Posted by OromianEconomist in Uncategorized.
Tags: Africa, Africa and debt, African presidents‘ use China aid for patronage politics’, China, China and Africa, debt and development, Decolonizing Development
“Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralized by strategically important natural assets with high long-term value (even if they lack short-term commercial viability). Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa and the Middle East to Asia. In exchange for financing and building the infrastructure that poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports.”
Police in Sri Lanka use water cannon to disperse people protesting a government plan to grant a 99-year lease of Hambantota port to a Chinese company on Jan. 7. Nations caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty. | AP
This month, Sri Lanka, unable to pay the onerous debt to China it has accumulated, formally handed over its strategically located Hambantota port to the Asian giant. It was a major acquisition for China’s Belt and Road Initiative (BRI) — which President Xi Jinping calls the “project of the century” — and proof of just how effective China’s debt-trap diplomacy can be.
Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralized by strategically important natural assets with high long-term value (even if they lack short-term commercial viability). Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa and the Middle East to Asia. In exchange for financing and building the infrastructure that poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports.
Moreover, as Sri Lanka’s experience starkly illustrates, Chinese financing can shackle its “partner” countries. Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, much less environmental or social impact assessments. As U.S. Secretary of State Rex Tillerson put it recently, with the BRI China is aiming to define “its own rules and norms.”
To strengthen its position further, China has encouraged its companies to bid for outright purchase of strategic ports where possible. The Mediterranean port of Piraeus, which a Chinese firm acquired for $436 million from cash-strapped Greece last year, will serve as the BRI’s “dragon head” in Europe.
By wielding its financial clout in this manner, China seeks to kill two birds with one stone.
First, it wants to address overcapacity at home by boosting exports. Second, it hopes to advance its strategic interests, including expanding its diplomatic influence, securing natural resources, promoting the international use of its currency and gaining a relative advantage over other powers.
China’s predatory approach — and its gloating over securing Hambantota — is ironic, to say the least. In its relationships with smaller countries like Sri Lanka, China is replicating the practices used against it in the European-colonial period, which began with the 1839-1860 Opium Wars and ended with the 1949 communist takeover — a period that China bitterly refers to as its “century of humiliation.”
China portrayed the 1997 restoration of its sovereignty over Hong Kong, following more than a century of British administration, as righting a historic injustice. Yet, as Hambantota shows, China is now establishing its own Hong Kong-style neocolonial arrangements. Apparently Xi’s promise of the “great rejuvenation of the Chinese nation” is inextricable from the erosion of smaller states’ sovereignty.
Just as European imperial powers employed gunboat diplomacy to open new markets and colonial outposts, China uses sovereign debt to bend other states to its will, without having to fire a single shot. Like the opium the British exported to China, the easy loans China offers are addictive. And, because China chooses its projects according to their long-term strategic value, they may yield short-term returns that are insufficient for countries to repay their debts. This gives China added leverage, which it can use, say, to force borrowers to swap debt for equity, thereby expanding China’s global footprint by trapping a growing number of countries in debt servitude.
Even the terms of the 99-year Hambantota port lease echo those used to force China to lease its own ports to Western colonial powers. Britain leased the New Territories from China for 99 years in 1898, causing Hong Kong’s landmass to expand by 90 percent. Yet the 99-year term was fixed merely to help China’s ethnic-Manchu Qing Dynasty save face; the reality was that all acquisitions were believed to be permanent.
Now, China is applying the imperial 99-year lease concept in distant lands. China’s lease agreement over Hambantota, concluded this summer, included a promise that China would shave $1.1 billion off Sri Lanka’s debt. In 2015, a Chinese firm took out a 99-year lease on Australia’s deep-water port of Darwin — home to more than 1,000 U.S. Marines — for $388 million.
Similarly, after lending billions of dollars to heavily indebted Djibouti, China established its first overseas military base this year in that tiny but strategic state, just a few kilometers from a U.S. naval base — the only permanent American military facility in Africa. Trapped in a debt crisis, Djibouti had no choice but to lease land to China for $20 million per year. China has also used its leverage over Turkmenistan to secure natural gas by pipeline largely on Chinese terms.
Several other countries, from Argentina to Namibia to Laos, have been ensnared in a Chinese debt trap, forcing them to confront agonizing choices in order to stave off default. Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa — the gateway to East Africa — into another Hambantota.
