In the 47th G7 summit in Cornwall (U.K), US president Joe Biden put forward a global infrastructure initiative, Build Back Better World (B3W), a plan similar on the lines of the Chinese infra development plan – Belt and Road Initiative (BRI), but also as a counter to the same.
The G7 consists of Canada, France, Germany, Italy, Japan, UK, and USA. India, Australia, South Korea, and South Africa were invited as guest countries for the summit this year. The Voices explains the BRI vs B3W buzz kicked off by the communique signed by above mentioned countries.
The Belt and Road Initiative of China
Also touted by experts as Modern-day Marshall plan, BRI, a Chinese foreign policy adventure, was first proposed by Chinese President Xi Jinping in 2013. An initiative which initially aimed at building of a trade, investment, and infrastructure network connecting Asia with Europe and Africa along the ancient trade routes, now, includes extending of financial and humanitarian aid projects too. The promotion of the massive diplomatic outreach, which as per official numbers, already has more than 126 countries and 26 International organizations on board, has also been incorporated into Chinese constitution by The Communist Party of China (CPC).
Evolution of B3W
As an idea, B3W isn’t new. In 2018, Ex US President Donand Trump too proposed an alternative infrastructure development programme – Better Utilisation of Investment to Development (BUILD). BUILD, apart from being poised to sponsor projects in LIC’s and MIC’S, also had a dedicated US$60 billion component for alleviation of extreme poverty.
For this US announced the transformation of US Overseas Private Investment Corporation into new International Development Finance corporation (USIDFC) empowered with comprehensive financing capabilities.
In 2019, at Indo pacific Business forum in Bangkok, Thailand, US partnered with Japan and Australia to launch a multi stakeholder initiative called Blue Dot Network (BDN) to bring in countries on board to promote, and confirm to high quality economic and environmental standards for global infrastructure development. This led to refinement of the vision for USIDFC in terms of what sort of projects to finance.
To an extent, B3W is a manifestation of vision rooted in BDN.
B3W: A bet on the low and middle-income countries (LIC’s, MIC’s)
LIC’s, MIC’s are finding it difficult to finance their infrastructure projects due to the current pandemic. Moreover, COVID-19 pandemic has already exposed the faultlines in Chinese financing model as more than 20% of BRI projects have been put on hold.
On the other side, B3W has pledged to finance a US$ 40 Trillion gap for infrastructure development across developing world through “sustainable and value driven infrastructure investment”. More so the Chinese investment through BRI in the LIC’s and MIC’s has created a Chinese hegemony. To counter the dominance of China and to offer an alternative to BRI, experts suggest, B3W is launched.
But once the initiative takes off the real challenge with the LIC’s and MIC’s would be to choose between the available option as the competing parties will offer lucrative deals and by previous experiences of the cold war era, with some exclusivity clause too.
The plan of action
B3W will be an infrastructure financing initiative led by the G7 and alliance of other like minded democracies representative of a soft power driven by common values, good governance and ideal standards. Infrastructure financing means it will offer soft, and faster loans or investment assistance to the beneficiary country for vital green infrastructure projects in harmony with Sustainable development goals to be achieved by 2030. The focus areas will be climate, health, digital technology & gender equality, and equity.
G7 communique confirmed about B3W aspirations for enhancement in “multilateral financing” through development banks and other financial institutions adhering to the highest standards for project planning, implementation, social and environmental safeguards, and analytical capability”
Need for the initiative
Biden says “The point is that what’s happening is that China has this BRI, and we think there is a much more equitable way to provide for the need of countries around the world.”
BRI offers some added advantage too for China which includes:
- Promotion of Chinese-led financial institutions.
- An assured route through the middle east and Africa for its energy security.
- Easy access to European Markets
- Establishment of Chinese maritime dominance in the South China Sea and the Indian Ocean
The G7 initiative will help the member countries to contain and compete with BRI’s default strategic investment.
B3W vs BRI
B3W is yet to deliver exhaustive details. BRI has already delivered on logistical and humanitarian fronts. But, time and again, west and experts have called out China over allegations of non-transparency, corrupt contracts, human rights, and environmental degradation.
The overboard financing temptations extended by China make LIC’s and MIC’s vulnerable to dept trap. For instance, Sri Lanka’s failure to repay the loans taken for modernization of Hambantota Port ultimately led to takeover of majority of it’s shares by a Chinese owned Company in 2017. And Hydropower plant constructed in Sumatra, was criticized as unsustainable intrusion in rainforests. Hence B3W is proposed as the antidote of such practices.
The BRI edge explained
BRI might still be a more enticing affair for countries. Here are a few reasons accounting to this
- China has been more flexible and less intrusive in local aspirations. The idealism of B3W driven by western commandments is too much for developing world to deal with.
- As per Investment criteria of B3W no funding will be given to coal fired power stations. The cost incurred in explorations of green alternatives is too much for the developing world. Hence, they would party with someone who remains flexible with green stipulations.
- Flexibility in financing arrangement and paperwork is another plus for China. The B3W is expected to be more exhaustive and bureaucratic in this aspect. For instance, the Caribbean govts. have found it difficult to complete paper work since years to access USDFI funding in Islands.
- Voices within the G7 grouping itself are skeptical about explicitly confronting China. UK PM Borish Jhonson says that the grouping’s priorities show “who we are, not who we are against.”
Strategic Financing (BRI vs B3W)
BRI has been creatively financed by China for strategic gains. The Chinese state has injected massive capitals in its public financial institutions so that they could offer cheap loans to Chinese companies working on the BRI and to Chinese State-Owned Enterprises so that they could place competitive bids against foreign and local companies on the projects.
Proponents of B3W will have a tough time in replicating such practices. Yes, the dominance of US on international financial and commercial institutions would help in penetration of the initiative but strategic financing is also about risk appetite which independent companies in west won’t risk themselves to. USDFC has already gone on record to say that they might not be able to finance such projects which might not be rewarding for American Tax payer in long run.
Hence China might continue to offer cheap bids and a bigger appetite for high-risk megaprojects. China’s risk appetite for megaprojects is not merely driven by financial gains, rather strategic ones. For example, In Indonesia, China got involved in an almost non-profitable Jakarta-Bandung high-speed rail project
China’s Position on B3W
As per Global Times, a mouthpiece of CPC, B3W is just propaganda and empty promises as they did after 2008 recession. They counter B3W on lack of details regarding the funds and timeline of the initiative.
India will study B3W: MEA, GOI
MEA has consistently protested against one of BRI’s element China Pakistan Economic Corridor (CPEC), saying, it’s proposed in “territory of India which has been illegally occupied by Pakistan”.
Undeniably, B3W, emerges as an exciting option for India to contain Chinese strategic outreach. But as of now, senior official of MEA, P Harish said, “On the specific question of joining B3W, I can confirm that relevant agencies of GOI would study them and would engage with them probably at the later stage.”
Meanwhile, many countries in Indian Subcontinent and South East Asia have welcomed the B3W plan as another alternative to realize the infrastructure needs.
Story edited by NK Jha