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  • Writer's pictureIrene Paviotti

A flurry of infrastructure development initiatives

Updated: Feb 14, 2023

Infrastructure development is seemingly back in fashion in international development policy circles. Last June, the Group of Seven (G7) launched the Partnership for Global Infrastructure and Investment (PGII). This comes approximately one year after Build Back Better World (B3W) was announced at the 2021 G7 Leaders' meeting and some months after the EU launched the Global Gateway and the UK announced the Clean Green Initiative.

What do all these initiatives aim at? The idea is to support infrastructure development in the Global South with an eye to the defining policy priorities of G7 countries' governments. This means preserving the environment, digitalisation, clean energy sources, healthcare, human rights, gender equality and democracy – while trying to leverage private investment and avoiding adding to the already significant debt burden some developing countries face.

However, there is a core common denominator behind this: China's Belt and Road Initiative (BRI). In general, this is not explicitly referred to as the competing model – except for the European Commission President's State of the Union address. Nevertheless, the focus on green, digital, safe and private sector-led projects to avoid so-called 'debt traps' is a clear rebuke to the BRI's much criticised polluting, authoritarianism-fuelling, state-driven and financially onerous investments. The Covid pandemic created the perfect occasion for traditional donors to try to rebuild relations with the partners they had previously ignored or patronised, not least when it came to vaccine distribution in 2021. After all, the pandemic has been touted by many as an opportunity to build back better.

The question on everyone's mind is: will these initiatives make a difference and deliver on their promises? Some factors should be considered.

First, there is an issue of feasibility based on the evolution of existing initiatives. The US B3W, closely connected to the not-very-popular domestic Build Back Better bill, didn't go beyond US officials’ listening tours in African and Latin American countries to discuss potential projects. For some, the PGII seems to be the next attempt at doing something similar to China's BRI. The Global Gateway was announced with pomp and circumstance in December 2021, and an investment package was launched at the February 2022 African Union – European Union summit, with specific areas to be targeted. As promising as this reframing of EU international partnerships sounds, there is still little clarity about the financial details – which are crucial when it comes to competing with the BRI. Global Gateway has also arguably received little traction within EU policy circles themselves. How can external power projection occur if there is no internal coherence and unity? And as for the UK Clean Green Initiative, it isn't easy to find information about it after the COP26 announcement in November 2021.

A second feasibility issue relates to the reality of infrastructure investment in developing countries. Investors from traditional donor countries find them too high-risk for business to be conducted on a regular and profitable basis. The challenges that are usually mentioned are corruption, low levels of law enforcement, long bureaucratic procedures, lack of skilled workforce, and lack of infrastructure itself. This might depend a lot on the sector – global energy companies don't seem too worried about investing in LNG facilities in resource-rich African or Middle Eastern countries – or it might derive from different attitudes towards risk across cultures. In any case, it is true that leveraging private investment in clean energy, digital connectivity and healthcare in developing countries is difficult. There's only so much that public financial guarantees can do to push the private sector to venture into new and uncertain territories.

Third, one might be led to wonder about the relevance of these initiatives, given Global South countries' response so far. When B3W and Global Gateway were announced, the reaction was lukewarm - if not outright critical. Many observers wondered how the US or the EU could be able to start investing in infrastructure like China had done through the BRI, given these donors' objectively different financial and operational capabilities. In addition, some lamented the G7 countries' lack of consultation with the supposed beneficiaries of their initiatives. In the case of Global Gateway, first, the strategy was designed and target areas identified within EU policymaking circles. Only after the launch would partner countries be involved in discussing actual projects. This year's PGII came as a bit of a surprise to developing country governments too.

Such an attitude is not beneficial in 2022. It resembles the patronising approach that traditional donors have taken towards development cooperation with the Global South in the past. And it is precisely one of the reasons why Global South countries, such as African ones, welcomed the Chinese engagement when this was seen in Beijing as a means to promote Chinese companies' outward investment. Rather than responding to a rhetoric that supported African governments' development agendas while in fact, it was mainly donor-driven, African countries' agendas are the starting point of the discussion on an equal footing. This doesn't mean that the Chinese engagement doesn't respond to domestic strategies at all – pushing Chinese companies to invest abroad was a means to support China's own economic development, and there is significant political capital to be gained by fostering closer relations with Global South partners. The key difference lies in the principles of solidarity and partnership that developing countries can find when engaging with an actor like China – something that sounds fresh when the dominant development discourse has been mainly G7-driven.

Fourth, beyond the relevance, the timing of these initiatives is not straightforward. G7 countries have decided to propose an alternative to China's BRI when the BRI has been losing momentum for a while. Chinese infrastructure finance has been on the decline since its 2016 peak – and the Covid pandemic, together with China's domestic economic slowdown, has created the conditions for less appetite for big infrastructure development financing. The high debt levels that countries like Kenya, Ethiopia and Zambia are facing, which make repayment of loans more difficult, showed the high exposure of some investments. Instead, the seemingly preferred instrument for financing infrastructure projects is Public-Private Partnerships (PPPs), as the outcomes of the last Forum on China-Africa Cooperation reveal. The preference is now for more private sector involvement, as the Nairobi Expressway exemplifies – the kind of route that traditional donors want to take too, thinking that China's development finance is entirely state-driven.

The timing of these initiatives can also be questioned when one considers the latest direction in China's global development engagement. Lessons were arguably learnt from the well-known problems the BRI posed (environmental destruction, labour abuse, debt distress, lack of stakeholder consultations), and a new initiative was launched to promote the global development agenda – the Global Development Initiative, which is supposed to advance SDGs achievement in the pandemic era. While details are scarce, it appears that social infrastructure will be more of a focus than hard infrastructure, which would be a new direction in China's global development practice. This begs the question: if China is moving toward new approaches, will the competition that the G7 initiatives started in the infrastructure field even make sense?

Infrastructure needs in developing countries are considerable – only in Africa, the investment gap is estimated to be USD130-170 billion per year. As a result, initiatives that aim to fill this gap are welcome – after all, infrastructure is key for economic growth and development. However, implicitly framing these new initiatives as competitors to China isn't beneficial, given the less-than-brilliant record of G7 relations with Global South countries and China's actual global development approach. In addition, the lack of prior consultation with the supposed beneficiaries doesn't bode well for the implementation of future projects – local agency and involvement has long been recognised as key for successful development cooperation. It is time that grand donor strategies reflect this principle from their conception phase too – only then will there be a solid basis to build back better.

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