Wed. Dec 1st, 2021

The UK is set to revamp its development investment arm in a move designed to counter China’s influence in emerging markets by offering “alternatives” to adopting “string-attached debt”.

British Foreign Secretary Liz Truss on Thursday will launch British International Investment (BII), a body that will use private capital to invest in countries across Asia, Africa and the Caribbean, which offers an alternative to Chinese loans, which by some in the west as a tool to spread Beijing’s influence.

The BII is a revamped version of the government’s Commonwealth Development Corporation Group, which has historically been criticized for investing in purely commercial projects, such as hotels and shopping malls, and for concentrating on more advanced economies.

According to plans for the BII, which will be launched at the London Stock Exchange, the UK will mobilize at least £ 9 billion in investment per year by 2025. Officials said it would include partnerships with capital markets and sovereign wealth funds to scale up funding and help the private sector move in.

Truss said in an interview with the Financial Times that the new body will prioritize infrastructure investment, by offering low- and middle-income countries “alternatives” to adopt “string-attached debt from autocratic regimes” and non-market economies.

She pointed out that the use of economics as a foreign policy instrument to exert more global influence is a “core part of the Global Britain agenda”.

Truss added: “We want to build a network of freedom around the world with our friends and partners. It involves closer economic partnerships. It’s a positive agenda. It’s not a confrontational agenda. It’s about countries alternatives to give. ”

US President Joe Biden has led calls for a “rebuild better world” plan that will provide poorer countries with a new source of infrastructure financing, providing a “democratic” alternative to Chinese lending.

In June, leaders at the G7 summit in Cornwall supported a Western rival of China’s Belt and Road initiative – Beijing’s pledge to spend about $ 1 billion on developing infrastructure in developing countries – with a billion-dollar plan deployed to help poorer countries tackle climate change. .

“The overall ‘rebuilding better world’, which is a number of different countries working together to create reliable, honest investments around the world, is about attracting more countries or more investments into the positive circle of influence,” Truss said. said.

The CDC, the UK’s development finance institution, received £ 650 million from the UK government in 2020 as part of a gradual shift from UK development funds to so-called impact investments, which also bring a commercial return. Over the past 10 years, it has received about 3 per cent of Britain’s overseas development budget.

Officials said the exact amount of funding the new BII would receive would depend on a “range of factors” and would be agreed by the government in the new year.

“More money for developing countries, especially focused on infrastructure and green investment, is a good thing,” said Ranil Dissanayake, a policy fellow at the Center for Global Development.

“But the inference that it will allow countries to replace Chinese debt is pure rhetoric – £ 9 billion a year is peanuts compared to the size of the Chinese Belt and Road Initiative.

“The most valuable part of this idea is the concept of the UK acting as a catalyst to encourage private sector investment and reduce the cost of new technologies. It is through this that British innovation can indeed compete with China’s brute force financing methods. ”

Truss, a Chinese hawk, has previously spoken out against “economic coercion”, especially with regard to some of Beijing’s controversial trade practices. The BII will operate according to a defined set of clear standards, Truss said. “Standards on transparency, standards on property rights and standards on the protection of personal freedoms.

“It will help those countries get the infrastructure and other funding they need to develop in a way that does not have the strings or opacity of other funding offerings.”

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