President Biden said America will pay one-third of the $600 billion G7 infrastructure program designed to rival China’s initiative
The G7 countries will have to invest a whopping $600 billion in the infrastructure of less wealthy countries around the world, with the US paying a third of the bill over the next five years. The announcement was made in Germany on Sunday, with money set to rival China’s Belt and Road Initiative.
Flanked by other leaders of the G7 group, US President Joe Biden said Western countries committed to: “financing for high-quality, high-quality, sustainable infrastructure in developing and middle-income countries.” Without mentioning China by name, he said that what the G7 was doing… “fundamentally different because it’s based on our shared values”.
The US has long accused China of arming its wealth by investing heavily in countries in Asia, Africa and Latin America. The Trump administration claimed Beijing was chasing “debt trap diplomacy” to its borrowers, offering loans that the recipients are ultimately unable to repay and taking as collateral already built infrastructure.
China rejects the claim, saying its global infrastructure investments, estimated at $2.5 trillion, will benefit both itself and the target countries. Much of the money goes to things like roads and ports, giving China more physical access to foreign resources and markets.
Since its launch nearly a decade ago, the US and its allies have struggled to provide an alternative to the Chinese program. Last year, at a meeting in Cornwall in the UK, the G7 nations announced their own version called “Build back a better world”(BBBW) to reflect the Biden administration’s domestic plan that was ultimately shunned by Republicans and some Democrats. BBBW was then renamed Partnership for Global Infrastructure and Investment (PGII).
“This is not aid or charity”, Biden said this during his speech at Schloss Elmau in Germany on Sunday. “It’s an investment that will pay off for everyone, including the American people and the people of all our nations.”
“It will boost all of our economies, and it’s an opportunity for us to share our positive vision for the future and help communities around the world see themselves – and show for ourselves the concrete benefits of partnering with democracies, “ he said.
The US $200 billion pledge is to be backed by a combination of federal government money with private capital from investors such as pension funds, private equity and insurance funds. The EU announced its own response of $300 billion ($317 billion) to Belt and Road in December last year.
The White House said PGII investments will focus on four key areas, including climate-resilient infrastructure and energy resources, secure communications, projects promoting gender equality and health care. Biden said there are “dozens of projects already underway” and gave a handful of examples.
Those include, $14 million to support Romania’s efforts to build a small modular reactor (SMR) plant; a $600 million contract to build a submarine telecommunications cable to connect Singapore to France via the Middle East and the Horn of Africa; and a $320 million private development project to build hospitals in Côte d’Ivoire.
Some publications, such as Politico, noted that Western investment plans were already being undermined in terms of combating climate change. While still relevant, they took a back seat to rising energy prices and the EU’s plans to decouple from Russia, leaving some members reliant on coal-fired power plants instead.
There is also the issue of high inflation in the US and the EU, which affects the value of the dollar and the euro, potentially diminishing the real impact of the allocated funding in the long run.
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