What Is The ‘Build Back Better World’ Partnership And How Is It Different From The Belt And Road Initiative?
Op/Ed by Chris Devonshire-Ellis
Leaders of the G7 nations (United States, United Kingdom, Canada, France, Germany, Italy, and Japan) have launched their own version of China’s Belt and Road Initiative, titled the ‘Build Back Better World’ or B3W Partnership. As the G7 does not have a secretarial office, details of the Partnership were released by the US White House as a Fact Sheet on Saturday June 12.
We can examine how the B3W Partnership compares with the Belt and Road Initiative as follows:
B3W Partnership – Mission Statement
Build Back Better World: An Affirmative Initiative for Meeting the Tremendous Infrastructure Needs of Low- and Middle-Income Countries. President Biden and G7 partners agreed to launch the bold new global infrastructure initiative Build Back Better World (B3W), a values-driven, high-standard, and transparent infrastructure partnership led by major democracies to help narrow the US$40+ trillion infrastructure need in the developing world, which has been exacerbated by the Covid-19 pandemic.
Through B3W, the G7 and other like-minded partners with coordinate in mobilizing private-sector capital in four areas of focus—climate, health and health security, digital technology, and gender equity and equality—with catalytic investments from our respective development finance institutions.
B3W will be global in scope, from Latin America and the Caribbean to Africa to the Indo-Pacific. Different G7 partners will have different geographic orientations, but the sum of the initiative will cover low- and middle-income countries across the world.
In announcing this partnership, the United States and its G7 partners are expressing a unified vision for global infrastructure development. As a lead partner in B3W, the United States will seek to mobilize the full potential of our development finance tools, including the Development Finance Corporation, USAID, EXIM, the Millennium Challenge Corporation, and the U.S. Trade and Development Agency, and complementary bodies such as the Transaction Advisory Fund. In doing so, the Biden Administration aims to complement domestic infrastructure investments in the American Jobs Plan and create new opportunities to demonstrate U.S. competitiveness abroad and create jobs at home.
In addition to the billions of dollars which the United States mobilizes in overseas infrastructure financing through existing bilateral and multilateral tools, we will work with Congress to augment our development finance toolkit with the hope that, together with the private sector, other U.S. stakeholders, and G7 partners, B3W will collectively catalyze hundreds of billions of dollars of infrastructure investment for low- and middle-income countries in the coming years.
Analysis: The B3W Partnership appears to only be available for ‘like-minded’ partners in the ‘developing world’ and makes a point of the contributors being democracies. While not specific, it does imply that democratic nations are preferred, imposing a political aspect to being part of B3W. This contrasts with China’s Belt & Road Initiative (BRI) which has not laid down any pre-conditions and comprises democratic nations, as well as autocratic and other government styles.
It sidesteps reasons why the acknowledged infrastructure investment has not previously been made available by tying it quite specifically as a need arising from the Covid-19 pandemic, whereas the BRI has stressed inter-connectivity as the primary reason for its reason for existence.
The B3W also focuses on ‘coordinating private capital’ – meaning that contributing Governments will be seeking to raise the money from capital markets, as opposed to providing the US$40 trillion mentioned from state funds, an area which I suspect may become problematic unless investors can be shown market rate returns or incentivized to do so. That differs from the BRI in which China has lent money at low interest rates for BRI projects and has injected State capital into projects.
A key point to note is the reference to the American Jobs Plan and the apparently exclusive use of American, rather than any G7 financial institutions. This suggests that a condition of B3W has to result in some beneficial elements to the United States economy and is conditional. This seems to be the message given by the United States showing President Biden with the ‘Build Back Better’ slogan – but posing in front of an image of the United States, not the world.
The US Development Finance Corporation (DFC) is mentioned, one of whose recent investments in Ethiopia we discussed in this article and appears highly indicative of loans being tied to US strategic objectives. This is a fundamental difference with China’s BRI loans which are usually purely interest driven and rarely come with conditions attached.
