Pascha, We ne
Wo king Pape
Bel s, oads, and egions: The dynamics o Chinese
and Japanese in as uc u e connec i i y ini ia i es and
Eu ope's esponses
ADBI Wo king Pape Se ies, No. 1114
P o ided in Coope a ion wi h:
Asian De elopmen Bank Ins i u e (ADBI), Tokyo
Sugges ed Ci a ion: Pascha, We ne (2020) : Bel s, oads, and egions: The dynamics o Chinese and
Japanese in as uc u e connec i i y ini ia i es and Eu ope's esponses, ADBI Wo king Pape Se ies,
No. 1114, Asian De elopmen Bank Ins i u e (ADBI), Tokyo
This Ve sion is a ailable a :
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ADBI Wo king Pape Se ies
BELTS, ROADS, AND REGIONS:
THE DYNAMICS OF CHINESE AND
JAPANESE INFRASTRUCTURE
CONNECTIVITY INITIATIVES AND
EUROPE’S RESPONSES
We ne Pascha
No. 1114
Ap il 2020
Asian De elopmen Bank Ins i u e
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Sugges ed ci a ion:
Pascha, W. 2020. Bel s, Roads, and Regions: The Dynamics o Chinese and Japanese
In as uc u e Connec i i y Ini ia i es and Eu ope’s Responses. ADBI Wo king Pape 1114.
Tokyo: Asian De elopmen Bank Ins i u e. A ailable: h ps://www.adb.o g/publica ions/bel s-
oads- egions-dynamics-in as uc u e-connec i i y-ini ia i es
Please con ac he au ho s o in o ma ion abou his pape .
Email: we ne [email protected]
We ne Pascha is a p o esso o Eas Asian economic s udies a he Ins i u e o Eas Asian
S udies and Me ca o School o Managemen o he Uni e si y o Duisbu g-Essen in
Duisbu g, Ge many.
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ADBI Wo king Pape [Do no en e ] W. Pascha
Abs ac
The pape a gues ha Eas Asia is se ing he pace o he ecen end in egional and
in e - egional in eg a ion, which is associa ed wi h mul ila e al in as uc u e connec i i y
ini ia i es, like he “Bel and Road Ini ia i e” (BRI) o he People’s Republic o China and
Japan’s “Pa ne ship o Quali y In as uc u e” (PQI). A e in oducing key issues, he pape
explains he logic behind he ecen ly g own impo ance o such ini ia i es and analyzes
concep s like he BRI and PQI agains his backg ound in mo e de ail. While in as uc u e
connec i i y ini ia i es p omise o combine na ional poli ical, economic, and mul ila e al public
good aspi a ions bene icially, con lic s among hem a e also possible and e en likely. The
pape hen deals wi h Eu ope’s, and pa icula ly he EU’s, ole in his dynamism. The EU was
one o he ea ly mo e s, wi h he es ablishmen o he Eu opean In es men Bank
o ins ance, bu i s mechanisms ha e so a no become pilla s o a cohe en and o ce ul
poli ical–economic s a egy o he EU. The cu en Eu opean si ua ion is a he one o eac ing
o a dynamic ha o he coun ies elsewhe e ha e c ea ed. The pape in oduces he 2018
Join Communica ion “Connec ing Eu ope and Asia: Building Blocks o an EU S a egy” in
his con ex and inds i o be lacking in a ious ways. The pape ends wi h conclusions and
policy ecommenda ions on some o he op ions o de eloping a mo e o ce ul Eu opean
s a egy.
Keywo ds: in as uc u e in es men , connec i i y, Eas Asia, Eu ope, Eu opean Union, Bel
and Road Ini ia i e, People’s Republic o China, Japan
JEL Classi ica ion: F21, F55, H54, H87, L91, O19, O57, P45
ADBI Wo king Pape [Do no en e ] W. Pascha
Con en s
1. INTRODUCTION ......................................................................................................... 1
2. THE GROWING IMPORTANCE OF INFRASTRUCTURE CONNECTIVITY .............. 1
3. THE PRC’S INFRASTRUCTURE INITIATIVE AND JAPAN’S “PARTNERSHIP
FOR QUALITY INFRASTRUCTURE” ......................................................................... 4
3.1 PRC In as uc u e Ini ia i es: Bel and Road and Beyond .............................. 4
3.2 Japan’s “Pa ne ship o Quali y In as uc u e” in he Con ex o O he
Ini ia i es o Japan and he PRC ..................................................................... 5
4. THE EU’S ROLE IN THE NEW DYNAMICS OF INFRASTRUCTURE
CONNECTIVITY INITIATIVES .................................................................................. 11
5. CONCLUSIONS AND POLICY RECOMMENDATIONS ........................................... 14
REFERENCES ..................................................................................................................... 17

ADBI Wo king Pape [Do no en e ] W. Pascha
1
1. INTRODUCTION
In as uc u e ma e s; connec i i y ma e s. The ield is quickly de eloping in o one
o he majo in e na ional and mul ila e al policy ields, nex o in e na ional ade
and o eign di ec in es men . In as uc u e encompasses a ound 14% o he global
GDP, and i is likely o gain in impo ance o e many yea s o come (McKinsey
Global Ins i u e 2017). The O ganisa ion o Economic Co-ope a ion and De elopmen
(OECD) no ed, ocusing on anspo : “T anspo in as uc u e is c ucial o connec
de eloping coun ies and help hem o boos ade, g ow h and egional in eg a ion”
(OECD 2018, Cap ion). Beyond economics, as he People’s Republic o China (PRC)
ies o in igo a e i s pos u e in he egional and mul ila e al o de and eshape some o
i s ea u es, i has chosen connec i i y, h ough i s Bel and Road Ini ia i e (BRI) and new
mechanisms like he Asia In as uc u e and In es men Bank (AIIB), as a majo ou e o
pu sue his ambi ion.
