What is the Partnership for Global Infrastructure and Investment launched at G7 summit to counter China?

The G7 countries are firm on their resolve to stem the growing influence of China in global networks. Just how firm is their resolve was for all to see when flanked by his G7 counterparts, President Biden announced that the U.S will mobilize $200 billion as an investment in global infrastructure projects in the next five years. The projects are seen as the efforts by the world's leading democratic economies to counter China's Belt and Road Initiative.

As he made the announcement formally launching the global infrastructure partnership, on the margins of the G7 Summit in Germany’s Elmau on June 26, 2022 (Sunday), he was flanked by the President of the European Commission – Ursula von der Leyen, Prime Minister of Japan – Fumio Kishida, Prime Minister of Canada – Justin Trudeau, German Chancellor – Olaf Scholz, Prime Minister of Italy – Mario Draghi and President of the European Council – Charles Michel.

The optics here are crucial. Led by the US, the overall investment – including the G7 partners and private capital – aims to hit $600 billion over the next five years.

Partnership for Global Infrastructure and Investment

Biden’s announcement package is being called ‘Partnership for Global Infrastructure and Investment’ or PGII. Technically speaking, it is old wine in a new bottle — just a rebranding and an official launch of what had been rolled out last year at the G7 in the UK as "Build Back Better World" (B3W). It was packaged as an alternative to China's Belt and Road Initiative (BRI) for the infrastructure development of the low- and middle-income countries.

The Dragon’s insatiable appetite

Chinese insatiable hunger for infrastructure projects and furthering its BRI has been increasingly irking other major economies that have been wary of Beijing’s expansionist agendas. China has focused on building bridges, roads, mining and other hard infrastructure projects in low- and middle-income countries – the developing world – for nearly a decade now. These infrastructure projects — estimated at $1 trillion in total spending, though the true amount could be many times more — have been effectively cloaking the Chinese debt trap and leaving the developing economies strapped for funds. In fact, as per a report last year, China has trapped 165 countries with debts of at least $385 billion for BRI projects.

How serious G7 is on countering Chinese expansionism

The apparent concern from leading democracies about China's growing influence in Africa, Asia and Latin America isn’t new or unheard of. However, as Biden made the announcement on Sunday, he was clear on the motive. "This isn't aid or charity," he said. "It's an investment that will deliver returns for everyone, including the American people and the people of all our nations."

He claimed that "We collectively have dozens of projects already underway around the globe," further arguing that this effort will prove democracies can deliver, and with fewer strings attached than Chinese-funded infrastructure. "It's a chance for us to share our positive vision for the future. And let communities around the world see themselves, see for themselves the concrete benefits of partnering with democracies."

The idea is to combine government funding with private capital from pension funds, private equity funds and insurance funds, among others. "The public sector alone will not be able to close the huge gap we face in many parts of the world," said German Chancellor Olaf Scholz in his remarks. Tapping on private investment to supplement public funding is again nothing new.

The deliverables

The projects to be funded under the G7 initiative fall into four broad categories — clean energy, health systems, information and communications technology, and gender equality. As of now four major investment projects have been announced.

First, a commitment of $2 billion for a solar project in Angola has been pledged. This would include solar mini-grids, home power kits and solar for powering telecommunications. Second, $600 million for a US company to build a submarine telecommunications cable that will connect Singapore to France through Egypt and the Horn of Africa, delivering high-speed internet. Third, up to $50 million from the US to the World Bank's Childcare Incentive Fund has been announced. This will also be getting support from Canada, Australia and numerous other foundations. Fourth, a $3.3 million fund for technical assistance from the US to the Institut Pasteur de Dakar in Senegal for the development of an industrial-scale, multi-vaccine manufacturing facility in the country. This would produce Covid-19 vaccines and others, in partnership with other G7 nations and the EU.

The commitment

So far, there has been some level of scepticism from the developing world on the credible alternative to China provided by the West. Their claim is that despite crying hoarse and sharply critiquing the Chinese loans and lending practices, the West and leading economies have not done enough to provide a solution. However, if the size of the commitment announced on Sunday is anything to go by, it indicates that the G7 is serious this time about countering the Dragon.