How Appealing is G7s Building Back Better?

It has been a long time coming, but last week the G7 have now tabled their own infrastructure plan – a “bold new global infrastructure initiative Build Back Better World (B3W), a values-driven, high-standard, and transparent infrastructure partnership led by major democracies” as part of its answer to the “strategic competition” with China (White House Fact Sheet 12 June). The ‘Build Back Better’ initiative is explained in Paragraph 67 of the Carbis Bay Communiqué. Let’s follow it step-by step.

The G7 state that the new initiative is needed because COVID-19 has exacerbated the infrastructure gap for middle income and poor countries. It is this new situation that requires a “step change” in approach. This is disingenuous. The figure of an ‘infrastructure gap’ of $15 trillion by 2040 quoted in the White House Fact Sheet is derived from the World Economic Forum and dates from April 2019, fully nine months before the outbreak of the pandemic. Moreover, as early as 2009 the Asian Development Bank’s Infrastructure for a Seemless Asia signalled the need for infrastructural investment, and the difficulties faced in funding it. Both the creation of the Asian Infrastructural Investment Bank and China’s Belt and Road Initiative recognised the problem. So too did the many ‘democratic’ countries that joined the AIIB so too did aid donor countries in the OECD that, between 2013 and 2019, granted bilateral aid for infrastructure projects to the tune of $136 billion for economic projects and $302 for social projects – and this, unlike China’s BRI, was mostly in the form of non-repayable grants.

The declared focus of the new initiative is fourfold - climate, health and health security, digital technology, and gender equity and equality. Whilst this list fits neatly into various UN agenda’s, it is questionable whether it fits the actual deficiencies in physical infrastructure, or the priorities of the states that form the object of the B3W initiative (later called ‘partners’). The G20 infrastructure hub shows that between 2019 and 2040 the greatest infrastructure gap by far is for roads, followed by energy.

This is what the AIIB and China’s BRI are both prioritising, supposedly on the basis of requests from national governments. It is true that both could be made more climate neutral (and I too would love to see a Chinese ban on exporting coal-burning electricity stations) but it would have made more sense to the ‘target audience’ had the references been explicit.

The reason behind this neglect soon becomes apparent. This is a top-down programme – “Working together and with others, and by building on and going beyond our existing action, we will develop a partnership” – in the ‘west knows best’ tradition. Compare this with China’s approach of sharing a (neo-)colonialist past, of wrestling with the same problems of poverty and underdevelopment and sharing the knowledge and means of its own success, and it is easy to see how this condescension is perceived abroad.

Then comes the slap in the face for China’s efforts –It is a “values-driven vision: we believe that infrastructure development, implementation and maintenance - carried out in a transparent and financially, environmentally, and socially sustainable manner - will lead to beneficial outcomes for recipient countries and communities. It is true that China’s loan agreements with partner countries are rarely published but there is no evidence of systematic abuse of criteria of financial, environmental or social sustainability. The same old tropes are dragged out, discredited and then recycled regardless.

Let us move on. The next statement invited disaster. After all the talk of working together, the G7 countries “will each pursue the necessary actions through our own DFIs (Development Finance Institutions).” One repeated complaint of aid recipients is in the sense of – I wish there were just one donor. Each aid agency, for each action, as its own planning and reporting cycles with which poor countries with underfunded and understaffed bureaucracies are forced to comply. Back in 1947/48 Marshall Aid did two things right – the Americans decided that there should be only one source of funds and that the sixteen European recipients should coordinate their response.

The next statement will cause shudders among the recipients – the B3W initiative should be “market led”. OK, this is immediately mitigated by a statement of the need to involve more private capital, but ‘market-led’ is not the right way to assuage concerns among recipients. Amazingly, they do not suffer from short-term, defective, memories. They remember the ruinous market-led deflations imposed to resolve their currency crisis (but not those of the West). They know the role of multi-nationals exploiting child labour and unsafe working environments until discovered. They know how multinationals had neglected leaking pipelines and the despoiled mining sites. There is no need to explain to them where market-led growth can lead.

The final claim to send a shudder trough poorer countries is G7’s insistence on “strong standards: to ensure our approach and values are upheld, and to drive a race to the top, we will make high standards….a central plank of our approach.” Here again we have a ‘west knows best’ rhetoric. Why not aim simply for higher standards instead of pretending that only the best is appropriate. China’s approach is not to interfere with domestic politics and to accept domestic legislation (though its market-oriented firm may bend the rules). What the G7 approach foreshadows are endless rounds of consultations and layers of conditionality attached to every approach.

I live in a rich western country and enjoy the benefits and privileges this entails. But this communiqué is like the queen in the fairy tale, Sleeping Beauty, asking…. ‘mirror, mirror on the wall, who is the fairest of them all?”. We have to wait until August until we see where this new initiative may lead. My main regret is that by posing it in such a conflictual manner, we have lost the chance of a truly coordinated and collaborative effort to resolve the world’s infrastructure crisis.

Richard T. Griffiths

Director New Silk Roads, IIAS, Leiden