US Strategic Influence in the Indo-Pacific and Sustainable Development Goals

Introduction: The Indo-Pacific as a Strategic and Developmental Epicenter

The Indo-Pacific region, home to over half the world’s population and nearly two-thirds of global GDP, is a critical zone for global security, economic prosperity, and sustainable development. It encompasses some of the busiest maritime trade routes and faces significant challenges including climate change, infrastructure deficits, and geopolitical tensions. The region’s development aligns closely with several Sustainable Development Goals (SDGs), including SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), SDG 13 (Climate Action), and SDG 16 (Peace, Justice, and Strong Institutions).

US Policy and Its Impact on Sustainable Development

Despite the region’s importance, recent US policy under the Trump administration has lacked a clear strategy for engagement. Key actions include:

1. Significant reductions in funding for the US Agency for International Development (USAID), a vital contributor to sustainable development projects across the Indo-Pacific.
2. Imposition of high tariff rates that risk harming regional economies and undermining economic growth (SDG 8).
3. Calls for Indo-Pacific countries to increase defense spending to 5% of GDP, potentially diverting resources from essential development sectors.

These measures threaten to weaken US influence and create openings for alternative actors, notably China, to expand their developmental and geopolitical footprint.

Development Cuts: A Strategic and Sustainable Development Misstep

USAID has historically been a cornerstone of US influence and sustainable development in the Indo-Pacific, supporting:

• Infrastructure development (SDG 9)
• Climate resilience initiatives (SDG 13)
• Governance and public health improvements (SDG 3 and SDG 16)
• Stabilization in fragile environments (SDG 16)

The pause in US foreign aid following the executive order “Reevaluating and Realigning United States Foreign Aid” has disrupted these efforts, creating a development vacuum that China is rapidly filling through targeted aid and infrastructure investments.

China’s Development Diplomacy and Its Implications for SDGs

China’s Belt and Road Initiative (BRI) has constructed strategic infrastructure projects across the Indo-Pacific, addressing real development gaps but often creating asymmetric dependencies. Key points include:

• BRI projects contribute to SDG 9 by improving infrastructure but may come with political conditions affecting SDG 16.
• Countries such as Pakistan, Cambodia, and Myanmar have aligned diplomatically with China in exchange for economic support.
• Some countries have pushed back against China’s approach, seeking more transparent and equitable partnerships.
• US-Philippines partnership on railway infrastructure exemplifies potential for US engagement that supports SDG 9 and SDG 8.

US Retreat and Chinese Advance: Consequences for Sustainable Development

China has quickly stepped in to replace US-funded programs, including:

• Child literacy and nutrition programs in Cambodia (SDG 4 and SDG 2)
• Demining operations enhancing safety and stability (SDG 16)
• Disaster relief efforts in Myanmar following earthquakes (SDG 11 and SDG 13)
• Climate change support and clean energy investments in the Pacific Islands (SDG 7 and SDG 13)

China’s increased development aid and diplomatic outreach strengthen its soft power and influence, while the US withdrawal risks diminishing its role in advancing sustainable development and regional stability.

Recommendations for US Policy to Support Sustainable Development Goals

To restore and enhance US influence in the Indo-Pacific while advancing the SDGs, the following actions are recommended:

• Presidential Visit to the Indo-Pacific: Reinforce bilateral alliances and demonstrate commitment to sustainable development and economic cooperation.
• Expand the US International Development Finance Corporation (DFC): Increase its mandate and resources to provide transparent, sustainable alternatives to China’s development financing, supporting SDG 9 and SDG 8.
• De-risk Private Sector Investment: Enhance access to political risk insurance to encourage private investment in sustainable infrastructure and development projects.
• Adopt a Comprehensive Economic Strategy: Focus on supply chain resilience, mutually beneficial economic growth, and sustainable development aligned with US strategic goals and the SDGs.

Conclusion

The US withdrawal from foreign aid in the Indo-Pacific undermines its economic, diplomatic, and strategic influence, while China’s expanding development diplomacy fills critical gaps. To maintain leadership and promote the Sustainable Development Goals across the region, the US must rebalance its approach by integrating security priorities with robust economic and development engagement.

Authors: Lize de Kruijf, Program Assistant, Atlantic Council’s Economic Statecraft Initiative; Nazima Tursun, Former Young Global Professional, Atlantic Council’s Economic Statecraft Initiative.

Note: Some Atlantic Council projects funded by the US government have been suspended due to the executive order “Reevaluating and Realigning United States Foreign Aid.”

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 8: Decent Work and Economic Growth
   • Article discusses economic growth challenges in the Indo-Pacific due to reduced US development aid and increased Chinese investment.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Focus on infrastructure gaps and investments, including railways, ports, and other strategic infrastructure projects.
3. SDG 13: Climate Action
   • Climate resilience and clean energy projects mentioned, especially in the Pacific Islands.
4. SDG 16: Peace, Justice, and Strong Institutions
   • Governance, public health, and stabilization efforts in fragile environments highlighted.
5. SDG 17: Partnerships for the Goals
   • International cooperation, development partnerships, and economic statecraft emphasized as key to maintaining influence.

2. Specific Targets Under Those SDGs Identified

1. SDG 8 Targets
   • 8.1: Sustain per capita economic growth in accordance with national circumstances.
   • 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation.
2. SDG 9 Targets
   • 9.1: Develop quality, reliable, sustainable, and resilient infrastructure.
   • 9.3: Increase the access of small-scale industries and other enterprises to financial services and integration into value chains.
3. SDG 13 Targets
   • 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters.
   • 13.2: Integrate climate change measures into national policies and planning.
4. SDG 16 Targets
   • 16.6: Develop effective, accountable, and transparent institutions at all levels.
   • 16.7: Ensure responsive, inclusive, participatory and representative decision-making.
5. SDG 17 Targets
   • 17.16: Enhance the Global Partnership for Sustainable Development, complemented by multi-stakeholder partnerships.
   • 17.17: Encourage and promote effective public, public-private, and civil society partnerships.

3. Indicators Mentioned or Implied to Measure Progress

1. Economic Growth and Productivity Indicators
   • GDP growth rates and defense spending as a percentage of GDP (article mentions defense spending targets of 5% GDP).
   • Levels of foreign direct investment and infrastructure financing.
2. Infrastructure Development Indicators
   • Number and scale of infrastructure projects (railways, ports, clean energy projects).
   • Access to reliable and sustainable infrastructure services.
3. Climate Resilience Indicators
   • Number of climate-related projects implemented (e.g., clean energy, ocean conservation).
   • Investment amounts dedicated to climate adaptation and mitigation.
4. Governance and Institutional Indicators
   • Effectiveness and transparency of development aid programs.
   • Levels of political risk insurance and private sector investment facilitation.
5. Partnership and Cooperation Indicators
   • Number and scale of bilateral and multilateral development partnerships.
   • Volume of foreign aid and development finance commitments.

4. Table: SDGs, Targets and Indicators

Source: atlanticcouncil.org