These experiences should serve as a warning that the BRI is essentially an imperial project that aims to bring to fruition the mythical Middle Kingdom. States caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty. The new imperial giant’s velvet glove cloaks an iron fist — one with the strength to squeeze the vitality out of smaller countries.
Brahma Chellaney, a professor of strategic studies at the New Delhi-based Center for Policy Research and a fellow at the Robert Bosch Academy in Berlin, is the author of nine books, including “Asian Juggernaut,” “Water: Asia’s New Battleground,” and “Water, Peace, and War: Confronting the Global Water Crisis.” © Project Syndicate, 2017
Related article from Financial Times:
Beijing’s plans for Africa do not stop there. President Xi Jinping is keen for China to serve as an economic and political model for the developing world. He hopes that China’s infrastructure finance and manufacturing investment in Africa will spur industrialisation and development. But to be productive and contribute to economic development, infrastructure needs to be high-quality and high-performing. And the evidence shows that China’s infrastructure-driven economic model has been far from efficient and is one to avoid rather than emulate. Over half of China’s infrastructure projects are under-performing, damaging rather than fuelling growth and leaving an enormous debt burden for the domestic economy.
Posted by OromianEconomist in Africa, Africa Rising, African Poor, Aid to Africa, Development & Change, Economics: Development Theory and Policy applications, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Afar, Ogaden, Sidama, Southern Ethiopia and the Omo Valley, The extents and dimensions of poverty in Ethiopia, UK Aid Should Respect Rights, UN's New Sustainable Development Goals, Youth Unemployment.
Tags: Africa, African presidents‘ use China aid for patronage politics’, African Studies, Aid Industry, Development and Change, Economic development, International Development Aid
They tell us that poverty has been cut in half in the last fifteen years or so, but independent watchdogs have repeatedly shown that this claim rests on statistical sleight-of-hand. Moreover, it relies on a poverty line of $1.25 a day, which no longer has any credibility. A more realistic line of $2.50 – the absolute minimum for achieving normal human life expectancy – shows that 3.1bn people remain in poverty today, which is 352m more people than in 1981, according to a 2008 study. And all the while, the wealth ratio between the richest and poorest countries has grown from 44:1 in 1973 to nearly 80:1 today (according to my estimation). The richest 85 people in the world (Mr Gates being one of them) now have more wealth than the poorest 3.5 billion, or half the world’s population. The aid project is failing because it misses the point about poverty. It assumes that poverty is a natural phenomenon, disconnected from the rich world, and that poor people and countries just need a little bit of charity to help them out. People are smarter than that. They know that poverty is a feature of the global economic system that it is very often caused by people, including some of the people who run or profit from the aid agenda. People have become increasingly aware – particularly since the 2008 crash – that poverty is created by rules that rig the economy in the interests of the rich. – http://www.aljazeera.com/indepth/opinion/2014/11/death-international-developmen-2014111991426652285.html
The death of international development
The development industry needs an overhaul of strategy, not a change of language.
By Jason Hickel*
International development is dying; people just don’t buy it anymore. The West has been engaged in the project for more than six decades now, but the number of poor people in the world is growing, not shrinking, and inequality between rich and poor continues to widen instead of narrow. People know this, and they are abandoning the official story of development in droves. They no longer believe that foreign aid is some kind of silver bullet, that donating to charities will solve anything, or that Bono and Bill Gates can save the world.
This crisis of confidence has become so acute that the development community is scrambling to respond. The Gates Foundation recently spearheaded a process called the Narrative Project with some of the world’s biggest NGOs – Oxfam, Save the Children, One, etc. – in a last-ditch attempt to turn the tide of defection. They commissioned research to figure out what people thought about development, and their findings revealed a sea change in public attitudes. People are no longer moved by depictions of the poor as pitiable, voiceless “others” who need to be rescued by heroic white people – a racist narrative that has lost all its former currency; rather, they have come to see poverty as a matter of injustice.
These findings clearly demonstrate that people are beginning to reject the aid-centric approach to development. But instead of taking this as an opportunity to face up to their failures and change the way the industry works, the Gates Foundation and its partner NGOs have decided to stick with business as usual – but to cloak it with fresh language.
