US power gambit in South Asia to offset China’s influence

Kamal Dev Bhattarai

Kamal Dev Bhattarai

US power gambit in South Asia to offset China’s influence

IPEF team set to visit India, Indonesia, Malaysia, the Philippines, Thailand, Fiji and Vietnam to identify bankable projects

On January 12, the United States and Japan jointly organized the fifth Indo-Pacific Business Forum in a hybrid formation in Tokyo.

According to the US Department of State, more than 140 in-person and 1,000 virtual business and government leaders from the US and Japan, economies of the Indo-Pacific region, and countries around the world participated in the meeting.

The IPBF is a vital pillar of America’s Indo-Pacific Strategy, which envisions a free, open, connected and resilient Indo-Pacific region.

An IPBF meeting is a routine program that has been taking place for a couple of years now. The previous meeting was held in 2021, and co-hosted by the US and India. It was the first IPBF meeting in South Asia.

Unlike the previous government under Donald Trump, which took a more confrontational approach to China, the Joe Biden administration has framed the implementation of IPS focusing more on economy and through its allies and partners.

In February 2022, President Biden introduced a new IPS, which replaced the document unveiled by his predecessor in 2019. In line with the new US strategy, South Korea earlier this month unveiled its own IPS, which aligns to the American policy of containing China’s rise in the region.

In the recent months, the US and its IPS allies have stepped up their engagements in the region with new policies and programs. The latest instance is of the IPBF, which includes several countries in South Asia including Nepal, making new announcements targeting the region.

First is the US Trade and Development Agency’s call for infrastructure activities that support the Indo-Pacific Economic Framework pillars of advancing digital infrastructures, promoting clean energy, and strengthening supply chains.

The second proposal is to expand the agency’s portfolio in the Pacific Island countries.

The Tokyo meeting also decided that the IPEF Infrastructures Accelerator Team would work across US government agencies and like-minded IPEF partners to identify and define bankable projects that can unlock new public and private funding.

The team is set to visit India, Indonesia, Malaysia, the Philippines, Thailand, Fiji and Vietnam in the near future.

“The Indo-Pacific is core to our mission,” declared Scott Nathan, CEO of US International Development Finance Corporation, in his opening remarks of the IPBF meeting.

“We have over 6.6 billion dollars in active commitment throughout the region. And just this past year we committed more than two billion dollars to a diverse set of nearly 50 transactions that bolster economic growth and development across a range of sectors,” he added. This shows that the US is eager to gain a strategic one-upmanship over China when it comes to holding clout over South Asia.

“Washington’s acknowledgement of the Indo-Pacific as the fastest growing and most dynamic region in the world continues to serve as a catalyst for its desire to strengthen ties with allies and strategic partners of the region,” says Don McLain Gill, director for South and Southeast Asia at the Philippine-Middle East Studies Association.

“Inevitably, the key driver for US interest in the region is China’s rise and its dissatisfaction with the US leadership and the alliance network.”

While US material capacity and hard power are unmatched, Gill says, its image continues to face challenges, particularly among regional states.

“Moreover, the speed of China’s military modernization also creates problems for the US’ ability to secure the established rules-based order.”

Recognizing this, the US engagement in the Indo-Pacific should be seen through the prism of the region’s emerging multipolar dimensions, which have bolstered Washington’s coordination with like-minded powers such as Japan and India.

“Along with the preponderance of the US material capabilities, Washington’s Indo-Pacific engagements also rest on maximizing the function of its bilateral and multilateral partnerships to add more value and dynamism to its approach towards the region,” says Gill.

American officials have said that they will further enhance the engagement in this region in 2023. In the words of Kurt Campbell, Biden’s Indo-Pacific Coordinator: “America and allies are looking at India as a country they want to draw more into the Indo-Pacific.”

“Our interests are to see India playing an ever larger, responsible role in almost everything that we’re doing,” Campbell said in an event in Tokyo.

Neeraj Singh Manhas, director of Research in the Indo-Pacific Consortium at Raisina House, New Delhi, says in the past few months the US engagement in the region is increasing, and it is also using economic and grey zone coercion tactics.

According to his reading, Washington has been renewing innovation and developing new concepts of operations as well as resilient command structures, prioritizing the network of allies and partners, fostering interlinking security ties, countering the trafficking of weapons, drugs and people, and improving cyber-security in the Indo-Pacific region.