This pape analyzes he dynamics o in as uc u e connec i i y, which ini ia i es
om Eas Asia, namely he PRC and Japan, conside ably shape. The second aim o he
pape is o s udy and e alua e how Eu ope and he EU in pa icula eac o hese
de elopmen s. The public choice iew o in e na ional poli ical economy (F ey 1984)
in o ms ou app oach. The idea is o apply he basic p emises o neo-classically inspi ed
economics o issues o in e na ional ela ions. Fo ins ance, we can unde s and he
in oduc ion o an in as uc u e ini ia i e as c ea ing a public good, as he pape will show
below.
The o ganiza ion o he pape is as ollows. The second sec ion explains he logic behind
he ecen ly g own impo ance o in as uc u e ini ia i es. The hi d sec ion analyzes
concep s like he PRC’s BRI and Japan’s Pa ne ship o Quali y In as uc u e (PQI)
agains his backg ound in mo e de ail. Sec ion ou deals wi h Eu ope’s, pa icula ly he
EU’s, ole in his dynamism. The inal sec ion, con aining conclusions and policy
ecommenda ions, discusses some o he op ions o de eloping a mo e o ce ul
Eu opean s a egy.
2. THE GROWING IMPORTANCE OF
INFRASTRUCTURE CONNECTIVITY
In as uc u e and connec i i y ha e ecei ed a conside able amoun o a en ion in
ecen yea s, bo h o economic and o poli ical easons. The li e a u e has ea ed
in as uc u e and connec i i y as closely ela ed concep s, he o me a he ocusing on
he inpu side and he la e on he ou pu side. Connec i i y (as well as in as uc u e)
in ol es di e en ypes o ne wo ks, anging om he physical domain, like anspo —
oads, ailways, sea, and ai —o ene gy, o digi al and o he in o ma ion lows, inancial
and people- o-people ne wo ks (GICA 2018). Fi s , connec i i y, pa icula ly anspo
in as uc u e, is a c ucial ac o o in e na ional ade and economic g ow h bu also o
o he conce ns, like egional in eg a ion and he Sus ainable De elopmen Goals (OECD
2018, 15). On he le el o c oss-coun y compa ison, a posi i e co ela ion be ween
in as uc u e and GDP g ow h is undeniable, al hough he di ec ion o causa ion is mo e
di icul o es ablish (ADB 2017, 37). On he basis o coun y case s udies, in as uc u e
de elopmen played a signi ican ole in he as economic de elopmen o Eas Asia,
including he PRC, Japan, and he Republic o Ko ea.
Impo an bene icia ies sha e he basically posi i e iew o he ole o ex ended
in as uc u e, and he ASEAN g oup o Sou heas Asian economies is a case in poin .
ADBI Wo king Pape [Do no en e ] W. Pascha
2
Vision 2020 and he ASEAN Economic Communi y o 2015 al eady con ained impo an
ideas o de elop a compe i i e economic egion, including in as uc u e.
The Mas e Plan on ASEAN Connec i i y 2025 ocuses on i e key a eas, namely
sus ainable in as uc u e, digi al inno a ion, seamless logis ics, egula o y excellence,
and people mobili y. I o mula es he ollowing as a ision: “To achie e a seamlessly and
comp ehensi ely connec ed and in eg a ed ASEAN ha will p omo e compe i i eness,
inclusi eness, and a g ea e sense o Communi y” (ASEAN 2016).
Second, he sp ead o global supply chains has made connec i i y e en mo e impo an
and a ac i e o he bene i o mo e e icien ne wo ks o p oduc ion. To make ull use
o declining anspo and communica ion cos s, i is necessa y o
c ea e app op ia e anspo ne wo ks and o he linkages on he basis o subs an ial
in as uc u e in es men .
An impo an Asian De elopmen Bank (ADB)/ADB Ins i u e (ADBI) s udy o 2009
es ima ed he in as uc u e needs o he Asian egion o be a ound $8 illion by 2020.
The policy conclusions o he 2009 ADB/ADBI s udy almos sound like a bluep in
o he PRC’s One Bel One Road agenda o 2013: “This s udy’s long- e m ision is
he c ea ion o a seamless Asia: an in eg a ed egion connec ed by wo ld-class
en i onmen - iendly in as uc u e ne wo ks ha link na ional ma ke s wi h dis inc
s eng hs, p omo e s ong and sus ainable economic g ow h, p o ide o people’s basic
needs, and hus help educe po e y” (ADB and ADBI 2009, 26).
A 2017 upda e o he ADB s udy con i med he end o he as needs in he egion (ADB
2017). The new es ima e o he in as uc u e in es men ha he egion equi es is
$22.5 illion un il 2030. Acco ding o McKinsey Global Ins i u e (2017), he e is
a global need o some $3.7 illion pe yea up o 2035 wi h a gap o a o al o
$5.5 illion. The needs a e pa icula ly s ong in Asia, while he gaps a y widely be ween
coun ies. Fo ins ance, he e is an expec a ion ha he PRC will eco d a domes ic
su plus o e he yea s.
