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India – Middle East – Europe Economic Corridor

  • 12 Sep 2023

Recently, during the G20 Summit in New Delhi, an MoU was signed between India, the US, Saudi Arabia, the European Union, the UAE, France, Germany, and Italy to create the India – Middle East – Europe Economic Corridor (IMEC).

Key Points

  • Establishment of IMEC: An MoU has been signed on the sidelines of the G20 Summit in New Delhi to establish the India – Middle East – Europe Economic Corridor (IMEC).
  • The IMEC is envisioned as a network of transport corridors, including railways and sea lanes, aimed at facilitating economic growth by connecting Asia, the Arabian Gulf, and Europe.
  • Competition and Potential Benefits: The competition between PGII and BRI could lead to diversification of options for countries with infrastructure requirements.
  • China has also modified the BRI to address concerns and emphasize a "Green BRI." Both initiatives may benefit from this competition, leading to improved infrastructure outcomes.

What is Part of Partnership for Global Infrastructure Investment (PGII)?

  • The PGII is a partnership committed to upholding values, generating substantial impact, and ensuring transparency in addressing the substantial infrastructure requirements of countries with low and middle incomes.
  • Response to China's BRI The PGII was established as a response to China's Belt and Road Initiative (BRI), which began in 2013.
  • PGII Aims: The PGII aims to be transparent and focuses on building climate change-resilient infrastructure.
  • It also aims to promote gender equality and develop health infrastructure in recipient countries.
  • The financing provided through PGII is in the form of loans, beneficial for both lending and receiving countries.
  • PGII Initiatives: Several projects have been announced as part of PGII initiatives, including investments in health infrastructure in India.
  • The European Commission has activated 300 billion euros for critical connectivity projects, with half allocated to Africa.

Introduction to the Belt & Road Initiative (BRI)

  • The Belt & Road Initiative (BRI) is an ambitious global project that centers around enhancing connectivity and fostering cooperation among numerous countries spanning across Asia, Africa, and Europe. According to China, the BRI encompasses approximately 150 countries.
  • Origins and Scope: The initiative was initially unveiled in 2013 and revolves around the development of extensive networks of infrastructure. These include roadways, railways, maritime ports, power grids, oil and gas pipelines, and associated projects.

Dual Components of the BRI

  • Silk Road Economic Belt:This component primarily focuses on land-based connectivity, with the goal of linking China to Central Asia, Eastern Europe, and Western Europe through various infrastructure projects.
  • 21st Century Maritime Silk Road: The maritime aspect of the initiative centers on sea-based connectivity, aiming to establish a network connecting China's southern coastline with regions such as the Mediterranean, Africa, South-East Asia, and Central Asia.

Significance for China

  • The Belt and Road Initiative (BRI) stands as a symbol of China's economic and industrial prowess, reflecting its aspirations for global political and strategic influence.
  • As domestic infrastructure investments faced sustainability challenges, China shifted its focus toward bolstering the global competitiveness of its businesses.
  • Substantial infrastructure investments in less developed and developing nations have allowed China to extend its influence worldwide, potentially reshaping established global order dynamics and contesting the positions of Western powers.
  • The BRI is set to reinforce China's presence in the Eurasian region, positioning it as a dominant force in the heartland of Asia.

Comparison Between PGII and BRI

  • Focus on Infrastructure Development:
    • Both BRI and PGII emphasize supporting infrastructure development, especially in low-to-middle-income countries.
  • Evolution from Intent to Implementation:
    • BRI took two years to move from an initial intent to a concrete and implementable initiative.
    • PGII evolved from an announcement of intent in 2021 (B3W) into an initiative with clear objectives and improved coordination.
  • Domestic Growth as a Priority:
    • Both initiatives prioritize domestic economic growth.
    • China seeks to address overcapacity and enhance global connectivity, while the US aims to boost competitiveness and create domestic jobs.
  • Utilization of Public Financing Tools:
    • BRI relies on Chinese policy banks, state-owned agencies, and development funds.
    • PGII encourages financial contributions from G7 public institutions.
  • Focus on Green Development:
    • Both emphasize green development.
    • China prioritizes greening the BRI, while G7 supports projects addressing climate change.
  • Hard vs. Soft Infrastructure Projects:
    • BRI focuses on large-scale physical infrastructure.
    • PGII prioritizes "softer" outcomes like climate improvements, healthcare, digital tech, and gender equity.
  • Project and Financing Scale:
    • BRI supports megaprojects, constituting a significant share of finance value.
    • PGII favors smaller to medium-scale projects.
  • State Finance vs. Private Sector Finance:
    • BRI relies on public bilateral loans, state-backed investment, and state-owned banks.
    • PGII aims to mobilize private-sector capital in addition to public funding.
  • Number of Actors and Coordination Level:
    • BRI has a comprehensive, state-level steering committee for coordination.
    • PGII lacks a transnational coordination mechanism but relies on individual G7 countries to coordinate contributions.