South Korea in the New Geoeconomics: Infrastructure and Development Finance

Date:

South Korea in the New Geoeconomics: Infrastructure and Development Finance

  • News by AUN News correspondent
  • AUN News – ISSN: 2949-8090

Summary:

The Center for East Asia Policy Studies at the Brookings Institution hosted the third and final workshop on March 23, 2022. The workshop’s focus was on infrastructure, financing for development, and the provision of local public goods. Experts from South Korea and the United States provided analysis. Digital is a priority in infrastructure development, and projects must be accountable and transparent. South Korea and the US may start a new project to close Asia’s infrastructure deficit.

A multilateral effort would enable the U.S. and others to counter China’s offerings more effectively. Whether it would be best for U.S.-ROK collaboration in development financing to be directed through current institutions or a recently launched initiative came up frequently in the group discussion. There seems to be a desire for the G7 GPII effort to provide China with rival financing for infrastructure and development.

To evaluate South Korea’s role in the new geoeconomics and its implications for U.S.-Korea ties and South Korea’s economic diplomacy in Asia, the Center for East Asia Policy Studies at the Brookings Institution hosted the third and final workshop in a series on March 23, 2022. The workshop’s focus was on infrastructure, financing for development, and the provision of local public goods.

Two experts made opening remarks for the workshop and presented analysis from the perspectives of South Korea and the United States. Practical help requires adherence to the five principles of the Paris Declaration: ownership, alignment, harmonisation, management for results, and reciprocal accountability, said Dr Taekyoon Kim, associate dean for public affairs and communication at Seoul National University. The need for improvement in one area was identified as donor harmony. Donors must exchange information, create joint agreements, and streamline processes to improve cooperation, but these behaviours currently appear to be lacking.

Kim pointed out that the Belt and Road Initiative (BRI) offered many advantages for recipient countries, including no integration of projects into local politics, no conditionality of terms, and the speed and scale of projects, in assessing China’s infrastructure and development finance engagement in the Indo-Pacific. However, a significant disadvantage of the BRI for recipient nations is the potential for debt trap situations (with Sri Lanka serving as one example). Kim argued that like-minded democracies should develop a transparent financial model for the area, allowing nations to select the donor that most closely matches their needs and beliefs.

Kim pointed out several significant flaws in how things are going now. Even though the area has many current development initiatives, the system is disjointed since different donors manage the various projects. Finding the ideal umbrella to merge these erratic bits is a task. Because South Korea currently lacks a development finance institution (DFI) through which direct coordination of financial plans might be routed, this presents a separate hurdle to bilateral U.S.-ROK cooperation. Another concern is accountability, namely developing coordination plans that offer quality control and international standards to avoid issues with debt and corruption. It should be thought about using the sectoral comparative advantages of different donor countries. Kim proposed incorporating South Korea’s ICT know-how into a comprehensive programme that includes funding from American and other Asian contributors. It remains to be seen if ROK participation with the Quad can accomplish this.

Dr George Ingram, the senior fellow with the Center for Sustainable Development at Brookings, began his remarks by highlighting two key similarities between the recently released Indo-Pacific strategy by the Biden administration and the recent G7 Global Partnership for Infrastructure and Investment: digital is a priority in infrastructure development, and infrastructure projects must be accountable and transparent. He noted that the successful adoption of remote work by employees and the shift to digital operations by governments and businesses are examples of how the COVID-19 pandemic has hastened the fourth industrial revolution (rapid changes in the integration of technology in all aspects of life). However, those who lack the necessary digital skills are falling behind. This is especially true for most Southeast Asia, where just 40–50% of the population has access to the internet in some nations.

Various analogue problems must be resolved to turn the region’s analogue infrastructure into a digital one. This involves safeguarding data privacy and the freedom of data flows, defending users from exploitation by governments and social media, and developing efficient policies that address interoperability, competition, inclusiveness, and cybersecurity. Promoting digital literacy will also help keep user prices low. With their shared vision for digital transformation, South Korea and the US may start a new project to close Asia’s infrastructure deficit. According to Ingram, a new U.S.-ROK cooperative effort might learn a lot from the Power Africa programme, which brings together twelve U.S. development agencies with USAID taking the lead and has used more than 100 public-private partnership agreements to raise money and power resources. Furthermore, a multilateral effort would enable the United States and others to counter China’s offerings more effectively. However, finding political support for such initiatives is difficult, particularly in the US, where Congress and bureaucracy pose considerable obstacles to donor coordination.

Whether it would be best for U.S.-ROK collaboration in development financing to be directed through current institutions or a recently launched initiative came up frequently in the group discussion. Given its emphasis on quality and accountability, the Blue Dot Network may be one framework under which collaboration might occur. South Korea may be able to benefit from technology cooperation, given its strength in ICT. On the other hand, if the threshold is set too high, these requirements could prevent widespread involvement, and it’s not sure whether Seoul is interested in the network. There seems to be a desire for the G7 GPII effort to provide China with rival financing for infrastructure and development. Still, as one participant pointed out, there was no efficient coordination system at the time of the workshop. Working groups under the Quad, the ASEAN-led Indo-Pacific Economic Framework, alternative fora and existing institutions were all considered possible channels for cooperation.

Participants disagreed on whether donor coordination issues or a lack of resource commitments represented the most significant barrier to cooperation. One participant disagreed, arguing that a lack of coordination, especially financial mismanagement, leads to resource commitment. Another attendee commented on the importance of DFIs in this regard, saying that as many DFIs rely more on private than on governmental funding, there may be room for cooperation in this area. As Asia has the largest potential market for DFI pledges and private donor funds, developing a legitimate DFI in South Korea may increase the chances for diplomatic involvement in the region. Another attendee asserted that no single DFI could compete with China’s BRI and that group attempts by a few DFIs typically result in a protracted and expensive lead time to beginning any collaborative ventures. Working with a DFI also has drawbacks because it relies on private investment, which might lead to an overemphasis on profit maximisation. A participant disputed this claim by saying that DFIs are taking more risks when supporting initiatives than people might think and that such earnings might serve as the seed money for the following project.

Analysis by: Advocacy Unified Network

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