Thi d, he inancing gaps ha e become pa icula ly no iceable since he Global Financial
C isis o 2008–09. P i a e in es men inance declined signi ican ly a e
he c isis (Bha acha ya and Romani 2013): in e ms o long- e m syndica ed bank
lending, in as uc u e lending eached a peak o mo e han $50 billion in 2007 and
ell o $30 billion and below in he yea s o 2012. I he ole o na ional go e nmen
budge s and na ional de elopmen banks o he Global Sou h is limi ed, mul ila e al
de elopmen banks (MDBs), like he Wo ld Bank, o egional de elopmen banks (RDBs)
could o e elie . Howe e , du ing hose yea s, MDBs and o icial de elopmen
assis ance only con ibu ed a mino pa o less han 10% o he annual global spending
on in as uc u e, amoun ing o a ound $0.8 illion o $0.9 illion. Mo eo e , while he
MDB lending o in as uc u e peaked a a ound $70 billion o he yea s 2009 and 2010,
i dec eased in he ollowing yea s (Bha acha ya and Romani 2013).
Fou h, ano he conce n in he yea s ollowing he Global Financial C isis was (and s ill
is) he engines o global economic g ow h. Fo many yea s, he e has been s ong
g ow h o ade o igina ing om economic globaliza ion. In ecen yea s, howe e , global
ade has been s agna ing a bes . Al eady in 2010, he Ha a d Business Re iew
published an essay on a possible “Peak Globaliza ion” (Nussbaum 2010). The easons
o such conce ns a e mani old. Among hem, i has been di icul o c ea e and sus ain
u he ade libe aliza ion and acili a ion, as is clea om he s alling WTO nego ia ions
and he ising p o ec ionism in many coun ies, including he US unde he T ump
adminis a ion. In compa ison, in as uc u e expendi u es a e s ill likely o g ow
signi ican ly. In as uc u e makes up abou 14% o he global economy (McKinsey
Global Ins i u e 2017). F om ha pe spec i e, i is possible o in e p e a mul ila e al e o
ADBI Wo king Pape [Do no en e ] W. Pascha
3
o in es in in as uc u e as a highly welcome g ow h ini ia i e. Indeed, he Seoul summi
o he G20 in 2010 discussed u ilizing global sa ings su pluses o mee p essing
in as uc u e needs in his spi i (Kohli 2015). Finding app op ia e inancing mechanisms
is essen ial o using he esou ces e ec i ely (Yoshino e al. 2018).
I he a gumen s lis ed abo e a e compelling, i is necessa y o ask why i has been so
di icul in he pas o inance and se up app op ia e connec i i y in es men s. The basic
eason is he public good p ope ies o in as uc u e in es men . Acco ding o basic
economics, he e a e ew incen i es o po en ial bene icia ies o public goods o inance
such p oduc s, i non-excludabili y and non- i al y hold. While in as uc u e is no a
pe ec public good, i s public good p ope ies a e powe ul enough o c ea e
he men ioned p oblem: he e is s ong de ac o non-excludabili y due o exo bi an cos s
o exclusion o se e al goods like oads. Mo eo e , he e is non- i al y a leas o he
ansac ion cos bene i s o es ablishing in as uc u e ecosys ems. The e a e also
signi ican posi i e ex e nali ies, which can ha dly exclude non-con ibu o s. The
me i oc a ic p ope ies o access and oppo uni ies a e also equen claims. Mo eo e ,
i is no able ha ansna ional in as uc u e c ea es addi ional public good issues o
global s. egional o bila e al p o ision (Sandle 2013).
Wha is necessa y o a coun y o ake he lead in p o iding an in as uc u e ini ia i e
as a public good? In he case o mul ila e al public goods, he s anda d answe is ha a
“bene olen hegemon” (o iginally Kindlebe ge 1973) is necessa y. Compa ed wi h he
usual economic bene i s and cos s, which a e no enough o a coun y o p o ide a public
good, he po en ial ad an ages o he hegemon also include poli ical bene i s, like
p es ige, agenda-se ing powe , and in luence. Such poli ical bene i s can become
pa icula ly ele an in a leade ship con es .
An impo an conside a ion in his con ex is he changing poli ical and economic weigh s
in he egion. While he impo ance o he PRC has signi ican ly inc eased in ecen yea s
and i is ac i ely seeking a mo e p ominen ole, Japan’s posi ion has ela i ely
weakened, while he US has se o he p io i ies. Whe eas he “Pi o o Asia” s a egy o
he Obama adminis a ion did ha e a ade and in es men componen , he ocus o he
ini ia i e was a he s a egic and mili a y.
Fo he PRC, his si ua ion p o ided compelling easons o s a a majo in as uc u e
ini ia i e. Compa ed wi h he usual cos –bene i analysis o incumben o aspi ing
leade s, he PRC, in he yea s a e he Global Financial C isis, could ealize a numbe
o peculia ad an ages: he economic cos o s a ing such an ini ia i e and p o iding
signi ican unds as an ea ly mo e aced lowe iscal and economic bu dens han
usual due o he exis ence o ample o eign exchange ese es. The economic bene i s
also p omised o be especially high: because o ela i ely low wages and ample
cons uc ion indus y capaci y, e en o e -capaci y, he PRC could expec o win a
signi ican numbe o in e na ional con ac s. I one includes dis ibu ional conce ns in he
economic bene i s, suppo o he backwa d wes e n egions o he PRC h ough
imp o ed connec i i y wi h Eu asia ia Cen al Asia was a aluable addi ional plus ac o .
