Author : Prithvi Gupta

Expert Speak Raisina Debates
Published on Jul 08, 2024

The G7's PGII initiative has the potential to become a key player in financing developmental projects across the developing world, offering an alternative to China's BRI

The PGII consolidates Western connectivity initiatives

From 13-15 June, Italy held the 2024 Group of Seven (G7) Leaders’ Summit in Apulia, hosting leaders from across the G7 countries, and observer nations such as India, Algeria, South Africa, Jordan, the United Arab Emirates (UAE) and the Holy See, among others. The Leaders’ Summit was held in the backdrop of Russia’s escalating offensive in Ukraine, the intensifying United States (US)-China geoeconomic competition and the war in Gaza—issues that the grouping has been grappling with since the 2022 G7 Summit in Germany.

Another global issue that the G7 has taken up is the problem of development finance, infrastructure development, and connectivity. At the 2022 Summit, the G7 partners launched the Partnership for Global Infrastructure and Investment (PGII), under the leadership of the US, and pledged US$ 600 billion in private and public sector investments from the G7 countries. Under the aegis of the PGII, the European Commission’s Global Gateway, the EU’s global connectivity and infrastructure development initiative, pledged US$ 450 billion as part of the US$ 600 billion promised by the PGII partners. The Global Gateway was launched in 2021 and consolidated under the PGII in 2022, in Germany. Since then, the two initiatives have built multiple projects across the developing world in the energy, renewables, transport, education and social infrastructure sectors. In 2024, the PGII added to its initiatives, Italy’s Mattei Plan for Africa (MPA)—a US$8.2 billion fund aimed at bolstering economic growth in Africa’s education and training, agriculture, health, infrastructure, water, and energy sectors.

At the 2022 Summit, the G7 partners launched the Partnership for Global Infrastructure and Investment (PGII), under the leadership of the US, and pledged US$ 600 billion in private and public sector investments from the G7 countries.

This article analyses the consolidation of Western connectivity initiatives under the G7’s consolidated PGII since 2022 and evaluates the current status of its flagship projects launched in 2022 and 2023.

Assessing the PGII’s progress 

A consortium of companies and public organisations from the G7 partners, Africa and Southeast Asia, including the US Export-Import Bank, Millennium Challenge Corporation (MCC), Microsoft, Google, Blackrock, Global Investment Fund, the World Bank Group, the Africa Green Industrialisation Initiative, Global Energy Alliance for People and Planet, Climate Finance Partnership, Africa Finance Corporation, Private Export Funding Corporation, and Standard Chartered Bank have mobilised close to US$60 billion between 2022 and 2024, to execute over 120 projects across 38 countries in the developing world. These projects also include the Lobito Economic Corridor in Africa, the Luzon Economic Corridor in the Indo-Pacific, the India-Middle East Economic Corridor in Eurasia, the Middle Corridor in Asia and the South-North Africa-Europe corridor proposed by Italy.

Table 1:      Major connectivity and energy projects under the PGII

Source: The PGII G7 Factsheet 

Currently, the PGII is undertaking 20 major connectivity (digital and transport) and energy infrastructure projects across 29 countries to the tune of US$ 16.6 billion. These projects include three intercontinental digital cables in Africa and the South Pacific, being built by US tech giants Google and Microsoft, four MCC projects for renewable energy infrastructure in Africa, and four mega-railway projects in Angola, Zambia, Kazakhstan, and the DRC.

Complementing these PGII projects, the EU’s Global Gateway is building connectivity infrastructure, upgrading roads, laying undersea and terrestrial optic fibre cables and enhancing port infrastructure across 29 countries in Africa. Some of these major projects include—the critical raw minerals supply chain development partnership with Rwanda, Tanzania, Uganda and Zambia, the 10,000 kilometres 6-country optic fibre cable with the DRC, Zambia, Zimbabwe, Malawi and Mozambique, and multiple renewable energy projects across 21 countries which will add 15.5GW of renewable energy capacity by 2027. The Global Gateway and PGII’s geographic reach in Africa is largely limited to Sub-Saharan Africa, omitting the Maghreb from these investments and partnerships. This is where Italy stepped up in 2024 through its Mattei Plan for Africa, which will infuse investments, loans and equity worth US$8.2 billion in Africa in the education and training, agriculture, health, water, infrastructure and energy sectors to bolster economic growth.

The Global Gateway and PGII’s geographic reach in Africa is largely limited to Sub-Saharan Africa, omitting the Maghreb from these investments and partnerships.

The G7’s connectivity and energy development outreach hinges on securing energy supplies from Africa and Central Asia as well as securing critical raw minerals from Africa, where China, its geopolitical rival, is already ahead in the development game, through its signature Belt and Road Initiative (BRI). 

Countering China’s Belt and Road

In Africa, China’s BRI has loaned over US$ 185 billion and invested close to US$ 60 billion across critical economic sectors such as gas, oil, renewables, transport, port infrastructure, coal, power, electricity grids, hydroelectric power plants, roads, railways and social infrastructure. China also has wide-ranging Free Trade Agreements with 12 African nations and is the continent’s largest trade partner. Africa is also critical to Beijing for its energy security and global value chains. Beijing imports nearly one-third of its oil and gas supply through Africa and has stakes in multiple CRM African mines, necessary for the green transition and EV supply chains. China has an edge over the West because of its domestic non-interference, aid-without-reform, and quick finance disbursement policies in addition to its first-mover advantage in the continent.

While the G7 and the Western powers were late to infrastructure diplomacy in the developing world, between 2021 and 2024, the West consolidated its initiatives under the PGII, by promoting green-field and sustainable projects based on good governance principles and global best practices, aimed at benefiting the local economy. These policy directives build on the criticism of China’s BRI projects which are mired with corruption, overhead costs, opaque loan terms, and non-disclosure agreements. The West aims to position itself as the preferred development partner in the developing world.

Beijing imports nearly one-third of its oil and gas supply through Africa and has stakes in multiple CRM African mines, necessary for the green transition and EV supply chains.

Conclusion

However, criticisms abound for the Western connectivity initiatives as well. Critics argue that the West mimics China’s investment partnership playbook, establishes corridors for traditional extractivism from Africa to the West and competes rather than complementing the BRI, which negates the developmental impact of projects from both sides, to an extent.

Yet, the G7's PGII initiative has the potential to become a key player in financing developmental projects across the developing world. PGII’s emphasis on good governance and sustainability, learning from the BRI’s fallacies and massive deployment of private finance positions it as a credible alternative for developing nations. The coming years will reveal how effectively PGII competes with China's BRI for influence in the developing world.


Prithvi Gupta is a Junior Fellow at the Observer Research Foundation

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Author

Prithvi Gupta

Prithvi Gupta

Prithvi works as a Junior Fellow in the Strategic Studies Programme. His research primarily focuses on analysing the geoeconomic and strategic trends in international relations. ...

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