The Roles of Aid in Politics Putting China in Perspective

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de Haan, Arjan (2009), “Will China Change International Development as We Know It?” ISS Working Paper No. 475, Den Haag: Institute of Social Studies.

The answer to the question whether China will change international development is both no and yes. The newness of the different experiences that China presents should not be over-stated. Its development record is almost unparalleled, but the explanations may not be as unique as sometimes suggested: its land reform, strategies of industrialisation, export-promotion, newly emerging global financial and soft power, can all be described without having to refer to necessarily unique characteristics. And, as Chinese academics would be first to emphasise, the development model has created many of its own problems, notably domestic inequality, environmental degradation, and global financial instability. What makes China fairly unique – but its explanations not exceptional – is the commitment and ability to address existing and emerging development problems.

But there are lessons that can be drawn from China’s development success, and I believe the international community is rightly playing a growing role in promoting such lessons, and can do much to ensure this becomes less supply-led than is currently the case. There are lessons from China’s records in reducing poverty, providing food security, promoting alternative industrial models, how it has provided and funded infrastructure, etc. Perhaps notably – though much less easy to “replicate” – there is great significance in understanding China’s processes of policy reforms, the experimental and incremental nature of addressing development problems. China’s experience needs to be better understood globally, and needs to be articulated in a way that makes it understandable to an international audience, while retaining the “Chinese characteristics” of the narrative.

In any case, China growing economic and political role, increasing confidence, and intentions to take its deserved position in the international community, all are already changing international development as we know it. Its approach to aid will have a growing influence in Africa, whatever the views of the old donors. It is too early to assess what that impact will be, as Chinese approaches are evolving very rapidly, and it is not impossible that a whole new different aid structure will emerge (though that is certainly not a current priority). As with all new forces, the impacts will be varied, and better mutual understanding arguably can help to make international development efforts of all parties more effective.

de Haan, Arjan (2010), “Will Emerging Powers Change International Cooperation? Implications of China’s Foreign Aid for Dutch and Other Donors,” Mimeo, submitted to The Netherlands Yearbook on International Cooperation.

I would hazard a guess that it will not be very long before China’s global role is no longer seen as exceptional as it is at the moment. A main reason for that would be that China itself does not want to be seen as exceptional: it wants to reclaim its rightful global role and status, but it does not have an interest in standing out too much, and the recent experience suggests that if it does, it is likely to increase expectations to levels that prove unhelpful (and some people have suggested that it is also a lesson it learned from South Korea). There are clear signs that China is becoming an ever-more important part of the international fora. When it does this it will both modify and adapt to the mode of discourse – in all its diversity including within Africa where serious engagement with and analysis of China’s role is rapidly emerging – and to some extent its practices. Maintaining distinctiveness should not be too problematic, given for example enormous differences within the community of old donors. Some would argue that it is taking long before China is taking place at the tables of the old donor, but in ten to twenty years we will probably look back at an amazingly rapid transition of China’s role as aid recipient to that of a donor.

Many of the international agencies have been proactive in working with China, including the World Bank, UNDP, the DAC, DFID etc. During the January 2010 (in The Hague) conference of Dutch Ambassadors in Africa there was – besides a growing wealth of experience and diversity of experience regarding China’s role – also an enormous amount of interest in finding out how to engage with China. Those having worked in Beijing on this issue have realised that currently there is more pressure from the old donors for this collaboration, than demand from Chinese agencies, which by comparison are enormously under-staffed, thus limiting the mere capacity to respond to calls for collaboration. But most people agree that the interest for collaboration is mutual, and this should not stop international agencies to explore new venues of collaboration. For each country venues for collaboration will be different, and a discussion on possible collaboration with China on international development could very well reinvigorate the post-WRR discussion on needs for specialisation and professionalisation.

In the process, there is much to learn for the old donors, about China’s own development model, and how it is making thus almost-unique transition from being an aid recipient to an aid donor. The international community could for example play a role in facilitating the process of learning from China’s own development successes and challenges – about which less is known within the international community than about other emerging economies – or at least stop articulating mistaken notions about China. At least, the old donors – and indeed China itself – could draw on lessons from aid provided to China to understand the conditions under which aid can work, thus also countering critiques aid has been a complete failure.