Finally and mos impo an ly, such an ini ia i e p omised signi ican poli ical bene i s o
an aspi ing in e na ional leade in e ms o in luence, agenda se ing, and inc eased
epu a ion. The delay o he 2010 e o m o he IMF and he Wo ld Bank o change he
o ing sha es in a o o poo e and upcoming coun ies con ibu ed o he PRC’s sea ch
o ways o es ablish i sel as an in e na ional leade by p o iding an al e na i e app oach
o ins alling public goods. An in as uc u e in es men ini ia i e could he e o e appea
as an ideal ins umen in he ligh o he ci cums ances o he yea s a ound 2010.
The ollowing sec ion will ace he PRC’s app oach and Japan’s eac ion in some de ail,
a guing ha he ini ia i es ha ha e eme ged in Eas Asia du ing ecen yea s ha e e y
ADBI Wo king Pape [Do no en e ] W. Pascha
4
much shaped he ecen dynamics, o which he EU also ela es, as he s udy will show
u he below.
3. THE PRC’S INFRASTRUCTURE INITIATIVE
AND JAPAN’S “PARTNERSHIP FOR QUALITY
INFRASTRUCTURE”
3.1 PRC In as uc u e Ini ia i es: Bel and Road and Beyond
The A chimedean poin om which o in e p e ecen in as uc u e ini ia i es is he
PRC’s Bel and Road Ini ia i e (BRI), which P esiden Xi Jinping announced in 2013;
i was o iginally e e ed o as One Bel One Road (OBOR). I is ha d o o e s a e i s
impo ance as a game change in mul ila e al coope a ion: sea ching Google Schola
in May 2019, one could al eady ind some 14,000 en ies o OBOR plus he PRC
and e en 68,000 o BRI plus he PRC. He e, i may su ice o lis some undamen als
and a he ocus on he dynamics since 2013 ( o he ea ly yea s, see o example
Li and Schme e , 2017; o a ecen o e iew, see Fang and Nolan 2019). The p oposal,
which he P esiden Xi Jinping announced in wo speeches du ing 2013, ocused on
connec i i y ac oss Eu asia, a “bel ” wi h h ee ou es and a ma i ime “ oad” wi h wo
sou he n ou es. Ini ially, he p oposal iden i ied 58 coun ies as po en ial pa ne s.
Coope a ion would be based on bila e al memo anda o unde s anding be ween he PRC
and indi idual coun ies. I de ined speci ic oles o Chinese egions, pa icula ly inland
egions. While i emphasized he connec i i y aspec , he p oposal encompassed i e
links: policies, in as uc u e, ade, inance, and people. Va ious inancial mechanisms
would become in ol ed, qui e a ew o which we e newly c ea ed: he Silk Road Fund,
es ablished in la e 2014 wi h $40 billion om o ex esou ces, he PRC’s so e eign
weal h unds, including he China In es men Co po a ion (CIC), majo na ional policy
banks, like he China De elopmen Bank and he China Ex-Im Bank, he newly c ea ed
Asian In as uc u e and In es men Bank (AIIB), and he New De elopmen Bank BRICS
(NDB), plus o he mechanisms, o ins ance he Shanghai Coope a ion O ganiza ion
In e bank Conso ium, he China–Cen al and Eas e n Eu ope In es men Coope a ion
Fund, and he China–Eu asian Economic Coope a ion Fund (see, o ins ance, Delman
2019).
Among hese mechanisms, he AIIB is he mos widely discussed one, as i seems
o challenge he es ablished MDBs, like he Wo ld Bank o he egional Asian
De elopmen Bank, and hus i is possible o in e p e i as a angua d o how he PRC
would y o in luence he amewo k o global and egional mul ila e al ela ions.
Xi Jinping announced he new MDB in 2013, and i s a ed business in Decembe
2015 wi h 57 ounding membe s, including Aus alia, he Republic o Ko ea, he UK, and
Ge many bu no he skep ical US and Japan. The bank was endowed wi h capi al s ock
o $100 billion, o which $20 billion was paid-in capi al. In e ms o go e nance, he
egional membe s accoun o no less han 75% o he o es, o which he PRC holds
26%; majo ins i u ional decisions equi e a supe majo i y o 75%, so he PRC has a
e y s ong posi ion. The AIIB, which is loca ed in Beijing, has non- esiden Boa ds o
Go e no s and Di ec o s, and he i s P esiden is om he PRC; among he i e Vice
P esiden s, he e is a B i ish and a Ge man na ional.
F om he beginning, c i ical oices ha e ques ioned he p udence o he new MDB. Fo
ins ance, hey ha e poin ed ou ha non- esiden di ec o s could weaken he ole o oice
ADBI Wo king Pape [Do no en e ] W. Pascha
11
4. THE EU’S ROLE IN THE NEW DYNAMICS OF
INFRASTRUCTURE CONNECTIVITY INITIATIVES
This pape will discuss how he EU pa icipa es in he new dynamics o in as uc u e
connec i i y ini ia i es by looking a exis ing o gans, ini ia i es, and hei ela ionship o
he majo Eas Asian ini ia i es.
Fo a long pe iod, in as uc u e and connec i i y ha e no been a co e policy o he EU
and o i s p edecesso s. Howe e , du ing he pas 30 yea s, qui e a ew ins i u ional
mechanisms and ini ia i es ha e come in o exis ence ha c ea e a basis o he s a egic
eo ien a ion in his ield.
