The Blue Dot Network: An Avenue for Increasing Investment
The Blue Dot Network (BDN) is an international effort Australia, Japan, and the United States launched in 2019 to mobilize funds for needed investments worldwide. Given the great need for infrastructure and other investments in the arc of countries running across the Greater Caspian Region from Turkey through Afghanistan, the Blue Dot Network can be a way to attract financial capital, especially important given the dislocations the COVID19 pandemic has wrecked upon national economies, investment plans, and capital flows. It is also essential to remember that these hundreds of billions of dollars in infrastructure needs are important and potentially lucrative private sector opportunities as well.
The Blue Dot Network is a mechanism to mobilize hundreds of billions of dollars held in funds that are currently reluctant to invest in infrastructure projects. As Steve Dowd, the new U.S. Executive Director at the European Bank for Reconstruction and Development (EBRD) told participants in an event USAID and Caspian Policy Center (CPC) held on September 10, a goal is to capture and mobilize some of the estimated $14 trillion in managed funds world-wide. By establishing a common standard of project excellence, including in transparency, positive social impact, and attention to the environment, the BDN can give the private sector — and especially institutional investors — the confidence they require for investing in infrastructure in the Greater Caspian Region and world-wide.
The needs for investment in infrastructure are staggering. According to the Global Infrastructure Hub(GIH) the world faces a $15 trillion gap between the dollars needed to build or develop required infrastructure by 2040 and the funds that are on-track to be available. Looking at Azerbaijan, for example, the GIH study finds the country will need $100 billion in investment but faces an $8 billion shortfall given current investment trends. Kazakhstan is expected to need $292 billion to meet its infrastructure requirements between now and 2040 but looks to be on track to face an $84 billion gap between that need and the amounts of funds currently expected to be available. Turkey, according to the GIH, will likely need $975 billion, but be able to find or obtain $569 billion and thus face a $405 billion financing gap.
However, it is not just emerging market or developing country economies that face significant gaps between what they look to have to pay for needed infrastructure and the volume of funds they seem likely able to attract. The Global Infrastructure Hub forecasts the United States will face a $3.8 trillion gap between projected available funds and the costs of meeting expected pressing infrastructure needs. Emerging market and developing countries will therefore need to compete with mature economies, as well as with headliners such as China and India, for essential funding. How governments, state-owned corporations, and private sector companies in the Greater Caspian Region position themselves to address this competition is critical.
Moreover, retrenched capital flows and other disruptions resulting from the COVID19 pandemic further raise the importance of acting now to become more attractive to investors.
Participating in the BDN can thus be helpful. Australia, Japan, and the United States announced the Blue Dot Network in November 2019 at the Indo-Pacific Business Forum in Bangkok, with the goal of building a standard of certification for individual infrastructure projects. That certification would be determined based on standards of transparency, sustainability, and development impact, building on the international consensus reached at the G-20 Summit in Osaka. The U.S. Agency for International Development, the U.S. Development Finance Corporation, and the State Department lead U.S. government efforts to carry the project forward.
As USAID Deputy Assistant Administrator for Asia, Javier Piedra noted during the September 10 event, “The Blue Dot Network will bring together governments, the private sector, and civil society under shared standards of global infrastructure development. The Network will certify infrastructure projects that demonstrate and uphold global infrastructure principles.” These international standards are in line with what international financial institutions, such as the World Bank and EBRD, already require and so should not be seen as some new, burdensome set of requirements. An open and inclusive framework, with projects reviewed and certified on a project-by-project basis, the BDN does not exclude any country from supporting the Blue Dot Network’s mission of promoting quality, market-driven, and private sector investment.
Moving forward, while the Blue Dot Networks’ principles and goals are attractive, developing and publicizing the details of the program will be crucial to its success. In developing, financing, and building infrastructure projects, governments and companies – whether in the Greater Caspian Region or elsewhere in the world – are making decisions on projects that will serve people and economies for decades, if not generations. It will be important for agencies, entities that might provide financing, and companies planning, executing, and running the infrastructure projects to engage with Blue Dot Network partners in the United States and elsewhere to examine specific questions, pick apart details, and together identify the best ways forward. Doing so will avoid the mistakes some governments have made with infrastructure projects in the past as well as ensure the BDN’s goals are achieved. Robust, resilient infrastructure is essential to a country’s strength and its people’s well-being and sustainable, high-quality infrastructure requires a potent framework for attracting sustainable, high-quality financing.