Friday, April 13, 2012

Whatever Happened to the Chinese special economic zone in Algeria?

Jiangling Motors SUV ... but probably not in Algeria
En route home from speaking in Chapel Hill, I learned a bit more about one of the failed Chinese efforts to establish an overseas economic zone (in Algeria) in a new paper written by Chris Alden and Faten Aggad-Clerx for the African Development Bank.
(p. 10) "... in 2008 China and Algeria entered into an agreement to establish a second Chinese Special Economic Zone in North Africa, the Jiangling Economic and Trade Cooperation Zone, which was to be hosted in Mostaganem (western Algeria) with the focus on assembling cars. The agreement involved the Chinese Jiangling Motors Cooperation and Jiangxi Coal Corporation Group and their Algerian partner, Groupe Mazouz. The activities of the Jiangling Zone were expected to assemble 50000 units in the five years that would follow. The deal was welcomed as Algeria seeks to revive its automobile sector, which collapsed in the 1990s."
Tang Xiaoyang and I found that the Algerian zone was cancelled after Algeria changed its laws on foreign investment to require Algerian ownership of at least 51% of a project. But this paper adds some new details and theories:
(p. 10) "Others have argued that the decision was influenced by ongoing negotiations between the Algerian government and the French car manufacturer, Renault, for the establishment of the Renault car-assembling factory in Algeria. Renault was said to be concerned that it would face  stiff competition from Chinese car manufacturers if they were to also produce in Algeria. (Renault eventually withdrew its offer and opened a factory in neighbouring Morocco). Subsequent interviews with Groupe Mazouz also indicated a concern over the quality of Chinese products given the high demands of the Algerian consumer and their attraction to anything produced by the West. Furthermore, as noted above, the Chinese companies and their Algerian partners have been involved in fraud cases further damaging the reputation of Chinese companies."
Another case perhaps of reputational risks sliding across sectors and companies.

It's good to see Chris Alden return to the China-Africa research field. A hat tip to Hayley Hermann via Yoon Park.

2 comments:

  1. Great to hear that Chinese investment flows to Algeria finally receive more attention. Despite the fact that Algeria has been one of the top 3 destinations of Chinese FDI to Africa since 2005, the country is missing in almost all studies on China-Africa relations. I am currently doing research about exactly this topic: what were the main reasons for not realising this Chinese economic zone in Algeria and what does this say about the negotiation position of the Algerian government and the motives of Chinese investors for investing in Algeria? Thanks for drawing the attention to Algeria!

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  2. I am very much looking forward to Sanne van der Lugt's research and wish her the best in her fieldwork in Algeria. Sanne, it would be great if you could also include the infrastructure projects. I would be interested to know CITIC's position on why they haven't paid their workers. I would guess it might be delays in their payments from the Algerian government, but the IADB paper didn't mention this.

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