Investment plan

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

The G7 countries, which are meeting during the current Leaders Summit in Germany, officially launched the Partnership for Global Infrastructure and Investment (PGII), a joint initiative to finance infrastructure projects in developing countries. The project, launched on June 27, is considered the block contrary to China’s Belt and Road Initiative.

US President Joe Biden said on Twitter: “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. population.

What is the G7 PGII?

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

This time, the initiative was officially launched under the name of PGII.

Essentially, the G7 countries – the United States, Canada, Italy, the United Kingdom, France, Germany and Japan – and the EU have taken note of the infrastructure projects undertaken and financed by China globally and have decided to present their alternative mechanism for this.

The stated purpose of PGII and BRI is to help secure finance for countries to build critical infrastructure such as roads, ports, bridges, communication facilities, etc. to improve global trade and cooperation.

However, the G7 says its initiative is intended to be transparent, focused on building climate-resilient infrastructure and contributing to the achievement of gender equality and health infrastructure development goals.

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

The US president also mentioned that the fund does not mean “charity or aid”, but loans, and will benefit both the countries that lend them and those that receive them.

Where are the funds 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 who are building the future of agriculture”. , food systems, climate and the rural economy,” according to a statement from the White House.

The fund will invest in companies that “increase food security and promote both climate resilience and climate adaptation in India, as well as improving smallholder farm profitability and agricultural productivity.”

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

What was China’s response to the PGII announcement?

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

“We believe that there is no doubt that various related initiatives will replace each other. We are opposed to advancing geopolitical calculations under the guise of building infrastructure or smearing the Belt and Road Initiative, he added.

What is the Chinese BRI?

China launched the Belt and Road Initiative in 2013 under the leadership of its President Xi Jinping. It aims to revive ancient trade routes crossing to and from China – from Rome in Europe to East Asia.

As part of 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 work. This has helped China make its mark on the world stage.

However, China has been criticized in the West and by some other countries for providing unsustainable debts to countries that will not be able to repay them. According to a 2019 World Bank report, among the 43 corridor economies for which detailed data was available, 12 could face a situation where debts were not sustainable, which could lead to the sale of assets. to foreign contractors or to China itself.

The report adds that if the problems of environmental degradation, high debt and corruption are successfully countered and the BRI is fully implemented to its potential, it could increase trade between 1.7 and 6.2. % for the world, increasing world real income by 0.7 to 2.9%.

In 2019, Chinese Foreign Minister Wang Yi told a press conference that since the launch of the BRI, “the trade volume between China and countries joining the BRI has exceeded US$6 trillion. , with more than US$80 billion of Chinese investment in these countries,” creating nearly 300,000 jobs for local people.

India opposed the BRI because it included the China-Pakistan Economic Corridor, which linked Kashgar in China to the port of Gwadar in Pakistan via Pakistan-occupied Kashmir. India’s External Affairs Minister, S Jaishankar, said in 2021: “Any serious connectivity initiative must be transparent and consistent with the most fundamental principle of respect for sovereignty and territorial integrity”.

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Is there an overlap between the two regimes?

While the United States has criticized the BRI, other G7 countries have had varying responses to it. Italy became the first G7 member to join the BRI in 2019, and UK finance minister Philip Hammond described the policy as a “vision” in the same year, despite not being officially part of it. the BRI.

“The UK is committed to helping realize the potential of the BRI and to doing so in a way that works for everyone whose lives are touched by the project,” he said, as the reports Reuters.

Germany and France, although not directly participating in the BRI, have also partnered with China to build rail networks and other connectivity projects.