The European Commission moved to limit the impact of foreign subsidies on its development projects Wednesday, part of a “Global Gateway” that it pitched as an alternative to China’s Belt and Road Initiative.
The commission claimed its plan would “mobilize” up to €300 billion ($339.72 billion) in infrastructure investments in areas such as digital and energy through 2027, with €135 billion leveraged via budget guarantees, €18 billion in grants, and €145 billion in investments already planned by European development finance institutions. Yet little of that money represented fresh commitments and The Economist called it a prime example of “Why bullshit rules in Brussels.”
UK aid to China has a 'whiff of tied aid,' says Champion
A meeting of ICAI and MPs also highlights the ongoing tension between the independent aid watchdog and the U.K. government, as investigators described how they struggled to receive key documents.
Overall the announcement primarily served to let the European Union’s executive body send a geopolitical message. “Countries made their experience with the Chinese investments and … they need better and different offers,” Commission President Ursula von der Leyen said at a short press conference.
She said the EU had a reputation for transparency, good governance, sustainable debt levels, and projects constructed in partnership with other countries. “And we bring on top the private sector with us, a private sector that in such a way does not exist in China,” she added. “So it is a true alternative.”
As for the money, “we are not magicians,” a senior EU official later told reporters, recalling that the bloc’s main external budget instrument for the next seven years was cemented in June at €79.5 billion. “We are now starting to roll out all the priorities that have been identified, and therefore everything is new for the moment.”
San Bilal from the think tank European Centre for Development Policy Management told Devex by email that “the EU needs to identify new sources of funding beyond its current resources to deliver at scale and truly compete with the BRI.”
Yet the most novel funding Wednesday was also the most poorly explained.
The €135 billion included a new “facility” — as one EU official called it — with the European Investment Bank “that could bring €25 billion of additional investments.” A footnote to that added that the commission “is offering to make available an additional €750 million over the period 2022-2027 in annual tranches, conditional on the EIB matching these funds.”
EIB did not immediately respond to request for comment, and the same senior EU official told reporters simply that the commission has been “discussing with the EIB and with other partners as well to see what is feasible here but we will further discuss in order to implement it.”
Losing its ‘naiveté’ on subsidies
Arguably more significant was one nonmonetary paragraph feted by European contractors who have complained about being outbid by state-backed Chinese firms, including for projects backed by loans from European financial institutions.
Financing through the European Fund for Sustainable Development Plus, which covers budget guarantees, blending, and technical assistance, will now include “systematic mechanisms,” according to the plan, “to filter out abnormally low tenders, which put in danger the actual implementation of the projects or the principles of the Global Gateway, and foreign subsidies that undermine the level playing field.”
European International Contractors, a European industry federation, welcomed the latest language on subsidies in a press release Wednesday.
A commission white paper in June 2020 — followed by a proposed regulation in May this year — undertook to begin a dialogue with EIB and the European Bank for Reconstruction and Development on the issue. And EIB President Werner Hoyer warned in an interview with Devex in early 2020 that Europe needed to lose its “naiveté” on open procurement after a Chinese firm won the contract to build a Senegal bus line in a project co-financed to the tune of €80 million by EIB.
In order to ensure “a more level playing field for EU businesses in third country markets,” the Gateway plan also noted that “the EU is exploring the possibility of establishing a European Export Credit Facility to complement the existing export credit arrangements at Member State level and increase the EU’s overall firepower in this area.”
Bilal told Devex that such a facility would be “the real innovation … expanding the existing toolkit of the EU to meet its geoeconomic global ambitions.”
About the author
Vince Chadwickvchadw
Vince Chadwick is a contributing reporter at Devex. A law graduate from Melbourne, Australia, he was social affairs reporter for The Age newspaper, before covering breaking news, the arts, and public policy across Europe, including as a reporter and editor at POLITICO Europe. He was long-listed for International Journalist of the Year at the 2023 One World Media Awards.
