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Australia to set up $2 billion infrastructure fund for Indo-Pacific region

Fadu News 2018-11-09 04:20:47

Australian foreign minister Marise Payne (left) with her Chinese counterpart Wang Yi in Beijing on Thursday. The meet is seen as a sign of a thaw in ties between the key economic partners. Photo: AP

New Delhi: A pushback against China’s ambitious Belt and Road Initiative (BRI) may be taking place in the Indo-Pacific region with the contours of an alternate financing mechanism taking shape among India, the US, Australia, and Japan, a grouping also known as the “Quad”.

The Australian government announced on Thursday that it would establish the Australian Infrastructure Financing Facility for countries in the Pacific region with a $2 billion infrastructure initiative “to significantly boost Australia’s support for infrastructure development in Pacific countries and Timor-Leste”.

“At the same time, we will deliver an extra $1 billion in callable capital to Efic, Australia’s export financing agency. This will complement new, more flexible infrastructure financing power to support investments in the region that have a broad national benefit for Australia,” said the Australian government.

The Indian foreign ministry in New Delhi did not comment on the Australian government’s announcement.

It is too early to say whether the present efforts at financing projects in the Indo-Pacific by India, Japan, the US and Australia “could be seen as a coordinated move” to take on the BRI, said a person in New Delhi who is familiar with the development.

The Australian announcement comes against the backdrop of increasing Chinese inroads in the Pacific islands, including the establishment of military bases in countries such as Vanuatu and the bagging of contracts to set up undersea telecommunication cable networks.

Beijing had committed more than $6 billion in aid, most often in the form of concessional loans, over the past seven years, making it the Pacific region’s second-largest aid donor, according to a Financial Times report.

There are security issues involved in Chinese firms undertaking telecommunication cable construction, which could aid possible espionage by China according to reports in the Australian media.

There are also concerns about small countries falling into an unsustainable debt trap.

China’s lending practices related to its ambitious BRI have raised concerns that poorer countries would not be able to repay Chinese infrastructure loans with India’s southern neighbour Sri Lanka being cited as a case of what could go wrong. In December, China received a 99-year lease for the strategic Hambantota port after Colombo said it would not be able to repay loans.

Australia’s announcement on Thursday comes days after India and Japan outlined development cooperation plans in the Indo-Pacific, with joint projects spanning infrastructure, health, housing, education and electrification. Both “will work towards establishing an India-Japan Business Platform...toward developing industrial corridors and industrial network in the region,” according to a joint statement.

Foreign secretary Vijay Gokhale told a conference in New Delhi last week that India, the US and Japan were coordinating on connectivity efforts in third countries.

“We see prospects for more impactful cooperation following the passage of the BUILD Act in the US Congress,” Gokhale said, a reference to a law signed by US President Donald Trump that seeks to make available $60 billion in funds for investment in the Indo-Pacific region.