SACRAMENTO, California — As the U.S. and China’s relationship becomes increasingly defined by competing visions of the international order, areas of the globe set the stage for a contest for influence. Nowhere is this competition more apparent than in Southeast Asia (SEA). Despite recognizing the region’s importance in its competition with China, the United States has deployed a half-hearted strategy to achieve influence there. Lack of support for developing Asian infrastructure, a dire regional need that China has invested in, serves as a notable example. Supporting infrastructure development in SEA could be key to the U.S.’s strategy of competing with China in the region.
The United States, China and Southeast Asia
Oftentimes fractious, the U.S.-China relationship has been increasingly tense since the Obama Administration years and even before. Then, tensions came to a significant head during the Trump Administration term. The Biden presidency has maintained a stance on China that continues the trend of treating China as a competitor. In Biden’s first six months in office, the president utilized diplomatic rhetoric, resurrected the Quad alliance and aligned European allies and NATO on his China policy.
As a result, the U.S. and China are competing for influence globally and specifically in the Pacific region. This competition manifests in many forms, such as military assistance, diplomatic overtures, investment and economic aid. For the U.S., the Trump Administration’s “Free and Open Indo-Pacific” strategy highlighted aspects of the competition and prioritized issues from trade to alliances. At its core, the U.S. strategy exists as a way to expand and deepen alliances as China does the same.
Understanding Context and Motivations For SEA Engagement
Many consider China as a threat to America’s predominance in the world system. Whether one evaluates China’s “provocative tactics in the South China Sea” or its annexation of territory in Northern Bhutan, the country has illustrated a lack of regard for normative restraints. Furthermore, China has also created parallel institutions such as the Asian Infrastructure Investment Bank (AIIB). China has also worked through international institutions to alter established norms of the global system.
For example, in the U.N.’s Human Rights Security Council, China has managed to “leverage” its influence to reduce criticisms of its human rights records on an international stage. For many reasons, SEA serves as a prominent battleground for internationally competing visions. It is one of the fastest-growing regions in the world. The Organisation for Economic Co-operation and Development reports that SEA has a combined GDP of almost $3 trillion, more than 600 million people within its markets and almost 20% of global foreign direct investment.
By 2050, the Association of Southeast Asian Nations (ASEAN) is expected to become the fourth-largest economy in the world. SEA also has a vital geographic position. The Strait of Malacca is the second-busiest waterway globally and, together with the nearby Straits of Lombok and Sunda, has already facilitated almost half of global “seaborne trade tonnage” in previous years. As Southeast Asia grows economically, it will become a more influential actor in international issues and institutions.
Southeast Asia’s Infrastructure Gap
One area ripe for Chinese or American involvement in SEA is infrastructure investment. Although growth has been remarkable across the region, investing in developing Asian infrastructure is critical to sustaining it. The Asian Development Bank (ADB) predicts that to maintain economic growth, ASEAN will need to invest somewhere between $2.8 and $3.1 trillion between 2016 and 2030. Unfortunately, SEA nations lack the supply of capital to reduce the infrastructure gap that the ADB quantifies as somewhere between $92 and $102 billion. As analysts and regional experts it, “[I]f measures are not taken to increase infrastructure spending further… the infrastructure gap will remain, and economic growth will slow or stagnate.”
Those most affected by the lack of infrastructure development are impoverished communities. The OECD explains that infrastructure investment reduces poverty for a few reasons:
- Infrastructure enhances economic activity and growth as a whole.
- It reduces bottlenecks that “impede asset accumulation, lowe[r]asset values, impos[e]high transaction costs, and creat[e]market failures.”
- It increases participation and access for the impoverished, opening doors to economic centers, opportunities and essential services.
Actions Taken by China
For its part, China has launched the most significant infrastructure investment initiative in history, the Belt and Road Initiative (BRI). First proposed in 2013, BRI covers 65 countries and 65% of the world’s population. In 2019, BRI investments totaled $29 billion in SEA, which was almost a third of all BRI investments. Predominately, the investments are in “hard” projects that include transportation and energy, developing Asian infrastructure in multiple ways. The Chinese government also invests through Asian Infrastructure Investment Bank (AIIB). As of 2019, 46 projects worth more than $8.5 billion were funded through the development bank that “aims to improve economic and social outcomes in Asia.”
Despite the potential importance, the U.S. invests less than $1 billion a year in developing Asian infrastructure in the region. Traditionally, U.S. infrastructure development has been done through multilateral institutions like the World Bank or Asian Development Bank. Yet, between 2015 and 2017, only 39% of ADB funding went to ASEAN infrastructure. At the same time, only 29% of the World Bank investment went to SEA infrastructure.
Actions Taken by the U.S.
Nonetheless, the U.S. and other western nations launched the Build Back Better World (B3W) initiative, seen as some to be the U.S.’s response to China’s BRI. Writing for The Diplomat, Karen Zhu describes B3W as a “values-driven and transparent partnership to provide infrastructure to low-and middle-income countries.” Although a total hasn’t been announced, the initiative would “catalyze hundreds of billions of dollars” to tackle the $40 trillion infrastructure gap plaguing the world.
B3W tackles many of the same fundamental issues as China’s BRI. Notably, Zhu posits the B3W initiative could also work alongside the BRI to meet similar goals. Without a doubt, developing Asian infrastructure in SEA through investment is not sufficient to counter China in the region. To meet geopolitical goals, the United States can increase its presence at regional forums and assign diplomats to vacant posts across the region. Yet, increasing investment in Southeast Asian infrastructure is necessary as the region requires it to sustain development.
The B3W initiative could prove successful in its goals, though careful evaluation over time remains necessary. However, the effort does signal an understanding in the Biden Administration regarding infrastructure support. Through this avenue and others, the U.S. can shore its regional alliances, develop its geopolitical goals and make infrastructure progress in relation to China like never before.
– Vincenzo Caporale