Leaked internal documents make it clear that the Narrative Project is nothing more than a PR campaign – a bid to “change public attitudes” by rolling out fresh language that will be more effective at securing public support and donations. The strategy goes like this: Talk about the poor as “equals” who share our values; emphasise that development is a “partnership”; stop casting rich people and celebrities as saviours of the poor; and above all, play up the idea of “self-reliance” and “independence”, with special attention to empowering women and girls. Progressive Westerners love this stuff.
This new framing amounts to little more than a propaganda strategy. Instead of changing their actual approach to development, the Narrative Project just wants to make people think they’re changing it. In the end, the existing aid paradigm remains intact, and the real problems remain unaddressed.
A failing project
Why do people no longer believe in the charity and aid-centric model of development? According to the Narrative Project, it’s because they’re all a bit stupid. They let their personal beliefs override the “facts”. They’re “old” and “conservative”. And they’re too calloused to care about social causes. It doesn’t occur to the development industry that people might have good reasons for their scepticism. And there are many.
For one, the aid project
is in fact failing. There have been some achievements, to be sure, but the Gates Foundation and official sources like the UN want the public to believe that these piecemeal gains are tantamount to overall success. They tell us that poverty has been cut in half in the last fifteen years or so, but independent watchdogs have repeatedly shown that this claim rests on statistical
sleight-of-hand. Moreover, it relies on a poverty line of $1.25 a day, which
no longer has any credibility. A more realistic line of $2.50 – the absolute
minimum for achieving normal human life expectancy – shows that 3.1bn people remain in poverty today, which is
352m more people than in 1981, according to a 2008 study.
And all the while, the wealth ratio between the richest and poorest countries has grown from 44:1 in 1973 to nearly 80:1 today (according to my estimation). The richest 85 people in the world (Mr Gates being one of them) now have more wealth than the poorest 3.5 billion, or half the world’s population.
The aid project is failing because it misses the point about poverty. It assumes that poverty is a natural phenomenon, disconnected from the rich world, and that poor people and countries just need a little bit of charity to help them out. People are smarter than that. They know that poverty is a feature of the global economic system that it is very often caused by people, including some of the people who run or profit from the aid agenda. People have become increasingly aware – particularly since the 2008 crash – that poverty is created by rules that rig the economy in the interests of the rich.
A system of plunder
We can trace this rigging process through history. The programmes that global South countries used successfully to build their economies and reduce poverty after the end of colonialism – trade tariffs, subsidies, social spending on healthcare and education – were in many cases actively destroyed by Western intervention in the name of “development”. Western-backed coups in Iran in 1953, Guatemala in 1954, Congo in 1961, Brazil in 1964, Indonesia in 1965, Chile in 1973 – to name just a few – deposed democratically elected leaders with pro-poor platforms to install dictators friendly to multinational corporations. Most of these dictators received billions of dollars in “aid” from Western governments.
When coups fell out of favour with the voting public, the World Bank and the IMF stepped in instead. They leveraged debts to impose crushing “structural adjustment” programmes on poor countries, forcing them to privatise public assets, open their markets to Western goods, cut social spending and reduce wages, and give foreign companies access to extra cheap labour and raw materials. Structural adjustment was one of the greatest single causes of poverty in the global South in the 20th century, and it continues to this day under the guise of “austerity” .
These destructive policies only persist because voting power in the World Bank and the IMF is controlled by rich countries. High-income countries control more than 60 percent of the voting power at the World Bank, but are home to less than 15 percent of the world’s population.
Right now, developing countries lose as much as $900bn each year to tax evasion by multinational companies through trade mispricing, and almost the same sum again through transfer pricing. They lose another $600bn each year in debt service to mostly firslt world banks. These losses alone amount to nearly 20 times more than the total flow of aid, which is a paltry $135bn – and that’s not counting land grabs and other forms of resource theft.
All of this makes it clear that poverty is not a natural condition. It is a state of plunder. It is delusional to believe that charity and aid are meaningful solutions to this kind of problem.
Some people in the NGO community know this all too well, and they are calling for genuine political change: The democratisation of the World Bank and the IMF, fairer trade rules, and an end to tax evasion. But because the leadership at the Gates Foundation and some NGOs find these issues inconvenient such alternative voices are being side-lined in favour of a disingenuous attempt to “fix” public attitudes by pushing ever harder on the same old charity and aid story.
