Blue Dot

7th March – Blue Dot Mechanism

Blue Dot Mechanism

During the recently concluded India visit of US President Donald J. Trump, a key issue that featured in the discussions between him and Prime Minister Narendra Modi was that of the “Blue Dot” Network.

Background –

  • Launched in November 2019 at the Indo-Pacific Business Forum in Bangkok, by Japan, Australia, and the US, the Blue Dot Network aims to address the challenges related to debt-trap, lack of transparency, and sustainability in investments on infrastructure development in the smaller and less–developed countries.
  • A key feature of the Blue Dot Network is that it would impartially and publicly rate the loan providing agencies on certain parameters so that the potential recipients could make an informed decision.

A signal of intent –

The joint statement released after consultations between President Trump and Prime Minister Modi, stated that “The United States and India recognise that, to contain the build-up of sovereign debt in developing and low-income countries, it is important to ensure responsible, transparent, and sustainable financing practices for both borrowers and creditors. Mr. Trump and the Indian Prime Minister expressed interest in the concept of the Blue Dot Network, a multi-stakeholder initiative that will bring governments, the private sector, and civil society together to promote high-quality trusted standards for global infrastructure development.” India is also considering the possibility of joining the Blue Dot Network.

What is it?

  • The objective of the Blue Dot Network is to ensure that internationally accepted rules and norms are abided by in building foreign-funded infrastructure in developing countries, particularly in the Indo-Pacific region.
  • Notably, both India and the US have expressed concerns with regard to infrastructure investment practices in the Indo–Pacific, particularly in Asia, which have often led to huge debts on part of the recipient countries.
  • A major challenge in that context would be to come up with a comprehensive and universally acceptable definition of a ‘safe’ infrastructure project.

Why is it important?

Countries such as Sri Lanka, Maldives, and Malaysia have faced challenges with regard to repayment of loans taken from China as part of latter’s Belt and Road Initiative (BRI), which was launched as the One Belt, One Road (OBOR) initiative in 2013.

How will it operate?

  • Popularly seen as the US response to China’s Belt and Road initiative, the initiative is to be funded by the AusAID (Australia), Japan International Cooperation Agency (JICA)), and the International Development Finance Corporation of the US.
  • The initiative aims to mobilise private sector for financing infrastructure projects in the Indo-Pacific and is likely to play a leading role in the Blue Dot Network initiative.
  • It has also been reported that the corporation has mobilised funds worth more than US$ 50 billion. Furthermore, it has secured the US Congressional support too.
  • The rating system would facilitate the US private investors to invest in the less developed countries of the Indo-Pacific region, thereby creating a ‘win-win situation’ for both the private American investors and their recipient countries.

Should India join it?

For India, the Blue Dot Network is a positive development. India has been experimenting with the Public Private Partnership (PPP) model of investment for its own domestic infrastructure development projects. In that context, a responsible and balanced mix of private and state-run investments, supported through the Blue Dot Network, would be an excellent opportunity to plug the existing infrastructure gaps.

SourceAll India Radio

QUESTIONWhat is ‘Blue Dot’ mechanism? Examine how the mechanism seeks to ensure financial transparency in the infrastructure projects of Indo-Pacific region.

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