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Managing Allied Expectations


This month, the European Union’s vision for global connectivity took an important step forward. The EU Council called for operationalizing existing partnerships with Japan and India, establishing new partnerships with ASEAN and the United States, and identifying “high impact and visible projects” by early 2022. Reading between the lines, the EU is grappling with a challenge that all allied alternatives to China’s Belt and Road must confront: international politics and infrastructure projects have fundamentally different timelines.

The political clock is what matters to most decision makers in the places where the European Union, United States, and others are trying to become more competitive. Electoral calendars always provide pressure, and in the aftermath of Covid-19, even unelected leaders are more desperate to deliver tangible improvements. The announcement of any foreign effort to provide higher quality projects will mean little unless it comes with real money to pursue real projects—real soon.

Managing expectations is key because allied objectives will extend project timelines. The emphasis on delivering higher quality projects means conducting more rigorous risk assessments before a project can begin. An EU environmental impact assessment, for example, can range from half a year to over two years. Addressing climate change should be a competitive advantage for allied approaches to infrastructure. But like most things worth doing, getting it right takes time.

Mobilizing private finance, which is vital for allied efforts to scale, takes time as well. There is no magical tree of shovel-ready projects just waiting for investors. If anything, the low-hanging fruit was thoroughly picked over by 2016-2017, the peak years of China’s Belt and Road. Even then, some of what looked attractive turned out to be rotten, underscoring the risks of moving too fast.

Doing the hard work of preparing projects is unavoidable. The European Bank for Reconstruction and Development’s Project Preparation Facility is one successful example that the United States and its partners can learn from as they consider how to develop project pipelines. It began operations in 2016 and is now seeing its first wave of projects come to market. Naturally, doing all of this with an emphasis on transparency, including holding open tenders and public consultations, adds time as well.

So does coordinating these efforts with allies, as the United States is doing with Japan and Australia through the Blue Dot Network. Expanding that effort to include partners from Europe, something I’ve also supported, will increase resources and global adoption of standards, but it will also add coordination costs. The Blue Dot Network is breaking new analytical ground by attempting to establish a global certification process for projects. But will it matter if they wait too long to break actual ground?

Clearly, there’s a balance to strike. Allied objectives — ensuring project quality, mobilizing private sector finance, increasing transparency, and coordinating with partners — are all worthwhile. But meanwhile, China is moving ahead, bilaterally and opaquely, with ample state financing and a higher tolerance for risk.

To compete in the international political arena, the United States and its allies need to look for quick wins that build credibility and demonstrate progress as they get longer-term efforts like the Blue Dot Network and Build Back Better World (B3W) partnership up and running.

Three actions would help. First, the United States and its allies should announce a credible financial commitment for global infrastructure. This could involve additional resources above current commitments, as well as taking credit for current levels of relevant development assistance and adding a target for mobilizing private sector finance. This commitment could be a collective announcement over a medium-term horizon, such as five years.

Second, they should allocate a fraction of that commitment toward more immediate use (ex. over the next 18 months). This could be easily justified as part of the global response to Covid-19. It would also help get some pilot projects off the ground that have already been identified. In addition to signaling seriousness, these projects would allow partners to learn while working together and potentially lower future coordination costs.

Third, they should secure statements of support from leaders in developing countries and the private sector. They don’t need to replicate China’s approach of signing mountains of empty MOUs. But statements from leaders involved with pilot projects, and those courting or considering making future investments, would add legitimacy to these efforts.

Collectively, these steps would help buy political time for setting up the systems and processes to deliver significant numbers of quality projects in the years ahead. Of course, that will require a sustained commitment and strategic patience from U.S. and allied policymakers, who face their own political pressures. But as the list of successful projects grows, so too will the attraction and political power of allied connectivity efforts.

Jonathan E. Hillman is a senior fellow with the CSIS Economics Program, director of the Reconnecting Asia Project, and author of The Emperor’s New Road.


https://reconasia.csis.org/managing-allied-expectations/


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