UK launches £8 billion a year investment body to offer development funding

Britain’s contribution to the G7 Build Back Better World initiative

The UK government is set to counter China’s growing influence in developing countries with the launch of its overhauled investment institution offering capital backing for schemes that promote growth in developing countries.

Britain’s Foreign Secretary Liz Truss said the body would be a “reliable and honest” source of funding for infrastructure and technology projects in countries across Asia, Africa and the Caribbean.

The institution — British International Investment (BII) — will see partnerships set up between the government and capital markets and sovereign wealth funds around the world, to scale up financing and open the door for private sector investment.

It is part of the ruling Conservative government’s bid to mobilise £8 billion ($10.7bn) a year of public and private sector investment in international projects by 2025.

Ms Truss said it would offer “alternatives” to taking on “strings-attached debt". She said using economics as a foreign policy tool to exert increased global influence was a “core part of the Global Britain agenda” adopted by Boris Johnson’s administration. Officials say it is part of efforts to offer an alternative to high-interest Chinese loans for African and developing world nations.

“We want to build a network of liberty around the world with our friends and partners,” she said.

“That involves closer economic partnerships. It’s a positive agenda. It’s not a confrontational agenda. It’s about giving countries alternatives.”

BII is a revamped version of the UK government’s Commonwealth Development Corporation Group, which has in the past been criticised for investing only in commercial projects and for channelling funding towards more advanced economies.

It will form part of the government’s Clean Green Initiative, Britain’s contribution to the G7 Build Back Better World initiative aimed at achieving a step change in development finance.

It will support the UK to co-invest with allies and partners, including the UAE, to help deliver infrastructure to low and middle-income countries.

The UK and its allies are seeking to develop viable alternatives to China’s overseas development finance programme which has made governments suspicious. Many leaders see it as a tool for Beijing to spread its influence.

Over an 18-year period, China granted or lent money to the sum of $843 billion to infrastructure projects in 165 countries, according to AidData.

Ms Truss said BII is part of the government’s bid to strengthen economic, security and development ties with nations around the globe.

She said the institution will prioritise sustainable infrastructure investment to provide honest financing and avoid unsustainable debt.

“When freedom-loving democracies invest in infrastructure and supply technical expertise, it makes countries freer, wealthier and more secure,” Ms Truss said.

“Too many countries are loading their balance sheets with unsustainable debt. Reliable and honest sources of finance are needed. Britain and our allies will provide that, with British International Investment a key delivery vehicle.

“This is a win-win for all. It benefits Britain by creating jobs and opportunities for our people. And it helps grow economies across Asia, Africa and the Caribbean while drawing them closer towards free-market democracies and building a network of liberty across the world.”

Ms Truss will launch the institution at the London Stock Exchange this morning, where she will open the market before a panel event with major businesses and investors.

BII's chief executive Nick O’Donohoe said the initiative aims to bring “the best of British finance, innovation, ethics and standards to developing economies”, and to build on previous investments in developing nations.

“This new strategy will allow us to invest further in even more countries and will result in us financing the critical infrastructure that will allow all countries to build back better and make a positive difference to countless lives,” he said.

Updated: November 25th 2021, 11:56 AM