian/Japanese Global Infrastructure Projects Rating Agency Is Born

The United States last week, along with Japan and Australia, unveiled what they have termed the “Blue Dot” network, and have officially described it as “promoting global, multi-stakeholder sustainable infrastructure development in the Indo-Pacific region and around the world.” But what is it?

Officially, it is a joint project of the US Overseas Private Investment Corporation, in partnership with Australia’s Department of Foreign Affairs and Trade and the Japan Bank for International Cooperation, and it was launched on the sidelines of the 35th ASEAN summit in Thailand a couple of weeks ago.

In presenting it, officials from these countries made the following statements:

David Bohigian, the Executive Vice President of the US Overseas Private Investment Corporation commented “The development of critical infrastructure—when it is led by the private sector and supported on terms that are transparent, sustainable, and socially and environmentally responsible, is foundational to widespread economic empowerment. Through Blue Dot Network, the United States is proud to join key partners to fully unlock the power of quality infrastructure to foster unprecedented opportunity, progress, and stability.”

Keith Krach, the Under Secretary for Economic Growth, Energy, and the Environment in the United States said “This endorsement of Blue Dot Network not only creates a solid foundation for infrastructure global trust standards but reinforces the need for the establishment of umbrella global trust standards in other sectors, including digital, mining, financial services, and research. Such global trust standards, which are based on respect for transparency and accountability, sovereignty of property and resources, local labor and human rights, rule of law, the environment, and sound governance practices in procurement and financing, have been driven not just by private sector companies and civil society but also by governments around the world.”

Richard Maude, the Deputy Secretary, Indo-Pacific Group, in the Australian Department of Foreign Affairs and Trade stated “Australia is committed to promoting high-quality infrastructure, inclusive approaches, and facilitating private sector investment in the Indo-Pacific region. I’m pleased that this commitment is shared by East Asia Summit Leaders, and we look forward to working closely with our regional partners to develop Blue Dot Network to take action on this commitment.”

Tadashi Maeda is governor of the Japan Bank for International Cooperation, and commented “Blue Dot Network is an initiative that leads to the promotion of quality infrastructure investment committed by G20 countries. As JBIC has a long history of infrastructure finance all over the world, JBIC is pleased to share such experience and contribute to further development of Blue Dot Network.”

White House national security adviser Robert O’Brien likened it to the Michelin Guide — which provides restaurants around the world stars for excellence.

Defining Blue Dot appears to be somewhat ambiguous at present, with Australia’s Department of Foreign Affairs saying the scheme will provide finance and greater transparency into poorer countries across the region. Other officials have said it is about ensuring “principles-based” and “sustainable” investment in infrastructure, and stated that the Blue Dot Network was about providing foreign companies, often reluctant to invest in developing countries due to concerns about corruption or climate change, the right information about which projects to invest in.

That implies the Blue Dot Network will act as a type of ratings mechanism that will be positioned to vet and grade global infrastructure projects. If correct, then Washington is likely to spin it as a “certification” process setting “international standards” – and will almost certainly begin to imply various Belt and Road projects are sub-standard compared to Blue Dot standards. The idea seems to be that “global trust standards” are needed to help spur private investment in infrastructure.

However, what sort of “global trust standards” are we talking about? Who will set the standards? And who will monitor them? Krach’s comments, in which he states they would be based on “respect for transparency and accountability, sovereignty of property and resources, local labor and human rights, rule of law, the environment, and sound government practices in procurement and financing” would appear to indicate the United States would apply standards. If so, then that may be a move that American corporates could buy into – there is plenty of money about, and available at very low interest rates. (In fact the United States should be using the opportunity to invest in its own infrastructure, as should Australia and Japan, instead of promoting property bubbles) In that case, it makes sense, or at least for American, Australian and Japanese investors, who would very much like to see some sort of Government assurance that infrastructure projects they invest in are somehow rated. Yet it remains unclear how the Blue Dot Network would step in if participating companies found that perhaps the project they had invested in was not entirely straight forward. Would the United States, Australian or Japanese Governments provide compensation should things go wrong, or promised standards (or profits) not be met?

There is also the issue concerning the proposed standards. If under Blue Dot it is the US, Australia, and Japan which plan to set the standards, there is an issue. Standards established by just three countries can hardly be considered “global” standards. So who else will assist? China, after all, is currently the worlds largest infrastructure developer.

So will it work? It depends. If Blue Dot intends to act as a type of guarantor that a project meets its standards, and that the respective governments will provide compensation to companies taking part in Blue Dot accredited projects, if they fall short, then of course corporates in the United States, Australia and Japan would be crazy not to participate. It could in fact release pent up investor dollars looking to get involved in the current global infrastructure bonanza – including the Belt & Road Initiative – currently being fed by low interest rates. But if the Blue Dot network is not actually in the business of providing guarantees, then it is destined to be just a piece of anti-China, Western PR. hot air, and another stick with which Washington in particular can use to beat up China about “global quality standards” along its Belt & Road.

If Blue Dot is to be meaningful – then the governments of the United States, Australia and Japan, if they are truly in the business of promoting global standards in global infrastructure projects, and accrediting them, need to put their hands in their pockets to assure their domestic investors they will provide a financial safety net when standards fall short for the contractor. If not, then Blue Dot is just a puff of hot air.

 

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About Us

Silk Road Briefing is written by Dezan Shira & Associates. The firm provides strategic analysis, legal, tax and operational advisory services across Eurasia and has done since 1992. We maintain 28 offices throughout the region and assist foreign governments and MNC’s develop regional strategies in addition to foreign investment advice for investors throughout Asia. Please contact us at asia@dezshira.com or visit us at www.dezshira.com

 

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