US Boosts Funds for Infrastructure Program for Developing Nations Above $30 Billion

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WASHINGTON — The Biden administration tells VOA that in recent months it has increased the amount of U.S. public and private funds for a multilateral program to build infrastructure in developing nations, surpassing the $30 billion figure that it announced in May.

But some observers say it will be tough for the U.S. to meet its pledge to raise $200 billion in the next five years for the program launched by the Group of Seven advanced economies. The program called Partnership for Global Infrastructure and Investment — also known as PGI — is a competitor to China’s Belt and Road Initiative, which marks its 10th anniversary this year. Other G7 members have pledged to raise $400 billion by 2027.

In a September 29 email to VOA, the White House’s National Security Council said that new U.S. financial pledges announced on September 9 “push up” the total U.S. commitment to the PGI program. The new U.S. pledges add between $1.1 and $1.6 billion to the $30 billion total commitment announced in May.

The Sept. 9 commitments were announced in a White House fact sheet on the progress of PGI, which the U.S. and its G7 partners originally launched in 2021 as “Build Back Better World” before rebranding it as PGII and then PGI.

PGI’s primary objective, as stated in the fact sheet, has been “narrowing the infrastructure gap in low- and middle-income countries to enable inclusive and sustainable growth and promote economic activity and prosperity.”

Observers have said its unspoken second objective is to offer higher-quality infrastructure projects to developing nations than those offered by China’s BRI.

The White House’s September fact sheet summarized what it described as a range of new PGI projects discussed by President Joe Biden when he met Indian Prime Minister Narendra Modi and other leaders of the Group of 20 (G20) intergovernmental forum at a summit in Delhi.

The international infrastructure projects cited in that fact sheet involve commitments of $1.1 billion in U.S. government funds, $60 million jointly pledged by the U.S. government and the Bill & Melinda Gates Foundation, and $10 million pledged by Microsoft.

One project also involves a $515 million joint commitment by the U.S. government and seven partner nations, with no indication in the fact sheet of the U.S. share of that commitment.

The White House also highlighted PGI’s goal of developing two international “economic corridors,” including a newly announced India-Middle East-Europe Economic Corridor (IMEC) and the Lobito Corridor in sub-Saharan Africa, previously announced as a PGI project in May.

IMEC’s founding partners include the U.S., India, Saudi Arabia, the United Arab Emirates, France, Germany, Italy and the European Union. They are seeking cooperation with other governments and the private sector to build new connections between India and Europe via railway lines and ports in the UAE, Saudi Arabia, Jordan and Israel, and via undersea cables.

The Lobito Corridor is intended to link the Democratic Republic of Congo and Zambia to the Lobito port in Angola via new transport infrastructure. A September joint statement announced that the U.S. and the European Union “are teaming up to support the development of the Corridor, including by launching feasibility studies for a new greenfield rail line expansion between Zambia and Angola.”

In one of several VOA interviews in late September with U.S. researchers who have monitored PGI’s progress, Erin Murphy of the Center for Strategic and International Studies said the Lobito Corridor has the greatest potential.

“It’s something the African nations need, the map makes sense, and the feasibility studies make sense,” Murphy said. “But otherwise, I’m not too impressed so far with PGI and I truly want to be.”

Murphy said IMEC faces major hurdles, such as getting the involved governments to reconcile differences in their standards on the rights of workers building new infrastructure, standards for new equipment like gauges and switches, and standards for border controls. “It’s going to require a lot of cooperation and it will be a real test,” she said.

IMEC’s founding nations said in their September 9 memorandum of understanding that they intend to meet again by November 9 “to develop and commit to an action plan with relevant timetables.”

As for other PGI projects announced by the U.S. in June and November 2022 and in May and September this year, the U.S. researchers interviewed by VOA identified several shortcomings in the U.S. strategy for implementation.

Oyintarelado Moses of Boston University’s Global China Initiative said many of those announcements either involve infrastructure projects that already had been underway for some time and were rebranded as part of PGI, or involve newer projects designed to align with PGI principles.

