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Is the developing world in for a treat as Sino-US economic rivalry heats up? While Donald Trump was busy tearing down America’s leadership mantle in the world from 2017 to 2020, China during that time remained focused on expanding its economic influence and soft power abroad under the Belt and Road Initiative (BRI). Recognizing that the ongoing ‘great power competition’ cannot be ignored any longer, new US administration has signaled it aims to catch up with China’s playbook in developing countries.

Last month, at the G-7 summit in the UK, the new US President Joe Biden, along with key US allies, launched the Build Back Better World (B3W) Partnership. The stated aim of the B3W framework is to help the low-income and middle-income countries with their infrastructure development needs, especially concerning areas of climate change, health security, digital technology, and gender divide. Hundreds of billions of dollars of infrastructure development funding is being promised to the world in the future.

The G7 is planning to mobilize infrastructure investments by working with the private sector and development sector stakeholders. The US is planning to use its development arms (e.g. USAID, DFC and EXIM Bank) to catalyze such investments. Reading between the lines, it appears that individual G7 countries – Canada, France, Germany, Italy, Japan, UK and US – will look after infrastructure projects in specific regions, and the sum total will be referred to as B3W investments across multiple continents.

On paper, this kind of race between China and the US-led alliance over wooing third countries via economic-development is a good omen to bridge infrastructure gaps in developing world. An economic competition between China and US is better than outright conflict. This emerging race should relieve China allies like Pakistan that fear repercussions of siding with China if the Sino-US rivalry becomes more intensified. Officials here have indicated openness to both US-led and Chinese investments.

The B3W program has received criticism, too. For instance, some observers feel this initiative is woefully short on specifics, akin to a statement of intent. Others grumble that the West is only now waking up to its developmental role when China’s BRI has grown massive in scale to multi-trillion-dollar investments across dozens of countries in several continents. In addition, some wonder what will be different about B3W if it also exports a prosperous country’s internal competitiveness abroad in poor regions.

It may take some time for B3W modalities – including the identification of the scale and scope of infrastructure investments, type of financing models, governance standards, sustainability guidelines, and qualification criteria for recipient countries – to be nailed down. Right now, the Western countries remain focused on tackling the pandemic and reviving their own economies. Therefore, do not expect funding to start raining down anytime soon!

Then there are issues to be sorted out within the G7 as well. For instance, the US seems much more upbeat about B3W than its G7 counterparts, as major European countries do not wish to antagonize China. Wooing private sector investment on such a large scale will also be a challenge, considering the low and long-term nature of returns from public infrastructure projects. And if B3W investments come with strict conditionality’s ala IFIs, recipient countries may walk away. Let's see how incentives line up on both sides in the coming years.


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