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Thursday, 19 October 2017

IMF/World Bank 2007: China’s African rise

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The fact that the African Development Bank meeting took place in Shanghai demonstrates that Sino-African ties are becoming ever more important. As trade rises and aid deals are exchanged for natural resources, will China’s rising influence affect the efforts of multilateral agencies on the continent? Rob Davies reports.

Over the past decade, China has increased its presence in Africa. In order to secure oil, uranium, diamonds and other natural resources, the Chinese government has enticed African counterparts with investment, loans and trade deals.

Trade between the continents – dominated by oil, metals and minerals and arms sales from China – increased from US$10bn in 2000 to US$50bn in 2006. Chinese President Hu Jintau says China intends to double direct investment on the continent to US$20bn over the next three years. The People’s Republic has become Africa’s third biggest trading partner behind the United States and France, with 670 state-owned companies having a base there.

Simultaneously, multilateral agencies including the World Bank are also increasing activity. The World Bank Group increased financial assistance to sub-Saharan Africa by US$1.8bn to US$7.5bn in the 2007 financial year.

China’s increased involvement is coming under ever-growing scrutiny. Critics say its willingness to deal with Africa’s most corrupt regimes undermines efforts by multilaterals to improve transparency and governance.

Conversely, China’s defenders say such criticism derives from jealousy at its success in building relationships where the West failed. Perhaps with some justification, the PRC resents the accusation it is a “Johnny-come-lately” in African affairs. During the decolonisation process that began in the 1960s, China was thought an ally against Western imperialists, sending doctors and agricultural engineers to work in former colonies.

But there is no doubt the crux of the relationship has shifted from ideological solidarity. Where it once sent doctors, China now distributes cheap manufacturing goods. And where it once propagated Maoism, now it is much more interested in buying oil – some 60% and 35% of Sudanese and Angolan oil exports are heading east, for example – and other raw materials.

“In terms of its geopolitical importance, Africa is a long way back from other regions,” said David Kang, professor of government at Dartmouth College. “China is making friends in order to access raw materials. It is doing the same in Latin America. This differs significantly from the role it has in East Asia where I think China is trying to build diplomatic relationships and not be seen as a destabilising threat.”

This changing relationship raises key questions. Is China continuing the tradition of foreign imperialists plundering Africa or, given turmoil in the Middle East and rising prices from former Soviet Bloc producers, adopting a logical approach to securing the resources it needs for growth? Do deals such as the US$2bn aid package for infrastructure in Angola in exchange for future oil production encroach on the space usually filled by the World Bank and other agencies?

Harry Broadman, economic advisor for Africa at the World Bank, says from a financial standpoint, Africa desperately needs investment. “Non-traditional development partners, including China and India, are welcome because the need for infrastructure in Sub-Saharan Africa is so great the World Bank, African Development Bank and other agencies could never fill this ‘infrastructure gap’ alone,” he said. “Frankly, it’s hard to argue against additional resources coming in to help build infrastructure in Africa. Furthermore, other countries traditionally active on the continent do not and probably should not have a monopoly on doing business there.”

Broadman suggests comparing the World Bank’s role to that of China is not comparing like with like. He argues it is more relevant to look at how China’s policy differs to other bilateral donors.

But Kang believes the scrutiny it is under reveals much about how China is now viewed by Western competitors. “Exploitation of Africa is clearly going on, but this is hardly new and not limited to Chinese actions,” he said. “China is doing what all resource-requiring countries do – striking deals for goods that are in its interests to acquire. If you look at US and European history, there have been numerous examples where business has been conducted with unsavoury regimes to secure oil and other natural resources.

“Foreign aid has always been politically driven: governments give donations to countries with which they need good relations, whatever the reason. So I would not defend China’s expansion in Africa, but at the same time I am cautious about judging its actions: like other governments, it is taking the actions it feels it needs to for its own interests.”

Indeed, just as the United States forged ties with questionable regimes such as Pakistan and Saudi Arabia for its own purposes, China is doing the same. One area where it is coming under heavy fire is in selling arms to countries such as Zimbabwe and the Sudan, led by regimes the West refuses to deal with. Beijing’s official policy is non-interference in domestic affairs of its business partners, which critics say is unjustifiable.

Additionally, even projects supposedly designed for the good of its “partners” are heavily loaded in China’s favour. One condition of China Exim Bank’s US$2bn line of credit to Angola’s government for infrastructure projects was that only 30% of the work could be subcontracted to Angolan firms. A component of the plan to double assistance to Africa by 2009 includes US$5bn for Chinese companies to expand their efforts.

Although corrupt African governments might welcome China with open arms, there is rising resentment among the public that they are not benefiting, says Henning Melber, executive director of the Dag Hammarskjold Foundation, an independent organisation promoting development, democracy and security.

“The Chinese policy of non-interference suits the governing oligarchies and cleptocrats since it eases the pressure which had been growing before to be accountable and transparent with regard to the revenue income appropriated,” Melber said. “In the end, however, Chinese interests are not very different from the interest of other competitors. That there is growing resentment on the ground from ordinary people in African countries testifies to the fact the Chinese presence is not considered a genuine alternative to other exploitative relations.”

It is for those types of criticisms the World Bank predicts its role in African development will continue to rise.

“In terms of development impact on countries, money ultimately is secondary,” said Broadman. “What really matters and has enduring impact is the technical assistance and policy advice we provide based on our multilateral structure. That is our comparative advantage and the key difference between us and a bilateral donor. Our staff have experience working in multiple countries and bring to bear experience at seeing a problem repeated in different settings. Consequently, we are able to offer practical advice on how to address these situations. In my own experience, this far outweighs the benefit of money on its own.”

Acknowledging the PRC’s rise as a commercial power, Broadman says it would be in China’s best interests to subscribe to international best practice on issues such as product standards.

“One criticism levelled at China is that it is inundating Africa with low quality, perhaps unsafe goods, but Africans are buying them,” he said. “Domestic governments do little to intervene and there are no product-recalls. In contrast, if you look at the case of harmful Chinese toy imports to the US, Western governments do have product standards, so those toys are being recalled. In Africa, many nation states do not hold product standards.

“In part, the responsibility lies behind the border in the host country. They have to say ‘no’ if products are not acceptable. Unfortunately, many African governments remain disassociated with civil society, and do not have or apply those standards.”

The desire to bring China’s investment policies in line with more traditional donors is causing relationship between the World Bank and the PRC to change dramatically.

Not so long ago, former bank president Paul Wolfowitz denounced Chinese lending to Africa as irresponsible, arguing that it ignored human rights and environmental standards. But in June, the bank signed a memorandum of understanding with China Exim Bank to collaborate on African projects.

According to Broadman, the initiative is based more on training/technical assistance than having real commercial significance at this point, adding he hopes it will help both sides better understand each other’s objectives.

“One of the Bank’s priority corporate strategies in Africa is trying to better co-ordinate our activities with those of all other development agencies. It has sometimes been the case that in one member country, development partners are spending money doing very similar things, which is a wasteful use of aid. We are trying to avoid this, and this MOU with China will hopefully help coordinate our efforts more effectively,” he said.

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