Can the G7 countries create an alternative to the Chinese belt and the Chinese road?
Western countries have criticized China’s inflow of development capital into Africa under its Belt and Road Initiative (BRI), and even urged African governments to avoid Chinese funding. With huge infrastructure investment gaps to cover, it was imperative for Africa to seek a forgiving development partner for its projects. Additionally, most African leaders – especially those with a history of corruption – generally avoid the Western Bretton Woods institutions (the World Bank and the IMF), which tend to demand high liability on their lending facilities.
From investments in mega-ports in Kenya to profitable fishmeal factories on the West African coast, half of the more than 100 countries receiving BRI investments are located in Africa. Indeed, the flexible terms of the BRI are a unique and attractive proposition for African politicians.
The BIS has placed China on a competing trajectory in the geopolitical arena against other global superpowers. However, can Western countries combine their efforts to compete with the BRI?
In March, President Biden told reporters that during a phone call with British Prime Minister Boris Johnson, they had considered an alternative infrastructure system that could essentially compete with China’s BRI. “I suggested that we should have, in essence, a similar initiative, pulling democratic states, helping communities around the world who, in fact, need help,” Biden told reporters. In addition, Biden has sought to encourage private sector investment in overseas projects that could rival those of the BIS.
The Biden administration appears determined to invest heavily in infrastructure after launching a multibillion-dollar infrastructure and jobs package last month. He called it “the moment when America won the future again” because the United States will increase funding for promising new technologies such as quantum computing, artificial intelligence and biotechnology.
President Biden was also city swearing that he would prevent China from overtaking the United States to become the most powerful nation in the world. He clarified that the United States was not seeking a confrontation, but implored China to adhere to the rules of international trade, fair competition and respect for human rights.
To determine what efforts President Biden needs to make to slow China’s growing influence on investment, we need to analyze what the BIS has accomplished since its launch in 2013.
So far, more than 100 countries have signed the BRI infrastructure projects. Recent estimates from the Refinitiv database show that more than 2,600 projects with a total cost of $ 3.7 trillion may be linked to the BIS as of the middle of last year. However, it is important to note that some countries under the BRI have heard criticism of the projects because they are seen as expensive and redundant. In addition, COVID-19 also affected around 20% of the projects.
Will Biden be able to put an end to this during his tenure? It may be too early to tell.
Or maybe the BRI alternative will emerge from a partnership between the EU and India. Last month, the Financial Times reported that the EU and India were in talks to build joint infrastructure projects around the world as part of a “connectivity” partnership. He includes sectors such as energy, digital technology and transport, with better legal guarantees and attractive loan conditions compared to those offered by Beijing. The partnership will offer alternatives to the BRI in Europe, Asia and Africa, and will aim to define financial sustainability standards and rule of law criteria.
There is already speculation that the upcoming G7 summit which will be hosted by UK Prime Minister Boris Johnson will feature an infrastructure investment program in light of the BRI. India, Australia and South Korea have been invited to participate in this year’s summit.
But some foreign policy analysts have questioned the intentions of the West’s initiative. “Is it just to blunt China’s growing power or is there a real intention to invest in LMICs (low and middle income countries)?” asked Gyude Moore, senior policy researcher at the Center for Global Development.
Gyude further observed that more sources of infrastructure finance for LMICs would provide a competitive landscape that ultimately lower the costs of infrastructure projects. However, the Western initiative faces significant political constraints. First, in the case of the United States, the Biden administration still has work to do to convince the United States Congress to allow funding for Biden’s $ 2 trillion infrastructure package. Second, Western countries will have to convince LMICs that their plans are genuine, and not just an instrument to oppose China.
The opinions expressed here are those of the author and not necessarily those of The Maritime Executive.