The G7 pitched the Build Back Better World Partnership (B3W) as a ‘first-world commitment’ to investing $40 trillion to assist low – and middle-income countries hit hardest by the COVID-19 pandemic.
The B3W is also presented in some circles as a serious alternative to the Belt and Road Initiative (BRI). If implemented, the B3W could serve as Washington’s primary investment tool to influence nations that see China or Russia as significant diplomatic, trade, and investment partners. The B3W is “a values-driven, high-standard, and transparent infrastructure partnership, while the BRI is a pragmatic global infrastructure plan representing a third of the world’s GDP and two-thirds of the worldwide population. Despite their differences, some believe that the B3W and the BRI could become complementary, but this will require significant compromise in Beijing and Washington.
The introduction of the B3W could allow for two infrastructure investment ecosystems. In short, countries could choose between either the B3W or the BRI. However, Prime Minister Imran Khan recently suggested that Pakistan might not need to choose one. He stated, “I think we should have a relationship with everyone,” illustrating that countries could decide when to do business with one investment apparatus over the other. Choosing between each program could benefit countries split between the spheres of influence belonging to Beijing and Washington.
The BRI is almost exclusively infrastructure-oriented or focused on energy and tech, while the B3W aims to tackle climate, health, digital technology, gender equity, and equality challenges. While the objectives of both plans overlap, the BRI is more pragmatic in tackling short-term problems in many medium to low-income nations with clear credit and logistics options. China’s recent commitment to the ‘Health Silk Road’ through its vaccine donations was a diplomatic effort to improve Beijing’s image abroad while cementing partnerships. While the B3W hasn’t kicked off, one can imagine that solving issues like gender or income inequality is infinitely more difficult because it requires societal transformation.
The other significant difference is that many G7 countries have serious income inequality issues and infrastructure deficiencies within their nations. China continues to rise and expand its middle class, while income inequality in the West still poses a problem. For these reasons, the B3W might have issues gaining support abroad, considering that the G7 nations all have investment needs. In short, the G7 countries might have a credibility problem since inequality is so prevalent in the West.
The B3W is not a product of the Biden administration. Its origins are in the Trump administration and are a strategic effort to combat Chinese influence worldwide. Through the B3W, Washington can reduce U.S. development expenditure while simultaneously increasing private sector investment in global development projects. In short, the B3W can be envisioned as a ‘green’ BRI with ambitions to generate social transformation throughout the globe. The members of the B3W hope to use combined private sector capital to help recover from the pandemic, reassert commitments to allies, recover and improve capabilities from within, and project shared values throughout the globe. The B3W mandate likely hopes to replace the previous mantras of liberal democracy and neoliberal free-market capitalism.
Further, the BRI is focused on ‘hard infrastructure,’ like ports, roads, dams, railways, power plants, and telecommunications systems, while the B3W addresses ‘soft solutions’ for climate change, health security, digital technology, inequality, and gender equality.
However, both the B3W and BRI share the goal of developing green and sustainable infrastructure to minimize ecological impact, reduce pollution, and increase energy efficiency to combat climate change.
However, the B3W will need to gain support from many different stakeholders. Some European nations, like Italy, already signed on to the BRI, raising questions about the B3W’s potential influence on international allegiances. Also, the B3W relies on private capital, which will be more complicated to raise than the BRI’s state-funded financing and bilateral negotiations model. The differences in funding approaches will significantly highlight the differences between both programs.
The BRI effectively spreads Chinese influence because it relies on bilateral loans that are both concessionary and commercial, or lending made by state-owned banks. The state-led approach allows for quick and direct financing and avoids the dirty tactic of using private capital. The BRI totals a volume of USD 4 to 8 trillion and enjoys BRI bond flotation. The B3W suggested lowering the global corporate tax rate to a minimum of 15% to undercut corporate leaders like Google and Amazon. However, this is likely to limit funding for the B3W, which would decrease its competitiveness with state-backed Chinese companies.
The B3W hopes to mobilize bilateral, multilateral, and private-sector capital to generate billions of investment dollars. Still, the long and low return cycle of public infrastructure projects shoos private investors away. The G7 identified a $40+ trillion global infrastructure gap and planned to use the B3W to implement its bilateral and multilateral experience.
In contrast, Data from Boston University’s Global Development Center shows that Chinese overseas development finance peaked in 2016 and has plummeted since. The Chinese government now stresses high-quality BRI development, implying a more restrictive and focused approach to overseas infrastructure investment.
Despite their differences, the B3W decision-makers can learn a lot from the BRI’s shortcomings related to credit risk, legal and regulatory challenges, corruption, climate concerns, debt management, and labor disputes.