AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies
NPIRIPS

Nakasone Yasuhiro

The Japan Institute of

Research Institute for

Peace InstituteInternational Affairs

Peace and Security(Secretariat)

Editorial Advisory Board:

No. 284

Akio Watanabe (Chair)
Ichiro Fujisaki
Masashi Nishihara
Kenichiro Sasae

14 January 2021

Editorial Committee:
Tsutomu Kikuchi
Fumiaki Kubo
Tsuyoshi Sunohara
Shujiro Urata andTomiko Ichikawa
Editor & Online Publisher:

A NEW PHASE OF INDO-PACIFICECONOMIC CONNECTIVITY AND
GOVERNANCE

Saori N. Katada

Kenichiro Sasae
President, JIIA・ The Indo-Pacific concept has provided a newforumforeconomic
connectivity
anddevelopment within the region.
・ he Indo-Pacific coalition is an effective forum toaddress Covid-19-related regional challenges,including supply chain disruption, debt
sustainability and democratic backsliding.
・ The new leaders in Japan and the UnitedStates should use this valuable forum topromote economic connectivity and good
governance.
The views expressed in this piece are the author’s own and should
not be attributed to The Association of Japanese Institutes ofStrategic Studies.

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The Association of Japanese Institutes of Strategic StudiesThe Indo-Pacific concept has come a long way since its introduction in foreign
policy lingo about a decade ago. This geostrategic construct covers a broad geographic
area merging the “two seas” of the Pacific and Indian Oceans, and has incubated many
cooperative initiatives under the Free and Open Indo-Pacific (FOIP) strategy, ranging
from protecting freedom of navigation to establishing regional peace and prosperity. Inaddition, the Quad has been formed as a foreign policy dialogue forum among theUnited States, Japan, Australia and India. As a structure to assemble like-mindedmembers supporting democracy, the rule of law and open trade, the Indo-Pacific has
also become a forum for efforts toward economic integration and connectivity in theregion.
From the start, challenges have existed for the Indo-Pacific concept to connect
this vast region. China is the center of regional economic activities with its expansive
trade and ever-increasing investment, but some conceptualize the expanded
Indo-Pacific regional notion as a way to counter China. The United States, especially
under the Trump presidency, is also keen on utilizing the Indo-Pacific as a security
forum, yet India is quite reluctant to agree. In addition, ASEAN members are worried
about losing their centrality in regional institution building. Despite such discontent, thecore members’ interests and priorities have converged on economic connectivity,
particularly through infrastructure investment, and economic governance.
Since China launched its Belt and Road Initiative in 2013, infrastructure
investment has been a realm of concern for FOIP members. China’s strong connectivity
push into Central Asia as well as throughout Southeast and South Asia was, on the one
hand, a welcome change from the old global development regime that had shied awayfrom infrastructure funding. On the other hand, it has raised challenges and concerns
about lax assessment, detrimental social/environmental impact, lack of transparency
and debt sustainability, as well as the geostrategic intent to lay out exclusive Chinese
access routes to the Middle East, Africa and Europe. Given that the world faces anestimated US$94 trillion in infrastructure investment needs over the course of the next
two decades, it is vital to meet this challenge in the Indo-Pacific through better rules andhigher standards. Here, Japan took the lead by promoting its Partnership for Quality
Infrastructure with US$200 billion in funding and an emphasis on life-cycle cost anddebt sustainability, while the US followed up with the BUILD (Better Utilization ofInvestment Leading to Development) Act that established the new International
Development Finance Corporation. Following the declaration of the G20 Principles for
Quality Infrastructure Investment at the Osaka G20 Summit in June 2019, the United

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AJISS-Commentary
The Association of Japanese Institutes of Strategic StudiesStates, Japan and Australia launched the Indo-Pacific initiative of Blue Dot Network withthe goal of creating a mechanism to certify that infrastructure projects meet their highstandards

basedoncriteria

includingtransparency,

sustainability

andsocial/environmental impact.
The Covid-19 pandemic has imposed additional burdens in the region
throughout 2020. Beyond the immediate questions of virus containment, medical
equipment procurement or vaccine access, the leading governments of the FOIP face
three vital concerns that will have lasting impacts on Indo-Pacific geopolitics.
The first impact is the disruption of the broader supply chain. Specifically, many
economies have begun to worry about their overdependence on Chinese imports,
prompting efforts to diversify supply chains away from China through the Indo-Pacificframework. The trade ministers of Japan, Australia and India met in late August 2020 toagree on supply chain resilience in the Indo-Pacific to balance China’s dominance.
Independently, the Japanese government has established a US$2.2 billion fund toencourage private companies to shift their production back to Japan or to Southeast
and South Asia. At the same time, with the successful conclusion of the 15-member
Regional Comprehensive Economic Partnership (RCEP) on November 15, 2020, there
is an incentive to connect these economies in the western Pacific at the expense ofIndia and the United States, which are not participants of the RCEP.
The second challenge is debt sustainability. With declining economic activity
both domestically and internationally, 83 countries around the world are currently
receiving some kind of financial assistance and debt relief extended by the IMF. Evenprior to this crisis, some borrower countries in Asia have faced repayment challenges,
especially vis-à-vis China’s infrastructure loans. With the need for restructuring
government debts under Covid-19 likely to expand, the G20 finance ministers haverecently agreed to establish a common framework among G20 creditors for acoordinated debt restructuring process. The FOIP is well-placed to contribute to theseefforts.
Finally, there are increasing concerns of democratic backsliding or corruption,
as the pandemic imposes unusual demands on governments and leaders to control
economies and societies. Authoritarian impulses are on the rise with the apparent
success of virus containment in China despite the country being the origin of Covid-19.
There is also increasing demand for government leaders to intervene and provide funds
to support people’s livelihoods and control their behavior. Many worry about the abuseof executive powers in the Indo-Pacific as seen from election suspensions andhttp://www.jiia.or.jp/en/commentary3

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

crackdowns on political opposition. As a forum of democracies, supporting democratic
governance at this time of crisis is a vital task for the Indo-Pacific coalition.
2020 will be remembered as the most disruptive year of the century. It wouldserve the Indo-Pacific forum well to provide a footing for securing stability, connectivity
and openness in the region. Added to last year’s disruption, however, are changes inleadership in two major actors of the FOIP, Japan and the United States. Following theresignation of Japanese Prime Minister Abe in September 2020, the new prime minister
Yoshihide Suga has large shoes to fill in leading Indo-Pacific efforts while balancing
Japan’s precarious relations with China. Incoming US President Joe Biden also has his
foreign policy plate full when he is inaugurated in January 2021, with many agenda
items left from his predecessor. That said, no foreign policy agenda item is more
important for the new administration than reviving US relevance in the vibrant yet
volatile region of Asia by utilizing the Indo-Pacific framework.

Saori N. Katada is professor of international relation at the University of Southern
California.

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