More tariffs on Vietnam would be great news for China

There is a clear consensus with regard to the fact that Vietnam has been one of the economic success stories of recent years.

The country has witnessed robust economic growth (GDP growth rate for 2018 was estimated at 7.15%, while the growth rate for 2019 is estimated at 6.6%) and has been successful in poverty reduction. Foreign Direct Investment (FDI) for the first five months of 2019 reached a four year high of over $16 billion (a year on year increase of over 69%).

If one were to look at a sectoral break up of the FDI, manufacturing and processing came right on top, receiving over $10 billion.

US appreciation for Vietnam’s economic achievements

US President Donald Trump, who recently imposed tariffs on steel imported from Vietnam, stated at the APEC CEO Summit in 2017 that:

Today, an opening Vietnamese economy is one of the fastest-growing economies on Earth. It has already increased more than 30 times over, and the Vietnamese students rank among the best students in the world.

In 2019, on the sidelines of his Summit with North Korean leader Kim Jong Un, the US President, while acknowledging Vietnam’s progress, stated that North Korea could emerge as another Vietnam if it denuclearized.

US Secretary of State Mike Pompeo had made a similar point while addressing a meeting of the US-Vietnamese business community in 2018.

Increasing FDI and factors which have contributed to it

It would be important to point out that FDI in Vietnam is also not restricted to any one particular region or city. While Hanoi (the Vietnamese capital), which drew well over $2.7 billion, and Bin Doung province in South Vietnam, are on top, North Vietnam too, is managing to draw significant investments. The shipping hub of Haiphong has witnessed significant economic growth since, after the imposition of US tariffs, a number of Chinese companies have shifted to the Shenzhen-Haiphong Economic and Trade Cooperation Zone.

Economic reforms (dubbed as Doi Moi) which began in 1986 have played a crucial role in Vietnam’s economic success. The main advantages which Vietnam has over its competitors are relatively low labor costs (though the country has witnessed a significant year on year growth in minimum wages between 2015 and 2019), increasing consumption as the result of a burgeoning middle class (currently 13% of its total population; it is estimated, by the World Bank, that in 2026 over one quarter of Vietnam’s population will be part of the middle class), and its geographical location.

Vietnam a beneficiary of the US-China Trade war and the CPTPP

Vietnam has benefited significantly from the US-China Trade war. A number of companies have shifted manufacturing operations from China to Vietnam, and others like Apple (which plans to shift anywhere between 15% and 30% of it’s iPhone production), Microsoft, Amazon, Sony, Nintendo, and Dell are likely to shift in a big way to Vietnam.

The Southeast Asian country is also gaining significantly by being part of the CPTPP. Exports to both Japan and Canada have risen significantly in the first quarter of 2019, if one were to look at the year on year figures.

US-Vietnam ties

In the past two decades ties between the US and Vietnam have improved significantly. The foundations were laid by Bill Clinton; during his first tenure, the Vietnam Foreign Ministry opened its office in Washington DC (1993), and the US State Department opened its office in Hanoi in the same year. Similarly, the US lifted its trade embargo on Vietnam in 1994. Vietnam also figured importantly in Obama’s ‘Pivot to Asia’ and was part of the Trans Pacific Partnership (TPP) that the US abandoned.

US President Donald Trump has given mixed signals on Vietnam. Trump has, though, referred to the geopolitical relevance of Vietnam, and it is for this reason that the US President articulated his vision for a free and open Indo-Pacific in Vietnam in 2017 (while speaking at the APEC CEO Summit at Da Nang).

In March 2018, U.S. Navy aircraft carrier USS Carl Vinson visited the port city of Da Nang for the first time since the end of the Vietnam war in 1975. Former Defence Secretary Jim Mattis visited Vietnam twice in 2018, and reiterated on both visits the increasing relevance of the Washington-Hanoi relationship.

The fact that the US President chose Hanoi for his 2nd summit with North Korean leader Kim Jong Un was significant not just in terms of symbolism, but also in sending a message that the Southeast Asian country was strategically relevant. During his visit in 2019, Trump of course praised Vietnam for its economic success, but a number of trade deals (Boeing inked a deal of over $12 billion to sell 100 planes to Vietnamese budget carrier, Viet Jet, for example) were also arranged.

