Washington and Brussels Hatch a Plan to Compete with China’s Belt and Road Initiative, But It Won’t Work
On Nov. 18 in Bali, U.S. President Biden and European Commission President Ursula von der Leyen gathered together a few heads of state and government to launch the G7’s anti-Belt and Road scheme, called the Partnership for Global Infrastructure Investment (PGII). The bombastic announcement of a $600 billion plan, however, is really just hot air. The PGII, like its EU predecessor “Global Gateway” or Washington’s “Build Back Better”, is based on the failing assumption that private capital can be mobilized to finance market-oriented infrastructure investments, and that such an initiative could compete with China.
How attractive the PGII is for developing countries is shown by the fact that India and the host Indonesia were the only developing countries present at the Bali meeting. Among the G7, Italy was absent, perhaps unintentionally.
“The West has been struggling with the brand-building exercise for years. While China’s plan quickly turned to steel and concrete, the West’s answer to the Chinese Belt and Road Initiative remains vague,” commented an article in Politico.
The European Network for Debt and Development (Eurodad) drafted an analysis of the Global Gateway approach, which shows why the PGII will also not work,. The report, entitled “The Emperor’s New Clothes: What’s New about the EU’s Global Gateway,” insists that “There is no fresh money allocated to the Global Gateway and instead its approach seems to be an attempt to rebrand existing plans, which raises concerns about diverting already scarce development resources.”
“Policies proposed under the Global Gateway primarily serve private sector interests and they lack a coherent focus on poverty alleviation,” according to the Sept. 2022 report. “The EU’s Global Gateway is based on the assumption that it will mobilize, or leverage, resources from private investors…. The overriding question is what is the EU Global Gateway really about? Is it a bold new strategy focused on the needs of global partners, or will it shape up to be little more than the Emperor’s New Clothes?… The geopolitics of the Global Gateway relies on the promise of financing an initiative that is qualitatively superior to the Chinese-led BRI…. Although the official documents on the Gateway do not explicitly mention competition with China’s Belt and Road Initiative, the implications are clear. The Commission has framed the Gateway as a superior initiative, which is rooted in democratic values, an ethical approach to infrastructure financing based on sustainability and good governance.”
The Global Gateway is based on the Commission’s plan to mobilize up to €300 billion in infrastructure investments. However, this is supposed to be done by mobilizing or leveraging private funds. At the same time, the money allocated comes from previous EU programs and is therefore tantamount to re-packaging development funds.
“The Gateway’s targeted mobilization amount of €300 billion is roughly based on a ballpark leverage ratio of 10. This means that, for every €1 of public finance, €10 will be mobilized in private finance. This amount is based on the activities of the EFSD+, [European Fund for Sustainable Development Plus] which are still in early days, and have been questioned by the European Court of Auditors for being surrounded by ‘lots of hopes and expectations’, but not so much reality.”