The Group of 7 has announced a new infrastructure funding program that could rival China’s One Belt, One Road initiative. One expert says the G7 plan offers hope to developing countries, but it remains to be seen whether it can be compared to the BRI.
On Sunday, the United States and other G7 members, including Canada, Germany and Japan, formally launched the Global Infrastructure and Investment Partnership, which aims to raise about $ 600 billion for global infrastructure projects in low- and middle-income countries in the coming years. five years.
“This really promises something that the BRI may not have had in the beginning,” said Choi Shing Kwok, chief executive of the Singapore-based ISEAS-Yusof Ishak Institute. “It promises hard and soft infrastructure, it promises a more holistic approach.”
BRI is China’s ambitious program to build physical and digital infrastructure, connecting dozens of countries spanning from Asia to Europe and the Middle East. He is at the heart of Chinese President Xi Jinping’s foreign policy.
“It is doubtful whether the scale at this stage [of the G-7 initiative] it may coincide with BRI’s, but it’s something that will be seen later, “Choi told CNBC’s Street Signs Asia on Monday.
US President Joe Biden, at the center, attended a working lunch with other G7 leaders to discuss shaping the global economy. The group of the seven leading economic powers is meeting in Germany for its three-day annual meeting.
Kenny Holston The New York Times via AP, Pool
Choi acknowledged that it may not be entirely fair to compare the two projects, especially since BRI has made 10 years of progress and the G-7’s partnership proposal lacked details.
Over the past decade, China has signed more than 170 BRI cooperation agreements with 125 countries and 29 international organizations in Asia and Europe, as well as with Africa, Latin America and the South Pacific, according to official Chinese data.
Nearly $ 800 billion in investment has been made under the BRI, surpassing the investment currently promised by the G7. Trillions more dollars were expected to be invested through China’s infrastructure project in the network, which includes six development corridors.
The G7 infrastructure project “is better than the original BRI approach, which was done in a fairly decentralized, I would say piecemeal,” Choi said.
BRI “did not have the rigor to ensure that all projects were economically stable and environmentally friendly,” he said, adding that the G7 plan seemed more climate-friendly and was designed to ensure that recipient countries benefited from the investment.
“But after saying that, China has refined its approach to BRI in recent years, and more money is now flowing to projects that are healthier.
It took Western economies more than 10 years to come up with a program that could compete with the BRI, Choi said, adding that it was initially rejected as a “Chinese project”.
However, the United States and other members appear to be taking it seriously now, as evidenced by the recent infrastructure partnership, he said.
“Its scale is significant. This is not exactly the scale of the BRI, but they are trying to compare it so that it is not far off. [from the BRI]Said Choi.
Ultimately, if the implementation is done in such a way as not to force countries to consider geopolitics, to join the partnership or the BRI, then this will be acceptable.
Choi Shing Kuok
Chief Executive Officer of ISEAS – Yusof Ishak Institute
Asked if the partnership was nothing more than “US geopolitical battle lines” against China, Choi said the way the G7 plan was delivered would signal his intentions.
“There are certain motives for starting the partnership. It really offers alternatives to BRI in a very deliberate way, “Choi said.
“Ultimately, if the implementation is done in such a way as not to force countries to take into account geopolitics – to go in partnership or BRI – then this will be acceptable.
Who could benefit?
As large economies now boost infrastructure support for developing countries, places like India, Brazil and Indonesia are likely to portend greater economic growth, Riedel Research Group founder David Riedel told CNBC’s Squawk Box on Monday.
He said it didn’t matter who invested, as long as more effort was put in, but said the results would not be obvious overnight.
“It doesn’t mean much in the short term, but in the long run, investors need to appreciate the importance of investing in infrastructure, no matter who makes it,” Riedel said.
According to the OECD, Asia alone needs about $ 26 trillion to pay for infrastructure construction, including green projects by 2030.
If more money is offered to developing countries, places like Brazil, India and Indonesia would benefit, Rydell added.
Brazil has a large population and a large economy and can do more infrastructure to boost growth, while Indonesia, as an energy exporter, will grow if more money is invested in its energy project, he said.
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