Policy Brief Responding to Growing Tensions and Contradictions June, 2013 Research Group of International Cooperation for Development
Authors: Paolo de Renzio (coord.), João Moura, Manaíra Assunção and Tyler Nickerson Responding to Growing Tensions and Contradictions Introduction China s involvement in Africa goes back more than fifty years. However, over the past decade or so its presence on the continent has been growing at a remarkable rate. Since 2000, China-Africa trade has increased twenty-fold, and Chinese direct investment in Africa more than thirty-fold. 1 Foreign aid figures are less readily available. According to the Chinese Government s White Paper on Foreign Aid, published in 2011, China had provided 256.29 billion yuan (US$37.7 billion) in aid to foreign countries by 2009 2. Africa has received a significant share of such aid, accounting for 45.7% of the total sum in 2009. Estimates of annual Chinese development assistance to Africa vary between US$ 1 and 3 billion. In 2012, China pledged US$20 billion in loans to Africa over three years for infrastructure, agriculture and manufacturing. If these funds are actually committed, China will become one the principal financial backers of Africa s growth and development. The Chinese government established the Forum on China-Africa Cooperation (FOCAC) in 2000 to mark a new chapter in bilateral relations between China and African countries, and in 2006 it published a document entitled China s Africa Policy. Over the years, the FOCAC Ministerial Conferences, the last of which was held in 2012 in Beijing, have generated a large number of principles, action agendas and commitments which have widened and deepened China s involvement and investment across Africa. The 1
motivations for such expansion are numerous and mixed, ranging from the need to strengthen political and diplomatic ties with countries seen as regional leaders to the promotion of commercial interests, and from securing access to natural resources to projecting a new global image of China as a trusted partner for developing countries. 3 The aim of this Policy Brief is to point out some of the growing tensions and contradictions that have emerged in relation to China s increased engagement in Africa, and that have received attention in local and international media reports. These focus on four specific areas: (a) the quality of infrastructure built by Chinese companies; (b) the choice and definition of priority infrastructure investments; (c) the practices of Chinese companies on the ground; and (d) the institutional complexity of Chinese development cooperation. Many of these problems are in no way specific to Chinese development cooperation, and indeed have plagued Western donor interventions for decades. However, responding to and addressing some of these tensions and contradictions will be key for defining China s future role in the development of the African continent, and as a development actor in general. The quality of infrastructure built by Chinese companies Chinese development cooperation in Africa has been highly praised for its focus on infrastructure, a sector from which Northern and multilateral donors have distanced themselves in the last decades. According to China s 2011 White Paper on Foreign Aid, by the end of 2009, 61% of China s global concessional loans were dedicated to the construction of transportation, communications and electricity infrastructure. China has not only outpaced the World Bank as the leading funder of Africa s infrastructure, but has been providing two-thirds of Africa s new spending in the sector since 2007. 4 This accounts for diverse types of financial flows, encompassing development cooperation, foreign direct investment and credit lines, which have been contributing to the construction and rehabilitation of roads, railways, bridges and hydropower dams in many African countries. It is clear that China s participation in African infrastructure development will remain highly relevant in the near future, as shown by the 2012 FOCAC meeting s Action Plan, which states that, between 2013 and 2015, China will 2
provide a credit line of US$20 billion to African countries to mainly support the development of infrastructure, agriculture, manufacturing, and development of small and medium-sized enterprises in Africa. 5 The relevance of this engagement has been paralleled by growing concerns over the quality of some of these projects frequently related to non-compliance with international standards and episodes of corruption which are partly enabled by China s low bidding costs and its relations with governments. 6 As shown by a 2009 study of China s role in infrastructure development in Botswana, 7 there are mixed perceptions on the issue: while some country officials and African scholars consider a gradual improvement of construction standards part of a normal developmental process, others highlight the local government s responsibility and collusion, and the damaging effect on the intended beneficiaries. The story of Luanda General Hospital is a case in point. Built by China Overseas Engineering Group (COVEC) under China's aid program and opened in 2006, the hospital was closed four years later due to serious structural problems. 8 The responsibility was probably equally shared: the Chinese design was flawed, but it was based on inaccurate geological survey data provided by the Angolans. In 2012, Angola and China signed a new memorandum on the plan for rehabilitation, construction and expansion of the hospital, which should be concluded by July 2014. 9 On one hand, Chinese officials and scholars devoted to China-Africa relations have criticized the frequently alarmist tone of international media coverage. On the other hand, there needs to be a thorough assessment of the design and implementation of infrastructure projects, so as to contribute to the reduction of the infrastructure gap in Africa, acknowledged by African governments and international institutions alike, with quality projects. In addition, African leaders should follow the example of Botswana, which has recently started to impose stricter controls on Chinese companies involved in infrastructure development, some of which have seen their projects stopped to assure that all regulations and policies are in order. 10 3
