Transcript Chinese engineers & architect quarters, parliament

Since we’re in the country of Hans
Christian Andersen, we’ll start
with a story:
“Once Upon a Time”
Chinese engineers & architect
quarters, parliament building
renovation, West Africa
“Beijing has thrown down its most
direct challenge yet to the West’s
architecture for aiding Africa’s
development.”
--- Financial Times
“China in Africa” as Represented in
the West (and South Africa)
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“New Colonialists” – The Economist
“Rogue Donors … toxic aid” – Foreign Policy
“Leading the land grab” – Mail & Guardian
“Billions in Aid for Sudan & Zimbabwe”
“Bring in all their own workers”
“China gives aid to get access to resources”
“Dragon with a Heart of Darkness”
Internet Dreams
• Media stories + lack of research =>
• Robust internet representation solidifies
into an unquestioned conventional wisdom
• Emma Mawdsley’s great article “Fu
Manchu versus Dr. Livingston in the Dark
Continent”
A Bit Alarming…
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Much of this did not reflect what I knew
China 1979, Sub-Saharan Africa 1983
“Doing Well by Doing Good” 1983
Chinese Aid and African Development St.
Martin’s Press, 1998
• 2007-2009 research
• South Africa, Zimbabwe, Mozambique,
Sierra Leone, Tanzania, Zambia, Nigeria,
Mauritius, Egypt, Liberia, The Gambia
China Does Present a Challenge
• Poor environmental & social standards
• Chinese companies probably more willing
to pay bribes
• Low wages and safety standards
• Chinese immigrants & traders
• Willing to partner with any government
granting Beijing diplomatic ties
But perhaps the biggest challenge:
Western aid has not been very successful in
raising standards of living or stimulating
structural transformation in Africa
Our aid has been systematically de-linked
from investment, manufacturing, jobcreation
The West’s Two Images of Africa
• Aid community & citizens: Poverty, chaos,
war, HIV-AIDs, starving children, fragile
states
• Businesses: Angolan oil, Congo’s
minerals, Zimbabwe’s diamonds, Niger’s
uranium, Liberia’s timber
We haven’t figured out a way to
link Africa’s riches to its
development. The Chinese are
actively trying to do just this.
• They’ve looked at our record: not so hard
to beat
• Remember Japan & China in 1978
• Chinese ambassador in Niger: “This
country has already seen uranium
extraction for nearly 40 years … But
when one sees that the direct revenues
from uranium are more or less
equivalent to those derived from the
export of onions each year, there’s a
problem.”
• West: aid (ODA) de-linked from
investment, trade
• China: a different model, mostly not
aid/ODA
• Chinese government funds (“economic
cooperation”) => investment, trade
Context for Understanding China
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China is a developing country
Run by the Communist Party
But not “China Inc.”
China is changing rapidly
China’s aid/ODA is primarily political
Akira Kurosawa’s Rashomon
Myth 1: China is a “New
Donor
1960
1961
1962
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Aid Agreements: 1960-2007
Sudan*
Guinea
Ghana
Mali
Somalia
Tanzania
Uganda
Kenya
Benin
Burundi
C.Afr. Rep.
Congo-B
Zambia
Mauritania
E. Guinea
Ethiopia
Cameroon
Nigeria
Rwanda
Senegal
Sierra Leone
Chad
D. R Congo
Madagascar
Mauritius
Togo
B. Faso
G.Bissau
Gabon
Gambia
Niger
Botswana
Comoros
Mozambique
S.Tome/Pricp.
Cape Verde
Seychelles
Liberia
Djibouti
Zimbabwe
Angola
Cote d'Ivoire
Lesotho
Namibia
Eritrea
S.Africa
Malawi
Swaziland
1958
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Why is this Important?
• Not just the Tan-Zam Railway
• Why is this important? Credibility
• Experiments to make aid & “economic
cooperation” sustainable
• Today’s engagement is the result
– Overseas economic zones
– Agri-businesses running 20 projects
– Resource-backed infrastructure loans
– $5 billion equity fund for Chinese investment
“Our cooperation with Africa
today, as well as aid, has
shifted from direct financial
assistance to the output of
development experience.”
