Wednesday, June 11, 2014

World Bank "Learning Event" on China-Africa

On May 20th I spoke at a World Bank event "China in the World Economy: New Partnerships in Africa." Some of the people speaking (and attending) have been following this topic for a few years now, and they had interesting things to say. Here are a few of them:

On debt sustainability, an official from the IMF confirmed: "The Chinese look at debt very differently [from the IMF]. It's a function of the project investment." He noted that the IMF Board has had "intense debate" on the debt limits policy (a post-HIPC innovation). "The debate has been heavily influenced by the way China has been approaching Africa. And that's all to the good."

A World Bank official working on the China-Africa relationship noted that the World Bank signed an MOU with China Eximbank in 2007, but nothing really resulted. Now, the World Bank has two new MOUs, one with China Eximbank signed in September 2013, and the other with China Development Bank, signed in June 2013. They may co-finance a project in South Sudan using World Bank standards [DB: we'll see about that, given the fighting there...].

An official from Kenya noted, "It's still early days" in this relationship, but "China is the most pragmatic development partner operating in Africa today." Someone related a story about Chinese pragmatism. A delegation from Tanzania went to Beijing with a list of vague ideas amounting to $10 bn. The Chinese looked at the list and said: "There are no bankable projects here."

Our panel had many of the same old questions about neo-colonialism, do Chinese import all their own workers, are they the largest investor, positive/negative influence, African opinion, and so on. An important point concerned procurement practices. Many Chinese companies are getting contracts on a no-bid basis. This tends to inflate costs. Competition is good. Transparency is good.

1 comment:

JP said...

I agree with the need for transparency etc but here are three reasons that highlight realities about Africa that make certain needs ideal, and much less a priority for most African leaders. First, there is a myriad of critical projects with yet very few companies capable of handling them. Indeed, Africa has very few African entities, if any, capable of financing, building and operating major infrastructure projects. So if you think that construction is a competitive sector in Africa, think again. On the top of that, these projects are often managed by poorly equipped administrations: the Tanzania case is classic, not enough people are actually trained to build solid business plans. Second, most construction materials need to be imported (remember, most industries seat in Asia/EU), reinforcing the need for international players, which in turn have financing conditions that can barely be met in frontier markets (unless the IMF and export credit agencies step in). These complex international arrangement require banks and experts and they do take lots of time. All these add to the final bill. Last but not least, politics make quick promises (to get elected) and therefore feel a certain pressure to deliver on iconic projects. No one will anyway argue against the pressant need for health centers, roads, dams, universities, housing etc. So yes, certain governments don't bother with tender processes anymore. All they want (governments and people) are companies which will get the job done. Too bad if that necessarily costs more! It is after all a basic market law..Price is where the demand meet the offer.