Chinese white elephants and China s development cooperation discourse Beyond the issue of infrastructure quality, there has been debate on the fact that many of China s gifts to African countries have turned out to be white elephants, including not only unnecessarily large and costly infrastructure projects, but also underutilized and poorly maintained ones. An interesting example is again from Angola. The New City of Kilamba is a project undertaken by China International Trust and Investment Corporation (Citic), a stateowned enterprise, at a reported cost of US$ 3.5 billion. Thirty kilometers outside Luanda, Kilamba was supposed to house up to half a million people after completion. Although nearly completed, few families have moved to Kilamba. Reasons include high costs, in opposition to the low-cost social housing that the Angolan government had promised, poor quality of infrastructure, and the late provision of the water and electric power system by the local government. As a result, the new residential area has turned into a ghost town. 11 Other examples that dot the African landscape are Chinese-built empty stadiums, crumbling conference centers and oversized foreign ministry buildings. The funding and provision of white elephants may be related to the weak planning capacity of African governments, and to the lack of a formal appraisal and evaluation system on the part of China, but it is also linked to the sustainability of China s South- South cooperation discourse, based on the principle of non-interference and demanddriven cooperation. As pointed out by Brautigam, those who design and negotiate Chinese aid programs do not seem to hold anything against fulfilling a host president or key minister s desire to have a fancy Chinese school built in his or her hometown, independent of absorption capacity or actual need. 12 Apparently unwarranted decisions like this are doomed to result in hospitals without enough doctors, or schools with no teachers. But there is another side to this story, and such decisions may not be so unwarranted after all. Another interpretation of national ownership is implied, and is manifested in China s broad criticism of Western development cooperation. Here, it is 4
interesting to quote a passage from a report of the China-DAC study group made after a joint visit to Tanzania: In Tanzania, development strategies and plans are designed and implemented with the active involvement of development partners, who provide advice and inputs for decisions. In the Tanzanian context, a broad coalition of partners own the national development strategy and so distinctions between national/international and between donors/beneficiaries become blurred. In China, the government strongly owns the development strategy and there is more clarity about the role of China s external partners. 13 Despite the fact that international criticism lies heavily on the Chinese side, it is also a problem of African governments and African people. Focusing solely on China denies local responsibility and, ultimately, African agency. Nevertheless, China should not be excused from better matching national and local absorption capacity, African governments demands and populations perceived needs, even if it means reassessing its South-South development cooperation discourse. Corporate responsibility of Chinese companies in Africa Another contradictory aspect of Chinese engagement in Africa is the growing concern about the actions of Chinese multinational firms operating on the continent, particularly pertaining to workers rights, questionable labor practices and loose environmental protection standards. As one example of questionable labor practices by private and state-run Chinese firms operating overseas, recent Human Rights Watch research found that African laborers working for Zambian subsidiaries of China Non-Ferrous Metal Mining Corporation face poor health and safety conditions despite recent pledges by Zambian President Michael Sata s government to protect workers rights. Tensions between the Zambian workers and their Chinese managers boiled over when a Chinese manager was killed last August during a riot protesting a new minimum wage and poor working conditions. 14 While the Zambian government must, of course, take some responsibility, equally little is being done by the Chinese government to improve working conditions and standards at these state-owned mines. There are also reports of Chinese nationals working on the continent being mistreated in the same way as their African counterparts. In fact, it is unclear 5
whether Chinese laborers working overseas are protected under domestic Chinese labor laws. 15 There is also concern about loose environmental standards of Chinese multinationals in Africa. Accounts of toxic run-off at China National Petroleum Corporation (CNPC)-led oil operations in South Sudan and Chad are two examples of questionable environmental practices. Also, in many African countries, a significant percentage of wood exported to China is illegally logged, and much of it enters Chinese customs undocumented. Consequently, there is no way to verify the extent of Chinese aiding and abetting in the illegal logging trade or the environmental degradation as a result of it. Unlike many Western corporations active on the continent, China lacks domestic non-governmental organizations that denounce and call attention to such practices. 