The Group of Seven (G-7) recently announced a plan to launch a $40 trillion programme —Build Back a Better World (B3W). It has presented an infrastructure development initiative. The G-7 has defined the core principles of B3W as: 1) value driven, 2) good governance and strong standards, 3) climate friendly, 4) strong strategic partnership, 5) mobilising private capital through development finance and 6) enhancing the impact of multilateral public financing.
It is good to see that the G-7 has realised that there is a need to invest in development and infrastructure. There is no denying that the world is in dire need of investment to bridge the widening gap of investment for infrastructure development.
The McKinsey Global Institute (MGI) in 2016 reported that the world is in need of $3.3 trillion investment for infrastructure on an annual basis. The report also said that the world is not able to meet the estimated needs of infrastructure. There is a $350 billion gap yearly. Unless serious efforts are undertaken to address the issue, the gap will reach $5.3 trillion by 2030. The projections do not include the needs for climate change adaptation. Moreover, the financial requirements to achieve the targets identified under the SDGs were not included. The MGI study underlined that the inclusion of SDGs will triple the gap so that it will be around $15.9 trillion till 2030.
The Global Infrastructure Hub (GIH) in 2020 also rang the alarm bell. It formulated projections on the basis of data from 56 leading countries. The results showed that the participating countries will be in need of $94 trillion till 2040. The current trends show that the real investment will be around $79 trillion so that the gap will be around $15 trillion till 2040. In this context, the B3W announcement raise hopes.
The success of the B3W programme will hinge upon the two fundamental pillars, 1) it must be inclusive and 2) it must follow the principles of investment, not politics. Unfortunately, that may not be the case. The G-7 has already described the plan as a rival to China’s Belt and Road Initiative (BRI). The objective of the plan apparently is to contain China at any cost. The G-7, led by the US, will use this plan to counter the BRI and Chinese investment. This is an alarming situation for the developing and the least developed countries.
Pakistan will likely face pressure on account of the China-Pakistan Economic Corridor (CPEC). The CPEC is already on the West’s radar. The US, its Western allies and financial institutions are pushing Pakistan to re-think the CPEC. They have called the CPEC a debt trap.
Pakistan should clearly tell G-7 that Pakistan will not be available for a new Cold War. Pakistan has already suffered immensely due to the Cold War and the war on terror.
It is expected that the launch of B3W will further complicate the situation for Pakistan over the coming days. The G-7 may ask Pakistan to join the plan and dump the CPEC. Although Pakistan has always welcomed investment, the conditionalities attached with B3W may make it extremely difficult for Pakistan to join it.
The US recently approved and launched the Strategic Competition Act, 2021. There are many points which require elaboration but the most important areas of interest are, 1) enabling the society to act against the perceived threat of CPEC, 2) creation of institutions to counter the imagined influence of China and 3) undesired interference in other countries.
The law states that the US will enable all sections of the society, including the civil society and think tanks, to counter the imagined influence of CPEC. Every department and agency of the US will create an office of undersecretary to keep a close eye on the perceived influence of China.
The US has declared that Chinese investment in infrastructure are a threat to its national security. So, the US will urge its allies, friends and other countries to not allow Chinese investment. It is feared that this will result in a 21st Century Cold War.
The US might ask Pakistan to be either “with us or against us”. The US and other Western countries can also deploy international financial institutions for arm twisting. Pakistan needs financial resources and cooperation at this point. The IFIs can turn this situation into an opportunity for the G-7.
Pakistan should be able to tell the US that it will never forgo its relationship with China. Pakistan should also clearly tell G-7 and other countries that Pakistan will not join a new Cold War. It has already suffered immensely due to the Cold War and the war on terror.
Pakistan should, however, welcome investment from the B3W as long as there are no conditionalities.
The writer is a political economist based in Islamabad
This article was originally published at: https://www.thenews.com.pk/tns/detail/852059-the-b3w-plan-and-pakistan
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.