In 1958, he Eu opean Economic Communi y c ea ed he Eu opean In es men Bank as
a policy bank. O e he yea s, in as uc u e has become a “ op p io i y,” wi h in es men s
in he anspo sec o o mo e han 153 billion eu os be ween 2005 and 2015 alone (EIB
2016). While he EIB ocuses on in a-EU p ojec s, engagemen wi h pa ne coun ies
unde he umb ella o a ious ini ia i es also plays a ole.
I is also necessa y o men ion he Eu opean Bank o Recons uc ion and De elopmen
(EBRD) in his con ex . While i is no an EU ins i u ion like he EIB, a conside able
ini ia i e om he EU and majo EU membe coun ies es ablished i in 1991 o suppo
he pos -Cold Wa sys em change in Cen al and Eas e n Eu ope. The ac i i ies o he
EBRD include Cen al Asia and a e commi ed o in ol ing he p i a e sec o in os e ing
change owa d ma ke economies. In as uc u e is one o i s compe encies, wi h a ocus
on u ban and en i onmen al in as uc u e.
As o EU ini ia i es, ou app oaches in pa icula a e no able (see a mo e de ailed
con ex ualiza ion in EC-HR 2018):
• The i s is he T ans-Eu opean T anspo Ne wo k (TEN-T) policy o he
Eu opean Commission. I is based on he 1991 T ea y o Maas ich and is
conce ned wi h he de elopmen o a Eu ope-wide anspo ne wo k. Fo ha
pu pose, i alloca ed unds o he a ious budge pe iods, wi h addi ional
Cohesion Fund and Eu opean Regional De elopmen Fund con ibu ions.
• The second policy line is he Eu opean Neighbou hood Policy o he EU, as i
ela es o i s eas e n neighbo s. The basic idea is o os e deepe ela ions wi h
hose coun ies nea by ha do no ha e a sho - e m pe spec i e o join he EU
bu in which he EU has a signi ican in e es in p ospe i y, secu i y, and s abili y.
The coope a ion has a alue-d i en componen , bu i is also conce ned wi h he
economic logic o in as uc u e ne wo ks, which a 2011 Commission
Communica ion en i led “The EU and I s Neighbou ing Regions: A Renewed
App oach o T anspo Coope a ion” (EC 2011) explici ly co e ed, connec ing he
Neighbou hood Policy o he TEN-T.
• The hi d ele an con ex is he EU’s ODA ac i i ies. Compa ed wi h se e al
o he OECD dono s, he EU policy has a epu a ion o being a he alue d i en.
Acco ding o he Eu opean Consensus on De elopmen , enewed in 2017,
p inciples and alues like democ acy, human igh s, and ule o law a e (again) a
p io i y. The Commission p oposed o combine ODA and he Neighbou hood
Policy in a single ins umen du ing he pe iod 2021–27.
• Fou h and inally, he gene al ex e nal ela ions con ex equi es conside a ion.
The Global S a egy o 2016 se he amewo k, e e ing o “s a egic au onomy”
o he EU and signaling a s ong alue-d i en agenda: “Ou in e es s and alues
go hand in hand. We ha e an in e es in p omo ing ou alues in he wo ld” (EU

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12
2016, 13). While he Global S a egy con ains only
a ew ema ks on pa icula egions, i does include a sho passage on
“Connec ed Asia” (EU 2016, 37–38), s essing ha engagemen wi h he PRC
should occu on a le el playing ield and, wi h espec o Japan, men ioning
he in en ion o a ee ade ag eemen (which in he mean ime i has
al eady ealized).
Di e en Di ec o a es Gene al o he Commission plus he Ex e nal Ac ion Se ice un
he policy ields men ioned abo e, complica ing policy making and coo dina ion.
Indi idual EU membe coun ies also ollow hei own policies, con using ma e s u he .
In e ms o gene al o eign and secu i y policies, he manda e o he EU-le el au ho i ies
is pa icula ly weak. Consequen ly, while Eu opean au ho i ies ha e de eloped he
ing edien s o a Eu opean-le el s a egy in he pas , as shown abo e, i comes as li le
su p ise, and has ecei ed epea ed c i icism (e.g., Came on 2017), ha i has been e y
ha d o he EU o o mula e a s ingen and cohe en se o policies owa d he egion o
Asia and i s majo playe s.
To some ex en , gi en ecen de elopmen s, i is necessa y o ee alua e his
p oblema ic imp ession, because, in he las wo yea s, he EU has made h ee impo an
s a emen s in pa icula ha a e ele an o he con ex o Asia-d i en in as uc u e
ini ia i es: i s , he conclusion o he EU–Japan S a egic Pa ne ship Ag eemen in July
2018; second, he announcemen o a new “EU–China S a egic Ou look” in Ma ch 2019
(EC-HR 2019), and inally, mos impo an ly he e, he Join Communica ion “Connec ing
Eu ope and Asia: Building Blocks o an EU S a egy” o Sep embe 2018 (EC-HR 2018),
in he ollowing abb e ia ed as EACS (Eu o Asia Connec i i y S a egy).
