The MEA needs to quickly get it's act together to counter the growing influence of China in Africa.This post is to bring out the learnings for India, and Indeed for Pakistan too given the purse-strings being opened liberally for pakistan by China.
Recently, an FT article reported the following, which I quote for the statistics: "China-Africa trade has surged over the past decade, reaching $200bn last year, up from $10bn in 2000 and $1bn in 1980, according to customs data. About 2,500 Chinese companies have established themselves in Africa over the last two decades. The Chinese PM announced during his trip that Beijing would increase its bilateral credit lines to African countries by $10bn, bringing the total to $30bn for 2013-15. He also announced another $2bn for infrastructure". [Recent liberal investments have been announced in Pakistan by China which includes illegal infrastructure plans in the Pakistan and Chinese occupied Kashmir as well. This article focuses on Africa bur relevant Pakistan, in the context of the host countries and their experience with Chinese investments.]
Admittedly, There is a lot going between China and many African countries, and it's instructive for India to see the benefits that China derives from such ties, and what can India learn from these arrangements in it's own Foreign Policy.
1. Government Backing : Chinese private firms with huge financial backing from their government are usually the key drivers of Chinese investments. The entire foreign policy of China is built around trade and commerce directly benefiting it's local firms. [And generally not that much of the host, may I add. This is soft colonialism, and the hosts realise this far later than the naked aggression of colonials of the past.]
2. Cheque-Book Policy : As most of this investment is on the back of bilateral loans or grants funded by Chinese owned banks, the profit is repatriated back to China almost totally. Also, Chinese loans tie the service of a contract entirely to Chinese firms, using migrant Chinese labour, thus locking out local capacity building or technology transfer. This kills local competition, job creation avenues, and furthermore, the methods of arriving at project budgets is tied to the volume of credit available, hence resulting in overpriced or untracked project delivery. [Pakistan, be wary, especially when as the stakeholders involved include the subjects of illegally occupied lands. In addition the vast influx of hans on the local soil threaten the ways of the local religions and cultures, as China has a historical record of creeping acquisition using demography alterations].
As Ms. Deborah Brautigam, the Chinese expert writes in her blog : " I suspect that Chinese firms will still win the majority of contracts but what an excellent tactic by a maturing Chinese leadership to make them compete internationally for their wins."
Notable exceptions have started emerging in past few months such as China's tie-up with African Development Bank, to counter the resistance from non-Chinese meritorious companies. However, If traditional multilateral agencies with their supposed transparency and accountability had worked for Africa before, China would not have made such a large footprint it has. Notwithstanding such exceptions therefore, the "Cheque-book Policy" holds good.
India needs to focus on much tougher program management and lasting benefit for their hosts to differentiate from China. [In the perspective of pakistan, you will need to be involved in quid-pro-quo giving out benefits today in anticipation of fruits of Chinese investments tomorrow. These fruits lie in the domain of the uncertain, as delays and sub-quality deliverables or indeed changed geo-political situations of the future are not a problem for China, who will get what they want upfront. In your case, an Arabia Sea port].
3. Capacity Building: African nations have little local manufacturing to stand up against low cost Chinese goods. Balance of trade will favour China now, and as it's partner's manufacturing capability is destroyed, it helps entrench and perpetuate the trade benefit to China. India needs to keep this in mind. [Pakistan may please note, as this may impact the entrepreneurial Sindh province adversely]
4. Unregulated Environment: African countries are still pretty green field in terms of their regulations for local equity or mandatory localization. This flux is both a risk and opportunity for Indian firms. As Chinese firms gain insurmountable market share, the lack of regulation does not accrue any benefit to the local African nation. Corruption worsens the scenario further, especially in the scenario of Chinese owned lines of credit. Funding from a multi-lateral agency can at least hold the funding to transparent processes of audit, minimizing the allegations of embezzlement and corruption, huge issues in much of Africa. [Chinese loans tied to specific firms are far more flexible to corrupt practices than multi-lateral agencies like WB etc. Corruption and transparency indices worsen due to this].
5. FDI figures: Chinese FDI came in most cases as concessional loans or grants. There is no transparency or published data that can point to the quantum of Debt burden being carried by countries due to such disguised FDI. By experience, I presume most of the FDI actually comes in as soft loans, and is double credited.
6. Resistance to "Neo-Colonialism": Chinese Prime Minister Li Keqiang has admitted to "growing pains" with increasing trade focus in Africa. Quoting the FT report, "Ghana last year deported thousands of Chinese workers in a crackdown on illegal mining in the country, while oil workers at two Chinese projects in Chad and Niger went on strike earlier this year in protest at their unequal salaries". This shows a growing resistance to neo-colonialism perceptions, an area which can be filled in with the soft-power approach of India viz-a-via China. [Pakistan: Hosts are hitting back]
And before we end, the following was President Jacob Zuma’s defence of China’s business relations with South Africa. “The countries that have been dealing with us before, particularly old economies, they’ve dealt with us as former subjects, as former colonial subjects,” Zuma said in an interview with CNBC Africa. “The Chinese don’t deal with us from that point of view. They deal with us as people that you must do business (with), at an equal level so to speak,” he said." [Vanity trumps economic sense and defense security at times, just because someone talks to you nicely!]
