Filling the infrastructure gaps . . .
On June 26, G7 leaders pledged C$772 billion to support infrastructure development in low- and middle-income countries. The initiative, first announced in 2021, will directly compete with China’s Belt and Road Initiative (BRI). Formerly known as the ‘Build Back Better World,’ the G7’s ‘Partnership for Global Infrastructure and Investment’ (PGII) foresees investment in what U.S. President Joe Biden terms “essential infrastructure [of developing countries] to help them navigate global shocks.” The investment is expected to be made in infrastructure that will support health care, digital connectivity, gender equality/equity, and climate security.
Competing with China . . .
The PGII and the BRI (launched in 2013) are designed to finance infrastructure development and modelled roughly on the U.S.’s post-Second World War Marshall Plan. Given the similar goals of the two initiatives, they may well end up competing with each other. While China appears to welcome initiatives that will close global infrastructure gaps, its foreign ministry sees the PGII initiative as a “zero-sum game” driven by geopolitics. These initiatives, however, will ultimately benefit recipient countries seeking to fund domestic infrastructure. Among Asian economies, India, Indonesia, and Vietnam are expected to be among the first to benefit from the PGII via clean energy investments.
Show us the money . . .
The G7’s PGII funding pledge will be drawn from grants, federal financing, and private funders. The U.S. has committed to mobilizing C$257 billion, European member countries have committed C$408 billion, and Japan more than C$83 billion. Canadian Prime Minister Justin Trudeau supported the PGII and reinforced his 2021 commitment to support the development of global infrastructure by noting Canada has committed around C$6.4 billion to finance infrastructure projects promoting energy transition. Trudeau also urged the private sector to partner with Canada’s government organizations to support infrastructure development around the world. While the pledge is an important indicator that G7 countries are committed to supporting infrastructure development in developing countries, engagement and contributions to this project will be determined on a case-by-case basis, leaving room for G7 governments and businesses to carve out their unique approaches to the PGII.