If Donald Trump had his tariff wars, his successor US President Joe Biden is pushing for Build Back Better World or B3W. The goal for both: tackle China and checkmate it at a game that Beijing is now seemingly playing much better than Washington, that is, to gain influence in as many countries as possible by the use of hard and/and or soft powers of diplomacy. Compared to the post-World War domination that the US achieved, China may appear relatively new to the game. But the dragon has already made big strides in the business of making friends and influencing countries; it is the US that may appear like it needs to play catch-up.
What US Has Proposed? How Much Has China Spent?
A White House press statement sharing details of B3W following the G7 meet in UK said that through the initiative, the US was "rallying the world’s democracies to deliver for our people, meet the world’s biggest challenges, and demonstrate our shared values". Towards that end, the US and its G7 partner countries would use B3W to meet the "tremendous infrastructure needs of low-and middle-income countries". The idea is to "help narrow the $40+ trillion infrastructure need in the developing world" that has been made more acute by the ravages wrought by the COVID-19 pandemic.
The B3W blueprint envisages actions in four key areas: climate, health and health security, digital technology, and gender equity and equality. However, additional details as to what the plan entails and what is the funding that developing countries can count on were not immediately available.
China launched the Belt and Road Initiative, described as a "transcontinental long-term policy and investment programme which aims at infrastructure development and acceleration of the economic integration of countries along the route of the historic Silk Road" in 2013. And it has moved quickly in spreading money and expertise among partner countries.
According to data firm Refinitiv, Beijing has so far committed to funding of $4.2 trillion in BRI projects along with those involving Chinese participation.
How Is The Belt And Road Initiative Funded? What Will US Do?
According to a piece in the South China Morning Post, funding for BRI projects mainly comprises bank loans that are routed through a matrix of government and private institutions. According to an online resource, China uses "diverse funding channels such as BRI bonds, private capital investment and public-private partnerships (PPP)... state-owned enterprise (SOE) investment," to extend funds. SCMP adds that apart from these, international agencies like the World Bank, Asian Development Bank, etc. are also used for funding. It also cites Refinitiv to say that "59 percent of the (BRI) projects are owned by government entities as of September 2020. The private sector accounted for about 26 per cent. The remaining projects are defined as public-private ventures".
The White House has said that G7 and its partners will "coordinate in mobilising private-sector capital" for the funding needs of B3W "with catalytic investments from our respective development finance institutions".
It has added that US shall be "a lead partner" and will press multiple institutions into service for meeting the development finance needs of B3W. Among the names proposed are the Development Finance Corporation, USAID, EXIM, the Millennium Challenge Corporation, and the US Trade and Development Agency. As far as, US is concerned, these efforts would also "complement domestic infrastructure investments in the American Jobs Plan and create new opportunities to demonstrate US competitiveness abroad and create jobs at home".
While more details are awaited, analysts say that information is too scant at this stage to fully decipher how B3W funds will be disbursed and the types of loan that the G7 countries are going to put up for the developing countries. However, the focus on private capital means these will be firmly tied to the market and profitability will be a key factor behind the funding.
Which Countries Are Part of BRI? Who WIll B3W Support?
According to an OECD report, infrastructure investment needs globally in areas such as transportation, energy, water and telecommunications have been estimated to be as high as $6.3 trillion annually. Which means, that till 2030, countries around the world could need to find up to $50 trillion for meeting their infrastructure needs. An Asian Development Bank (ADB) report says that Asia alone faces an infrastructure funding gap of an estimated $26 trillion till 2030.
The BRI projects tracked by Refinitiv are tailored to address these specific infrastructure needs. According to the fifth edition of its BRI report, the "transportation sector was the biggest focus for BRI project funding in the first half of 2020), followed by the power and water and real estate sectors". Russia led the list of countries both on total value of investments and the number of projects up to June 2020 with Malaysia, Turkey, Thailand, Pakistan making up the top five countries where China has spent BRI money.
The website green-bri.org says that there are a total of 140 countries that have joined "BRI by signing a Memorandum of Understanding (MoU) with China". Of these, 40 are in Sub-Saharan Africa, 34 in Europe & Central Asia, including 18 in the European Union and 24 countries in East Asia & Pacific.
According to analysis by professional services firm Dezan Shira & Associates, the mention in the White House statement of "like-minded partners" in relation to B3W indicates that the funding may only flow to democracies. That it notes, "contrasts with (BRI), which has not laid down any pre-conditions and comprises democratic nations, as well as autocratic and other government styles".
In the neighbourhood, green-bri.org says, China has funded BRI projects in Pakistan, Bangladesh, Nepal, Afghanistan, Sri Lanka, and the Maldives. That is, all Saarc nations except India and Bhutan.
India was an invitee to this year's G7 and was present as a guest the last time the leaders had met, in 2019 in France. Increasingly frosty ties with China means that New Delhi and Washington are closer than ever when it comes to the goal of keeping China in check. Infrastructure is a key focus area for the Narendra Modi government and following the B3W announcement, Indian officials have said that they will study the plan to explore scope for engagement.
Why Is BRI So Controversial? How Will B3W Be Different?
Right in the mission statement, the US has stressed that B3W will be "a values-driven, high-standard, and transparent infrastructure partnership led by major
democracies". The indirect reference to China is unmistakable. In the manner in which China typically does business, there is limited clarity officially on how much money the country is spending on BRI and what kind of projects are treated as being part of the initiative.
But the biggest issue without a doubt is the large amounts of debt that developing countries have come to owe China for joining BRI. According to SCMP, China's investments in "countries that already have high levels of debt" has led to Washington labelling BRI as a “debt trap”. Analysts say that these are loans that countries often will not be able to repay while some of the projects may be of the kind that would never turn profitable.
The Council on Foreign relations cites a 2018 report by the Centre for Global Development to say that "eight BRI countries are vulnerable to debt crises". It also notes that "overall debt to China has soared since 2013, surpassing 20 per cent of GDP in some countries". China seems to be responding to such criticism and reports say that it last year suspended debt repayments for 77 developing countries as part of a G20 initiative.
G7 has said it will take care that "infrastructure development (is) carried out in a transparent and sustainable manner — financially, environmentally, and socially". Putting the stress on transparency, it adds that they "will offer countries a positive vision and a sustainable, transparent source of financing to meet
their infrastructure needs". It's still early days, experts say, in the first combined effort by the advanced west to contain China. But any plan formulated by vibrant democracies such as these countries are usually takes time and has to go through many diplomatic and bureaucratic twists and turns. The target would
certainly be to show that advanced democracies, too, can move quickly and decisively to extend funding and assistance to countries that need it so that they may get the better of China at its own game.
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