In Nepal, too, the US is stepping up its economic engagement. In September last year, the USAID and the Ministry of Industry and Commerce jointly launched a trade and competitiveness or T&C project.

The overall goal of the project is to increase inclusive and broad-based sustained free and fair trade as well as competitiveness in the Indo-Pacific region.

The project falls under the broader framework of the IPS, but the ministry has said that the project launch does not make Nepal a part of the IPS, and that it will only play the role of an advisor to the program.

Similarly, in May last year, Nepal-US signed a grant agreement of $659 to support Nepal’s goal to be a middle-income country. It is noteworthy that the US, along with 13 countries in South Asia, launched the IPEF that same month to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the region.

The US officials are in talks with the countries in the region that have not yet officially joined the framework. They are conveying the message that the US wants South Asian countries to be part of all components of IPS.

Those countries that are not part of the IPS regard it as a military alliance. As a result, opinions are divided whether to join or stay out.

Bangladesh has recently informed the US that it needs some time to study the IPEF before coming to a decision. The IPS remains a highly divisive issue in Nepal as well. That is why the official documents and US officials rarely mention IPS while announcing or implementing the programs under it.  Perhaps the word ‘Strategy’ has created doubt. As the US Ambassador to Nepal Dean Thomas recently said that it is better to call it “Indo-Pacific Policy” instead of strategy.

New Commercial Initiatives in Indo-Pacific

-In October 2022, Honda and LG Energy Solution announced they will build a $3.5 bn EV battery plant in Ohio that will create at least 2,200 new jobs.

-In July 2022, Panasonic announced a $4 bn investment in batteries in Kansas that will hire as many as 4,000 people.

-In April 2022, Toyota announced a major investment in sustainable transportation with an investment of $383m across four US plants to support fuel-efficient hybrid vehicles and build the workforce of the future.

-In 2021, Japan announced additional budget to develop its semiconductor industry, and supported several new projects in 2022, including:

  • Taiwan Semiconductor Manufacturing Co. (TSMC) and Sony received $3.5 billion in support for a joint venture to build a new chip fabrication plant.


  • Kioxia Corp. and US firm Western Digital Corp. received $680m for a semiconductor production facility.


  • Japan’s Ministry of Economy, Trade, and Industry agreed to provide $320m in investment support to US semiconductor manufacturer Micron to accelerate the manufacturing ramp up of advanced chips at its Hiroshima facility.

-The Department of State, Bureau of Energy Resources’ Power Sector Program, has pledged to provide technical assistance to the Malaysian electric utility company, Sabah Electricity Sdn Bhd (SESB) to displace up to 100 MW of diesel generation with solar and battery storage deployment.

-The US Trade and Development Agency has approved funding to NOW Telecom Company, Inc. for technical assistance to support the development and implementation of a fifth generation (5G) stand-alone network in the Philippines.

-A USTDA grant to the Electricity Generating Authority of Thailand is funding a feasibility study to assess the technical and economic viability of retrofitting the Vajiralongkorn Dam in western Thailand with a grid-connected pumped storage hydropower (PSH) plant.

-USTDA is providing a technical assistance grant to support the digital transformation of the Malaysian electric utility company, Sarawak Energy Berhad.

-USTDA and GE Healthcare will co-fund a pilot project to support the Indonesian Ministry of Health develop a national image and data repository, creating a new cloud-based centralized warehouse for electronic medical records and a hub-and-spoke network connecting general practitioners in primary care facilities with cardiologists in a central hospital.

-The US International Development Finance Corporation has more than $6.6 bn in total active commitments across the Indo-Pacific region, invested across 395 individual projects. The agency committed $2.1 bn of financing across 49 projects in the Indo-Pacific region in fiscal year 2022 alone.  DFC has active commitments in 16 countries throughout the region.

-Since October 2022 DFC has approved three new projects worth approximately $110m of total investment to advance economic growth and development in India and across Southeast Asia, including expanding access to electric vehicles in India. A $5m loan will enable Revfin Services Private Limited, a digital lending company that leverages non-traditional data to underwrite electric vehicle financing loans, to expand financial access and inclusion for underserved individuals and communities and provide an e-mobility solution to support India’s clean energy transition.