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23rd May 2022

EU pitches infrastructure investment plan to rival China

  • EU Comission president Ursula von der Leyen presented the plan as part of a grander Indo-Pacific strategy (Photo: European Commission)
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European Commission president Ursula von der Leyen on Wednesday (15 September) launched Europe's "Global Gateway" strategy - an international investment plan for transport and infrastructure.

She presented the plan during her annual State of the Union speech, and as a clear response to China's Belt and Road Initiative (BRI): "We will take a values-based approach, offering transparency and good governance to our partners."

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"We want to create links and not dependencies," she added. She also proposed a ban on products using forced labour, in reference to concerns over abuses in the Chinese region of Xinjiang.

In July, EU foreign ministers called on the commission to develop a strategy to promote European values abroad and to "protect its global interests through sustainable connectivity."

This followed a series of recent infrastructure schemes by Japan and India (Asia-Africa Growth Corridor in 2017) and the US, Japan and Australia (The Blue Dot Network in 2019).

And in June, the G7 nations led by president Joe Biden, agreed on a global infrastructure initiative, dubbed Build Back Better World, which is a loose collaboration that aims to compete with the Chinese BRI.

Although Global Gateway is yet to be finalised, and nothing has been said about the budget, von der Leyen said that investments must be a mix of private and public, and must prioritise collaboration with the business sector.

'Trusted brand'

"We will connect institutions with investment banks and the business community," von der Leyen told MEPs. "We want to turn Global Gateway into a trusted brand around the world."

This business-minded approach was met by approval by Reinhard Hans Butikofer, MEP for the Greens, who has long advocated for such a scheme: "This parliament has pressed this for years, and I strongly welcome that the commission now takes ownership. I think China has stolen a march on us with their BRI, and we have to play catch up."

Echoing von der Leyen, he added that the Global Gateway should be a shared effort between government, civil society, business and international finance.

"Business is fully ready to join forces, and I believe business should help with drafting the strategy," adding that a 'Global Gateway Business Advisory Council' should be a practical next step. At the time of writing the commission could not yet answer if the business community (or civil society) has been consulted in drafting the plan.

Macro-economist Daniela Gabor, in a 2020 paper called 'The Wasington Consensus', has warned against finance becoming too dominant in infrastructure investment strategies.

"We cannot rely on private finance to lead us out of a climate crisis it has systematically contributed to. We have to disempower carbon financiers, and we do that by making the democratic state – not investors – lead the way forward," she wrote in August.

Private investors prioritise infrastructure investments that promise a rate of return - 'roads to nowhere', instead of publicly funded projects that people need.

Global Gateway will be made a priority at the next EU-Africa summit in February, von der Leyen has said. Africa is a region where China has become the dominant investor in recent years.

According to accounting firm EY (formerly Ernst & Young), China was the largest investor in Africa in terms of total capital, investing more than twice the dollar amount of France or the US, the next two biggest investors.

"We will invest with Africa to create a market for green hydrogen that connects the two shores of the Mediterranean," von der Leyen added.

A recent underwater fibre optic cable that connected Brazil with Portugal was also named as an example of the type of investments Global Gateway could engender.

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