US counters China with Blue Dot Network

US counters China with Blue Dot Network

Global standard to determine environmental and social risks of development projects

With China's massive One Belt One Road international development project and upcoming pan-Asian trade deal, the country has been flexing its muscles throughout the region, pulling Thailand closer to Beijing than Washington.

The Americans' muted response is their own broad development programme, the Blue Dot Network.

While most of the details are still being ironed out, the network will essentially act as a certification programme, similar to the LEED certification given to green buildings. Infrastructure projects around the world (hypothetically including the Belt and Road project) can apply to receive a "blue dot", which verifies the project meets standards set by the US Development Finance Corporation (DFA). The scheme will focus on infrastructure projects such as gas lines, renewable energy, seaports and airports.

Any infrastructure project can apply for the blue dot, however the programme appears to have an Asia focus, at least initially. It was announced last June at the Asean Summit to a somewhat chilly reception. The US had just removed millions of dollars worth of tariff exemptions from Thailand, and some Asean leaders felt snubbed by the low-ranking envoy the US sent to the summit (the highest-ranking member being US Commerce Secretary Wilbur Ross).

The Blue Dot Network was announced in partnership with Australia and Japan, two Asia-Pacific nations part of America's opposing sphere of influence to China.

The partner nations met in January to hash out the details surrounding blue dot certifications, likely to be modelled after the G20 Principles for Quality Infrastructure Development and Equator Principles, used to determine environmental and social risks of development projects.

"We have had global interest, including the Thai government and civil society, as well as businesses wanting to be part of this network," said David Bohigian, the former head of the Overseas Private Investment Corporation (Opic), which recently restructured into the DFA.

"It's not a funding mechanism, but a way for developing and developed countries to come up with a global standard that ensures that their taxpayers and project developers are getting value for their dollar."

The certification aims to encourage private sector-led projects to adopt stronger labour protection and be sustainable, both financially and environmentally. Blue dot certifications will likely not be issued until mid-2020, once the specific standards are finalised, according to Mr Bohigian.

Through the Belt and Road Initiative, China has been engaging in massive infrastructure projects in nearby countries, while dividing the cost with the home nation. This has led to some remarkable failures such as the Hambantota port that was built in Sri Lanka through massive loans from China.

When the Sri Lankan government failed to make payment on the debt, they were forced to lease the port back to China for 99 years.

This led to speculation that other projects, like a US$7 billion railway project in Laos, could lead to a similar debt trap.

"I've had the opportunity to visit the port in Sri Lanka and I think it's important for policymakers to consider what the cost of it will be, beyond financing," he said.

"Countries and financiers need to understand whether they are protecting their sovereignty, upskilling local workers and protecting the environment. We want to draw a distinction between how Blue Dot Network projects operate and how other projects operate."

When Opic turned into the DFC last month, the US doubled the size of the agency, increasing its investment capabilities from $30 billion to $60 billion.

According to the DFA's website, the agency operates three developmental aid projects in Thailand amounting to $4 million in investment.

"I would emphasise the $60 billion we have is representative of our capital. We catalyse private capital, so that represents hundreds of billions of dollars of potential investment. We have a significant amount of capital," said Adam Boehler, the new chief executive of the DFA in a teleconference call with the media.

"The Indo-Pacific region will be a strong focus of the US going forward, and I would stay tuned for some very significant deals here. We're open for business and you'll see us be very active in this region."

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