THE G7 SUMMIT 2022 AND THE BELT AND ROAD INITIATIVE

The seventh Summit to be hosted by Germany was held at Schloss Emmau in the Bavarian Alps, Germany, from June 26 to 28. This was the 48^th G7 Summit and it was also the first summit for German Chancellor Olaf Scholz and Japanese Prime Minister Fumio Kishida.

As a brief background – The initial meetings of what would become the G7, began in 1973 and included only four countries: the United States, the United Kingdom, West Germany, and France. Japan, as a fifth member, was invited to join soon after, and Italy was added in time for the first formal meeting of the “G6” in 1975. Canada was added in 1976. Also, either the European Economic Community or the European Union has typically attended G7 meetings since 1981 as a “non-enumerated” member. Russia officially had joined the G7 in 1981 and it was renamed the G8. However, Russia’s annexation of Crimea in 2014 led the other G8 members to suspend Russia’s membership and revert to the G7 moniker. Russia officially left the G8 in 2017.

G7 is a coalition of seven countries along with the European Union (EU) has the largest and most advanced economies in the world. The G7 members represent over 46 percent of the gross domestic product (GDP) globally based on nominal values. These countries represent over 32 percent of the Gross Domestic Purchasing based on purchasing power parity. In 2018, the countries in this group comprised more than 60 percent of the global net wealth for a total of $317 trillion.

The leaders of the Group of Seven industrialized nations have promised to raise $600 billion within the next five years to fund the Partnership for Global Infrastructure and Investment (PGII) with the focus to finance infrastructure projects in developing countries, an effort designed to compete for influence in the developing world with the similar Belt and Road Initiative (BRI) launched by China in 2013.

Last year, at the 2021 G7 Summit, President Biden and G7 leaders announced their intent to develop an infrastructure partnership to meet the enormous infrastructure needs of low- and middle-income countries.

It was recognized that China’s BRI has helped finance trains, roads, and ports in many under developing countries.  But it has been criticized for saddling some with debt.  In a statement at their summit in the English county of Cornwall, in 2021, the G7 leaders said they would offer a “Values-Driven, High-Standard and Transparent Partnership”.

The concept of PGII was materialized at the G7 Summit 2022 when President Joe Biden announced on Sunday that the U.S. will mobilize $200 billion dollars of investment in global infrastructure projects in the next five years, as part of an effort by the world’s leading democratic economies to counter China’s BRI.

It was also announced at the Summit that Europe will mobilize 300 billion euros for the initiative over the same period to build up a sustainable alternative to China’s BRI.  The leaders of Italy, Canada and Japan also spoke about their plans, some of which have already been announced separately.

The PGII initiative is funding projects in the following four major categories:

• Clean Energy;
• Health Systems;
• Gender Equality; and
• Information and Communication Technology.

Initial investments include the following:

• $2 billion for a solar project in Angola, including solar mini-grids, home power kits and solar to power telecommunications;
• $600 million for a U.S. company to build a submarine telecommunications cable that will connect Singapore to France through Egypt and the Horn of Africa, delivering high speed internet;
• Up to $50 million from the U.S. to the World Bank’s Childcare Incentive Fund, which is also getting support from Canada, Australia and numerous foundations; and
• $3.3 million in technical assistance from the U.S. to the Institut Pasteur de Dakar for development of an industrial-scale, multi-vaccine manufacturing facility in Senegal that could produce COVID-19 vaccines and others, in partnership with other G7 nations and the EU.

Here is a fact – for nearly a decade, China has been focused on bridges, road, mining and other hard infrastructure projects in the developing world, which has been estimated at $1 trillion in total spending, though the true amount could be higher. Here is an example:

At the end of 2013 Chinese President Xi Jinping announced one of China’s most ambitious foreign policy and economic initiatives. He called for the building of a Silk Road Economic Belt and a 21st Century Maritime Silk Road, collectively referred to as the BRI. Xi’s vision is an ambitious program of infrastructure building to connect China’s less-developed border regions with neighbouring countries. BRI is arguably one of the largest development plans in modern history.

Speaking of “Silk Road”, according to National Geographic, the term refers to a network of routes used by traders for more than 1,500 years, from when the Han dynasty of China opened trade in 130 B.C.E. until 1453 C.E., when the Ottoman Empire closed off trade with the West. German geographer and traveler Ferdinand von Richthofen first used the term “Silk Road” in 1877 C.E. to describe the well-traveled pathway of goods between Europe and East Asia. The term also serves as a metaphor for the exchange of goods and ideas between diverse cultures. Although the trade network is commonly referred to as the Silk Road, some historians favor the term Silk Routes because it better reflects the many paths taken by traders.

There are many BRI projects in various countries with the focus to create a modern version of the ancient Silk Road trade route from Asia to Europe.

The following project is a prime example of the success of BRI:

• The China-Pakistan Economic Corridor (EPEC)

China–Pakistan Economic Corridor (CPEC) is a collection of infrastructure projects that are under construction throughout Pakistan since 2013. Originally valued at $47 billion, the value of CPEC projects is worth $62 billion as of 2020. It is widely regarded as one of the flagship projects of BRI and is enthusiastically supported by both Beijing and Islamabad.

