Transcript The issues of Chinese Aid to Africa – Jean Raphaël Chaponniere

CUTS – FICCI Conference
Global Partnership for Development
« Where do we stand and where to go ? »
The issues of Chinese Aid to
Africa
Delhi August 13, 20082
Jean Raphaël Chaponniere
Agence Française de Développement
Asian Department
A broader perspective
• While economist
•
discuss on the issue
of « decoupling »
between US and
emerging economies
The « coupling »
between Asia and
Africa intensifies
• Bilateral trade in US billions with
Africa (North Africa incl)
60
US billions
50
40
China Africa
30
20
India Africa
Japan Africa
10
0
2000
2006
China and Africa
Bilateral Trade
60
10%
US Billions
50
Chinese exports
40
Africa’share of Chinese and
World Trade
Chinese Imports
9%
China Africa % China
8%
Africa % World trade
7%
China % World Trade
6%
30
5%
4%
20
3%
10
2%
1%
1995 1997 1999 2001 2003 2005 2007
0%
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
The growth of China Africa trade halted the marginalisation of Africa in
world trade. African share of Chinese trade is now larger than in the
An emerging donor ?
• Chinese aid began in the
•
late 1950’s (Egypt,
Algeria) and accelerated
after Chou En Lai visit in
Africa in the 1960’s.
Large scale projects such
as Tanzam built between
1973 and 1976 (US $400
millions) have been the
exception as Chinese aid
financed small projects as
well as technical and
medical assistance.
Number of cooperation
agreements between
China and African
states
30
25
20
15
10
5
0
1950s
1960s
1970s
1980s
1990s
A minor or major donor ?
• The lack of statistics leads
•
•
either to inflate or to under
estimate Chinese Aid to Africa.
Various estimates conclude
that China is not yet a major
donor in Africa.
While OECD countries may not
meet their Gleenagles
objective, China will probably
double its aid by 2009 and will
be a major donor in Africa
during the next decade
Esimates of Chine Aid to Africa in
US$ Billions in 2006
Competition or complementarity ?
Aid to infrastructures in dollars and
% of OECD’s ODA to Africa
While the lack of infrastructure is one
of the critical constraint to African
development, OECD’aid shied away
from infrastructure projects.
Among the reasons there is the CAD’s
Helsinki Arrangement that forbad
interest rate subsidies to
commercially viable projects. As the
private sector did not engage in
those projects, this “market failure”
opened the way to Chinese ODA.
45%
40%
35%
30%
25%
% of ODA
$ million
amount (r-h scale)
%
2000
1800
1600
1400
1200
1000
20%
15%
800
600
10%
400
5%
200
0%
0
1973 1977 1981 1985 1989 1993 1997 2001 2005
In current dollars, OECD aid to
infrastructures in Africa is equal to its level
in the 1970’s
Is China a free Rider ?
• The Heavliy Indebted Poor
Countries initiative (HIPC) has
reduced African external debt to
GDP ratio to 35%. To avoid a
new debt crisis, OECD countries
agreed to respect a debt
sustainibility framework and
monitor new credits.
If China does not cooperate to this
scheme, this collective effort
may not be effective. This could
eventualy lead to a new debt
crisis
• Sub saharan African debt (%
of GDP and exports)
100%
300%
90%
Debt GDP
80%
Debt /export
70%
250%
200%
60%
50%
150%
40%
30%
20%
100%
50%
10%
0%
0%
1970 1975 1980 1985 1990 1995 2000 2005
The issue of tied aid
Chinese firms based in Africa won half of
the market for major civil engineering
projects. Their competitiveness is
explained by :
– (i) their extensive presence in
Africa that reduces their cost
– (ii) good financial conditions
– (iii) and, not systematically, the
use of Chinese labour.
Chinese aid is tied as it finances Chinese
(as well as foreign subsidiaries)
exports.
• The fact that Chinese firms won
contracts financed by bilateral donors
while Chinese aid is tied, has led to
discuss the relevance of untied aid in
OECD countries.
Knowing the competitiveness of
Chinese contractors, the
untying of Chinese aid and
the use of international calls
for tender by China would
probably have little impact on
Chinese firms.
• However, China may be
reluctant to untie her aid as
open tender may create
transparency problem within
China.
The issue of aid effectiveness
: different definition
• Chinese claim that their aid is more
effective than OECD’s as their projects cost
less and their implementation is shorter (no
conditionality). They sometimes
acknowledge that their projects meet with
problems once the Chinese experts leave.
• Among the criteria used by OECD to assess
Aid effectiveness there is its appropriation
by the host country.
Conclusion : Divergence or
Convergence ?
• Chinese aid is considered as an alternative to
•
OECD’s aid which is critized as having too many
conditionalities (Beijing consensus vs Washington
consensus ).
As China is now financing large projects, Chinese
may have to change their view on effectiveness.
This may lead to some convergence with
established donors that could take into account the
Social and Environmental Responsablility.
OECD donors have started to negociate with the
Chinese ExIm Bank. Cooperation with China in
Africa could lead to an effective Trilateral
Cooperation.