Why Australia wants to build its own 'Belt and Road' scheme with Japan and the US to rival China's investment
Australia, Japan and the US have confirmed they are pushing ahead with their own fund.
AAP: MICK TSIKAS
Australia is teaming up the United States and Japan to set up a regional infrastructure scheme to rival China's massive Belt and Road Initiative.
Details are scant, and there are plenty of unanswered questions.
All three countries are signalling they want to offer countries in the region an alternative to Beijing.
Dollar for dollar, Australia, the US and Japan do not have the capital to compete with the emerging superpower.
Still, if you're the leader of an infrastructure-hungry nation in South-East Asia or the Pacific, then life might soon become interesting.
More countries might soon be knocking on your door with money in hand.
Hang on, what is the Belt and Road?
China's Belt and Road Initiative (BRI) is a massive global network of infrastructure projects.
Some experts estimate that more than $US1 trillion will be poured into ports, bridges and roads across the globe in the coming decade.
BRI links China by land and sea to many of its major markets, laying down new arteries for the global economy.
And many of the nations who are the beneficiaries are cash-poor.
They would often struggle to build these major infrastructure projects without the money flowing from Beijing.
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China attempts global dominance with One Belt One Road project
Why are we worried about it?
US officials are deeply suspicious about the Belt and Road. They argue it's largely a vehicle for China to exert its influence in the region.
Some nations have also accused Beijing of using predatory lending practices in order to build leverage in small nations.
The US and Australia are particularly worried about "debt-for-equity swaps" — when local governments hand over local bits of infrastructure instead of paying back loans.
Earlier this year Sri Lanka handed a new port to a Chinese company after it failed to make debt repayments.
US officials argue these debt traps will allow China to slowly build a network of strategic assets across Asia and the Pacific. And they worry that those assets could quickly be turned into footholds for the Chinese military in the future.
Australia has hedged its bets. Trade Minister Steve Ciobo signed a Memorandum of Understanding on the BRI last year, but the Government has refused to release it.
And what are we doing?
What do you do if you are uneasy about the way China is calling the shots on infrastructure in the region? Set up your own infrastructure fund, with your own set of rules.
The new infrastructure partnership announced by the US, Australia and Japan doesn't even have a name yet.
But in a joint statement, the three countries say they want to "mobilise investment in projects that drive economic growth, create opportunities, and foster a free, open, inclusive and prosperous Indo-Pacific".
The statement doesn't mention China or the BRI. But there are plenty of unmistakable references to it.
"Good investments stem from transparency, open competition, sustainability, adhering to robust global standards, employing the local workforce, and avoiding unsustainable debt burdens," it says.
Lowy analyst Peter Cai said all three nations were signalling they wanted to compete with China by offering other countries an alternative source of cash.
"It is very much a coordinated response to Belt and Road and some of its perceived failings," he said.
"A lot of developing nations have been taking on substantial debts from China.
"If you read the statement it's pretty clear that this initiative is designed to address this."
So, will it work?
It's hard to say. But it won't be easy.
If we want to compete with Beijing's massive infrastructure push, then the reality is all three countries will have to stump up plenty of money.
PHOTO Experts estimate that more than $US1 trillion will be poured into ports, bridges and roads under the Belt Road Initiative.
So far none in the Japan-Australia-US deal have said how much cash they are willing to put on the table.
Mr Cai says there are big question marks hovering over the capacity of all three countries.
The US has plenty of economic muscle, but it's deeply in debt — and already faces a daunting challenge to update creaking infrastructure back at home.
Mr Cai says he is "not convinced that the US has the political will or the resources to sink money into this" given the US deficit and President Donald Trump's aversion to spending taxpayers' dollars on overseas ventures.
Australia might have more political will, but our economy is much smaller.
Mr Cai predicts Japan might be best placed to step up its engagement and do more.
Competition is healthy anyway
Australia, Japan and the US might not be able to seriously challenge Beijing on infrastructure in our region.
After all, Beijing's Belt and Road vision is sweeping, with the vaulting ambition of a power on the rise.
And the animating principles of this new partnership might be defensive, rather than offensive.
But that doesn't mean it is futile.
And China might find it more difficult to impose conditions on infrastructure deals with smaller players if those nations have other options.
For example, China had to compete with Japan to build a new high-speed railway between Jakarta and Bandung in Indonesia.
Mr Cai said the contest made it easier for Jakarta to hammer out an agreement on its terms.
The same lesson applies across the region — and it might be repeated more often as the competition heats up.
"For the small players in the region they can certainly use this to extract a better deal from the US, or from Japan, or from Australia or China," Mr Cai said.
"Competition is always good."