The Dragon s Gift. Deborah Brautigam. Overseas Development Institute London March 17, 2010

Transcription

1 The Dragon s Gift Deborah Brautigam Overseas Development Institute London March 17, 2010

2 Once upon a time

3 Goals of the Book Provide historical & comparative context Explain how Chinese aid & economic cooperation actually work today Impact of Chinese engagement on development in Africa Evidence-based analysis of conventional wisdom

4 Why is China Different? Foreign policy framework Core ideas about development Experience as recipient of aid & loans East Asian developmental state

5 Today s Focus: Two Tools of Chinese Engagement (1) Resource-backed infrastructure loans (2) Overseas economic zones Hybrid Public-Private Partnerships Not ODA But still development

6 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,

7 1994 Reforms: Chinese Policy Banks China Export Import Bank (Eximbank) China Development Bank China Agricultural Development Bank

8 A. Eximbank s Instruments Export Sellers Credits (Huawei, ZTE) Export Buyers Credits (issued in $$) Preferential Export Buyers Credits ($$) Concessional Aid Loans (issued in rmb) Guarantees B. China Development Bank

9 Export Buyer s Credit: Varieties 1. Normal line of credit: Mauritius, Nigeria 2. Resource-secured line of credit: Angola, Ghana 3. Package: export credit plus resource investment: Chile, DRC

10 I. Resource-backed Infrastructure Credits & Loans Market-rate line of export buyer s credit Non-transparent Tied to Chinese goods & services Request based Secured by resources

11 Eximbank Resource-Backed Credits & Loans Confirmed Sudan 2001 Congo-B 2001 Nigeria 2004 Angola 2004 E. Guinea 2006 Ghana 2007 DRC 2008 About $14- $16 billion (excluding Sudan) Negotiations in Gabon, Guinea, Zimbabwe

12 Angola: Oil-Backed Line of Credit Terms (2004) Amount Interest rate Maturity Grace Period China Eximbank $2.0 bil LIBOR plus years Until end of each project Standard Chartered $2.35 bil LIBOR plus years none

13 Angola: 33 Projects for $1b ( ) 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.

14 Fig. 5.2 China Eximbank Loan Cycle 3. Sign Framework Agreement Borrowing Government (Borrower) Chinese Government (Ministry of Commerce) 1. Apply for Loan 4. Sign Project Loan Agreement 2. Preliminary Appraisal Report China Eximbank (Lender) 7.Send Withdrawal Application along with Documents, Report Process 6.Submit Documents, Report Process 9.Repay Principal, Pay Interest and Fees 8.Disburse Loan Foreign Executing Agency (Owners or Importers) Commercial Contracts 5.Submit Documents According to Contract, Request Payment Chinese Executing Agency ( Contractors or Exporters)

15 Risks and Benefits Risks: Value for money Project selection/ feasibility Kickbacks Maintenance Double-mortgage Benefits: Agency of restraint Eliminates embezzlement risk Can expand debt servicing capacity Infrastructure

16 II. Overseas Economic Zones Lekki Economic Cooperation Zone, Lagos State, Nigeria

17 2006 Goal: 50 Overseas Zones 1. reduce trade frictions and barriers 2. assist China s domestic restructuring 3. increase demand for Chinese machinery, & local supply of construction materials 4. economies of scale for overseas investment 5. SMEs to venture overseas in groups 6. diplomacy: transfer China s success to other developing countries

18 Tanzania s Friendship Textile Factory, 2008 a former aid project

19 Holley Pharmaceutical s Artemisinin Factory, Tanzania.

20 Nnewi, Nigeria

21 Enugu: Joint Venture Tire factory

22 Nnewi, Nigeria: Instant Noodle Factory

23 Two Competitive Tenders 2006: 60 submissions of interest 30 invited to submit proposals 12 invited to Beijing => panel 8 selected (Zambia, Mauritius, Ogun) 2007: 50 submissions of interest 20 invited to submit proposals 11 selected (Algeria, Egypt, Ethiopia, Lekki) 19 Zones selected as experiments

24 China s First Seven Overseas Zones in Africa

25 Chinese Developers Mainly Provincial & Municipal SOEs Zhejiang --Guangdong Tianjin --Shanxi etc. But also Minying ( private firms) A few National SOEs -- CCECC -- China Railways

26 Design of Zones Infrastructure at world-class standards But much varies: Can be export processing, import substitution, services PPP Model & 100% Private Follow local incentive framework

27 Benefits for Chinese Companies Developing Approved Zones Grants: RMB 200 to 300 million ($29 to $44 m) Long-term loans of up to RMB 2 billion ($294 m) MOFCOM: Trade and Economic Cooperation Zone Development Fund Subsidies for up to 30 % of some development costs MOFCOM: Economic and Technical Cooperation Special Fund rebates on interest for Chinese bank loans Support from provinces & municipalities

28 Risks and Benefits Risks: White elephant Enclave Technology transfer (?) Labor & environmental standards Local Learning of Zone model (?) Benefits: Backing of Beijing Company as developer Local employment Infrastructure Flying Geese

29 Competing with China Can Chinese companies in Africa compete with Chinese companies in China for the African market?

30 Innocent Chukwuma

31 Nigerian Official The West comes here, and it s oil, oil, nothing but oil. But the Chinese come, and they are interested in everything.