Building a better world after the pandemic

Can B3W, backed by the US, beat its rival BRI?
Joe Biden with Xi Jinping during a visit to Beijing in 2011. Photo: AFP

Under the current global configuration, the roles played by the two rival superpowers USA and China will be pivotal not only in the geopolitical sphere, but their respective strengths will also determine the trajectory of trade patterns, economic hegemony, and world power alignment. China, despite being a latecomer on the world stage, has caught up fast and is now giving the USA (and its partners) a run for their money. China's BRI programme launched in 2013 to support economic development in middle- and low-income countries generated a lot of heart-burn in G7 circles and now will be met head-on by the West's new B3W initiative.

At their summit in June this year, the G7 leaders launched a global infrastructure development programme known as Build Back Better World (B3W) which aims to generate USD 40 trillion worth of infrastructure investment needed by developing countries by 2035. Led by the US, the B3W Partnership plans to catalyse funding for quality infrastructure from the private sector and will encourage investments that support "climate, health and health security, digital technology, and gender equity and equality," according to the Fact Sheet released by the White House. The name B3W is a play on Biden's frequently used slogan to promote improving infrastructure at home.

From the get-go, the sponsors made it clear that the B3W initiative was an attempt to counter China's Belt and Road Initiative (BRI). China stepped in to support infrastructure projects in Asia and Africa and is investing USD 50-100 billion annually on power, ports, roads, bridges, and railroads. More than 60 countries, including the G7 member Italy, have expressed interest in working with China on BRI. Morgan Stanley has predicted China's overall expenses over the life of the BRI could reach USD 1.2-1.3 trillion by 2027. Western leaders have promoted B3W as a form of "strategic competition with China".

So, here we have two competing global programmes, one funded by China, and the other spearheaded by the US with G7 backing, which have similar objectives. While the B3W programme is at the starting line, it might catch up with the eight-year-old BRI if the promises made by the G7 leaders are fulfilled. Countries in the African, Asian, and Latin American regions face a yearly infrastructure financing shortfall of over USD 2-3 trillion dollars, according to an earlier UNCTAD estimate. Asian Development Bank (ADB) estimates show that infrastructure projects in only a few countries in South Asia including India, Pakistan, and Bangladesh could easily soak up billions of additional dollars. The total annual excess demand in ADB countries is nearly USD 800 billion.

All this competition between the two economic giants to invest in developing countries is good news, but as they say in economics, "there ain't no such thing as a free lunch". For both the donor and the recipient there are costs, as well as benefits. Why would China or the US want to build infrastructure or support the security, trade, or environmental goals of emerging nations? As we saw after the Second World War, when the US and Russia attempted to carve out their own zones of influence, their rivalry led to armed conflicts, debt and destitution for some countries, and often a toxic international climate devoid of any goodwill between neighbouring countries.

A question on everyone's mind is: "which programme is better?" How should a country decide whether to go with B3W or BRI? And in the long run, can the world be a better place with both programmes competing for customers, or would the rivalry bring ruin for the host countries? A few years ago, after China signed a 99-year lease on a Sri Lankan port at Hambantota, analysts warned that another major BRI partner, Pakistan, could be facing a debt-crisis. Media in the West voiced concern that Pakistan's partnership with China has left the former critically in debt, and it might be soon handing over its ports, particularly Gwadar, and other infrastructure to China, replicating the Sri Lanka scenario.

According to a survey published last year by the EU Chamber of Commerce in China, European firms have been hesitant to participate in BRI projects mainly due to a lack of information and transparency. The Chamber requested that China create an open procurement system as well as perform feasibility and impact studies for BRI projects. The World Bank and other bodies have also called for increased transparency.

Notably, many of the areas targeted by China suffer from underinvestment due to domestic economic struggles, and they often register low on the United Nations Human Development Index (HDI). Myanmar and Pakistan—two countries heavily targeted by the BRI—rank 148th and 150th globally in terms of HDI.

Regardless of their respective strengths and weaknesses, if BRI and B3W programmes complement each other, the world that emerges after the pandemic can be a better one. Economic trade theory suggests that new and improved infrastructure may lead to more trade and increased welfare. However, oftentimes these roads and bridges are underutilised and there "is increasing evidence of malinvestment in previous Chinese infrastructure investments, rising corporate debt and corruption." There is no guarantee that B3W will do any better. The borrowing countries might find themselves struggling with financial and economic crises.

Trade brings about winners and losers within a country and unless there is adequate redistribution of the gains within an economy, it can lead to increased inequality, poverty and structural unemployment. BRI critics also point out that, "there are negative consequences to the environment that trade expansion may bring about unless effective legal, political and economic institutions are in place addressing the issue." As can be expected, champions of B3W are promoting it as a "green BRI"!

There are some differences between the two programmes. BRI's focus is on strategic infrastructure such as ports, and most expenditure to date has been on transport and power. The B3W, meanwhile, will focus on climate, health, digital technology, and gender equity and equality. The USA has tended to provide funds for large projects in large countries, as compared to China, which has funded smaller projects in developing countries. B3W might also provide a boost for democracy and force China to pay greater attention to raising its standards on human rights.

The success of B3W will depend on how the programme is structured. The initiative will need to work with "multiple governments and mobilise multiple sources of private capital, a slower and messier approach than BRI's bilaterally negotiated, largely state-funded projects."

Details of how the G7 plan will be financed remains unclear. German Chancellor Angela Merkel said the group was not yet at a stage to release financing for its initiative.

A final word. Biden and his allies might need to corral all their resources and put their money where their mouth is, to boost B3W. The US and its democratic partners in G7 got a hard knock after the debacle in Afghanistan. Under the headline "Withdrawal Shuffles Global Power Order", the Wall Street Journal wrote on September 1 that "Beijing couldn't contain its glee at what it described as the humiliation of its main global rival." Russian Foreign Minister Sergei Lavrov said last week that Russia was "not gloating" about the US defeat in Afghanistan, but it's obvious they are not sad. Now the USA and its allies can do what trillions of dollars squandered on armaments could not achieve—use B3W to tilt or realign the global balance of power back in their favour.


Dr Abdullah Shibli is an economist and IT consultant. He is also Senior Research Fellow at International Sustainable Development Institute (ISDI), a think tank based in Boston.



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