Supporting Japanese Infrastructure Plan, US Counters China's Belt and Road Initiative
The U.S. hopes supporting Japan will benefit American construction companies and product supply chains
The U.S. on Nov. 7 signed an agreement with Japan to support the nation's "Partnership for Quality Infrastructure," a program many regard as a rival to China's Belt and Road Initiative. Announced amid President Donald Trump's 12-day swing through Asia, a U.S. government financing agency ratified an agreement with two Japanese financiers to jointly develop infrastructure projects in different countries.
At the Tokyo signing ceremony, the U.S. Overseas Private Investment Corp., the Japan Bank for International Cooperation and the Nippon Export and Investment Insurance company were represented by their respective senior leadership: Ray W. Washburne of OPIC, Tadashi Maeda of JBIC and Kosaburo Nishime of NEXI. Their stated goal is to bolster investment in infrastructure, energy and other critical sectors throughout Asia, the Indo-Pacific, the Middle East and Africa.
The move is seen as a signal from Washington that it would support Tokyo's scheme, which involves a four-country joint partnership, the other two countries being India and Australia. Japan has achieved some success, having persuaded India to sign an agreement to implement an Asia-Africa Growth Corridor, which comprises a string of infrastructure projects that is opening up opportunities for construction companies in both countries. India also has agreed to allow Japanese rail makers to build a 500-kilometer-long high-speed-railway facility to connect the cities of Mumbai and Ahmedabad.
Talking about the deal with Japanese financiers, OPIC's Washburne said, "These agreements will allow us to have a broader impact while strengthening the continued work between the U.S. and Japan. Through focusing on infrastructure and energy projects around the globe, we can enhance the position of our respective private-sector companies in an increasingly competitive global market."
Among its first projects, the new collaboration is looking closely at a Jordan-sited solar project, backed by Japanese solar power generator Mitsui & Co. and U.S. energy provider AES.
The U.S. is close to receiving the first set of subway cars built in China. The subway cars are expected to be delivered in December by the China Railway Rolling Stock Corp. for use in Boston's Orange line. Three years ago, the manufacturer, CRRC subsidiary Changchun Railway Vehicles, signed a delivery deal with the Massachusetts Bay Transportation Authority.
The CRRC holds the intellectual property rights to the carriages, which have met all U.S. standards and successfully passed 40-km-per-hour collision tests, Chinese media stated..
Jerry Polcari, chief procurement officer for MBTA, was quoted in Chinese media as saying, "These 'next-generation vehicles' will be the backbone of our heavy rail fleet for many years to come."
With signs of U.S.-China collaboration in infrastructure, some experts say Washington would not encourage Japan to compete with China on the sensitive Belt and Road Initiative.
"The U.S. is in the process of thinking through its own plans to provide alternative offers to the BRI, and that will require closer cooperation with the other major economic powers, most obviously Japan and the Europeans," said Jonathan Hillman, director of the Reconnecting Asia project at the Center for Strategic and International Studies, a Washington, D.C., think tank.
"With all the attention to the Belt and Road [Initiative], it's sometimes forgotten that Japan has been in the infrastructure game for years, particularly in Southeast Asia. Prime Minister Abe's Partnership for Quality Infrastructure [program] can be seen as doubling down on that longer history of involvement," Hillman told ENR.
Japan benefits from building infrastructure that supports its supply chains and helps Japanese companies compete with Chinese exports of high-speed-railway technology, he said.
There are signs the U.S. has agreed to join in Japan's partnership plan to extend some of the advantages to U.S. construction companies and product supply chains. "I see this partnership for quality infrastructure … as a sort of [Japanese] response to Belt and Road, but it really is doubling down on what has been a historic commitment already," Hillman said.
One of Japan's challenges is China's ability to construction Belt and Road projects at extremely competitive prices. But Japan maintains that its own infrastructure projects incur much lower maintenance costs and have a longer lifespan, making them cost-effective in the long run, Hillman pointed out.
Western experts have often noted that China's Belt and Road Initiative may put some of the recipient countries, which are small and inadequately developed, under severe repayment pressure and even put them on the road to bankruptcy. Some of these countries—Sri Lanka, Myanmar and Thailand, for example—have either halted or cut down the size of Beijing's proposed infrastructure projects. The reasoning is to avoid both overcapacity and economic pressure.
"But aside from trying to ensure that the region does not become hard-wired to Chinese standards and Chinese firms, there is also a concern to avoid a situation in which countries' economic dependence translates into undesirable political or security choices," said Andrew Small, a senior trans-Atlantic fellow with the Asia program of the German Marshall Fund.
Chinese President Xi Jinping recently surprised some observers when he persuaded other leaders to enshrine the Belt and Road Initiative in the Communist Party's constitution, giving it political validity and making it an important objective of China's ruling party.
"Enshrining the Belt and Road in the CP constitution underscores the intended longevity of the initiative and, to some extent, raises the pressure on China to deliver," Hillman said. "For Chinese investors, this underscores the importance of branding their investments as supporting the Belt and Road. Anecdotally, we have heard that Belt and Road projects are more likely to be approved and be approved faster."