16 Of course it might be difficult for the Chinese government to oversee the global operational standards of privately owned corporations headquartered within its borders. The role of African governments in enforcing their laws also needs to be considered in this respect. While the Chinese are not the only outside actors responsible for violations of international standards of corporate responsibility on the continent, there is a sense that domestic pressure on Chinese corporations operating overseas to adhere to adequate labor and environmental standards remains weak in comparison with the standards used by OECD multinationals. Recent reports suggest, however, that state-owned Chinese corporations are becoming more sensitive to these concerns, requiring firms to publish annual corporate social responsibility reports. As one example, CNPC is now working with the Gabonese government to ensure more environmentally sensitive practices in the future after it faced criticism for loose environmental standards. Institutional complexity and aid management Sino-African relations are becoming increasingly complex, presenting diverse layers and dimensions, in part fuelled by Chinese strategic institutionalization efforts such as the 6
Forum on China-Africa Cooperation (FOCAC). Under China s Africa Policy (2006), the government announced its objective to pursue an institutionalized dialogue and consultation in a flexible and pragmatic manner. As of 2007, 49 out of 54 African countries had established diplomatic ties with China, accounting for 41 embassies and 7 general consulates. 17 It is estimated that anywhere between 15 to 23 central ministries and agencies are involved in different parts of China s foreign aid program. This is a number comparable to those of administration structures in the United States and France, showing that complex aid administration is not exclusively a Chinese feature. 18 The literature identifies four main actors: the State Council, the Ministry of Commerce (MOFCOM), the Ministry of Foreign Affairs (MOFA), and the national banks (Exim Bank and China Development Bank). Table 1 below provides some detail about the main tasks of each one of these, and a couple more. Table 1: Institutional Overview of Chinese Aid Management Ministry/Agency State Council Ministry of Commerce (MOFCOM) Ministry of Foreign Affairs (MFA) State-Owned Banks Task It authorizes MOFCOM to oversee and manage China s foreign aid program. It issues and publishes policies on foreign aid. Some departments of the SC are responsible for or participate in the management of foreign aid programs that require specific professional expertise. It is responsible for the formulation of foreign aid policies, regulations, overall and annual plans, examination and approval of foreign aid projects and management of the project execution. The Executive Bureau of International Economic Cooperation, China International Center for Economic and Technical Exchanges, and Academy of International Business Officials affiliated to the Ministry of Commerce are entrusted with tasks of managing the implementation of complete projects and technical cooperation projects, material aid projects and training programs connected with China's foreign aid. Oversees aid decisions and their congruence with China s foreign policy through its regional departments. The Export-Import Bank of China is responsible for the assessment of projects with concessional loans, and the allocation and recovery of these loans. The Chinese Development Bank manages the China-Africa Development Fund. 7
Local embassies and consulates Coordination mechanisms They are in charge of the direct coordination and management of foreign aid projects in the respective countries. In order to strengthen the coordination of the departments concerned, the ministries of commerce, foreign affairs and finance officially established the country's foreign aid inter-agency liaison mechanism in 2008. In February 2011, this liaison mechanism was upgraded into an inter-agency coordination mechanism. Source: http://english.gov.cn/official/2011-04/21/content_1849913_7.htm Due to its increasing engagement in international development cooperation, China s aid system is beginning to professionalize. Today, only 70 professionals work at MOFCOM s Department of Aid to Foreign Countries, while the Department of Concessional Loans has 100 people. This suggests that Chinese professionals may not be participating in missions at the local level, as the decision-making process is centralized in Beijing. The interaction of Chinese bureaucrats and local embassies with African authorities might be limited to the negotiating process and decreasing significantly after signing the cooperation agreement. According to Lancaster, no specific ministry or agency within the government has full oversight of China s aid disbursements. 19 Additionally, the problem of different agencies collecting and reporting disaggregated data without any overarching framework represents an obstacle for the development of a coherent and comprehensive picture of Chinese development assistance. The Economic Councilors at the embassies, for example, have not continuously assisted and reported back to the Chinese government, frequently providing outdated information and nonsystematic data. One consequence of this is oversized estimates of Chinese aid. 20 However, there seems to be willingness to gradually enhance transparency on aid. The Deputy Director-General of the MOFCOM s Department of Aid to Foreign Countries, Yu Yingfu, recently declared: the Chinese government is becoming more open and transparent on its foreign aid. 21 The publication of China s Aid Policy in 2011 is a step in that direction, though information is provided only at very aggregate level. Due to China s increasing role as a development cooperation partner, reducing problems related to transparency and coordination is of particular importance. In this sense, some have noted that China has opened dialogue with professionals in UK and Sweden 22, as 8
