Jack McDermott | Indo-Pacific Fellow
The Quadrilateral Security Dialogue between Australia, India, Japan, and the United States (the Quad) has had a busy start to the year, marked by a monumental expansion in scope. While military exercises were the primary grounds for its initial formation, the Quad 2.0 has put diplomacy and economics at centre-stage, organising to tackle issues as diverse as vaccine production, climate change, and emerging technology. But with the ideal of a “free and open Indo-Pacific” central to the Quad’s blueprint, a coordinated international investment strategy is a conspicuous omission from its current agenda.
International infrastructure investment can be a powerful strategic tool. Leaders of the G7 countries acknowledged this recently, announcing what may evolve into a major contribution to this space in the form of the Build Back Better World (B3W) initiative at the most recent Summit in June. But Indo-Pacific powers face a vastly different strategic environment, and investment proposals are causing increased diplomatic friction in the region as their security implications are scrutinised more closely. Just this year, Australia’s Foreign Minister Marise Payne’s decision to cancel two deals between the Victorian Government and China was strongly condemned by China’s embassy in Australia, and was by considered by the Chinese government to have caused “further damage to bilateral relations.”
Both projects fell under the largest and most controversial offering in the infrastructure investment space, China’s flagship ‘Belt and Road’ Initiative (BRI), which has signed on 137 countries and completed projects in 70. But a developing pattern of delayed projects and opaque deals shows that, if a country is to be seen as a reliable investor, quantity cannot eclipse quality. Infrastructure investment carries a heavy normative weight, and thus the potential exists to counter China’s investment strategy.
The Quad’s potential
The notion of a Quad-initiated investment fund is not unfeasible, nor entirely new. The idea of collaborative infrastructure investment enjoys the political backing of all involved Quad members, each of which have contributed to jointly-funded investment projects with one another in the past. This initiative would also be less strategically sensitive than an overt security agreement, and therefore less likely to be stalled by apprehensive members—India being the most likely candidate given its commitment to strategic non-alignment and ongoing hostilities on its northern border.
Of course, codifying an investment fund as an ongoing initiative would be challenging. It would require the finances to be consistently procured and would demand agreement on priority projects, which may be difficult for a grouping as geographically scattered as the Quad. Quad investment is also unlikely to match the scale of the BRI. But thinking—as Quad members show an increasing willingness to do—beyond its strategic dimension, an infrastructure development fund is an opportunity to underscore the Quad’s leadership with a decisive commitment to an open Indo-Pacific economy.
Three objectives of mutual investment
The initiative should firstly—and perhaps most importantly—champion more open norms of international investment. Of particular significance to the “free and open” Indo-Pacific concept are economic sustainability, transparency, the creation of local jobs and the transfer of skills and capital. These are crucial as concerns mount over the efficacy and reliability of China’s offerings. In Papua New Guinea, for example, more than three quarters of recent contracts have gone to Chinese companies for major infrastructure projects including roads, bridges, and ports, despite indications of substandard quality and lower pay for local workers compared with domestic bidders. An alternative fund could champion the Quad’s ideals and promote competition.
Quad members must also work with key regional states and address the development needs of the region. A commitment to infrastructure development in Southeast Asia in particular would alleviate concerns that the Quad is designed to bypass ASEAN centrality, which will be crucial to maintaining positive engagement with leaders in the heart of the region. According to a recent survey, decision-makers in Indonesia and Singapore—countries at the critical fulcrum between the Indian and Pacific subregions—were mostly sceptical of the Quad. Given the position of major Southeast Asian states, engaging ASEAN and committing to the region economically will be crucial for the cohesion of the Indo-Pacific concept.
It is entirely possible that the hurdles ahead of a codified Quadrilateral investment effort will prove insurmountable. But the Quad’s signature defence-focused strategy will not be enough to secure its vision, and its members seam acutely aware of this. Even a comparatively modest initiative could create a powerful normative backdrop for the Quad’s ambitions. After all, a free and open economic order is not the only “operating system” on offer in the Indo-Pacific—at the risk of sounding too literal, commitment to this alternative must be built.
Jack McDermott is the Indo-Pacific Fellow for Young Australians in International Affairs.