Wednesday, December 22, 2010

Moises Naim and the $9 Billion Dollar Myth

Moises Naim (photo: le livre noir de l'economie)
This week in an Indian opinion piece on India-China rivalry, I read yet another reference to a myth first circulated (I think) by Moises Naim, editor of Foreign Policy, and then picked up by Fareed Zakaria. Here's how the story was told today:
"In his book The Post-American World, Fareed Zakaria quotes Moises Naim, editor of Foreign Policy magazine, telling a story about the Nigerian Government negotiating a $5 million loan for train systems with the World Bank in 2007. The bank had insisted that the Government clean up the notoriously corrupt railway bureaucracy before it approved the loan. The deal was almost done when the Chinese stepped in and offered the Government a whopping $9 billion loan to rebuild the entire train system — with no democratic and human rights strings attached. The World Bank was sent home within days!  This is how China works."
This is a great story. The only problem is (as I point out in The Dragon's Gift):  it never happened.

I don't mean to impugn Moises Naim's veracity. No doubt someone from the World Bank did tell him this tall tale. But because he seems to have liked the story, he never checked the facts. In fact, this is not how China works, and repeating this fictional story only helps cloud our understanding of Chinese engagement in resource-rich countries in Africa.

What really happened -- as just a little research would have revealed -- was this:  a Chinese company (CCECC) won an $8.3 billion contract to rebuild the Lagos-Kano railway. The Chinese government had offered a line of export credit for $2 billion at a competitive commercial rate, and a preferential export credit for $500 million. The Nigerian government discussed a number of projects that might have benefited from these tied credits, not just the railway. At the end of the day (as Nigerians are fond of saying), the $2 billion credit was never used and expired. The railway contract was suspended, and the $500 million preferential credit was renewed, and is likely being used today to fund a much smaller railway project. More on this

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