B3W Guiding Principles
Together with leaders of the G7, the Biden Administration fully endorses the guiding principles of B3W:
Infrastructure development carried out in a transparent and sustainable manner—financially, environmentally, and socially —will lead to a better outcome for recipient countries and communities. We will offer countries a positive vision and a sustainable, transparent source of financing to meet their infrastructure needs.
Analysis: These values are not essentially different from China’s Belt & Road Initiative, although the references to ‘transparent financing sources’ could be considered a nudge towards Beijing, who tends to keep their finance sources secret. Most of this is just marketing speak without the ‘win-win’ terminology.
Good Governance and Strong Standards
High standards have become ever more important at a time when governments are grappling with complex decisions on how to tackle climate change, build back local economies, direct scarce financing, and boost employment in an inclusive way. We are committed to providing citizens of recipient communities with the long-run benefits they expect and deserve from infrastructure projects. Our efforts will be guided by high standards and principles, such as those promoted by the updated Blue Dot Network, relating to the environment and climate, labor and social safeguards, transparency, financing, construction, anticorruption, and other areas.
Analysis: There is perhaps more mention of long-term benefits, but this tends to happen anyway as communities use new infrastructure builds. Again, further commitments to transparency, anti-corruption, social and the climate but without saying how these issues will be monitored.
The investments will be made in a manner consistent with achieving the goals of the Paris Climate Agreement.
Analysis: There is some irony in this statement as the United States only rejoined the Paris Climate Agreement in January this year after having previously classed its findings as ‘scientifically unproven.’ China ratified the Paris Climate Agreement in 2016 and submits its Belt and Road Initiative projects to an independent ‘Green Light’ Eco-Committee for vetting.
Strong Strategic Partnerships
Infrastructure that is developed in partnership with those whom it benefits will last longer and generate more development impact. Infrastructure created under the B3W will be developed through consultation with communities and assessing local needs as a true partners. We will establish a taskforce together as a G7, and with others, to coordinate, harmonize our efforts, and increase our impact and reach.
Analysis: This text is a long-winded way of saying ‘win-win’.
Mobilize Private Capital Through Development Finance.
Status quo funding and financing approaches are inadequate to address the tremendous infrastructure gap in low-and middle-income countries. We are committed to augmenting the development finance tools at our disposal to support and catalyze a significant increase in private capital to address infrastructure needs. Infrastructure investment by a responsible and market-driven private sector, paired with high standards and transparency in public funding, is crucial for long-run development effectiveness and sustainability.
Analysis: High standards and transparency are mentioned for the fourth time, suggesting the BW3 need to invest in a superlative thesaurus, although the Chinese text is often not that much better. More seriously, again there are no references as how financing is to come from the private, not public sector and no details on how this will be achieved or incentivized.
Enhancing the Impact of Multilateral Public Finance.
Multilateral development banks and other international financial institutions (IFIs) have developed rigorous standards for project planning, implementation, social and environmental safeguards, and analytical capability. The United States will incorporate these standards and safeguards to help ensure that U.S. taxpayer resources are used appropriately and effectively. We will work with the IFIs to enhance their catalytic impact and increase the mobilization of capital—both public and private—needed for impactful and sustainable infrastructure investment.
Analysis: This is a G7 initiative yet only mentions US taxpayers.
There is actually very little meat on any bones here as regards the US ‘Fact Sheet’ concerning the B3W, except three key points that thus far it only includes US financial institutions, appears to imply there needs to be some benefits for the US economy and job creation from the B3W and mentions US$40 trillion needed to be raised from the private, rather than government sector. Much of the Fact Sheet is marketing speak as opposed to concrete plans, although further details have been promised in a G7 final communique. While this initiative will generate a great deal of media coverage, there is very little – if anything – in substance here at this moment, and nothing to suggest anything has yet been organized to compare with the amount of money that China has actually invested and lent to countries as part of its BRI.
Dezan Shira & Associates have a 30-year history of assisting UK and other foreign investment into Asia, and maintain offices in Japan, Malaysia, Singapore, and Vietnam. We also have offices throughout China, ASEAN, and India. Please contact us at email@example.com for local market intelligence and market entry assistance, or visit us at www.dezshira.com