Question for U.S.-Led Infrastructure Fund: Where Is the Money?

(Bloomberg) -- A bid by the U.S., Japan and Australia to create a new Indo-Pacific infrastructure fund to help counter China's rising influence appears to be lacking in one key element: Cash.

Next to China's ambitious infrastructure plan, which includes spending $60 billion in Pakistan alone, U.S. Secretary of State Michael Pompeo's statement that his nation had earmarked $113 million for the Indo-Pacific region poses little competition. Australian Foreign Minister Julie Bishop on Tuesday announced the trilateral partnership that “represents our commitment to an Indo-Pacific region that is free, open and prosperous” -- without giving funding details.

“Despite neither Bishop nor Pompeo mentioning China, the initiative was immediately framed as a counter to Beijing's Belt and Road Initiative,” Lowy Institute researchers Jonathan Pryke and Richard McGregor said in a report released Wednesday.

“For the three countries, this characterization of their plan is as unsurprising as it is dangerous,” the report said. “Without significant resources behind it, it runs the risk of looking like an attempt to challenge China, and falling well short in the process.”

The trilateral infrastructure partnership is designed to bolster influence of the U.S. and its allies in a region that stretches from the east coast of Africa, through Australia to Hawaii in the Pacific Ocean, amid concerns that China may use concessional loans to poorer nations to win diplomatic leverage.

“Based on our free and open Indo-Pacific strategy, we will cooperate with relevant counties such as the U.S. and Australia and work toward developing infrastructure there,” Japan's chief cabinet secretary Yoshihide Suga said yesterday.

‘Tokenistic'

According to Morgan Stanley, President Xi Jinping's BRI could grow as large as $1.3 trillion over the next decade as it helps fund new or expanded highways, railways, ports, pipelines and power plants.

Asked about the trilateral partnership in Beijing on Tuesday, Ministry of Foreign Affairs spokesman Geng Shuang said: “As a Chinese saying goes, ‘talking the talk is not as good as walking the walk'. We hope that the three countries can make substantial financial contributions and take more concrete steps to enhance the connectivity of the region and help the regional countries with their development.”

The Lowy Institute said the “heart of concerns” about the trilateral plan was the question: where is the money?

“Even if real spending does not match the headlines, the BRI is still likely to be worth tens of billions of dollars,” it said. “By comparison, the trilateral initiative runs the risk of looking more tokenistic and symbolic than a real geo-political alternative.”

--With assistance from Emi Nobuhiro.

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Colin Keatinge

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