Imposition of Trade Tariffs

As a result of trade wars, Vietnam’s exports to US have also witnessed a sudden rise. Exports for the period January-June 2019 rose 27.4% year on year. The US trade deficit with Vietnam for the first six months was estimated at $25.3 billion (in 2018, this was $40 billion).

US has recently imposed tariffs of 456% on certain steel products which were imported from Vietnam. According to the US Commerce Department, certain corrosion resistant steel products and cold-rolled steel which were supposed to be manufactured in Vietnam actually underwent only minor processing in the Southeast Asian country, but used substrate of Taiwanese and South Korean origin (duties on these South Korean and Taiwanese products had been imposed in 2015 and 2016 respectively).

Imposition of tariffs by the US is not likely to end here. There are strong indicators that the US could impose further tariffs on Vietnam, citing the reason that a number of Chinese goods are rebranded there to avoid tariffs (this is dubbed as transshipment). Trump had made some harsh remarks, including in an interview with Fox News:

Vietnam is almost the single worst — that’s much smaller than China, much — but it’s almost the single worst abuser of everybody.

It remains to be seen as to what impact the imposition of tariffs will have not just on Vietnam’s economy (the increase in bilateral trade and exports), but also on the bilateral relationship which has witnessed significant improvement due to the efforts of successive US Presidents. Vietnam’s growth and prosperity is also important from a strategic perspective, as it is one of the countries which has been strengthening defense ties with the US, Japan, and India. While Vietnam does have robust economic ties with China, it also has serious differences over the South China Sea (only recently, tensions between both countries had escalated when a Chinese survey ship and coastguard vessels had entered disputed waters near the Spratly Islands).

Conclusion

Vietnam provides a good lesson for many other countries. It has stuck to the basics, and so far has been very astute in balancing out economic relationships between China and other countries. Vietnam’s real test lies in how it deals with Trump’s unpredictability, and deals with the turbulence resulting out of Trump’s brash decisions. If the US President actually slaps more tariffs on Vietnam, not only will it have an adverse impact on bilateral ties and undo all the good work of previous US and Vietnamese administrations, but fissures between Hanoi and Washington will also have an adverse impact on efforts towards promoting a Free and Open Indo Pacific. On the other hand, Beijing, the biggest loser of the China-US trade war, would certainly not mind tensions between Washington and Hanoi (which has been a big beneficiary of the trade war).

The nature of the China-US-Vietnam economic triangle

While addressing a joint press conference in Hanoi, after his summit with North Korean Leader Kim Jong Un, US President Donald Trump spoke not just about the Summit, but also the current state of US-China relations. Trump criticised his predecessors for not doing enough to address the trade imbalance with China, while also making the point that he was all for China’s economic progress and growth, but not at the cost of the US.

If one were to look beyond the Summit in terms of the US-Vietnam economic relations, top US companies – Boeing and General Electric – sealed some important deals.

Given the focus of Trump’s visit (which was the Summit with Kim), perhaps these deals did not draw the attention they ought to have. The fact is that the US has begun to recognise Vietnam’s economic potential, as well as its geopolitical significance in Asia. This long note will give a backgrounder to Vietnam’s economic growth story in recent years, highlight some of it’s key strategic relationships, and then examine the nature of the China-US-Vietnam economic triangle.

Vietnam’s growth story: The key reasons Continue reading

How the United States can woo Africa away from China

On December 13, 2018, US National Security Advisor John Bolton, while speaking at the Heritage Foundation, highlighted the key aims and objectives of ‘Prosper Africa,’ which shall probably be announced at a later date. The emphasis of this policy, according to Bolton, would be on countering China’s exploitative economics unleashed by the Belt and Road Initiative, which leads to accumulation of massive debts and has been dubbed as ‘Debt Trap Diplomacy’. A report published by the Centre for Global Development (CGD) (2018) examined this phenomenon while looking at instances from Asia as well as Africa.

During the course of his speech, Bolton launched a scathing attack on China for its approach towards Africa. Said the American NSA:

bribes, opaque agreements and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands.

Bolton, apart from attacking China, accused Russia of trying to buy votes at the United Nations through the sale of arms and energy.

Bolton also alluded to the need for US financial assistance to Africa being more efficient, so as to ensure effective utilization of American tax payer money.