The e alua ion should ake place in he ligh o he challenges ha he EU aces in
esponding o he dynamism o in as uc u e ini ia i es in ecen yea s, as explica ed
abo e. The majo challenges, condensing hem signi ican ly, a e he ollowing:
• Many ea u es o he in e na ional in as uc u e ma ke place show p ope ies o
an oligopolis ic ma ke s uc u e wi h s ong ex e nali ies, beyond economics in
he ield o ex a poli ical bene i s (in luence, e c.), and he possibili y o en
shi ing. This cons i u es a alid case o public in ol emen , also on a le el
beyond he na ional engagemen o indi idual EU membe s a es, making use o
he po en ially supe io ma ke powe o he combined EU. The ac ha o he
majo playe s, like he PRC and Japan, a e al eady ying o u ilize hese
oppo uni ies p oac i ely s eng hens he case o EU in ol emen .
• The EU has o conside o he majo playe s as well, al hough hey did no ea u e
p ominen ly in he analysis abo e. Fo emos , i mus conside he US. The US,
Japan, and Aus alia signed an in as uc u e ag eemen in July 2018, wi h an
MOU in No embe , possibly in ol ing as much as $1 illion. Howe e , he small
amoun o $113 million ha he US has ac ually p omised so a seems o suppo
he a gumen ha coun ies canno cu en ly ega d he US adminis a ion as a
se ious and eliable ac o and pa ne in his ield. ASEAN and he Republic o
Ko ea a e o he impo an ac o s in he Eas Asian con ex , wi h which he EU
enjoys good s a egic ela ions. Finally, he Russian Fede a ion is ye ano he
impo an playe , which, due o i s geog aphical posi ion in Eu asia and i s links
in he egion, is ha d o a oid in Eu o-Asia connec i i y schemes. The cu en
sanc ions, imposed since 2014, imply conside able oppo uni y cos s o he
c ea ion o meaning ul connec i i y coope a ion ac oss Eu asia.
• Mo e gene ally, he e is he demanding challenge o making he alue-d i en
agenda o he EU—in e ms o democ a ic and sus ainabili y no ms in pa icula —
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13
con o m o he mo e sel -in e es ed, bu legi ima e, economic, business, and
poli ical conce ns ha i has o pu sue o he bene i o i s membe s.
• To achie e a no iceable impac in he Eu o-Asia connec i i y and in as uc u e
ield, a sizable con ibu ion o o e coming he iden i ied inancial gaps is
necessa y.
• Finally, connec i i y and Eas Asian in as uc u e ini ia i e issues conce n no
only a away places bu he a ea o he EU i sel and o po en ial new EU
membe s. The PRC has de eloped close connec ions wi h 16 Cen al and
Eas e n Eu opean (CEE) coun ies since 2012, and wi h G eece since 2019,
making i a 17+1 scheme, encompassing 12 membe s o he EU plus i e s a es
in he Wes e n Balkans. The coope a ion has achie ed no ewo hy esul s
in e ms o ade expansion and inc eased di ec in es men o a leas some
o he 17 coun ies. The PRC has se up a PRC–CEE in es men und and
endowed i wi h 10 billion eu os. The e a e conce ns ( o a summa y, see S anzel
2016) abou whe he such a coope a ion migh lead o p ojec s no con o ming
wi h o e en unde mining EU guidelines and s anda ds and whe he EU membe s
could become oo lenien when o he membe s eel ha hey should c i icize he
PRC o poli ical easons. I is no able ha he g oup o 17 is no e y cohesi e,
wi h he membe s compe ing agains each o he o he PRC’s a en ion.
Howe e , mos o he conce ns men ioned p e iously do no depend on he
cohesion o he g oup bu wo k on he le el o indi idual s a es. In 2019, I aly, as
a co e EU membe , signed an MoU wi h he PRC’s BRI, aising simila
ese a ions. I is indeed no ewo hy ha he weake s a es o he EU and he
Wes e n Balkans seek his kind o coope a ion, while hey a e he ones ha a e
he mos ulne able o p oblema ic incen i es. Finally, Japan’s P ime Minis e
Abe announced a Wes e n Balkan Ini ia i e du ing a six-day isi in 2018 (Mlloja
2018), clea ly eac ing o he PRC’s ac i i ies.
To wha ex en do he h ee majo s a emen s and policy decisions men ioned abo e, on
Eu asian connec i i y, on he PRC, and on Japan, ela e o hese challenges? The EACS
se ou o explain and p aise a “Eu opean way” o “sus ainable, comp ehensi e and ules-
based connec i i y” (EC-HR 2018, 2–3), which i ecommended o he engagemen wi h
Asian pa ne s, oge he wi h he mobiliza ion o addi ional ( inancial) esou ces. Whe he
he e is uly a “Eu opean way o connec i i y” seems o be a he unlikely. Howe e ,
enlis ing a ious mechanisms o mobilizing inancial esou ces, pa icula ly in he
con ex o a “new ex e nal in es men a chi ec u e,” is meaning ul, al hough de ails abou
conc e e alloca ions o quan i a i e goals a e missing. The EACS con inued by lis ing
speci ic issues and key ac ions in anspo , digi al connec i i y, ene gy connec i i y, and
people- o-people connec i i y, he la e including educa ion exchange.
