As part of a coordinated effort by the leading democratic economies around the world to combat China’s Belt and Road Initiative, President Biden declared Sunday that the U.S. would mobilize $200 billion in investment in global infrastructure projects over the next five-years. Over the next five-years, the total investment will include G7 partners as well as private capital.
Biden spoke out, flanked at the summit in Germany by other G7 leaders. It’s an investment that will bring returns for all, including the Americans and the citizens of all our countries.
This announcement marks the official launch of the “Build Back Better World” initiative that was launched last year at G7 in the UK. It is a play on Biden’s domestic proposal, which would have reshaped America’s economy but ended up in Congress. This effort is now known as the Partnership for Global Infrastructure and Investment (or PGII).
China has spent nearly a decade focusing on infrastructure projects in the developing countries, such as bridges, road, and mining. The total amount of spending has been estimated to be $1 trillion, but it could be much higher. G7 is funding four main categories of projects: clean energy and health systems, gender equality, information and communication technology, and clean energy.
These are some of the options for investments:
Biden stated that “we collectively have dozens” of projects underway across the globe. He argued that this effort will show democracies can deliver and without as many strings attached to Chinese-funded infrastructure. It’s an opportunity for us to share our positive vision of the future. Let communities all over the globe see the tangible benefits of partnering up with democracies.
This is a combination of government funding and private capital, such as private equity funds, pension funds, and insurance funds.
“The public sector alone won’t be able to close many of the enormous gaps we face in many areas of the world,” stated Olaf Scholz, German Chancellor, during his remarks at launch event.
It is not a new idea to harness private capital to augment public funding for development projects. Leading democracies are also concerned about China’s increasing influence in Africa, Asia, and Latin America. However, so far the results have not been good, according to Gyude Moore (a former Liberian minister of public works).
“The West has been unable to respond to China’s [Belt and Road Initiative] for close to a decade. Moore stated that their sharp criticism of Chinese lending practices and loans was not accompanied with a credible alternative.
He stated that many developing countries had ignored criticisms and turned to China. He was skeptical that the G7 could offer an alternative to China, leading up to the announcement. Moore was surprised at the magnitude of the commitment after the announcement.
“This Partnership for Global Infrastructure and Investment represents the beginning of the missing solution. It’s a sufficient response, both in terms of size and scope. Implementation details will be the next challenge. But that’s another day. Moore, now at the Center for Global Development, said, “Today, we commend and applaud the G7 leadership.”