Dollar, David (2008), “Lessons from China for Africa,” Policy Research Working Paper 4531, World Bank.

Each developing country faces unique challenges and has to find its own way forward. Countries, however, can learn from each other and adapt lessons taken from other experiences. China’s success with growth and poverty reduction over a quarter century provides many interesting lessons. On the positive side I have focused on the sound investment climate, openness to foreign trade and direct investment, cost recovery as a basis of infrastructure expansion, and support to agriculture combined with rural-urban migration as interesting areas that other developing countries might want to study further.

The way in which China has approached reform also provides interesting lessons. Chinese reform is sometimes characterized as gradual, but I do not think that this is an accurate characterization. The actual change in institutions and policies in China over a 25 year period is one of the most remarkable transformations in history. It is hard to find other examples in which there has been so much change in such a short period of time. Rather than gradual, I would call Chinese reform pragmatic and experience-based. China is a large and diverse country. In many sectors there has been a process of pilot testing reform, evaluating results, and scaling up good ideas. Sometimes this has been top-down and deliberate: foreign trade and investment were initially liberalized in special economic zones, and as good results were achieved the trade and investment reforms were then extended to more and more locations. But the experimenting has often been bottom-up as well. Much of the enterprise reform, privatization, and creation of a sound investment climate has been the result of experimentation at a local level. Localities were given the objective of growth and the freedom to experiment. Competition among cities has then led good ideas to disseminate broadly.

If there is a lesson here for other developing countries, it is to be pragmatic about reform. Try out new ideas, evaluate results, and then expand ones that work. There is also a useful lesson here for development agencies such as the World Bank. The World Bank has never had a particularly important financial role in China, but it has financed pilots and innovations in a broad range of sectors. In the early days of reform World Bank projects supported the development of grain markets, the power tariff reforms discussed above, the use of tolls to finance road construction and management, commercialization of rail and ports. More recently the focus of the program has shifted to environmental and social issues. World Bank-financed projects today support renewable energy technologies (wind, biomass), waste water treatment and clean-up of lakes and rivers, aforestation, urban transport management, rural health and education reform, and programs to help rural migrants integrate into urban employment. China uses the World Bank to help it introduce, evaluate, and disseminate innovations, providing a good model for how the Bank can help in successful middle-income countries.

Eisenman, Joshua and Kurlantzick, Joshua (2006), “China’s Africa Strategy,” in Current History, May 2006, pp. 219-224.

Competing Values

Ultimately, Africa will provide a test of whether Beijing can be a successful great power, exerting influence far from its borders. In some respects, China’s influence may prove benign, as China shares burdens in Africa with other nations like the United States, becomes a greater source of investment in the continent, and funds much-needed aid programs.

Even as the United States has largely ignored African nations in UN forums, China has supported a range of proposals favored by African countries on UN Security Council reform, peacekeeping, and debt relief. In so doing, Chinese officials often portray Beijing as a champion of the developing world that listens to other countries, drawing an implicit contrast with the United States, which China portrays as uninterested in developing nations’ needs. As Chinese Prime Minister Wen Jiabao put it, “As a permanent member of the UN Security Council, China will always stand side by side with developing countries in Africa and other parts of the world.”

Yet Beijing’s influence must be weighed in light of the fact that China, at least for now, does not share American values of democratization and good governance—in Africa or anywhere else. Because China’s influence might constrain the existing powers in Africa, including the United States and France, the temptation may be to match some of China’s efforts on the continent in order to win resources. But it is more important that the United States leverage its values, which are still more appealing to average Africans.

For the United States, China’s growing role in Africa should be a wakeup call. Washington needs to convince both average Africans and their leaders that their future is better served, over the long term, by working more closely with the United States, the European Union, and international financial institutions. After all, a Chinese victory on the continent could come back to haunt the struggling residents of Maputo and other African capitals.

Foster, Vivien, Butterfield, William, Chen, Chuan and Pushak, Nataliya (2008), “Building Bridges: China’s Growing Role as Infrastructure Financier for Sub-Saharan Africa,” Trends and Policy Options, No. 5, Washington, DC: The World Bank.

