US Government policy on ASEAN
/Today there was a panel on ASEAN within the larger US Indo-Pacific Strategy at CSIS (details and video here). I must have mis-read the panel, but I thought it was about energy (and it was to some extent). It was really about US policy towards infrastructure and energy investment in Indo-Pacific.
A few points:
State went hard on trade liberalization and technical assistance. Also, get ready for AsiaEdge to be the next big government slogan.
A Deputy Assistant Secretary at the US State Dept had the unfortunate job of talking about the US strategy on the Indo-Pacific. There does seem to be a focus on helping countries in ASEAN put together good projects in order to attract Western investment. State and other US government entities are doing a lot around technical assistance (legal, procurement, transparency, etc), which is actually very positive. And the new DFC (see below) could be a big part of this.
…but it is hard to talk about how you really want trade liberalization and the ability to compete effectively against China, yet when asked if there is any movement on TPP, the only answer is: No.
Oh, and the government is focused on three areas: 1) infrastructure, 2) energy, and 3) ecommerce/digital economy. This was consistent across all government officials. I actually think focusing on these three areas is smart, but I am worried that any change in administration is going to upend all of this. This is the problem of the American system - inconsistency between administrations. It doesn’t help that Trump is actively trying to destroy anything that Obama touched.
Chevron talked its book on LNG.
It sees a lot of growth for LNG in ASEAN. Asia represents about 48% of the company’s production, according to the 2018 annual report, but it sounds like they really want to find new customers in emerging markets, especially for LNG. This requires a lot of infrastructure.
Chevron really wants people to step in and fund LNG infrastructure in ASEAN. Not sure why they aren’t doing more on their own. They are the ones that benefit the most. I guess they have resource constraints. Also, LNG is great and all, but Vietnam could probably do more exploration in their own backyard for their own natural gas. That plus renewables would probably be money better spent.
OPIC is becoming a bigger and better entity called DFC!
Brian Churchill spoke for OPIC. He was probably the best speaker and sold OPIC well. Anyway, OPIC is rebranding as the US International Development Finance Corporation (DFC) I remember the debate over the past few years, mainly by Republicans, but also Democrats that were against OPIC (the Overseas Private Investment Corporation, which provides financing and guarantees for companies/banks/firms investing in emerging markets). There is a bit of crony capitalism feel about OPIC, because the knock against is was the it only helped big companies.
The other side of the debate was the idea that we actually need to support our export businesses if we want to be competive. This is because allies like Japan and Germany are much more supportive of export businesses, and they are able to steal deals from US companies because of this support. Even worse, our “frenemies” like China are even more aggressive (see: Belt and Road Initiative), and if we want to counter their influence, we need to put some dollars behind it.
So, the side supporting OPIC won: the US government decided to double down. The limit to DFC’s exposure was doubled to $60bn. But, as Churchill acknowledged, it is going to be spread over all of the world. ASEAN is a small part of that, and energy/infrastructure is just a part of that as well. So once it is cut down, it might be small, and lots of people are fighting over it. It’s not going to be pretty.
The most interesting comments came from Peter Raymond at CSIS framing the strategy as a response to China.
In his comments, Raymond really framed much of the US strategy as a response to China’s Belt and Road Initiative. China has an industrial policy versus the US’s free market policy. Industrial policy can be quick and scale, but has risks around corruption, transparency and sustainability of projects. Free markets are usually slower, but generally more sustainable (meaning that they are less likely to fail quickly). The US push towards free markets can be very appealing, but its commitment needs to be real and consistent, something that has not been true during this administration.
The three things Raymond said the US needed to do were:
Signal direct support: This is the part about offering something real and actionable. Plus do it consistently. This can be the US alone or with partners. There has been some positive moves on this front from the administration over the past 12 months, but we need to do more.
Support: This includes a lot of the technical assistance that the US official talked about, but also includes advocacy for countries even when dealing with other funders. Push them to get better deals for their own sake.
Tools: This is DFC and any other funding that can be drummed up. Even private sector funding. Partners are a good source of funding as well. Japan has committed $200 billion to infrastructure. The DFC should also look at other potential products, such as around currencies or political risks or whatever is needed.
Overall, it was pretty interesting. I thought we would hear more about ASEAN government’s policies towards energy and infrastructure, but there were no panelists from the countries themselves. I would love to see this at some point.
Interesting fact: I didn’t realize this, but the amount of gas flared in the Permian basin (close to where your dear author grew up) could meet all residential demand in Texas! It’s hard to talk about how great natural gas is for the environment when so much is wasted…