The p oposals include sensible endea o s, like connec ing he TEN-T amewo k wi h
ne wo ks in Asia. Some o hese ac ions a e al eady unde way, howe e . Fo ins ance,
he e was a p e ious ag eemen o ex end he TEN-T o six Eas e n Eu opean and
Cen al Asian coun ies, namely A menia, Aze baijan, Bela us, Geo gia, Moldo a, and
Uk aine. In ha espec , he EACS a he seems like a summa y o policies o a ious
pa s o he Commission and o he Ex e nal Ac ion Se ice, wi hou cons i u ing a
o ce ul and consis en eo ien a ion. I lis s a ious ields and he a ious EU ini ia i es
in hose ields unde he headlines o ai , sea, and land anspo , digi al connec i i y,
ene gy connec i i y, and people- o-people connec i i y. The lo y claim o a “Eu opean
way” does no subs i u e a s a egic ision. Ano he ea u e, which i s his
cha ac e iza ion, is ha i la gely lea es ou con o e sial opics and hus emains
inde e mina e. Fo ins ance, he sho pa ag aph on ene gy connec i i y does no e en
ouch on he g a e p oblems o how o posi ion he EU wi h espec o ecei ing gas om
ADBI Wo king Pape [Do no en e ] W. Pascha
14
ac oss Eu asia and h ough a ious (po en ial) ou es, how o handle p oblema ic ac o s
like he Russian Fede a ion in his con ex , and how o balance economic–s a egic
in e es s and Eu opean alues. In his con ex , esea ch has es ablished well ha he
EU’s sel -in e es , namely i s ene gy needs and he pe cei ed ene gy secu i y h ea ,
mainly d i e i s s a egic in e es in Cen al Asia (e.g., P oed ou 2012).
The PRC and Japan appea a he p ominen ly in he chap e on bila e al coope a ion.
In bo h cases, i men ions aspec s o coope a ion and coo dina ion in an engaging way.
In he case o he PRC, howe e , i eco ds he po en ially con o e sial issues o ma ke
access and a le el playing ield as impo an Eu opean posi ions. The Ma ch 2019 EU–
China S a egic Ou look poin ed ou he posi ion o he PRC as a pa ne bu also as a
compe i o and e en as a sys emic i al e en mo e clea ly. Fo connec i i y, his means
ha , on he one hand, people see he PRC as a aluable pa ne in inding ui ul
con igu a ions o connec i i y ac oss Eu asia. The EU–China Connec i i y Pla o m, se
up in 2015, se es his pu pose. On he o he hand, no ing issues in
he 16+1 (now 17+1) amewo k, he Wes e n Balkans, and elsewhe e, he EU in ends
o use i s ins umen s “mo e obus ly” o “p ese e i s in e es in s abili y, sus ainable
economic de elopmen and good go e nance” (EC-HR 2019, 5). As o Japan, he EACS
men ioned ein igo a ing he EU–Japan anspo dialogue and, mo e impo an ly, he
need o “coo dina e closely e o s o p omo e in e na ional s anda ds and egional
coope a ion in Asia” (EC-HR 2018, 7). In e ms o s anda d se ing o in e na ional
in as uc u e p ojec s, he EU hus sees Japan as an ally, sha ing simila in e es s, while
i iews he PRC a he as a compe i o . Such coope a ion is al eady isible wi h espec
o he G20 mee ing in June 2019 in Japan. The 2018 EU–Japan S a egic Pa ne ship
Ag eemen does no men ion in as uc u e coope a ion and connec i i y, bu he
e e ence o mul ila e al, de elopmen , and indus ial coope a ion (A icles 10, 11, and
17) easily allows o such a ocus.
Summing up, he EACS o 2018 s ill lacks igo and a pe suasi e s a egic ision in
se e al espec s, while i has al eady s a ed o shape he way in which he EU sees
i s ole in he ongoing e olu ion o Eas Asia-d i en in as uc u e ini ia i es. I is
unde s andable, hough s ill eg e able, ha he Commission and he Ex e nal Ac ion
Se ice ha e no ye en u ed u he a his poin in ime: he majo inhibi ing ac o s a e
ha membe coun ies ollow hei own policies, which a e possibly o some ex en a
odds wi h he EU le el and among hemsel es, a new Commission will ake up o ice
a e he Eu opean Pa liamen elec ions in May 2019, and he budge amewo k
o 2021–2027 has no passed ye , wi h B exi and he budge a y issues ollowing i
making o esigh e en mo e p oblema ic.
Be o e de i ing policy ecommenda ions o he u u e, he e should be some s ock aking
o he main indings o his pape on which o base he ecommenda ions.
5. CONCLUSIONS AND POLICY RECOMMENDATIONS
The pape se ou o analyze he g owing impo ance o in as uc u e connec i i y
ini ia i es in ecen yea s, which Eas Asian playe s, he PRC, and Japan in pa icula
ha e la gely d i en. While bo h coun ies a e ollowing a wide ange o p ojec s as pa
o di e en policy lines, i is possible o in e p e he BRI and he PQI as no able lagship
p ojec s ha dese e special a en ion. The BRI is a majo in as uc u e ini ia i e ha
s a ed in 2013 wi h he p oposal o a so-called “bel ” ac oss Eu asia wi h h ee ou es
and a ma i ime “ oad” wi h wo ou es. Besides in as uc u e in a na ow sense, i co e s
policies, ade, inance, and people connec i i y. In he mean ime, he p oposal has
e ol ed conside ably, o ins ance in e ms o co e ing mo e egions han Eu asia. The
ADBI Wo king Pape [Do no en e ] W. Pascha
15
Japanese PQI in 2015 s a ed as a egional in as uc u e ini ia i e o Asia in 2015, bu
i quickly u ned owa d he wo ld a la ge in 2016. I s majo p oposi ion a he ega ds
con en , namely o p omo e so-called “quali y” in as uc u e. The EU has been ac i e in
in as uc u e in es men o a long ime, including beyond i s bounda ies, o ins ance
h ough he EIB. I only spelled ou an explici policy owa d Asia in 2018. I is a he a
summa y o exis ing policies in a ious ields ha will in ensi y is-à- is Asia, namely
anspo , digi al connec i i y, ene gy connec i i y, and people- o-people connec i i y.