This study documents the emergence of China as a major new financier of infrastructure in Sub-Saharan Africa. Chinese financing commitments rose from less than US$1 billion per year in the early 2000s to exceed US$7 billion in 2006, which was China’s official “Year of Africa.” Such indirect evidence as exists on the financing terms of these loans suggests that they are more favorable than the private capital markets, though not as soft as ODA. Thus, Chinese loans were found to have an average grant element of 36 percent compared with 66 percent for ODA.

China is not the only non-OECD financier to be playing a major role in Africa. Indian finance for African infrastructure projects is not far behind, with commitments averaging US$2 billion per year over the period 2005 to 2006. Chinese and Indian finance share many common characteristics; including their channeling through the respective countries’ ex-im banks and their focus on countries that are becoming major petroleum trading partners, such as Nigeria and Sudan. In addition to China and India, the Arab donors are also playing a significant role in African infrastructure finance, with their resources being channeled primarily in the form of soft loans through development funds focusing on roads and other social infrastructure projects.

China’s approach to its intergovernmental financial cooperation forms part of a broader phenomenon of south-south economic cooperation between developing nations. The principles underlying this support are therefore ones of mutual benefit, reciprocity and complementarity. Unlike traditional ODA, financing is not channeled through a development agency, but rather through the Ex-Im Bank with its explicit mission to promote trade. Given the export promotion rationale, the tying of financial support to the participation of contractors from the financing country is a typical feature. A similar approach is currently being taken by the India Ex-Im Bank, and has in the past been used by export credit agencies of other countries.

Even compared to other developing regions, Sub-Saharan Africa faces a serious infrastructure deficit that is currently prejudicing growth and competitiveness. The estimated infrastructure financing needs are on the order of US$22 billion per year with an associated funding gap of over US$10 billion per year. Against this context, the growth of Chinese (and other emerging) finance presents itself as an encouraging trend for the region, and can potentially make a material contribution to closing the deficit. In the power sector, for example, the six hydropower plants currently under construction amount to 6,000 MW of capacity and when completed would represent a 30 percent increase over and above existing hydro capacity in the region.

To put these findings in perspective, the combined contribution of China and the other emerging financiers at more than US$8 billion for 2006 is broadly comparable to PPI and exceeds the combined official development assistance of the OECD countries that topped US$5 billion in the same year. The analysis shows a significant degree of complementarity in the sectoral and geographic focus of traditional and emerging finance. Non-OECD donors tend to focus on productive infrastructures, mainly power (in particular hydroelectric schemes) and railways, and direct their resources primarily to major petroleum trading partners. Traditional donors tend to focus on public goods such as roads, water, sanitation, and electrification and spread their support more evenly, reaching non-resource-exporting countries to a greater extent.

The advent of China and other non-OECD players as major financiers presents itself as a hopeful trend for Africa, given the magnitude of its infrastructure deficit. The aid provided by these emerging financiers is unprecedented in scale and in its focus on large scale infrastructure projects. With new actors and new modalities, there is a learning process ahead for borrowers and financiers alike. The key challenge for African governments will be how to make the best strategic use of all external sources of infrastructure funding, including those of emerging financiers.

Gill, Bill, Huang, Chin-hao and Morrison, J. Stephen (2007), China’s Expanding Role in Africa: Implications for the United States, Washington DC: Center for Strategic International Studies.

China, in its quest for a closer strategic partnership with Africa, has increasingly dynamic economic, political, and diplomatic activities on the continent. As demonstrated in the third Forum on China and Africa Cooperation (FOCAC) in November 2006, the high-profile summit marked a historic moment in China-Africa relations. China’s highest leadership actively espoused the summit’s ambitious vision, which was enthusiastically embraced by a broad range of African leaders. Forty-eight African countries were present, including 43 heads of state. The Chinese push forward in Africa raises the promise of achieving future gains that benefit Africa in significant, constructive ways, raising hopes that China will seriously turn its attention to long-neglected areas such as infrastructure development and that its strategic approach will raise Africa’s status globally, intensify political and market competition, create promising new choices in external partnerships, strengthen African capacities to combat malaria and HIV/AIDS, and propel the continent’s economic growth, enabling African countries to better integrate with the global economy.

