The Group of 20 major economies is likely to soon adopt its first list of international principles for promoting high-quality investment in infrastructure that contributes to the development of emerging nations.
The centerpiece of the initiative is ensuring debt sustainability by demanding that the provision of funds for infrastructure does not saddle the recipient nation with debts that outstrip its ability to repay. This is aimed at curbing the actions of China, which in some cases has provided excessive loans that recipients have struggled to repay.
The infrastructure investment principles are set to be adopted at the meeting of G20 finance ministers and central bank governors to be held in Fukuoka on June 8 and 9.
China has swiftly expanded its investment in overseas infrastructure projects, especially in developing Asian nations, in line with its Belt and Road Initiative, a plan to create a mega-economic zone. However, several of these nations have found themselves left at the mercy of China's vast financial might. Sri Lanka turned to China for a loan to construct a port, but became unable to pay back the debt and ended up handing over the port's operating rights to China for 99 years.
There are growing concerns within the international community that China is placing emerging nations deep in debt so it can bolster its influence over them. Japan has been leading the call for adopting new international principles that can block China's moves in this regard.
A broad agreement has been reached during working-level discussions among officials from all G20 nations, including China. Officials are working out a detailed text that would include the new principles, with a view to having it adopted at the Fukuoka meeting.
The summit meeting of the Group of Seven major nations Japan hosted in May 2016 adopted principles that confirmed the importance of high-quality investment in infrastructure by the world's advanced nations. However, such an initiative has not materialized at G20 meetings. China's willingness to adopt such principles at the upcoming G20 summit apparently reflects awareness of international criticism of its investments in infrastructure.
In addition to debt sustainability, the principles likely will include ensuring such infrastructure projects are open to use by anyone when completed and that financing for them is transparent and arranged fairly, such as through competitive bidding. Both of these principles are aimed at preventing China from corralling a certain country and then restricting usage of infrastructure for its own advantage, or from narrowing down the sources of capital for infrastructure projects.
The principles are also expected to cover economic efficiency so that projects will turn a profit; environmental and social considerations, to prevent excessive destruction of the natural environment and other problems; and resilience against disasters, with an emphasis on preventing damage caused by such events.
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