Wednesday, December 1, 2010

China Splurges in Africa: Can Both Benefit?

Western nations have spent decades lavishing aid on African countries to little avail. Dambisa Moyo addressed this failure in her book Dead Aid. She argued that the African countries would be better off if the Western countries had provided more funds in the form of direct commercial investments. She pointed out that China is the one country that had stepped up in this area. She provided a chapter titled “The Chinese Are Our Friends” in which she convinced herself that this was a good thing. Recognizing the distrust the Western nations had for China’s motives, she argued that both China and Africa would benefit.

“Bartering infrastructure for energy reserves is well understood by the Chinese and Africans alike. It’s a trade-off, and there are no illusions as to who does what to whom and why. There are those who see China as merely using Africa for its own political and economic ends....But for Africa it’s about survival. In the immediate term, Africa is getting what it needs—quality capital that actually funds investment, jobs for its people and that elusive growth. These are the things that aid promised, but has consistently failed to deliver.”
While people understand that China is acting in its own interests it seems to be doing it in a way that generates approval among the various nations.
“First, across the continent, favorable views of China (and its investments in Africa) outnumber critical judgments by at least two to one in almost every country....Second, in nearly all African countries surveyed, more people view China’s influence positively than make the same assessment of US influence.”
The discussion of China’s role has continued with two interesting recent articles: one enthusiastically positive, the second, ambivalent at best.

Deborah Brautigam has an article on the Foreign Affairs website: Africa’s Eastern Promise: What the West Can Learn from Chinese Investment in Africa. She provides a summary of China’s activities from her point of view.
“The first prong of Beijing's efforts is to offer African states resource-backed development loans, an initiative inspired by its experience at home. In the late 1970s, eager for modern technology and infrastructure but with almost no foreign exchange, China leveraged its natural resources -- ample supplies of oil, coal, and other minerals -- to attract a market-rate $10 billion loan from Japan. China was to get new infrastructure and technology from Japan and repay it with shipments of oil and coal. In 1980, Japan began to finance six major railway, port, and hydropower projects, the first of many projects that used Japanese firms to help build China's transport corridors, coal mines, and power grids.”

“Since 2004, China has concluded similar deals in at least seven resource-rich countries in Africa, for a total of nearly $14 billion. Reconstruction in war-battered Angola, for example, has been helped by three oil-backed loans from Beijing, under which Chinese companies have built roads, railways, hospitals, schools, and water systems. Nigeria took out two similar loans to finance projects that use gas to generate electricity. Chinese teams are building one hydropower project in the Republic of the Congo (to be repaid in oil) and another in Ghana (to be repaid in cocoa beans).”
Much of this infrastructure development is being performed by the Chinese themselves. Much of the money they put up goes back into their own economy. That is a smart move on their part. It is up to the African country involved to strike a deal that ensures sufficient labor and training are obtained by locals so that they have bettered themselves by the time the Chinese leave. Some countries strike a smart bargain, some don’t.
“In its second major experiment, China is helping to build special trade and economic cooperation zones in Africa. Seven such zones are in the works: two in Nigeria; the others in Egypt, Ethiopia, Mauritius, Zambia, and, possibly, Algeria. Special economic zones were an important feature of China's early development; today, China has more than one hundred such areas. The economists Paul Collier, author of The Bottom Billion, and John Page, of the Brookings Institution, argue in a recent report for the United Nations Industrial Development Organization that special economic zones can be a very promising strategy for industrialization and employment in Africa's least developed countries. It allows countries to improve poor infrastructure, inadequate services, and weak institutions by focusing efforts on a limited geographical area. And a targeted focus on boosting manufactured exports can help countries overcome the exchange-rate appreciation and the weakening of local non-energy industries that often accompany natural-resource exports.”
Brautigam seems to think that part of China’s motivation is to provide additional locations where they can offload low margin manufacturing (requiring cheap labor), and to create areas where it can move some of its environmentally damaging industries. That is what many developed countries did to China when it was hungry for investment. Now they will pass on the lesson learned.

As for the criticism that China will deal with any country, no matter how noxious the leadership might be, she has a ready reply.
“China may wind up supporting some dictatorial and corrupt regimes, but -- and this is an inconvenient truth -- the West also supports such regimes when it advances its interests. And given the limits of the West's success in promoting development in Africa so far, perhaps Westerners should be less judgmental and more open-minded in assessing China's initiatives there.”
The second article is by Howard W. French, The Next Empire. It appeared in the May, 2010 issue of the Atlantic magazine. From the snarky title one might expect that French’s assessment will be somewhat less rosy that Brautigan’s.

French spent time on the ground going across several countries in Africa observing and talking to people before ending up in the Democratic Republic of the Congo. French is clearly suspicious and is on the lookout for negative things. If one looks hard enough there will always negatives to be found. Nevertheless, his report, while not exactly balanced, is not biased either. He even brings up a discussion he had with Dambisa Moyo. It was encouraging to note that she continues to be enthusiastic about the Chinese activities.

French uses the Congo-China agreement to illustrate the difficulties one can encounter.
“In spring 2008, Congo’s beleaguered government unveiled a package of Chinese investments totaling $9.3 billion, a figure later reduced, for complex reasons involving International Monetary Fund pressure, to $6 billion—still roughly half of Congo’s GDP. China will build massive new copper and cobalt mines; 1,800 miles of railways; 2,000 miles of roads; hundreds of clinics, hospitals, and schools; and two new universities. Speaking before the parliament, Pierre Lumbi, the country’s infrastructure minister, compared the package to the Marshall Plan, and called it ‘the foundation on which the growth of our economy is going to be built’.”

“In exchange, China will get almost 11 million tons of copper and 620,000 tons of cobalt, which it will extract over the next 25 years—a ‘resource for infrastructure’ swap that China first pioneered, on a smaller scale, in Angola in 2004. Congo will choose from a menu of Chinese construction companies—pre-vetted and supplied with credit by China’s Export-Import Bank—which typically begin (and end) their work quickly, dispatching hundreds or thousands of workers to do the job.”
French’s fear, and the fear of many Congolese he talked with, is that the Chinese will deliver exactly what they promised, but when they leave there will be schools without a school system, hospitals without medical staff, and infrastructure the country cannot maintain. That is a valid criticism, but who is at fault here? By French’s own account, he suspects the government officials who negotiated the deal were more interested in lining their own pockets than protecting their citizens. This is exactly the same result obtained with so much aid funding over the years. It is inappropriate to use this example to fault the Chinese or their general approach. Other countries showed greater foresight in ensuring they were moving in a sustainable direction when negotiating deals.

China’s activities do not resemble classical colonialism, they certainly do not involve aid grants, and there clearly is no altruism involved. Perhaps they most closely resemble the good business practices that Dambisa Moyo pleaded for the Western countries to impose on Africa in place of aid. In any event, there appear to be more positives than negatives at this point. Let us hope for the best. Africa could use a break.

No comments:

Post a Comment

Lets Talk Books And Politics - Blogged