The BUILD

It would be pertinent to point out that the Trump administration, while realizing increasing Chinese influence in Africa, set up the US IDFC (International Development Finance Corporation), which will facilitate US financing for infrastructural projects in emerging market economies (with an emphasis on Africa). IDFC has been allocated a substantial budget — $60 billion. In October 2018, Trump had signed the BUILD (Better Utilization of Investments Leading to Development) because he, along with many members of the administration, felt that the OPIC (Overseas Private Investment Corporation) was not working effectively and had failed to further US economic and strategic interests. Here it would be pertinent to mention that a number of US policy makers, as well as members of the strategic community, had been arguing for a fresh US policy towards Africa.

Two key features of IDFC which distinguish it from OPIC are, firstly, deals and loans can be provided in the local currency so as to defend investors from currency exchange risk. Second, investments in infrastructure projects in emerging markets can be made in debt and equity.

There is absolutely no doubt that some African countries have very high debts. Members of the Trump administration, including Former Secretary of State Rex Tillerson, had also raised the red flag with regard to the pitfalls of China’s unsustainable economic policies and the ‘Debt Trap’.

According to Jubilee Debt Campaign, the total debt of Africa is well over $400 billion. Nearly 20 percent of external debt is owed to China. Three countries which face a serious threat of debt distress are Zambia, Republic of Congo, and Djibouti. The CGD report had also flagged the precarious economic situation of certain African countries such as Djibouti and Ethiopia.

US policy makers need to keep in mind a few points:

Firstly, Beijing has also made efforts to send out a message that BRI is not exploitative in nature, and that China was willing to address the concerns of African countries. Chinese President Xi Jinping, while delivering his key note address at the China-Africa Summit in September 2018, laid emphasis on the need for projects being beneficial for both sides, and expressed his country’s openness to course correction where necessary. While committing $60 billion assistance for Africa, the Chinese President laid emphasis on the need for a ‘win-win’ for both sides.

African countries themselves have not taken kindly to US references to debt caused as a result of China. While Bolton stated that Zambia’s debt is to the tune of $6 billion, an aide to the Zambian President contradicted the US NSA, stating that Zambia’s debt was a little over $3 billion.

At the China Zhejiang-Ethiopia Trade and Investment Symposium held in November 2018, Ethiopian State Minister of Foreign Affairs Aklilu Hailemichae made the point that Chinese investments in Ethiopia have helped in creating jobs and that the relationship between China and Ethiopia has been based on ‘mutual respect’. The Minister also expressed the view that Ethiopia would also benefit from the Belt and Road Initiative.

During the course of the Forum of China-Africa cooperation in September 2018, South African President Cyril Ramaphosa had also disagreed with the assertion that China was indulging in predatory economics and this was leading to a ‘New Colonialism,’ as had been argued Malaysian Prime Minister Mahathir Mohammad during his visit to China in August 2018.

Washington DC needs to understand the fact that Beijing will always have an advantage given the fact that there are no strings attached to it’s financial assistance. To overcome this, it needs to have a cohesive strategy, and play to its strengths. Significantly, the US was ahead of China in terms of FDI in Africa in 2017 (US was invested in 130 projects as of 2017, while China was invested in 54 projects). Apart from this, Africa has also benefited from the AGOA program (Africa Growth and Opportunity Act), which grants 40 African countries duty free access to over 6000 products.

Yet, under Trump, the US adopts a transactionalist approach even towards serious foreign policy issues (the latest example being the decision to withdraw US troops from Syria) and there is no continuity and consistency.

US can explore joint partnership with allies

In such a situation, it would be tough to counter China, unless it joins hands with Japan, which has also managed to make impressive inroads into Africa, in terms of investments, and has also been providing financial assistance, though it is more cautious than China and has been closely watching the region’s increasing debts. Japan and India are already seeking to work jointly for promoting growth and connectivity in Africa through the Africa-Asia Growth Corridor. The US is working with Japan and India for promoting a free and open Indo-Pacific, and can work with both countries for bolstering the ‘Prosper Africa’ project.

Perhaps, Trump should pay heed to Defence Secretary Jim Mattis’ (who will be quitting in February 2019) advice where he has spoken about the relevance of US alliances for promoting its own strategic interests.

There are of course those who argue that US should find common ground with China for the development of Africa, and not adopt a ‘zero-sum’ approach. In the past both sides have sought to work jointly.

