ASEAN Beat | Diplomacy | Economy | Southeast Asia

Australia, the US, and the Race for ASEAN’s Infrastructure

Australia and the U.S. are both providing infrastructure investments in ASEAN, sometimes in direct competition with each other.

By Muhammad Zulfikar Rakhmat and Ahmad Turdmuzi for
Australia, the US, and the Race for ASEAN’s Infrastructure

Leaders wave during the ASEAN-Australia Special Summit in 2018.

Credit: Australian Government

The United States and Australia are two countries that share a close cooperative relationship with ASEAN, especially in the infrastructure sector. However, this cooperation has not been carried out together; both the United States and Australia have separate infrastructure cooperation initiatives with ASEAN. Australia’s and the United States’ separate infrastructure investments in ASEAN indicate the existence of some competition between the two countries in this regard.

Infrastructure cooperation between the United States and ASEAN has been going on since the cooperative relationship between Washington and ASEAN began in 1977. ASEAN’s economic development and high growth have made the region a major market for U.S. exports and investments. ASEAN has even become the number one investment destination for the United States in the Indo-Pacific.

In the field of infrastructure, the United States has implemented several programs within ASEAN, including the Infrastructure Transaction and Assistance Network (ITAN), the U.S.-ASEAN ITAN Transaction Advisory Fund, and the Smart Cities Partnership (USASCP).

ITAN is an infrastructure development assistance projects undertaken by the United States Agency for International Development (USAID) in Indo-Pacific countries. The stated purpose of this project is to ensure peace and stability and increase prosperity in the region. ASEAN countries that have felt the impact of ITAN include the Philippines and Vietnam, through the implementation of the Power Development Plan to help modernize their electricity networks and diversify energy sources.

In the Philippines, ITAN’s efforts have proven to have a good impact on the country’s infrastructure development. This is evidenced by the period between 2012 and 2017, during which time ITAN was able to reduce transportation and logistics costs and increase industrial competitiveness in the Philippines. This resulted in about $5 billion worth of new investment in road infrastructure, electricity, and business development in the country.

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In order to support ITAN projects, USAID has also created another project, the ITAN Transaction Advisory Fund, which was first promoted in July 2018. This program aims to provide assistance to countries that rely on ITAN by providing the legal access and technical assistance needed to ensure infrastructure development that is sustainable, transparent, and of high quality. This was done in a number of ways, including providing consulting services to help increase the capacity of partner countries in evaluating contracts and assessing the financial and environmental impacts of potential infrastructure projects. This project will be announced specifically at the end of 2019.

Moreover, USASCP is a collaboration carried out by the United States and ASEAN with the aim of building smart cities that use data-based technology to innovate and manage city resources. The United States and ASEAN held the inaugural USASCP meeting in July 2019, which was attended by representatives from 26 pioneering cities in the ASEAN Smart Cities Network. During the meeting, USASCP exchanged ideas with public and private sector smart city experts and explored U.S. commercial solutions to smart city challenges. The United States’ initial commitment for this partnership was $10 million.

In the midst of these investments from the United States, Australia also came to  the forefront of ASEAN infrastructure. Then-Australian Prime Minister Malcolm Turnbull, when speaking at the 2018 ASEAN-Australia Special Summit, said that Australia has been investing in infrastructure in ASEAN and committed Canberra to do more, given the fact that ASEAN is in need of AU$4.2 trillion for infrastructure development in the next two decades. Necessary investments include the construction of bridges, overpasses, ports, and railroads.

Until now several Australian companies have engaged in infrastructure in various countries in ASEAN. These companies’ expertise and experience in managing engineering projects, including those related to mining operations, have encouraged them to expand at the international level.

One example is Leighton Asia, which is a subsidiary of the CIMIC Group company. The company has projects in various countries in ASEAN, including Indonesia, Malaysia, the Philippines, Singapore, and Thailand. In Indonesia alone, the company is involved in a $6.8 million infrastructure project for the Vale (Brazil) mining company. In the Philippines, the company is part of a $201 million rail construction project for the Manila North Tollways Corporation. In addition, Leighton Asia is also involved in two civil engineering projects for the Land Transport Authority in Singapore.

Another crucial Australian company is Aurecon Group, which has offices in Indonesia, the Philippines, Singapore, Thailand, and Vietnam. The company has several projects in several ASEAN countries, including a port development project in Indonesia, the development of hydropower projects for Nam Theun Iidi in Laos, and the development of port facilities in Myanmar in collaboration with the U.K.-owned Halcrow Group. In addition, the company is also involved in several high-rise infrastructure projects in the Philippines, Thailand, and Singapore.

In addition to operating many of its companies in ASEAN countries, Australia, like the United States, also cooperates with ASEAN in building smart cities. The ASEAN-Australian Smart Cities were initiated by Australia after the 2018 ASEAN-Australia Special Summit. In order to realize this, Australia offered funds of AU$30 million (roughly US$20 million) as an initial investment in smart city execution.

Although not clearly visible, competition between the United States and Australia in infrastructure cooperation in ASEAN exists. This can be seen from one form of infrastructure cooperation that focuses on the same goal: the development of ASEAN smart cities. As outlined above, the United States and ASEAN have collaborations that focus in this field through the US-ASEAN Smart Cities Partnership (USASCP), which aims to build smart cities that use data-based technology to innovate and manage city ​​resources. Meanwhile Australia and ASEAN also collaborate in the sector, as the ASEAN-Australian Smart Cities project aims to create a city worthy of living for both regions.

Australia, which is regionally closer to ASEAN, was the first to start cooperation in the field of smart cities after the July 2018 ASEAN-Australia Special Summit in Sydney. Meanwhile the United States and ASEAN started the USASCP in July 2019 with $10 million in U.S. funding. When measured in material terms, for now Australia’s AU$30 million commitment in establishing cooperation in the field of smart cities with ASEAN is greater than that of the United States.

Looking into the future, it is difficult to predict how the competition dynamic will develop. It is possible that Australia and the United States will continue to compete with one another in ASEAN. However, with the increased implementation of China’s Belt and Road Initiative (BRI) in several ASEAN countries, it is also possible that the U.S. and Australia, given their alliance, will cooperate with each other to compete with Beijing. This, however, remains to be seen. What can be expected for now is that the infrastructure investments in ASEAN from the U.S., Australia, and China will increase in the coming years.

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Muhammad Zulfikar Rakhmat and Ahmad Turdmuzi are analysts of ASEAN affairs.