Explained: The G7’s infrastructure investment plan to counter China’s Belt and Road Initiative

The G7 countries that meet during the current conference Leaders Summit in Germany, formally launched the Partnership for Global Infrastructure and Investment (PGII), a joint initiative to finance infrastructure projects in developing countries. The project, which was launched on June 27, is viewed as a conglomerate project Contrasted with China’s Belt and Road Initiative.

“Collectively, we aim to mobilize nearly $600 billion from the G7 by 2027 to invest in critical infrastructure that improves lives and delivers real gains for all of our people,” US President Joe Biden said on Twitter.

What is the G7’s PGII?

The infrastructure plan was first announced in June 2021 during last year’s G7 summit in the UK. At the time, US President Joe Biden called it the Rebuilding a Better World (B3W) framework. However, not much progress was recorded and details regarding the time period for the plan or the source of funding were not clear.

This time, the initiative was officially launched as PGII.

Basically, the G7 countries – the United States, Canada, Italy, the United Kingdom, France, Germany and Japan – and the European Union have noticed the infrastructure projects implemented and financed by China at the global level and decided to present their alternative mechanism for this.

The stated purpose of both the PGII and the BRI is to help secure funding for countries to build critical infrastructure such as roads, ports, bridges, communications equipment, etc. to enhance global trade and cooperation.

However, the G7 says its initiative aims to be transparent, focus on building climate-resilient infrastructure, help achieve gender equality goals and develop health infrastructure.

“When we demonstrate all that democracies have to offer — I have no doubts that we will win the competition every time,” Biden said in a speech announcing the plan Monday. He added that about ten projects are already underway with government and private sector funding.

The US President also stated that the fund does not mean “charity or assistance”, but rather loans, and it will be beneficial to both the countries that lend and receive them.

Where is the money directed under the plan?

In India, the US International Development Finance Corporation, the country’s development bank, will invest up to $30 million in the Omnivore Agritech and Climate Sustainability Fund 3, described as an “impact venture capital fund that invests in entrepreneurs to build the future of agriculture, food systems, climate and the rural economy” According to a statement issued by the White House.

The fund will invest in companies that “increase food security and enhance climate resilience and adaptation in India, as well as improve the profitability and agricultural productivity of smallholder farms.”

Aside from India, projects have been announced in countries across West Africa, Southeast Asia and South America.

What was China’s response to the PGII declaration?

Asked about PGII, Chinese Foreign Ministry spokesman Zhao Lijian said, according to Reuters, “China continues to welcome all initiatives to promote global infrastructure development.”

We believe that there is no doubt that different related initiatives will replace each other. “We are against pushing forward geopolitical calculations under the pretext of building infrastructure or distorting the Belt and Road Initiative,” he added.

What is China’s Belt and Road Initiative?

China launched the Belt and Road Initiative in 2013 under its president, Xi Jinping. It aims to revive the ancient trade routes that crossed to and from China – from Rome in Europe to East Asia.

Under this, the Chinese government has helped provide loans for infrastructure projects to various countries, and in many cases, Chinese companies have been awarded contracts to carry out the works. This helped China make its mark globally.

However, China has been criticized in the West and some other countries for introducing unsustainable debts to countries that they would not be able to repay. According to a 2019 World Bank report, of the 43 corridor economies for which detailed data is available, 12 could face debt unsustainability, which could result in the handover of public assets to foreign contractors or China itself.

The report adds that if the issues of environmental degradation, high debt, and corruption are successfully addressed and the Belt and Road Initiative is fully implemented according to its potential, trade could increase between 1.7 and 6.2 percent for the world, increasing global real income by 0.7 to 2.9 percent.

In 2019, Chinese Foreign Minister Wang Yi said at a press conference that since the launch of the Belt and Road Initiative, “the trade volume between China and BRI countries has exceeded 6 trillion US dollars, with more than 80 billion US dollars of Chinese investment in these countries.” ‘, creating nearly 300,000 jobs for local residents.

India opposed the Belt and Road Initiative because it included the China-Pakistan Economic Corridor, which links Kashgar in China to the port of Gwadar in Pakistan via Pakistan-occupied Kashmir. Indian External Affairs Minister S Jaishankar said in 2021: “Any serious communication initiative must be transparent and in line with the fundamental principles of respect for sovereignty and territorial integrity.”

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Is there any overlap between the two schemes?

While the United States has been critical of the Belt and Road Initiative, other countries in the G7 have mixed responses to it. Italy became the first G7 member to join the Belt and Road Initiative in 2019, and British Finance Minister Philip Hammond described the policy as a “vision” in the same year, although it is not officially part of the BRI.

“The UK is committed to helping realize the potential of the Belt and Road Initiative and to do so in a way that works for all whose lives have been affected by the project,” Reuters reported.

Although Germany and France are not directly involved in the Belt and Road Initiative, they have also partnered with China to build rail networks and other connectivity projects.

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