PARTNERSHIP FOR GLOBAL INFRASTRUCTURE INVESTMENT (PGII) - INTERNATIONAL
News:
EU's commitment to the
Partnership for Global Infrastructure and Investment (PGII)
What's
in the news?
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The new project is a part of the
Partnership for Global Infrastructure Investment (PGII) – a West-led initiative
for funding infrastructure projects across the world, seen as a counter to
China’s Belt and Road Initiative (BRI).
PGII:
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The Partnership for Global Infrastructure
and Investment (PGII) is a collaborative effort by the G7 (or Group of Seven).
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The G7 countries include the United
Kingdom, the United States, Canada, France, Germany, Italy, Japan, and the
European Union (EU).
Objective:
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It aims to fund critical infrastructure
projects such as roads, ports, bridges, communication setups, etc. in
developing nations through public and private investment to enhance global
trade and cooperation.
Target:
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PGII aims to mobilize nearly $600 billion from the G7 by 2027 to invest in
critical infrastructure.
Principles:
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It is based on the standards and trust
principles of the Blue Dot Network (BDN)
which are “respect for transparency and accountability, sovereignty of property
and resources, local labour and human rights, rule of law, and sound government
practices in procurement and financing.”
History
behind PGII:
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The infrastructure plan was first
announced in June 2021 during the G7 (or Group of Seven) summit in the UK.
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The G7 countries include the United
Kingdom, the United States, Canada, France, Germany, Italy, Japan, and the
European Union (EU).
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US President Joe Biden had called it the
Build Back Better World (B3W) framework. However, it did not register much
progress
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In
2022, during the G7 summit in Germany, the PGII was officially launched as a joint initiative to help fund infrastructure projects in developing
countries through public and private investments.
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With the aim of collectively mobilizing
nearly $600 billion from the G7 by 2027 to invest in critical infrastructure
that improves lives and delivers real gains for all of our people.
Alternative
to China’s BRI:
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Essentially, in response to the
infrastructure projects being undertaken and funded by China under the Belt and
Road Initiative (BRI) at a global level, the G7 decided to present their
alternative mechanism for it.
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The stated purpose of both the PGII and
the BRI is to help secure funding for countries to build critical
infrastructure such as roads, ports, bridges, communication setups, etc. to enhance
global trade and cooperation.
Background
of China’ BRI:
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China began the Belt and Road Initiative in 2013 under its President Xi Jinping. It
aims to revive the ancient trade routes
crossing to and from China–from Rome in Europe to East Asia.
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Under this, the Chinese government helped in providing loans for infrastructure
projects to various countries, and in many cases, Chinese companies were
awarded contracts for carrying out the work. This helped China mark its
footprints at a global level.
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However, China was criticized by the West and by some other countries for providing unsustainable debts to countries
that will be unable to repay them.
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According to a 2019 World Bank report, among the 43 corridor economies for which
detailed data was available, 12 could face a situation where debts were not
sustainable, which could lead to public assets being handed over to foreign
contractors or China itself.
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The report added that if issues of environmental degradation, high
debts, and corruption are successfully countered and the BRI is fully
implemented to its potential, it could increase trade between 1.7 and 6.2
percent for the world, increasing global real income by 0.7 to 2.9 per cent.
China has claimed the BRI has made economic gains and helped in job creation.
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India,
however, opposed the BRI as it included the China-Pakistan
Economic Corridor, which connected Kashgar in China with the Gwadar port in
Pakistan via Pakistan-occupied Kashmir.
Challenges
to PGII:
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Less
investment than BRI: The scale of investments that can be
raised by China is higher than that of the G7.
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Need
for political consensus among G7 countries: PGII will have to
look for political consensus within G7 countries for pledging to such projects.
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No
control over private investment: PGII also has no control
over assured private-sector participation.
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Reaction
from China: Also, China is in the process of modifying
BRI to address its criticisms. In 2019, China dramatically diminished its
overseas infrastructure investments, especially pulling back on high-risk
projects. President Xi Jinping emphasized his commitment to a ‘Green BRI.’
If PGII succeeds to a
certain extent and with BRI addressing its own issues given this competition of
sorts, it could actually help diversify the options available to the countries
who have infra requirements.