What’s in the news?

• The European Commission announced a plan to mobilise €300 billion ($340 billion) in public and private infrastructure investment around the world, a move seen as a response to China’s Belt and Road strategy.
• The Global Gateway will aim at mobilising investments of up to 300 billion euros between 2021 and 2027 bringing together resources of the EU, member states, European financial institutions and national development finance institutions.

Global Gateway

• The Global Gateway plan does not mention China’s rival and longer-standing international infrastructure strategy by name — but EU chief Ursula von der Leyen called it a “roadmap for major investment in infrastructure development around the world.”
• China launched its global investment strategy known as Belt and Road, a flagship project of President Xi Jinping, in 2013. Beijing has said it had invested $139.8 billion by 2020, including $22.5 billion last year alone.
• Officially, it aims to develop land and sea infrastructure to better connect China to Asia, Europe and Africa for trade and development, and it has found many partners around the world.
• The West, however, sees it as a tool for China to influence poorer countries. They criticise Beijing for inciting emerging economies to take on too much debt, and allege the secretive tender process is prone to corruption.
• China argues that it respects its partners’ sovereignty while providing loans that benefit joint projects, while critics say Beijing’s contractual terms ignore abuses of human, labour and environmental rights.
• The EU strategy is an offshoot of a plan by G7 countries to offer developing countries an alternative to Belt and Road Initiative, presented in June at the industrial powers’ summit in Cornwall.

Belt and Road Initiative

• China’s Belt and Road Initiative (BRI) aims to strengthen Beijing’s economic leadership through a vast program of infrastructure building throughout China’s neighbouring regions. 

• Launched in 2013 by President Xi Jinping, the vast collection of development and investment initiatives would stretch from East Asia to Europe, significantly expanding China’s economic and political influence.
• The plan was two-pronged: the overland Silk Road Economic Belt and the Maritime Silk Road. The two were collectively referred to first as the One Belt, One Road initiative but eventually became the Belt and Road Initiative.
• China’s vision included creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, to Pakistan, India, and the rest of Southeast Asia. 

• To date, more than sixty countries—accounting for two-thirds of the world’s population—have signed on to projects or indicated an interest in doing so. 

What are the potential roadblocks?

• The Belt and Road Initiative has also stoked opposition. BRI projects are built using low-interest loans as opposed to aid grants. Some BRI investments have involved opaque bidding processes and required the use of Chinese firms. As a result, contractors have inflated costs, leading to canceled projects and political backlash.
• Critics worry China could use “debt-trap diplomacy” to extract strategic concessions – such as over territorial disputes in the South China Sea or silence on human rights violations. 

India’s position

• India has tried to convince countries that the BRI is a plan to dominate Asia, warning of what some analysts have called a “String of Pearls” geoeconomic strategy whereby China creates unsustainable debt burdens for its Indian Ocean neighbors in order to seize control of regional choke points. 
• Meanwhile, India has provided its own development assistance to neighbors, most notably Afghanistan, where it has spent $3 billion on infrastructure projects.

What is the CPEC project?

• China-Pakistan Economic Corridor (CPEC) refers to a clutch of major infrastructure works currently under way in Pakistan, intended to link Kashgar in China’s Xinjiang province to Gwadar deep sea port close to Pakistan’s border with Iran. 
• Several other road, rail and power projects are associated with the corridor, and the project seeks to expand and upgrade infrastructure across the length and breadth of Pakistan, and to widen and deepen economic ties with China.
• CPEC is part of the larger Belt and Road Initiative.
• CPEC was launched in 2015 when Chinese President Xi Jinping visited Pakistan and it now envisages investment of over USD 60 billion in different projects of development in Pakistan. 

Significance

• The goal of CPEC is both to transform Pakistan’s economy—by modernizing its road, rail, air, and energy transportation systems—and to connect the deep-sea Pakistani ports of Gwadar and Karachi to China’s Xinjiang province and beyond by overland routes. 
• This would reduce the time and cost of transporting goods and energy such as natural gas to China by circumventing the Straits of Malacca and the South China Sea. 
• The CPEC project is also strategically important for China. Currently, eighty percent of China’s oil has to pass through the Strait of Malacca, a narrow stretch of water between the Indonesian island of Sumatra and the Malay Peninsula. In the event of a conflict, the Malacca Strait could easily be blocked by a rival nation, cutting off China from crucial energy resources. CPEC allows China to circumvent the Strait of Malacca and reduce its dependency on the strait.

India’s position on CPEC

• India has been opposing the project as it passes through Gilgit-Baltistan in Pakistan-occupied Kashmir (PoK), which New Delhi considers its own territory.
• India claims that the CPEC project encroaches on sovereignty and territorial integrity of the country.

Reference:

1. https://www.thehindu.com/news/international/eu-plans-300-billion-infrastructure-fund-to-counter-chinas-bri/article37795447.ece