TRADE & INVESTMENT - Sights Set on Eurasia

15.jpg

Map information: CSIS Reconnecting Asia website

As regional powers compete for physical and political influence over the Eurasian super-continent, the U.S. considers its options from afar. Matthew Goodman of the Center for Strategic and International Studies provides a perspective from Washington

By Jennifer Khoo



Khorgos Dry Port, Photo: Daniel Zaretsky


 Bridge construction across Indus River along the Karakoram Highway between China and Pakistan


Matthew Goodman  

New roads, railways and ports are mushrooming across the Eurasian landmass as major powers race to build hard infrastructure over it in the coming years. Comprising a third of the world’s land area and more than half of global GDP, it is no wonder that a battle for influence has broken out across the region.   

Matthew Goodman, of the Center for Strategic and International Studies (CSIS), explains the forces behind these projects and where American interests enter the picture.

Asia’s competing visions

At CSIS, Goodman oversees a project called Reconnecting Asia, which maps around 2,000 infrastructure projects across the combined land masses of Europe and Asia. Of these, China's “Belt & Road” initiative is the most ambitious, with estimates of ultimate spending as high as US$4 trillion. But other powers central to the region’s future, like Japan and India, are also advancing their own visions for connectivity. 

For decades, Japan has been heavily involved in Asia’s infrastructure efforts, especially in Southeast Asia, where many roads and ports service the needs of Japanese corporate supply chains. According to CSIS’s September newsletter, the Japanese-led Asian Development Bank (ADB) quietly celebrated its 50th anniversary this year.

Though China’s Asian Infrastructure Investment Bank (AIIB) now has more members than the ADB, in financial and operational terms the AIIB is still an infant, according to CSIS analysis, lending roughly a tenth of the ADB’s spending on infrastructure during the same annual period. According to the Reconnecting Asia database, Japan is outspending China on transport projects in six of nine Southeast Asian countries. 

Meanwhile, India is focused on improving its internal connectivity, but its infrastructure activities are growing in scope and intensity, says CSIS. With its economy expanding 7.1 percent last year, Delhi aims to build 40 kilometers of new road and 15 kilometers of new railway each day. After decades of leaving its border areas with China relatively undeveloped, India has built 27 of what it calls “strategic roads” in these areas since 2006, and it aims to develop 46 more by 2022.

Beyond its borders, India’s “Act East” policy aims to strengthen ties with the Association of Southeast Asian Nations (ASEAN), through new projects that will provide India’s landlocked northeast with better access to southern ports and connect India to Thailand via Myanmar. Other projects include the North-South Transport Corridor, which will connect St. Petersburg with Mumbai via Tehran. 

“Competition is a good thing, it makes everyone better. There will be mutual opportunities to work together and participate in each other’s projects,” says Goodman at a recent AmCham event. 

American interests

In addition to obvious commercial interests, Goodman says the U.S. has good reasons for continuing to invest in this part of the world. From a political standpoint alone, these include national security and preventing the overgrowth of a strong Eurasian influence.  

A U.S. -owned port in the region for instance would facilitate trade while establishing political influence at the same time.

Bringing with them the rule of law and extensive commercial experience, American companies have a lot to offer the area, and are likely to play a powerful role in shaping business standards and practices. The U.S. government is conducively compartmentalized to facilitate these types of projects, says Goodman.

But no amount of experience grants immunity to the challenges of a vast, unfamiliar terrain, which include rough geography, national and local politics, corruption, unclear land rights and right of way. There is also concern about the social and environmental impacts.

Other risks include unintended consequences, like social disruption and unrest, as well as debt and unmet expectations. “The Yiwu train to London, for example, went there full but returned only one third full,” he says.

At this point the U.S. is still taking a studied approach, with policy makers yet to action any plans, says Goodman. The White House has taken steps towards greater engagement by sending delegations to forums in the region, and participating in economic dialogues with other Asian leaders. 

By working through multilateral development banks and other international organizations like the G20, Washington can demonstrate its commitment to the area by aligning interests around key issues such as open procurement processes, safe environmental and social practices, and debt management. 

“This will ultimately pave the way for more profitable projects in the region and investment opportunities for American investors.”