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EU Unveils Plan to Invest in Asian Infrastructure, Countering China

September 24, 2018

Last week the European Commission put forth a proposed strategy to assist with critical infrastructure development within Asia, apparently as a direct response to China’s expanding influence in the region via infrastructure investments.

The approach was described in a 13-page strategy document released through the EU. Though the amount of money the EU itself would spend as part of this was not specified, the European Commission did say it planned a €60 billion ($70 billion) fund to be used as insurance in case projects were not finished.

It was felt such an insurance scheme, along with strong political and financial backing from the EU itself, could help raise over €300 billion between 2021 and 2027 for the new program.

The plan is expected to be funded in part with additional monies to be allocated out of the EU common budget from 2021 going forward. The plan’s authors also expect multilateral banks and private sector loans to provide much of the rest.

Road, bridge, waterway, railroad and telecommunications are all possible targets for the new EU investments in Asia.

Although EU foreign policy chief Federica Mogherini denied the plan was tied to specific Chinese policies, the Commission did make note of China’s drive in this area within the EU strategy brief. It noted that the Manila, Philippines, based Asian Development Bank (ADB) had recently estimated that infrastructure needs in Asia will require over €1.3 trillion annually. The European Commission said China can not meet all those cash needs, which opens an opportunity for the EU to provide support and involvement.

By investing these funds, the EU gains in multiple ways. It helps to build political bridges to nations currently ignored by the West, largely because the U.S. has pulled out of such support; it provides another investment opportunity for companies and funds within its member nations; and it helps steer Chinese engagement and how it works with these countries, just by setting a different example of how to be good neighbors with emerging economies.

 

Copyright: North America Procurement Council Inc., PBC