Conclusion

African countries will ultimately see their own interests, mere criticism of China’s economic policies, and the BRI project, and indirectly questioning the judgment of African countries, does not make for strategic thinking on the part of the US. The key is to provide a feasible alternative to China, along with other US allies, or to find common ground with Beijing. Expecting nuance and a long term vision from the Trump Administration, however, is a tall order.

Tokyo’s holistic approach to Africa needs to be applauded

A Ministerial meeting attended by representatives from 52 African nations was held ahead of the 7th Tokyo International Conference for African Development (TICAD) to be held in Yokohama in August 2019.

TICAD (which is co-hosted by the Government of Japan, The UNDP, World Bank Group and African Union Commission) was launched over two decades ago, in 1993, with the main objective being to bring back global interest in Africa (a number of key geopolitical developments, such as the end of the Cold War, had resulted in the global community shifting its focus away from Africa).

In the past two decades, TICAD forum has played a key role in Africa’s development. In recent years, the government of Japan has contributed to Africa’s development in a number of important areas. In the phase between 2008-2013, for example, the Government of Japan built a number of elementary and middle schools, upgraded healthcare and medical facilities, and also provided drinking water to rural villages.

During the last TICAD event, in 2016, held at Nairobi (Kenya), Japanese PM Shinzo Abe had committed $30 billion in assistance over a period of three years for key areas such as infrastructure and health care.

Beijing would be closely observing the recent meeting for a number of reasons. Continue reading

The EU’s laudable Asia Connectivity Strategy

The European Union (EU) has put forward a plan for enhancing connectivity within Asia, and has been dubbed as the Asia Connectivity Strategy.

The EU does not want to give an impression that the Asia Connectivity Strategy (ACS) is a counter to the Belt and Road Initiative (BRI). Yet, senior officials of the EU, while commenting on the broad aims and objectives of the project, have categorically stated that the primary goal of the Asia Connectivity Strategy is enhancing connectivity (physical and digital) while also ensuring that local communities benefit from such a project, and that environmental and social norms are not flouted (this is a clear allusion to the shortcomings of the BRI). There are no clear details with regard to the budget, and other modalities of the project (EU member countries are likely to give a go ahead for this project, before the Asia-Europe Meeting in October 2018). The EU has categorically stated that it would like to ensure that the ACS is economically sustainable.

Other alternatives to BRI: the US

It is not just the EU, but also the US, along with Japan and Australia, which are trying to create an alternative vision to the BRI.

Continue reading

China and the liberal vision of the Indo-Pacific

Mike Pompeo’s recent speech (titled ‘America’s Indo-Pacific Economic Vision’) at the Indo-Pacific Business Forum hosted by the US Chamber of Commerce in Washington, DC, has been carefully observed across Asia. Beijing has understandably paid close special attention to it. Pompeo emphasized the need for greater connectivity within the Indo-Pacific, while also highlighting the role which the US was likely to play (including financial investments to the tune of $113 million in areas like infrastructure, energy, and digital economy). The US Secretary of State, while stating that this vision was not targeted at anyone, did make references to China’s hegemonic tendencies, as well as the lacunae of Chinese connectivity projects (especially the economic dimension).

The Chinese reaction to Pompeo’s speech was interesting. Senior Chinese government officials were initially dismissive of the speech, saying that such ideas have been spoken in the past, but produced no tangible results.

A response article in the Global Times is significant here. Titled ‘Indo-Pacific strategy more a geopolitical military alliance’ and published in the communist state’s premier English-language mouthpiece, what emerges clearly from this article is that Beijing is not taking the ‘Indo-Pacific vision’ lightly, and neither does it rule out the possibility of collaboration. The article is unequivocal, though, in expressing its skepticism with regard to the geopolitical aspect of the Indo-Pacific vision. Argues the article:

[…] the geopolitical connotation of the strategy may lead to regional tensions and conflicts and thus put countries in the region on alert.

The piece is optimistic with regard to the geo-economic dimension, saying that American investment would be beneficial and would promote economic growth and prosperity. What must be noted is that while the US vision for an ‘Indo-Pacific’ has been put forward as a counter to the Belt and Road Initiative (BRI) of China, the article also spoke about the possible complementarities between the US vision for an ‘Indo-Pacific’ and China’s version of BRI. While Pompeo had spoken about a crucial role for US private companies in his speech, the article clearly bats in favor of cooperation between the Indian, Japanese, Chinese, and US governments, rather than just private companies. This is interesting, given the fact that China had gone to the extent of dubbing the Indo-Pacific vision as “the foam on the sea […] that gets attention but will soon dissipate.”

