The European Union this week launched a $ 340 billion fund, called Global Gateway, to boost infrastructure around the world that analysts say is targeting rival the Belt and Road Initiative from China.
But can it compete with Beijing’s billions?
The EU says Global Gateway will finance high-quality transport, climate, energy and digital infrastructure, including fiber optic cables, roads, railways and renewable energy, mainly in developing countries.
Green transition
The fund “will invest around the world to support our priorities, namely the green and digital transition,” European Commission President Ursula von der Leyen told a press conference at the end of November.
“Think, for example, of investing in clean hydrogen. We have partner countries that have a lot of renewable energy. Think of wind or solar energy to produce hydrogen, which is of interest to them and to us, or think of cables. of underwater data connecting the continents, “he told reporters. “Global Gateway will also focus on transportation linkages, health care capacity … it will also support schools and education systems.”
The fund will offer the equivalent of $ 340 billion through 2027, mostly in loans rather than grants.
Democratic values
“We want to take a different approach. We want to show that a democratic, values-based approach can meet the most pressing challenges. We want to show that, on the one hand, it can meet local needs, but also, on the other hand, tackle the global challenges that And so, in a way, also, of course, benefit the European Union, because Global Gateway is also about our strategic interests around the world, “argued Von der Leyen.
The project is also clearly about geopolitics, said analyst Jonathan Holslag, professor of international politics at the Free University of Brussels.
“The European Commission obviously doesn’t want to say it, but the main objective behind the Global Gateway is to respond to the China Belt and Road Initiative, China’s new Silk Road,” Holslag explained to the Voice of america. “Many European companies have faced enormous competition from their Chinese rivals. They have also seen countries slide into the orbit of China.”
Francesca Ghiretti, an analyst at Germany’s Mercator Institute for China Studies, told the VOA that the European Union should be strategic with regard to the projects it selects, but foresees investments directed towards Africa and India.
“We know that until now Africa would be a big focus of Brussels, and probably also India, in light of the fact that in 2022 there will be two summits, an EU-Africa summit and an EU-India summit,” he said.
Chinese competition
Is Europe’s $ 340 billion enough to compete with Beijing?
“Given the need for infrastructure development in all aspects, be it railways, ports, etc., this is just a drop in the bucket, you could say,” Holslag argued.
“But also, if you compare it with what China is investing, it is still quite small. China today has a total portfolio of overseas loans and credits of around US $ 1.5 trillion,” the expert explained.
That financial powerhouse was on display in Laos this week, when the country officially inaugurated a $ 5.9 billion 1,000-kilometer rail link with Kunming in China, which was 60 percent financed by Chinese state loans.
The railway, which connects the capital of Laos, Vientiane, with the southern Chinese city through lush tropical mountains, is one of hundreds of projects launched under the Belt and Road to expand trade through the construction of ports, railways and other facilities in Asia, Africa and Africa Pacific.
Debt
For some analysts, the costs of Chinese debt are dangerously high.
“The covid situation does not bode well for making money with the railroad, and that means more debt, less income, less exports,” he told The Associated Press Greg Raymond of the Australian National University.
“For me, when I look at the facts about Laos’ economic situation, it is difficult to avoid the conclusion that they are slipping deeper into a kind of Chinese orbit simply because of the economic decisions they have made,” Raymond said.
China has also invested heavily in Europe, buying ports, including Piraeus in Athens, the EU’s sixth-busiest container port, and financing shipping routes in the Balkan states. Montenegro was recently forced to seek help from European and American banks to pay off a $ 1 billion Chinese loan used to finance a new highway.
European alternative
After seeing Beijing move into its backyard, analysts say, the EU wants to offer an alternative. The EU said this week that its Global Gateway program could work in conjunction with the Build Back Better World infrastructure fund (Rebuild a Better World) by the United States, launched together with other G-7 members in June.
But Europe cannot compete on the same terms as China, analyst Holslag argued.
“We also have to see if developing countries are interested in adopting the conditions that will be imposed on European loans, in terms of environmental sustainability, transparency, etc.,” Holslag told the VOA.
China’s reaction
China denies that the Belt and Road Initiative creates debt traps. Beijing has yet to respond directly to European plans.
Responding to a question about the US fund Build Back Better World, Chinese Foreign Ministry spokesman Wang Wenbin told reporters on November 9: “There is a lot of room for cooperation in the field of global infrastructure. , where different initiatives will not compensate or compensate to replace each other. What the world needs is to build bridges instead of breaking them down, to be interconnected instead of decoupling, and to be mutually beneficial, not closed or exclusive. “
* Kris Cheng and the VOA Cantonese Service contributed to this report.
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