Blue Dot Network Gains Momentum

After a slow start, the Blue Dot Network (BDN) is on its way to expand membership and deploy its mechanism more broadly to certify quality infrastructure. The United Kingdom announced that it joined the BDN Steering Committee on April 17, an important step for the initiative both as a vote of confidence in its credibility and potential longevity. The United Kingdom has been a leading voice on quality investments, including the announcement during its G7 presidency at Carbis Bay of a $600 billion infrastructure initiative focused on climate, health, digital connectivity, and gender-focused investments first known as Build Back Better World (rebranded as the Partnership for Global Infrastructure and Investment, or PGII). The BDN still has a ways to go, including setting up an independent assessment committee to review and certify projects and convincing private sector and financing agencies to include the BDN certification into their project evaluations.

The BDN was established in November 2019 by the former U.S. Overseas Private Investment Corporation (OPIC), now known as the U.S. International Development Finance Corporation, Australia’s Department of Foreign Affairs and Trade, and Japan Bank for International Cooperation to create a voluntary certification mechanism based on quality infrastructure standards in an effort to address the multitrillion-dollar global infrastructure gap and attract investment to emerging economies. These entities did not set out to develop new standards, but to create a common framework for private and public sector-supported projects on environmental, social, and governance (ESG) standards, anti-corruption, and project lifecycle cost transparency. The BDN draws from standards frameworks many development finance institutions (DFI) and private companies already adhere to, including G20 Principles for Quality Infrastructure Investment, the G7 Charlevoix Commitment on Innovative Financing for Development, the Equator Principles, and the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises. Projects are rated on a scale and can receive up to three blue dots, like the Michelin star system.

It is clear that BDN members, the G7, and like-minded countries share the same goal in promoting quality infrastructure, making the effort timely. This framework highlights private sector-led financial transparency, promoting labor and safety standards, preparing and protecting low- and lower middle-income countries from the impacts of climate change, and addressing the ever-growing infrastructure gap. But the BDN initially produced concerns from perspective members and investors of added due diligence, assessment costs burdens, and lengthened approval time for financing, plus questions around who would be certifying the projects and what benefits participants would get.

There were also questions on how the BDN would fit in with or work alongside the proliferation of initiatives from G7 and like-minded countries: the United States (PGII and the Indo-Pacific Economic Framework), Southeast Asia (Infrastructure Asia), and the European Union (Global Gateway and Fast-Infra). Skepticism abounded in Europe around the BDN and among potential stakeholders as to how the effort would be adopted without adding time and money burdens to a project and what standard body to actually follow.

The U.S. Department of State, now the U.S. lead for the BDN, together with the OECD, which provides technical support to the BDN, and the founding partners have conducted extensive outreach and launched pilot certification processes by OECD technical experts (including a Brazilian wind farm, a water sanitation project, a Colombian airport, a tunnel project in Turkey, and an undersea cable project in Palau) to provide proof of concept.

Thanks to these efforts, the BDN has emerged from the pack and seemingly has won over some in Europe, asserting it could support or complement the other initiatives. Companies see the awarding of a blue dot as a sign of quality work that could help with future project bidding. Like the Michelin star, it is a visible and tangible sign of quality work. For both the private sector and governance advocates alike, pressing for strong standards, including transparent regulatory regimes and rule of law, enables a better investment environment and could attract more financing. For host governments, providing jobs and skills transfer is a political win. Adding BDN standards to their tenders could also simplify project preparation. The addition of the United Kingdom is an important and tangible step towards solidifying the BDN’s credibility and feasibility.

There are still outstanding questions the BDN will have to answer, especially on the administrative structure of the BDN and costs and time burdens. There are advantages of having one recognized set of standards that are credible, feasible, and broadly recognized. There are efforts BDN members and the OECD will need to undertake to maintain momentum and put the initiative on the path to success. It is critical to get more projects in the pipeline, even if it means evaluating projects already completed, to demonstrate the power of the BDN to promote sustainable and resilient infrastructure, attracting more private sector investment in emerging markets, lessons learned to make it more user-friendly and therefore attract more private sector involvement, and what else is needed for member countries to make it work. An initiative embraced, implemented, and constantly gardened by a cross section of key stakeholders, including and especially within the U.S. interagency, will be more effective that creating new initiatives that address the same thing. A push to launch additional new initiatives for the sake of having something new could reduce the BDN’s efficacy and demonstrate a lack of cooperation and commitment of like-minded partners. Instead, the BDN requires partners to work through disagreements and focus on a shared overall goal: quality infrastructure.

Erin Murphy is the deputy director and senior fellow with the Economics Program at the Center for Strategic and International Studies in Washington, D.C.