G7's Belt and Road changes name, but limits remain
Renamed the Partnership for Global Infrastructure and Investment, it is expected to raise US$ 600 billion over five years. Money to be invested in "sustainable" infrastructure projects for developing countries. With pandemic crisis, inflation and war in Ukraine, it will be difficult to mobilize resources. Potential client states prefer to deal with Beijing, which imposes few conditions.
Rome (AsiaNews) – One year ago it was baptised Build Back Better World, now G7 leaders have renamed it the Partnership for Global Infrastructure and Investment. It may be a change in label, but in order for it to become a real alternative to China's Belt and Road Initiative, it must first contend with the problems of Covid-19 and the Russian invasion of Ukraine.
At their annual summit on June 26, the world's seven most advanced economies announced their "new" partnership and the aim to raise US$ 600 billion over five years to finance infrastructure projects in developing countries. The Biden administration speaks of a coordinated effort to meet the needs of the most disadvantaged nations, but in a "transparent" manner and in accordance with high financial, environmental, labor and security standards. Spending should be used to combat climate change, improve global health, foster gender equality and strengthen the digital economy.
With a view to competing (confronting) with China, the Partnership for Global Infrastructure and Investment comes at an opportune time. As also pointed out by Chinese observers, the Belt and Road has experienced a dramatic decline in investment over the past four years. According to the China Global Investment Tracker, the initiative launched in 2013 by Xi Jinping to increase China's global clout through infrastructure investment has so far seen allocations of US$ 838 billion: from a peak of US$ 130 billion in 2015, however, to US$ 63.5 billion in 2021.
The economic slowdown in China, exacerbated by draconian Covid-19 containment rules and the effects of the Russian-Ukrainian war, could dry up Chinese investment in the 140 Belt and Road partner countries even more.
The first hurdle for G7 nations will be financial resources. For the Partnership for Global Infrastructure and Investment, the U.S. has pledged US$ 200 million in public and private funding: an alternative to those offering schemes that Washington says are actually "debt traps." The European Union wants to put up US$ 316.7 billion so as to build a "sustainable" alternative to the Belt and Road. Between pandemic recovery plans, fighting inflation and supporting Ukraine, it remains to be seen how much Washington and its allies will be able to allocate; not to mention that it will not be easy to engage private investors.
The Belt and Road has come under indictment for funding polluting facilities such as coal plants, its opaque bidding that favors Chinese companies, and the forced displacement of populations to make way for new infrastructure. The harshest accusation, however, is of making debtor countries increasingly dependent on the Chinese creditor.
Despite a study by AidData revealing that 40 of the 50 largest loans allocated by Chinese state creditors received "collateral" from client governments, developing countries do not seem to want to give up Beijing's money. In all likelihood, the biggest problem for G7 governments is to unhinge a relationship that has been structured over time between China and its debtors.
Even if they pay higher interest rates than those offered by Western governments and institutions, many developing countries favor Chinese financing and projects because Beijing does not impose fiscal and financial conditions, environmental and humanitarian constraints, or complex management controls and transparency on them – essentially the points on which the Partnership for Global Infrastructure and Investment is based.