If the Gates Foundation and NGO leadership want to get serious about tackling poverty, they might start by talking to the public about the importance of releasing developing countries from the siphons of rich countries and their corporations. They might help put the final nails in the coffin of the paternalistic story of charity and aid, white saviours and poor brown victims, and tell the real story about how the rich get richer off the backs of the poor. That would be a true starting point for development in the 21st century.
*Dr Jason Hickel lectures at the London School of Economics and serves as an adviser to /The Rules.
Martin Kirk, Global Campaigns Director of /The Rules, contributed to the analysis for this article.
Read more @ http://www.aljazeera.com/indepth/opinion/2014/11/death-international-developmen-2014111991426652285.html
African presidents ‘use China aid for patronage politics’
Most of the $80bn of development funds sent to Africa went to areas where national leaders were born rather than the most needy, says AidData report
http://www.theguardian.com/global-development/2014/nov/19/african-presidents-china-aid-patronage-politics
African leaders are almost three times more likely to spend Chinese development aid in areas where they have ethnic ties, casting doubt on the humanitarian effectiveness of Beijing’s strict “hands-off” policy in the continent.
China says it spends more than half of its foreign aid in 51 African countries, and AidData, an open-source data centre, says Beijing sent more than $80bn in “pledged, initiated, and completed projects” between 2000 and 2012. Most of that aid went to areas where national leaders were born, indicating a strong political bias, AidData said.
“As soon as [a region] becomes the birthplace of an African president this region gets 270% more development assistance (from China) than it would get if it were not the birth region of the president,” said Roland Hodler, professor of economics at the University of St Gallen in Switzerland and co-author of a report, Aid on Demand: African Leaders and the Geography of China’s Foreign Assistance, published in conjunction with the database.
Ghana, the Democratic Republic of the Congo and Ethiopia received the most Chinese development assistance over the reporting period, the study showed.
China is sending development funds to African governments with the aim of buying long-term political alliances, Hodler said. Sierra Leone’s president, Ernest Bai Koroma, recently used Chinese aid to build a school in Yoni, his hometown, according to the report.
“To us, this suggests that the Chinese principle of non-interference in domestic affairs allows African presidents to use Chinese aid for patronage politics. I am sure the Chinese are aware of this, and I would argue that they accept it because they care more about having a president who is sympathetic to them than about the poor,” said Hodler.
But the study also noted that, contrary to popular belief, Chinese aid to Africa is not strongly tied to countries that host Beijing’s oil and mining operations. “We do not find a strong pattern that Chinese aid only goes to regions where there’s a lot of natural resources. The picture that they only go after natural resources is not really confirmed by our sub-national level analysis,” Hodler said.
Deborah Brautigam, director of the China Africa Research Initiative at John Hopkins University, said: “Most Chinese finance in Africa is not official aid, but business-related export credits borrowed by governments to finance infrastructure projects of various kinds. If these governments want to channel projects to their home town, Chinese banks would have no objection.
“For official aid, which is heavily diplomatic, the Chinese government looks beyond any sitting African leader to all the leaders to come, and to public opinion more generally. This is why they use their official aid for big, visible projects like stadiums, ministry buildings, and airports that can be seen and used by many people – in the capital city – and not tucked away in a rural hamlet.”
Researchers took data that China published on its foreign assistance and mapped where development projects were located. “The Chinese tend to send more aid to countries that are somewhat poorer but within these countries they go for the relatively rich regions,” said Hodler.
China maintains that it sends aid to African governments with the aim of furthering their development agendas.
The Chinese government said in July: “When providing foreign assistance, China adheres to the principles of not imposing any political conditions, not interfering in the internal affairs of the recipient countries and fully respecting their right to independently choosing their own paths and models of development. The basic principles China upholds in providing foreign assistance are mutual respect, equality, keeping promise[s], mutual benefits and win-win.”
• This article was amended on 21 November 2014 to clarify that the $80bn figure for aid to Africa between 2000 and 2012 was an estimate by AidData, not an official Chinese government figure, and that the estimate includes “pledged, initiated, and completed projects”.
Read more @ http://www.theguardian.com/global-development/2014/nov/19/african-presidents-china-aid-patronage-politics
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