While there is absolutely no doubt that there is immense scope for synergies between the Indo-Pacific vision and BRI, especially in the economic sphere, China’s recent openness towards the Indo-Pacific vision needs to be viewed in the following context.

First, the growing resentment against the economic implications of some BRI projects. In South Asia, Sri Lanka is a classical example of China’s debt trap diplomacy, where Beijing provides loans at high interest rates (China has taken over the strategic Hambantota Project, since Sri Lanka has been unable to pay Beijing the whopping $13 billion). Even in the ASEAN grouping, countries are beginning to question the feasibility of BRI projects. Malaysia, which shares close economic ties with Beijing, is reviewing certain Chinese projects (this was one of the first steps undertaken by Mahathir Mohammad after taking over the reigns as Prime Minister of Malaysia).

Secondly, the Indo-Pacific vision has long been dubbed as a mere ‘expression’ that lacks gravitas in the economic context (and even now $113 million is not sufficient). Developments over recent months, including the recent speech by Pompeo, indicate that the American Department of State seems to be keen to dispel this notion that the Indo-Pacific narrative is bereft of substance. Here it would be pertinent to point out that Pompeo’s speech was followed by an Asia visit to Indonesia, Malaysia, and Singapore.

The US needs to walk the course and, apart from investing, it needs to think of involving more countries, including Taiwan and more South Asian countries like Sri Lanka and Bangladesh in the Indo-Pacific partnership.

The Indo-Pacific also speaks in favor of democracy as well as greater integration, but countries are becoming more inward-looking, and their stands on democracy and human rights are more ambiguous than in the past. Japan is trying to change its attitude towards immigration, and is at the forefront of promoting integration and connectivity within the Indo-Pacific. Neither the US, nor India, Japan, or Australia have criticized China for its human rights violations against the Uighur minority in Xinjiang province.

Here it would also be important to state that there is scope for China to be part of the Indo-Pacific, but it needs to look at certain projects beyond the rubric of the BRI. A perfect instance is the Bangladesh, China, India, Myanmar (BCIM) Corridor, which India was willing to join, but China now considers this project as a part of BRI.

In conclusion, Beijing can not be excluded from the ‘Indo-Pacific’ narrative, but it cannot expect to be part of the same, on its own terms. It is also important for countries like the United States and India to speak up more forcefully on key issues pertaining to freedom of speech and diversity (and ensure that these remain robust in their own respective countries), given that one of the objectives of the Indo-Pacific vision is a ‘Free and Open Indo-Pacific’.

Finally, the US is getting serious about the Indo-Pacific

China has not been particularly comfortable with the Trump Administration’s repeated use of the term ‘Indo-Pacific’ instead of ‘Asia-Pacific’ (of late, it has been quite scathing in it’s criticism). The term ‘Indo-Pacific’, which has been used for a few years, has now gained more attention after a few developments:

First, during Trump’s Asia visit in 2017, in which he visited Japan, Vietnam, and attended the ASEAN Summit, he used this term on more than one occasion.

Before his India visit in October 2017, former Secretary of State Rex Tillerson articulated a vision for a ‘Free and Fair Indo-Pacific’. Tillerson, while pitching for a greater role for India in the Indo-Pacific, also highlighted the need for preventing illiberal multilateralism. Said the former US Secretary of State:

We need to collaborate with India to ensure that the Indo-Pacific is increasingly a place of peace, stability, and growing prosperity — so that it does not become a region of disorder, conflict, and predatory economics.

The use of the term ‘Indo-Pacific’ was followed by the revival of the Quad Grouping (India, Australia, US, Japan). Senior officials of these four countries met on the eve of the East Asia Summit, held in Manila, and discussed ways to strengthen cooperation for promotion of a ‘Free and Fair Indo-Pacific’.

There have been a number of meetings between representatives of Japan, the US, and India to discuss a wide range of issues such as maritime cooperation, connectivity, and strengthening collaboration between these countries

China’s criticism of Indo-Pacific and Quad

China dismissed the Indo-Pacific as an ‘attention grabbing idea’, while the Quad too has been criticized by Beijing. Foreign Minister Wang Yi, while commenting on the Quad, likened the Quad to ‘foam on the sea’ that ‘will soon dissipate’ once the attention due to headlines turns elsewhere.