Mr. Fung, Deputy General Manager of Tianjin TEDA Investment Holding, Egypt Suez Economic and Trade
Cooperation Park, October 16, 2008
http://www.cec.mofcom.gov.cn/ciweb/cec/info/Article.jsp?
Myth 2: Chinese Aid is Huge
Some Western Reports on China’s
African Aid
• World Bank “$44 billion” since 1956
• Foreign Policy “$9 billion for just one
project”
• US Congressional Research Service:
– 2006 “$9 billion”
– 2007 “$17.9 billion”
Major Donors, ODA to Africa,
2007
($ bil)
EC, $5.4
World
Bank,
$6.9
France,
$4.9
UK, $2.8
Japan,
$2.7
USA, $7.6
Source: Brautigam, The Dragon’s Gift, 2009
China*,
$1.4
Germany,
$2.5
Chinese Business is Huge
China-Africa trade
2006: $ 55.5 billion
2008: $ 108 billion
Construction &
labor service
revenues
2002: $1.2 billion
2005: $12.6 billion
2008: $20 billion
Myth 3: Chinese Bring in All
Their Own Workers
Researchers’ Evidence:
• Sierra Leone 1983
– 600 local/105 Chinese: hydropower project
– 300 local/100 Chinese: stadium
• Across Africa: average 20% Chinese, 80%
African
• Wide variance:
– Angola 45% Chinese, 55% Angolan
– Tanzania 90% Tanzanian, 10% Chinese
• Why differences?
– Local capacity, enforcement, time
• Zambia Chambishi Mine 2005
Myth 4: China gives aid to get
access to resources
Chinese Aid/ODA
• Distribution is Primarily Political
• Broad and even distribution
– Zero-interest loans, grants
– Donations-in-kind
• Debt relief mainly to HIPCs: 32 in Africa
– With diplomatic ties
– Not for Egypt, Mauritius, Pakistan, Zimbabwe
– Yes for Equatorial Guinea, Kenya, Lesotho,
Angola (non-HIPC)
What about China’s Huge
Resource-backed Infrastructure
Credits & Loans?
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Market-rate line of export buyer’s credit
Non-transparent
Tied to Chinese goods & services
“Request based”
Secured by resources
Angola: Oil-Backed Line of Credit
Terms (2004)
China
Eximbank
Amount
Interest
rate
Maturity
Grace
Period
$2.0 bil
LIBOR
plus 1.5
12 years
Until end
of each
project
LIBOR
plus 2.5
5-7 years
none
Standard
$2.35 bil
Chartered
Consortium
Angola: 33 Projects for $1b
(2004-2007)
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Ag. Machinery & equipment $22m
4 Irrigation systems $93m
Luanda’s electricity system: $45m
Water treatment system repair in 3 provincial
cities: $21m
5 agricultural training institutions
6 polytechnical colleges
5 secondary schools: $26m
Kifangondo-Caxito road: $211m
86 ambulances
6 provincial health centers
Rehabilitate 7 regional hospitals … etc. etc.
Resource-Backed Infrastructure
Loans as “Agency of Restraint”
• Less likely to be embezzled: no cash
– “with China, you never see that money”
• Translates natural resource exports
directly into development infrastructure
• Doesn’t wait for governance to improve
– Angola after the end of the civil war
DAC & China
DAC: “aid/ODA”
--includes debt relief
--loans: full value
• What shocks us:
China can build a
presidential palace in
Sudan and call this
“aid”
• China: “aid/ODA”
--doesn’t include debt
relief
--loans: only the
subsidy
• What shocks them:
Western experts live
in 5 star hotels &
overseas lifestyle
It’s not just the minerals
• Nigerian Official
• China’s other interests
– Exports: $50 billion market
– Construction contracts: $40 billion signed ’08
– National Champions: Huawei, ZTE, Nuctech
– Largest single investment so far?
Why is China Different?
• Foreign policy framework
• Core ideas about development
• Experience as recipient of aid &
loans
• East Asian developmental state