This report identifies six key factors that significantly undergird the Chinese approach:

  1. China’s quest to build a strategic partnership with Africa fits squarely within Beijing’s global foreign policy strategy and its vision of the evolving international system.

  2. Chinese leaders and strategists believe China’s historical experience and development model resonate powerfully with African counterparts, thereby creating a comparative advantage vis-à-vis the West.

  3. China’s history of friendly, respectful, and helpful political linkages with Africa is thought to provide a durable foundation for a future strategic partnership.

  4. China believes Africa is on the verge of a developmental takeoff.

  5. China’s policymakers are confident that a state-centric approach to Africa will build strategically on Beijing’s core strengths and align with the stated preferences of African countries.

  6. Policymakers believe it is in China’s interest to engage third parties on Africa, but cautiously, slowly, and with serious reservations.

Drawing momentum and confidence from the six key factors above, China’s expansive presence in Africa has been erected on an array of political, economic, and cultural exchanges that have proliferated in recent years. These activities visibly confirm China’s growing interest in Africa; they also visibly signal the continent’s emergent importance to China’s burgeoning economy and rising political stature.

While China’s more ambitious and complex Africa policy of today may in due course bring financial and political payoffs, alter the playing field in Africa, and create pressures for changes in U.S. policy approaches, multiple risks also attend China’s strategy. In particular, Beijing faces nine core challenges in translating its vision of a strategic partnership with Africa into a sustainable reality:

  1. China will need to work assiduously to overcome obstacles tied to language, culture, religion, and racial bias.

  2. Although the FOCAC Beijing Action Plan calls for increased exchanges between African and Chinese media, and for the two sides to facilitate the placement of resident correspondents in China and in African countries, Chinese media and popular culture have only very limited entry into African markets thus far. Knowledge and expertise about Africa in China’s policy advisory and think tank communities is thin and lacking in up-to-date, on-the-ground experience.

  3. Evolving African popular opinion—the “African street”—is not currently factored systematically into Beijing’s thinking.

  4. The Chinese approach is neither familiar nor well equipped to engage with the emergent and increasingly vocal and influential nongovernmental groups in Africa.

  5. Adhering to a formal policy of noninterference and putting it into consistent practice will be difficult and likely clash over time with deepening Chinese interests.

  6. In the future, China will be under increasing pressure to define how it will direct and coordinate internally the complex bundle of ambitious policy and programmatic initiatives it is advancing.

  7. The Chinese diaspora business community poses special “reputational risks” related to bribery and counterfeiting, among other controversial practices.

  8. Pressures will mount for China to do more to harmonize its donor activity in Africa with ongoing international assistance, especially with respect to debt.

  9. Pressures will mount on Beijing to manage its relations better with its most important bilateral partner, the United States, vis-à-vis Africa.

China’s expansive engagement in Africa inherently carries significant implications for U.S. interests in Africa and around the world, as well as for U.S.-China relations. Like China, the United States is in the midst of an expansive phase of ever-greater engagement in Africa. U.S. foreign assistance levels to Africa have more than tripled during the Bush administration. Signature White House initiatives have been launched that have had a predominant focus on Africa: the five-year, $15-billion President’s Emergency AIDS Relief Plan (PEPFAR); the U.S. Malaria Initiative; and the Millennium Challenge Corporation, which seeks to reward states that are well governed and performing well economically with substantial new aid compacts that will accelerated economic growth. Private-sector engagement is steadily rising, concentrated in the energy field, and annual two-way trade reached $60.6 billion in 2005, up 36.7 percent from 2004. It is now widely acknowledged that U.S. national interests in Africa have burgeoned to include substantial global energy stakes, counterterrorism concerns, public health, and intensifying competition with China, India, South Korea, and other Asian countries that have significantly enlarged their engagement in Africa.

Up to now, the United States and China have been largely absorbed in their separate, respective spheres, enlarging their presence and investment in Africa, with little systematic or substantive reference to the other. Some initial think tank research, as well as multiple media reports in the United States, has raised concerns about China-Africa relations, often framed in apprehensive or censorious terms. The United States and China did endorse in principle in 2005 a U.S.-China subregional Africa dialogue, as part of the larger U.S.-China strategic dialogue, but since that point there has been very little progress in building real content into that commitment.

