What’s in the United States Belt & Road Plan? A US$3 Trillion Spend on its Own Infrastructure, or is There More?

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By Chris Devonshire-Ellis 

Last week, the US President Joe Biden stated that the United States would be launching its own version of China’s Belt & Road Initiative, saying that in a call with British Prime Minister Boris Johnson “I suggested we should have, essentially, a similar initiative, pulling from the democratic states, helping those communities around the world that, in fact, need help.”

That has been followed by last Fridays US$3 trillion plan to upgrade US infrastructure and high-technology industries. This project will increase US investment in new technologies such as the 5G telecommunications network, artificial intelligence, biotechnology, and green technologies, with the investment proposal will then be presented to congressional leaders and key industry groups for further discussion.

The US certainly needs an internal infrastructure boost. China is investing three times more in infrastructure than the US, with Washington only spending the 13th largest amount in global infrastructure investment.

No further details have been forthcoming about the US plans for its version of China’s Belt & Road external financing, which have now reached an estimated US$4 trillion.

But there are significant differences, apparent even at the outset. Biden has stated that any such infrastructure investments will be restricted to ‘democratic states’ meaning that any US financing of global infrastructure needs is immediately politicized. That means it will not be global in nature and will service US political needs not global infrastructure bottlenecks. This immediately reduces the impact. It also remains unclear with this policy as to how any US financed infrastructure would interface with infrastructure build in non-democratic countries. Should there be no intention to do so, the US will end up financing and building a lot of duplicate white elephants. Any major global infrastructure build is going to have to interface with the Belt & Road at some point.

Then there is the issue about what ‘democracy’ actually means. It obviously discounts Countries operated as One-Party States such as China, Cuba and North Korea. But how about Vietnam which has US most-favored nation status? Libya, Sudan and Yemen are all in need of infrastructure financing but are in transitional states. What about them?

Then there are the Absolute Monarchies, which include US allies such as Saudi Arabia. Some Monarchies install an elected Prime Minister, yet retain ultimate authority, including Bahrain, Jordan, Kuwait, Morocco, Qatar and the United Arab Emirates. In addition to these there are Constitutional Monarchies where popular elections are held, but considerable power remains in position, as is the case in Cambodia, Japan, Malaysia, Norway, Spain, and Thailand.

Clearly the situation remains fluid, with the implication therefore that overseas infrastructure build will serve US interests first. That is not China’s sole aim when it comes to the BRI – there are numerous other considerations, many of which have to do with trade development, wealth enhancement and security as well as develop China supply chains.

Neither has the United States shown itself in recent years in being globally generous. It banned the export of Covid-19 vaccines and pulled out of the worldwide Covax scheme. “America First” is alive and well. It also means that any US version of the BRI will be politically conditional first, rather than dealing with real infrastructure requirements as and where they are needed most.

So, what will happen? President Biden is currently pre-occupied with handling the Covid-19 situation and busy with that. Then he must get the US$3 trillion internal infrastructure development plan agreed and the finance put in place. After that will come any plans for overseas infrastructure financing, and that is highly likely to be contentious. American voters will wonder why their tax dollars are being spent in countries most will never visit and on projects they will never use.

Joe Biden’s plans to introduce an alternative to China’s Belt & Road to the United States ‘democratic’ allies will run up against that same barrier: democracy. Americans won’t approve it. Which is the exact political reason why China has been able to proceed and suceed. It didn’t have to put the BRI to a vote. The US version of China’s Belt & Road Initiative will either be vastly scaled down or come with so many strings attached it reduces its impact. Washington hasn’t been supportive of China’s Belt & Road, and selling a US version to American politicians, financiers and voters will ultimately meet the same criticisms.

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Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at silkroad@dezshira.com or visit www.dezshira.com

 

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