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Thayer Consultancy Background Report:

ABN # 65 648 097 123


United States: Secretary
Pompeo’s Indo-Pacific Economic
Vision - 1
Carlyle A. Thayer
August 4, 2018
I am writing an article on the Indo-Pacific economic, developmental initiatives that
US Secretary of State Mike Pompeo announced on July 30 (see the attached article
below). I understand that you are a Southeast Asia regional specialist. Hence, I would
like to hear your fascinating thoughts about these issues:
Q1. Some experts say that those initiatives is a contrast to China's investment
policies under its "One Belt, One Road" (OBOR) plan. However, a researcher at China
Institute of International Studies says Washington’s plan was more likely to be a
“diplomatic gesture” than a direct competitor to the OBOR. Do you agree with this
comment?
ANSWER: Secretary Pompeo’s recent address to the Indo-Pacific Business Forum
reflected the theme of a free and open Indo-Pacific Region (IPR) enunciated in the
U.S. National Security Strategy (2017) and National Defense Strategy (2018). The
official U.S. position is that funding for high-quality infrastructure offers an alternate
to China’s Belt and Road Initiative and is not in competition with China. As Secretary
Pompeo made clear, the estimated demand for infrastructure funding in the IPR by
2030 will be $26 trillion, “no government nor combination of governments has that
kind of money. Only the private sector does.”
Secretary Pompeo did not mention China directly but it was clear that he had China
in mind when he stated U.S. commitment to “a region rooted in sovereignty, the rule
of law, and sustainable prosperity… For that to happen, Indo-Pacific leaders must
prioritize transparent, anti-corruption, and responsible financing… what you see is
what you get: honest contracts, honest terms, and no need for off-the-books
mischief.”
Q2. In your opinion, how can the US achieve what it expected with those initiatives,
given that the $113 million that it plans to invest in the Indo-Pacific region is
considered not to proportionate with the vast amount of money China is willing to
pay under OBOR?
ANSWER: Secretary Pompeo said that the $113 million was allocated for
foundational or new for the future – digital economy, energy and infrastructure. It
was a down payment on further U.S. investment in the region. U.S. policy was to
encourage private American businesses to get involved.
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It is important to note, as Secretary Pompeo stated, “no country does more two-way
trade in the Indo-Pacific than the United States. In Southeast Asia, the U.S. is the
single largest source of cumulative foreign investment – larger than China, Japan and
the European Union.” The U.S. Overseas Private Investment Corporation has a
portfolio of $3.9 billion invested in the Indo-Pacific. The U.S. Millennium Challenge
Corporation has provides $2.1 billion in funding to promote development and
governance since 2004.
The United States is assembling a coalition of likeminded states, including Australia,
to provide infrastructure funding. The U.S. National Security Strategy also identified
multilateral institutions such as the Asian Development Bank as sources of funding.
The key here is quality of investment rather than quantity. The proof of whether
China or the United States is successful will rest on sustainable development in the
target countries.

Suggested citation: Carlyle A. Thayer, “United States: Secretary Pompeo’s Indo-


Pacific Economic Vision - 1,” Thayer Consultancy Background Report, August 4, 2018.
All background briefs are posted on Scribd.com (search for Thayer). To remove
yourself from the mailing list type, UNSUBSCRIBE in the Subject heading and hit the
Reply key.

Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.
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Thayer Consultancy Background Report:


ABN # 65 648 097 123
United States: Secretary
Pompeo’s Indo-Pacific Economic
Vision - 2
Carlyle A. Thayer
August 5, 2018
We request your assessment of U.S. Secretary of State Mike Pompeo’s Indo-Pacific
Economic Vision.
Q1. Since US Secretary of State Mike Pompeo revealed the plan, many experts have
compared this initiative to China's "One Belt, One Road" (OBOR) plan. How do you
compare between 2 programs? What are the common things and what are the
differences?
ANSWER: China’s One Belt One Road (OBOR) Initiative is the signature policy of
President Xi Jinping and is global in scope. OBOR aims to connect China to the
Eurasian landmass and connect China to littoral states in the maritime area
extending from China’s east coast through the South China Sea and Indian Ocean to
the east coast of Africa and from China to the South Pacific. OBOR is estimated to
cost one trillion U.S. dollars. OBOR also aims to resuscitate China’s rust-belt
provinces and reduce China’s over capacity of construction materials (steel and
cement). OBOR is China’s grand strategy to become a major world power by 2013.
Secretary’s Pompeo’s Indo-Pacific Economic Vision (IPEV) is regional in scope. It
forms part of President Donald Trump’s free and open Indo-Pacific (FOIP), a region
that has been elevated to the top priority of his Administration. Trump’s FOIP will
rely on private businesses to finance the bulk of the projects, U.S. government
funding will limited.
President Xi’s OBOR is all about China being the dominant leaders with other powers
joining as secondary partners. This contrasts with the Trump Administration’s
approach to enlist allies, partners, multilateral institutions such as the World Bank
and Asian Development Bank, and private businesses.
Q2. Many see IPEV as a “countermeasure” to OBOR. However, some say
Washington’s plan was more likely to be a “diplomatic gesture” than a direct
competitor to the OBOR, because the US$ 113-million fund is too small when
compared to big sums of money China’s committed to provide under OBOR. What is
your viewpoint?
ANSWER: Secretary Pompeo’s recent address to the Indo-Pacific Business Forum
reflected the theme of a free and open Indo-Pacific Region (IPR) enunciated in the
U.S. National Security Strategy (2017) and National Defense Strategy (2018). The
official U.S. position is that funding for high-quality infrastructure offers an alternate
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to China’s Belt and Road Initiative and is not in competition with China. As Secretary
Pompeo made clear, the estimated demand for infrastructure funding in the IPR by
2030 will be $26 trillion, “no government nor combination of governments has that
kind of money. Only the private sector does.”
Q3. Mr. Pompeo made no reference to China when announcing the plan, while many
top officials, like Secretary James Mattis, had not hesitated to criticize Beijing
publicly before. Yet China was clearly the elephant in the room, given what Mr
Pompeo mentioned in his speech.
ANSWER: Correct. Secretary Pompeo launched his IPEV on the eve of his visit to
Singapore to attend four multilateral meetings – Lower Mekong Initiative, ASEAN
Post Ministerial Conference (10+1), East Asia Forum Ministerial Meeting and the
ASEAN Regional Forum. Pompeo was scheduled to meet State Councillor and Foreign
Minister Wang Yi.
Secretary Pompeo did not mention China directly but it was clear that he had China
in mind when he stated U.S. commitment to “a region rooted in sovereignty, the rule
of law, and sustainable prosperity… For that to happen, Indo-Pacific leaders must
prioritize transparent, anti-corruption, and responsible financing… what you see is
what you get: honest contracts, honest terms, and no need for off-the-books
mischief.”
Secretary Pompeo’s Senior Policy Adviser Brian Hook was more direct when he he
characterized China’s OBOR as “a made in China, made for China initiative.”
Q4. What do you think about the message here, if it comes to Sino-US strategic
competition in Asia-Pacific (or now Indo-Pacific)? And was this message not strong
enough without mentioning China in name?
ANSWER: The Trump Administration must speak to multiple audiences. The U.S.
National Security Strategy and National Defense Strategy elevate inter-state
competition as the main threat to the United States. China and Russia are identified
as the major threats. China is accused of using intimidation, coercion and predatory
economic policy. This message is designed for China, Russia and U.S. allies and
strategic partners.
Secretary Pompeo muted his comments and did not mention China directly because
he was addressing a Southeast Asian audience on the eve of his trip to Malaysia,
Singapore and Indonesia. Southeast Asian countries prefer dialogue to
confrontation. Pompeo wanted to win his hosts over by supporting ASEAN centrality
at the same time as he stressed the importance of engaging with China.
Q5. Some analysts doubt if Washington’s plan will be formalized, especially with a
too big vacancy left by the US in Asia-Pacific after Trump withdrew from the Trans-
Pacific Partnership (TPP)? What do you think? What are the biggest challenges?
ANSWER: It is important to note, as Secretary Pompeo stated, “no country does
more two-way trade in the Indo-Pacific than the United States. In Southeast Asia, the
U.S. is the single largest source of cumulative foreign investment – larger than China,
Japan and the European Union.” The U.S. Overseas Private Investment Corporation
has a portfolio of $3.9 billion invested in the Indo-Pacific. The U.S. Millennium
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Challenge Corporation has provides $2.1 billion in funding to promote development


and governance since 2004.
The IPEV should not be confused with the TPP. The IPEV is focused on targeted
investment to assist future economic development. The TPP is a multilateral free
trade agreement. Eleven members of the original TPP have moved on and
renegotiated a new agreement. The United States will continue to trade with
regional states on a bilateral basis and negotiate or renegotiate free trade
agreements as appropriate.
Secretary Pompeo stated that the $113 million provided to kick-start the IPEV was a
down payment. Although it is a small amount, it signals that the Trump
Administration is now developing economic policies to underscore the U.S.
commitment to remain engaged in the Indo-Pacific.
Q6. The plan highlights regional multilateral institutions like ASEAN, despite Trump
administration has shown that they prefer bilateral mechanism. What do you think
about the role that ASEAN will play in implementing this plan?
ANSWER: President Trump prefers a bilateral approach to trade but he and his
Cabinet secretaries have repeatedly stated their support for ASEAN and its centrality
in regional affairs. Endorsement for ASEAN and ASEAN-centrality may also be found
in the U.S. National Security Strategy. The U.S. has also signalled that it will rely on
the World Bank and Asian Development Bank for funding.
ASEAN and the United States have a strategic partnership that will incorporate the
IPEV into their plan of action. The IPEV is focused on foundational or new initiatives
for the future – digital economy, energy and infrastructure.
The key here is quality of investment rather than quantity. The proof of whether
China or the United States is successful will rest on sustainable development in the
target countries.

Suggested citation: Carlyle A. Thayer, “United States: Secretary Pompeo’s Indo-


Pacific Economic Vision - 2,” Thayer Consultancy Background Report, August 5, 2018.
All background briefs are posted on Scribd.com (search for Thayer). To remove
yourself from the mailing list type, UNSUBSCRIBE in the Subject heading and hit the
Reply key.

Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.

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