The Indo-Pacific narrative did lack a vision

One issue on which it is hard to disagree with Beijing, and those skeptical about the ‘Indo-Pacific’, is the fact that countries who have joined hands for promoting a Free and Fair Indo-Pacific (as a sort of counter narrative to China’s Belt and Road Initiative), did not have clarity in terms of enhancing connectivity and economic linkages. They have met on a number of occasions to discuss connectivity projects and a myriad of other issues but nothing substantial has emerged so far. This lack of effort, according to many, has been one of the main reasons for the Indo-Pacific narrative not being taken seriously (even by US allies). The other problem, of course, has been the Trump administration’s differences with allies like Japan and South Korea on economic and geopolitical issues.

US rolls out an economic vision for the Indo-Pacific

At the Indo-Pacific Business Forum, organized by the US Chamber of Commerce, Secretary of State Mike Pompeo articulated a broader economic vision for the Indo-Pacific, while also speaking about the likely role of the US in promoting cooperation.

First, Pompeo yet again reiterated the US desire for a Free and Open Indo Pacific, and how the US was fervently opposed to the hegemonic tendencies of certain countries (in a clear reference to China).

Second, at a time when a number of countries, such as Malaysia and Sri Lanka, are beginning to question the financial feasibility of China’s Belt and Road Initiative-related projects, Pompeo’s words are significant. It may also be pointed out that his address at the US Chamber of Commerce was made days before he began his Asia trip (which included visits to Malaysia, Indonesia, and Singapore).

Third, Pompeo spoke about the $113 million investment in areas such as digital economy, energy, and infrastructure. Pompeo dubbed this investment as a ‘…down payment on a new era in US economic commitment to peace and prosperity in the Indo-Pacific region’.

Fourth, the US Secretary of State also spoke about the potential role of the US private sector in promoting economic growth, prosperity, and cooperation in the Indo-Pacific. In an interview with CNBC, Pompeo stated:

We want private industry with the assistance of the United States government, understanding that we’re going to support this effort, we’re going to have private industry go in and develop relationships. When American businesses come to these countries, they’ll thrive

China’s reaction to Pompeo’s speech

China was dismissive of the US commitment towards Indo-Pacific, and Chinese foreign ministry spokesman Geng Shuang stated that even in the past, there has been talk of cooperation between Japan, the US, and Australia working jointly for developing infrastructure, but so far not much has been achieved.

While there is absolutely no doubt that an alternative narrative is needed to China, the US also needs to be more predictable in terms of economic and strategic relations with key players in the Indo-Pacific. One of Washington’s closest allies in the past, Japan, has been extremely uncomfortable with not just the tariffs, but also on Trump’s handling of strategic issues (such as the North Korea issue).

The example of Indian and Japanese Companies in South Asia

If differences can be ironed out, there is clear space for companies of different countries to work together in the Indo-Pacific. India and Japan have already taken the lead in Sri Lanka and Bangladesh (two countries likely to play an important role in the Indo-Pacific). In Bangladesh, Marubeni and Larsen and Toubro shall work jointly for supplying electrical and mechanical railway systems for Phase 6 of the Dhaka Mass Rapid Transport. In Sri Lanka, Petronet, along with Japanese companies, is setting up an LNG terminal near Colombo (L&T has already been working with Marubeni for setting up a 400 MW gas plant in Habibgant district, Bangladesh). Petronet will hold 47.5 per cent stake in the project while Japan’s Mitsubishi and Sojitz Corp will take 37.5 per cent stake, while the remaining 15 percent stake will be held by a Sri Lankan company.

Conclusion

Pompeo’s emphasis – on the need for greater transparency in investments, US support for areas such as technology in the Indo-Pacific, and a more pro-active role for the private sector in the Indo-Pacific – all make sense. A lot will depend upon Donald Trump’s approach on critical geopolitical and economic issues, and whether he is able to take along key allies such as Japan. A lot will also depend upon relations of countries, especially Japan and India, with China. In recent months, Japan and India have been trying to recalibrate economic ties with Beijing (a number of Japanese companies are in fact participating in the BRI). While this in no way implies that the narrative of the Indo-Pacific will lose its relevance, it does remain to be seen whether Japan and India would put it on high priority.

Pompeo’s speech is interesting, and it remains to be seen how companies from other countries react and whether they explore the possibility of investing in big ticket connectivity projects.