The China-Pakistan Economic Corridor consists of bridges, railways, energy installations, a redeveloped highway, and expansion of the Pakistani port of Gwadar. The focal point for Pakistan was developing projects in Pakistan and the pivotal regions in this respect include Punjab, Sindh, and Baluchistan where Gwadar city is situated. Whereas the Chinese focal point is on Xinjiang. Xinjiang is a landlocked autonomous region of the People’s Republic of China (PRC), located in the northwest of the country at the crossroads of Central Asia and East Asia. Being the largest province-level division of China by area and the 8th-largest country subdivision in the world.

The outcomes of the individual projects are designed to aid both China and Pakistan. At the same time, China is not just trying to export higher-end goods through BRI but to encourage the acceptance of Chinese standards and help China undergo economic structural reform and upgrade its industries, moving away from the cheap mass manufacturing model.

Be aware of the fact that the infrastructural developments in Pakistan are just a start as CPEC is committed to economic regionalization in its surrounding locations and consequently those upgraded transport links will be extended into Iran, Afghanistan, India, and Central Asian Republic.

The overall benefits of CPEC are summarized below:

1. Quaid-e-Azam Solar Power Park Bahawalpur: The 100MW Solar Power Park in Bahawalpur has generated not just jobs but the cleanest and the most reliable source of energy to Pakistan.  This unique solar project is the biggest solar producer in Pakistan and has surpassed its intended energy production by 4.42 percent in 2015-2016 and 5.48 percent in 2016-2017;
2. $4.8 Billion is being spent by China in developing Gwadar to be the busiest shipping port in South Asia by 2022: Gwadar has become a major global port city and will be the gateway of trade for the continent, linking China with markets in Central and South Asia. Over 500,000 professionals are expected to live in the city by 2023;
3. Lahore Line Metro Train: It promises to connect the vast city of Lahore from one end of the city to the other end. A One-Of-A-Kind project, funded by China, this train line will drastically improve Pakistan’s infrastructure and will cater to 250,000 passengers on a daily basis. The train was recently trialed and is due to be completed in a matter of months;
4. 2,000 km of Rail and Road Networks connecting Kashgar (China) to Gwadar (Pakistan): The chains of roads and rail networks ensure both the investors and the public a route to communicate more efficiently and it is expected that both countries will see economic benefits. It is estimated that around $2-2.5 billion revenues per year could be added to the economy of Pakistan within a few years;
5. 3000 locals were hired by Sahiwal Coal Fired Power Plant: Coordinated by the Ministry of Water and Power of Pakistan, Sahiwal’s Coal Fired Power Plant promises to deliver 1.3MW of energy and was completed in 2017, a landmark in the history of Pakistan and China relationships;
6. $35 Billion is being spent by China to construct 19 Power Plants: Out of the $46 billion, $35 billion is being invested by Chinese firms and companies. This huge investment promises to bring 12,114MW of energy to Pakistan. Given the current crisis of Pakistan’s energy deficits, this gigantic investment promises to deliver Pakistan all its energy crisis solutions in a very short span of time;
7. 30,000 direct job opportunities have been created in power and infrastructure sectors for Pakistanis: Specifically, 5,000 jobs have been formed at Port Qasim Coal Power Project and It is estimated that around 800,000 employment opportunities will be available in the next two decades, owing to the diversity and nature of the ever-expanding projects and investments of CPEC;
8. Karakoram Highway Phase 2: The phase 2 of Karakoram highway connects Thakot and Havelian in KPK (Khyber Pakhtunkhwa) in a 120km highway and is already under construction. The road is considered to be a major highway that would establish a foundation of networks from the north to the south. The financial estimate of this project was $1.36 Billion;
9. Special Economic Zones where companies can enjoy business incentives and tax holidays: to facilitate rapid commercial and economic development and encourage investment from industries around the world, Pakistan promises to set up special economic zones. These zones can be found on the outskirts of large cities in Pakistan such as Faisalabad, Islamabad, Mirpur, Nowshera, Karachi, and Gilgit; and
10. 2.5 percent projected annual growth for Pakistan via CPEC: The projects being undertaken in CPEC are promising to help boost the GDP of Pakistan to 7.5 percent. It has been estimated the introduction of CPEC in Pakistan is going to give a straight boost of 2.5 percent to the current GDP of 5 percent.

Even though Sohilwal Coal Fired Plant Project (Number 5) wasn’t necessarily consistent with the climate related initiatives around the world but the overall benefits associated with CPEC initiatives in Pakistan were undeniably impressive.

In spite of the inherited controversy whether BRI is contributing to the growth of Chinese power and influence across the globe, as of 23 March 2022, 215 cooperation documents have been signed with 149 countries and 32 international organisations to be a part of BRI initiatives which is indubitably a massive undertaking. Nonetheless, the fact remains that the coalition of seven countries (G7), along with the European Union representing most advanced economies in the world are attempting eagerly to raise $600 billion by 2027, five years from now, to counter China’s BRI and the question is:

• When and how these countries would be able to offer the world, the promised “Value-Driven Standards and Transparent Partnerships”? Hope it’s not going to be too little, too late.

Ottawa, Ontario, Canada 09 July 2022