In as uc u e is an impo an g ow h sec o o he global economy, while he e a e
conside able inancial gaps. An ini ia i e like he BRI makes sense o he PRC, because,
despi e he public good p ope ies o such an ini ia i e, i se es he in e es s o he PRC
as an aspi ing egional and possibly global leade , ying o make an impac on he
mul ila e al o de as well. As an incumben majo playe in he egion, Japan ollowed
wi h i s own ini ia i e, he PQI. Bo h concep s a e con inuously e ol ing, and aming
in as uc u e as a ma ke was help ul in unde s anding he dynamics be e : in an
oligopolis ic ma ke , supplie s will equen ly eac o each o he , and empo a y
ou comes a e less meaning ul han adap a ion and lea ning. Con lic s may occu , bu
coope a ion is also possible; o bo h, he e a e al eady empi ical cases. Rega ding
Japan, which canno compe e wi h he PRC on p ice, p omising in as uc u e “quali y”
and sa egua ding i h ough mul ila e al ag eemen s was a sma mo e.
The EU has no been a majo playe in he in e na ional in as uc u e a ena o a long
ime. S ill, i canno a oid aking a s ance in ha ield: in as uc u e is an impo an
cu en and u u e ma ke o he EU as well, and Eu asian connec i i y, he o iginal ocus
o he BRI, ouches i s i al in e es s. The impac o he BRI is e y appa en in he 17+1
amewo k and he PRC’s in e es in he Wes e n Balkans, I aly, and elsewhe e.
In ecen yea s, he EU has al eady become mo e ac i e, pa icula ly by ying o
synch onize and push o wa d ele an policies in he 2018 Join Communica ion on
Connec ing Eu ope and Asia: Building Blocks o an EU S a egy. While i s ill lacks some
igo and a pe suasi e s a egic ision, i al eady encompasses impo an policy
p oposals wi h which he EU akes a mo e ac i e posi ion in he ongoing e olu ion o
in as uc u e ini ia i es. Examples include measu es o mobilize addi ional inancial
esou ces and ex end he T ans-Eu opean T anspo Ne wo k owa d Eu asia, e en i
no all he p oposals a e en i ely new. The EU sees Japan as a pa ne in se ing up and
sa egua ding mul ila e al s anda ds, while i iews he PRC bo h as a pa ne and as a
i al, which needs o espec a le el playing ield.
To sha pen i s policies u he , he EU should conside u he measu es ha
• inc ease he le e age o EU policies on in as uc u e connec i i y wi h Asia
beyond i s own budge a y means, and
• a e in line wi h i s sel -p oclaimed objec i es, which include sus ainabili y,
comp ehensi eness, ule-based mechanisms, openness, anspa ency, and
good go e nance (EC-HR 2018, 2–3).
ADBI Wo king Pape [Do no en e ] W. Pascha
16
I is beyond he scope o his pape o de elop policy p oposals sys emically based on
hese undamen al conside a ions and in line wi h easibili y cons ain s, ela ed o he
a ious dimensions o in as uc u e connec i i y, he o ganiza ional s uc u e o he EU,
and i s ela ionship wi h he business communi y and wi h po en ial ex e nal pa ne s.
S ill, i is impo an o conside he ollowing poin s, concen a ing on ins i u ional ma e s:
• Financing in as uc u e will be a majo challenge o all global playe s in iew o
he iden i ied gaps. The 2018 Communica ion unde lines his bu lacks a conc e e
oadmap. The EU should sha pen he s a egy in he no - oo-dis an u u e while
allowing o lexible eac ions o wha happens elsewhe e. The Eu opean
Commission’s In es men Plan o Eu ope, known as he “Juncke Plan,” was a
majo e o om 2015 o 2017. The incoming Commission should conside
some hing simila o in as uc u e, wi h a global pe spec i e including Eu asia.
• Gi en he ambigui ies o oligopolis ic compe i ion o majo in as uc u e p ojec s,
mul ila e al ules o en i onmen al and social s anda ds as well as
o ai compe i ion and good go e nance o p ojec s a e ex emely impo an ,
bo h in hei own igh and because EU indus y canno win a compe i ion
ace based on p ice and (lowe ) con ac condi ions. Japan is a na u al ally
o suppo his posi ion join ly in egional and mul ila e al o a, like he G7,
he G20, and he OECD. The e is conside able scope o u he EU–Japan
connec i i y coope a ion unde he umb ella o he S a egic Pa ne ship
Ag eemen o suppo common in e es s. The bila e al “Pa ne ship on
Sus ainable Connec i i y and Quali y In as uc u e,” signed in Sep embe 2019,
is an impo an s ep in his di ec ion, which i is now necessa y o ac i a e (EU
and Japan 2019). One obs acle o de eloping a mo e ocused EU s a egy is ha
membe coun ies ollow hei own policies in iew o hei espec i e indus ial
in e es s. The Commission and i s se e al Di ec o a e Gene als and he Ex e nal
Ac ion Se ice should he e o e closely and pe sis en ly coo dina e hemsel es
and wo k wi h membe s ha ha e a s ong posi ion in he in as uc u e ma ke .
A join ask o ce o he EU, na ional au ho i ies, and business in e es s may be
help ul as an o ganiza ional ame.

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17
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