China’s expansive engagement in Africa is a complex new reality that we only partially grasp—fast moving, multidimensional, and long-range in its various impacts—and it calls for greater attention and action in Washington. As such, critical work needs to be done to generate new, longer-range thinking and greater intellectual content to help create effective U.S. policies to engage China productively in Africa, if a costly U.S.-China clash in Africa is to be avoided. A strategic approach can build on the reality that, broadly speaking, the United States and China share a range of common interests in seeking a more collaborative and constructive bilateral relationship. The relationship between the two countries is in a period of relative stability and constructive dialogue, presenting a window of opportunity to make further gains in expanding their common ground. Most obviously, the two sides have become deeply intertwined economically and share a joint interest in managing their political and security relationship in a way that assures continued bilateral economic benefits.

Integral to any such approach, however, will be the expectation that—owing to the weak state institutions, high incidence of conflict, and relative economic fragility in most African countries—developments in Africa, independent of U.S.-China relations, will repeatedly test U.S. and Chinese approaches and their resolve to work collaboratively. It will be no less important to anticipate that enduring philosophical, ideological, and programmatic differences, mutual suspicions and misunderstandings, and competitive tensions will sustain the risk of a clash of U.S.-China interests in Africa. Hence the special need to anticipate flash points in approaches to Africa and manage them preemptively: most important, at this point, are crisis cases such as Darfur, sensitive assistance issues such as debt and harmonization of donor approaches, and access to energy resources.

With urgent foreign and security policy concerns elsewhere around the world, and with several major and growing U.S. diplomatic, humanitarian, developmental, and security initiatives in process in Africa already, there is a risk that U.S. policymakers will be unwilling or unable to give China’s expansive presence in Africa the priority time and policy energy it requires. This would be a mistake. The opportunities and interests present themselves now to assess China’s approach to Africa more accurately, engage China more effectively, and work to shape outcomes in Africa that are beneficial to Africans, as well as Chinese and Americans.

More specifically, this report finds several promising options for U.S.-China-Africa collaboration at the multilateral, government-to-government, business, and civil society levels.

Multilateral Level

  • Give high priority to multilateral organizations—such as the UN Security Council, UN operational agencies, the African Union, and African subregional bodies—as principal mechanisms for gaining Chinese support for U.S.-China-Africa collaborations in political and security spheres.

  • Encourage deeper engagement among China, the United States, and other international donors on the issues of development assistance, poverty alleviation programs, multilateral development banks lending, and African debt sustainability.

  • Encourage engagement of China at the G-8 summit in Germany in 2007, especially as it relates to the G-8’s priority focus in 2007 on African development.

  • Engage China to take part in the Extractive Industries Transparency Initiative (EITI).

  • China and its African partners, under the FOCAC umbrella, should establish a permanent secretariat or other high-level coordinating body to guide and implement their deepening partnership.

Bilateral Government-to-Government Relations

  • Accelerate the development of a more substantive agenda for U.S.-China cooperation in Africa, recognizing inherent limitations.

  • Increase ongoing bilateral consultations addressing immediate and emergent challenges, especially regarding developments in the Niger Delta and in the arc stretching from the coastal Horn of Africa and inland: Somalia, Ethiopia, Sudan, and Chad.

  • Ramp up military-to-military consultations regarding Africa between China and other key players, including the African Union, European countries, and the United States.

  • Intensify collaboration on health- and education-related issues in Africa.

Business, Economic, and Trade Activities

  • Expect increased Chinese interest in business partnerships.

  • Encourage Chinese public-private partnerships in Africa.

  • Seek trilateral ways to work with African authorities to assure that the massive increases in U.S. and Chinese development and trade assistance complement one another.

Civil Society and Nongovernmental Organizations

  • Facilitate interaction among Chinese, African, and international civil society organizations to meet on issues of common research interest, including observation of grass-roots elections, cooperative activities to support environmental protection or worker safety, and other civil society activity related to good governance, religious practice, community health, and rights of women and girls.

  • Facilitate interaction between U.S. and Chinese Africanists to deepen the level of Chinese scholarly understanding of contemporary Africa.

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