“In practice, PGI seems a little disaggregated on the U.S. side, whereas the European Commission (the EU’s executive branch) seems to have a more coordinated effort with its Global Gateway program,” Moses said.

The Commission launched Global Gateway in December 2021 to “boost smart, clean and secure links in digital, energy and transport and strengthen health, education and research systems across the world.” It declared the program to be part of PGI in June 2022.

Murphy said U.S. PGI efforts also have been hampered by the lack of a team of senior officials dedicated to coordinating the efforts of multiple federal development and lending agencies.

In May, the White House said the then-incoming Senior Adviser to the President for Energy and Investment Amos Hochstein would “join the newly designated group of G7 senior government officials who will provide strategic direction to drive PGI investments with partners, including the private sector.” Hochstein assumed the senior adviser role in June.

“It would be fine if PGI was his only job,” Murphy said, noting his additional focus on energy. “PGI needs a dedicated team that can work with different U.S. agencies, other countries and the private sector. And that requires perhaps three or four people who work really well together,” she said.

In an October 12 email to VOA, the U.S. State Department’s Acting Special Coordinator for PGI Helaina Matza said PGI events hosted by President Joe Biden at this year’s G7 and G20 summits and by Secretary of State Antony Blinken and Treasury Secretary Janet Yellen in New York last month show the program is an administration “priority and is being treated as such.”

“Hochsten’s move to the White House has further strengthened our progress, with him working directly with the president and White House leadership on elevating PGI, and my team at the State Department expanding and implementing PGI economic corridors around the world,” Matza said.

Moses said raising the U.S. PGI contribution to $200 billion by 2027 from the current level of just over $30 billion will require the Biden administration to make greater efforts to recruit private funds.

“The target is just not doable without the private sector, which makes its own decisions” about the risks of investing in developing countries, Moses said. “So the U.S. government should think more about ways to support private sector involvement in PGI by providing them with insurance policies and guarantees.”

Elizabeth Losos, executive in residence at Duke University’s Nicholas Institute for Energy, Environment & Sustainability, said the U.S. government also should consider investing more federal funds into the early stages of infrastructure projects in developing nations.

“Private companies are not going to invest in helping those nations to develop anti-corruption and procurement programs that are needed to build infrastructure more efficiently,” Losos said. “So investing more public funds in early-stage development activities can really pay off in making private companies feel more comfortable about getting involved.”

Matza said the Biden administration has been gaining momentum in attracting private sector investment to PGI.

“Just a few weeks ago, Secretary Blinken and Secretary Yellen co-hosted the inaugural U.S. PGI Investor Forum with leaders from the top U.S. financial institutions that collectively represent trillions of dollars of assets under management,” Matza said. “Utilizing this forum, PGI has, and will continue to, identify ways to further mobilize infrastructure investment in quality, sustainable infrastructure in emerging economies around the world.”

Losos said one U.S.-led program that could help PGI to attract more private capital is the Blue Dot Network (BDN), which certifies infrastructure projects as “high quality” with sustainable economic, social and environmental benefits and climate resilience.

The mostly U.S.-funded program, which also involves Japan, Australia, Britain and Spain, was launched in 2019 and incorporated into PGI’s first iteration in 2021.

“Development of BDN’s certification process has been thorough and consequently slow. I hope that once certification standards are publicly released and broadly adopted, we will see a real uptick in private investors showing an interest in PGI projects,” Losos said.

At the request of BDN member nations, the Organization for Economic Co-operation and Development (OECD) published a proposal for a BDN certification system in March 2022. OECD is an intergovernmental forum of 38 member countries seeking to improve the economic and social well-being of people around the world. Since 2022, OECD has been working with technical experts from the private sector, civil society and academia to apply the certification framework to several active infrastructure projects, from a wind farm in Brazil to a tunnel project in Turkey and refine the framework in preparation for adoption by BDN members.

Source : VOA News