Wednesday September 22, 2021

Aid, B3W and the BRI

June 22, 2021

“China has its Belt and Road Initiative, and we think that there’s a much more equitable way to provide for the needs of countries around the world”, US President Biden stated after the end of the 47th G7 summit held on June 11-13 in Cornwall in the UK.

President Biden did not mince any words in his blunt criticism of China, both regarding the oft-repeated charges related to the spread of the Covid-19 virus and on Beijing’s alleged unsustainable predatory loan policies under the BRI. Endorsing and branding a new vision for funding infrastructure projects in developing countries named the Build Back Better World (B3W) plan, President Biden offered an alternative to China’s BRI, one he claimed will be ‘greener and more inclusive’.

The 25-page communiqué containing 70 paras covers several issues and challenges the world faces. While the document mentioned China four times, it listed ‘build back better’ seven times and discussed the Sustainable Development Goals (SDGs) and the 2030 Agenda many times. Highlighting the importance of the B3W vision, G7 leaders pledged in the communiqué that “we are deeply concerned that the pandemic has set back progress towards the Sustainable Development Goals and continues to exacerbate global inequalities, and therefore [we] recommit to enhance our efforts to achieve the SDGs by 2030, including by supporting the Addis Ababa Action Agenda (AAAA) and aligning financial flows with the SDGs”. They committed to support developing countries “build back better, in line with the 2030 Agenda for Sustainable Development, including through innovative measures and massive budgetary support”.

There is no doubt that no discussion of development (or the lack of it) in the Global South is complete without a reference to the role of international development cooperation or foreign aid. Whether bilateral or multilateral, in hard form or in soft, transnational development assistance is part and parcel of the development process in numerous resource-starved countries in Africa, Asia, the Pacific, Latin America and elsewhere. To this end, under the SDG 17, all UN member states have committed to build a renewed and reinvigorated global partnership for implementing the UN 2030 Agenda and accomplishing the highly ambitious SDGs. There is a unanimous consensus that without robust external support, it is highly unlikely for many developing countries to continue their voyage towards sustainable development.

Hence, there is no doubt that implementation of the 2030 Agenda needs considerable external means of financing from rich industrialised nations and any such initiative from G7 member states should be greeted with cheer, provided it is not aimed at raising geo-political rivalry between competitors.

Jeffrey David Sachs, an eminent American economist, academic and public policy analyst who is one of the world's leading experts on economic development and the battle against poverty, writes about the significance of external concessional financing in his book titled ‘The End of Poverty: Economic Possibilities for Our Time’. Sachs asserts that “a large number of the extreme poor are caught in a poverty trap, unable on their own to escape from extreme material deprivation”. He argues that to lift these deprived countries out of this poverty trap a “big push” is essential.

In view of this, the so-called B3W plan as mentioned by President Biden is a welcome initiative, although at present there are no details about the financing mechanisms and institutionalisation of the programme. Currently, it seems the primary concern of G7 member states is how to counter the rising role of China under the BRI.

To judge the actual contribution and commitment of G7 members towards global poverty alleviation initiatives, it is critical to see how much aid they have been allocating to developing countries. All G7 member states are represented in the Development Assistance Committee (DAC), an elite club of 30 major donors of the OECD. The best-known target in international aid, to which DAC countries agreed back in 1970 under the UN General Assembly Resolution 2626, proposes to raise official development assistance (ODA) to 0.7 percent of donors' gross national income (GNI).

The Rio+20 Conference (2012) and the Addis Ababa Conference (2015) have specifically mentioned that DAC members need to achieve the ODA/GNI ratio of 0.7 percent. SDG 17 also reiterates that developed countries need to “implement fully their official development assistance commitments, including the commitment by many developed countries to achieve the target of 0.7 percent of gross national income for official development assistance (ODA/GNI) to developing countries”.

Of the 30 DAC members, only six countries have reached the target of 0.7 percent and the OECD average has rarely exceeded 0.4 percent of their national income. Sweden became the first country to meet the target in 1974 and the Netherlands joined it in1975. Norway and Denmark achieved the target in 1976 and 1978 respectively, and all four countries have consistently met it since. Finland achieved it once, in 1991. Luxembourg reached it in 2000 and continues to do so. The UK and Germany have achieved it occasionally.

Regarding the performance of G7 member states, Italy, Japan and the US contribute less than 0.2 percent of their national income in foreign aid while France, Canada and the UK are also far behind the UN target of 0.7 percent. Currently, among the G7 member states, only Germany has achieved the 0.7 percent target.

Thus, if such is the actual ‘commitment to development’ of G7 member states, it is highly unlikely any such massive aid and investment programme will materialize. These countries along with their peers in the OECD-DAC may have the essential wherewithal to launch a massive initiative in the form of B3W but any programme of such a scale also requires significant political will and agreement among the partners. Here, it seems a daunting challenge to compete with China which has both the resources and the political capital.

The writer holds a PhD from Massey University, New Zealand. He teaches at the University of Malakand.

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