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The story so far: On June 26, U.S. President Joe Biden along with his G7 allies unveiled the ambitious Partnership for Global Infrastructure and Investment (PGII), announcing the collective mobilisation of $600 billion by 2027 to deliver “game-changing” and “transparent” infrastructure projects to developing and middle-income countries. The PGII is being seen as the G7’s counter to China’s multi-trillion dollar Belt and Road Initiative (BRI) to build connectivity, infrastructure, and trade projects in Asia, Europe, Africa, and Latin America.
The West has been sceptical of the BRI, since it was launched in 2013 by President Xi Jinping, as it was considered to be part of China’s larger strategy to increase geopolitical influence in Asia and other developing countries. The U.S., along with G7 partners the U.K., Japan, France, Canada, Germany, Italy, and the European Union (EU), had in 2021 announced the launch of the Build Back Better World (B3W) with the aim of narrowing the $40 trillion infrastructure gap in the developing world. PGII is therefore, a relaunch of Mr. Biden’s B3W plan.
The factsheet put out by the White House described the PGII as a “values-driven, high-impact, and transparent infrastructure partnership to meet the enormous infrastructure needs of low and middle-income countries and support the United States’ and its allies’ economic and national security interests”. The G7 members aim to collectively mobilise $600 billion by 2027 to invest in sustainable and quality infrastructure projects in developing countries, including India, and strengthen global supply chains. Mr. Biden announced the country’s pledge to channel $200 billion in grants, public financing, and private capital over the next five years for the PGII. European Commission President Ursula von der Leyen declared Europe’s pledge of mobilising 300 billion euros for the partnership over the same period.
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All PGII projects will be driven by “four priority pillars that will define the second half of the 21st century”. First, the G7 grouping aims to tackle the climate crisis and ensure global energy security through clean energy supply chains. Second, the projects will focus on bolstering digital information and communications technology (ICT) networks facilitating technologies such as 5G and 6G internet connectivity and cybersecurity. Third, the projects aim to advance gender equality and equity, and lastly, to build and upgrade global health infrastructure.
Mr Biden announced the flagship projects for PGII that have either commenced or are set to begin. The U.S International Development Finance Corporation (DFC), along with the G7 nations and the EU are disbursing a $3.3 million technical assistance grant to build a vaccine facility in Senegal, having a potential yearly capacity of manufacturing “millions of doses of COVID-19 and other vaccines”. Ms. Leyen said that the European Commission’s Global Gateway initiative is also undertaking projects supporting the PGII such as mRNA vaccine plants in Latin America and a fibre-optic cable linking Europe to Latin America among others.
In India, the U.S. DFC will invest up to $30 million in Omnivore Agritech and Climate Sustainability Fund 3, an impact venture capital fund that invests in entrepreneurs building the future of agriculture, food systems, climate, and rural economy in India.
The Belt and Road project was started to revive connectivity, trade, and infrastructure along what was China’s ancient Silk Road. China had announced a two-pronged approach of building a Silk Road Economic Belt on Land and a maritime 21st century Silk Road. The project initially aimed to strengthen connectivity with Southeast Asia but later expanded to South and Central Asia, Africa, Europe, and Latin America, with Mr. Xi saying it would “break the bottleneck in Asian connectivity”.
The G7 meanwhile has specifically touted the PGII as a values-based plan to help underfunded low and middle-income countries meet their infrastructure needs. PGII has laid focus on climate action and clean energy, while China has built large coal-fired plants under BRI along with solar, hydro, and wind energy projects. While the G7 has pledged $600 billion by 2027, Morgan and Stanly estimate that China’s overall funding for BRI by that time could reach $1.2 to 1.3 trillion dollars with the actual funding being higher. Under the PGII, large private capital will be also mobilised while China’s BRI is majorly state-funded.
Besides, the BRI was also launched at a time when China’s local construction firms were short of projects in developed Chinese provinces. Studies have shown that 89% of the contractors participating in BRI projects are Chinese. According to Engineering News Record’s 2019 data, seven out of the world’s 10 biggest construction contractors based on foreign revenue were Chinese. Large number of Chinese workers are employed in BRI projects; for instance 1.82 lakh were working in Africa by late 2019.
While G7 leaders emphasised ‘transparency’ as the cornerstone of PGII projects, the BRI has faced criticism for making countries sign confidential tenders for extending massive loans, leaving countries indebted to China. For instance, after the BRI’s flagship $62 billion China-Pakistan Economic Corridor, Pakistan owes Beijing a large proportion of its foreign debt.
China builds BRI’s projects by extending large, low-interest loans to countries that have to usually be paid over 10 years. There have been cases of debt-saddled countries failing to repay on time. Sri Lanka, for instance, had to cede its key Hambantota Port on a 99-year lease to China. Mr. Biden has said meanwhile, that PGII aims to build projects through grants and investments.
A PGII project has already been announced in India but India had opted out of China’s BRI, being wary of Beijing’s aim to increase its influence in the Indian Ocean Region by roping in Pakistan as a major BRI recipient.