well as with OECD countries, via the China-DAC study group. The White Paper on Foreign Aid emphasizes coordination efforts and the establishment of inter-agency coordination mechanism. But it is still unclear if and when Chinese aid management structures will be reformed and streamlined. The establishment of a single centralized agency responsible for all cooperation activities has been debated, but so far has not materialized. Other providers of South-South Cooperation such as India, South Africa and Brazil face similar challenges, although each with their own particularities. Due to the larger scope of China s engagement in development cooperation, it is especially under international scrutiny and pressure. Vested interests within the current aid system might pose difficulties to any transformations, and the tough domestic bargaining process may not be easily resolved. 23 Conclusions and Recommendations This Policy Brief has highlighted some existing tensions and contradictions stemming from China s increased engagement with African countries, focusing in particular on investments financed through grants and concessional loans in China s growing foreign aid and economic cooperation portfolio on the continent. Many of these tensions are often picked up in media reports on China s interventions in Africa, projecting it under a negative light. Given the Chinese government s concerns about improving its global image as a trusted development cooperation partner, there are at least three things that it could do to start responding to these tensions and contradictions: 1. Improve its guidelines and oversight capacity over Chinese companies implementing infrastructure projects or more generally operating in African countries and globally, to ensure that they follow adequate labor and environmental standards, and other relevant quality standards; 9
2. Modify and improve its planning and appraisal approaches, so that the identification of projects to be financed and built generates sustainable infrastructure that responds to broad country priorities. 3. Reform and streamline aid management structures and the overall institutional framework of Chinese development cooperation, to ensure better coordination and information flows. The idea of establishing a single agency in charge of managing Chinese aid should be further explored. As already highlighted, none of the considerations above apply exclusively to China, as they represent challenges that are common to many providers of development cooperation. Their negative impact is in many ways also a reflection of weak government capacity and lack of a developmental focus on the side of African governments negotiating projects and programs financed by the Chinese government. As recently highlighted by some observers, there is a lack of coherent and collective policy on the side of African governments when it comes to defining and formulating strategic and comprehensive policies, for the influx of Chinese aid and investments. 24 In many ways, the responsibility for responding and addressing the tensions and contradictions highlighted in this Policy Brief lies partly in the hands of African countries themselves. Notes 1 Between Extremes: China and Africa Briefing Note 1202, Africa Research Institute. http://africaresearchinstitute.org/newsite/wp-content/uploads/2013/03/briefing-note-1202- pdf.pdf 2 China s Foreign Aid. http://news.xinhuanet.com/english2010/china/2011-04/21/c_13839683.htm 3 H. Wenping (2007) The Balancing Act of China s Africa policy China Security 3(3), 23-40. http://kms1.isn.ethz.ch/serviceengine/files/isn/44745/ichaptersection_singledocument/55aadb7 9-bf86-4363-864a-7e918468fd35/en/cs7_02.pdf 4 http://www.oecd.org/daf/inv/investment-policy/mappingreportweb.pdf 5 http://www.focac.org/eng/dwjbzjjhys/hywj/t954620.htm 6 D. Cissé (2013) China's footprint in Africa's infrastructure building sector: Contribution to development? CCS Commentary. http://www.ccs.org.za/wpcontent/uploads/2013/05/ccs_commentary_chinese_in_infrastructure_2013_dc.pdf 7 A. Ying Chen (2009) China s Role in Infrastructure Development in Botswana SAIIA Occasional Paper 44. http://www.saiia.org.za/occasional-papers/chinas-role-in-infrastructure-development-inbotswana 8 http://www.chinaafricarealstory.com/2011/04/chinese-aid-and-luanda-general-hospital.html 10
9 http://www.sinoafrica.org/en/node/2013 10 D. Cissé (2013) China's footprint in Africa's infrastructure building sector: Contribution to development? CCS Commentary. http://www.ccs.org.za/wpcontent/uploads/2013/05/ccs_commentary_chinese_in_infrastructure_2013_dc.pdf 11 http://www.bbc.co.uk/news/world-africa-18646243 12 D. Brautigam (2012) Investors, not Infesters. China Economic Quarterly, p.23. 13 http://www.oecd.org/dac/dac-globalrelations/final%20report%20on%20joint%20study%20visit%20to%20tanzania.pdf 14 http://www.hrw.org/news/2013/02/20/zambia-safety-gaps-threaten-copper-miners 15 http://fordhamilj.org/articles/the-center-cannot-hold-assessing-the-reach-of-chinas-laborprotections-to-migrant-workers-in-africa/ 16 http://www.chinadialogue.net/article/show/single/en/741-china-s-environmental-footprint-in- Africa 17 http://www.fmprc.gov.cn/eng/ 18 D. Brautigam (2011) China in Africa: What Can Western Donors Learn? Norfund Report. http://www.norfund.no/getfile.php/dokumenter/studier%20for%20norfund/norfund_china_in_af rica.pdf 19 C. Lancaster (2007) The Chinese Aid System Center for Global Development. http://international.cgdev.org/files/13953_file_chinese_aid.pdf 20 http://www.ccs.org.za/wp-content/uploads/2011/09/transparency-of-chinese-aid_final-forprint.pdf 21 http://www.china.org.cn/business/2013-04/16/content_28554473.htm 22 S. Lengauer (2011) China s Foreign Aid Policy: Motive and Method http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1126&context=cm 23 C. Lancaster (2007) The Chinese Aid System Center for Global Development. http://international.cgdev.org/files/13953_file_chinese_aid.pdf 24 B. Zoumara and A.R. Ibrahim, China-Africa relations: looking beyond the critics. Pambazuka, 6 June 2013. http://pambazuka.org/en/category/features/87735 11