New donors (China), new finance, new ideas? implications for governance and development

Maputo Residential School on Governance and Development

CARLOS OYADevelopment Studies, SOAS, University of London

Email: co2@soas.ac.uk

Maputo, 6 April 2011

Some preliminary considerations on the China-Africa complex

• ‘Chinafrique’ represents a complex set of vectors (processes, linkages and relations)– For instance: trade, investment, aid, migration

• Many of these elements linked in various forms of ‘bundling’ but not always

• Data problems: a lot published material but scarce evidence – problem of comparing ‘apples and lychees’ (Brautigam)

Literature on China in Africa: a preliminary assessment

• Significant amount of junk: biased, anecdotal, methodologically flawed, naïve ‘China bashing’

• Good news: some serious scholarship emerging Brautigam, CCS-Stellenbosch, SOAS (Large, Corkin), Mohan-Power, etc.

• Bad news: still early days to assess ‘impact’ of a complicated process with multiple facets, lack of comparative analysis, still room for speculation

Some antidotes against poisonous ideas…

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http://www.chinaafricarealstory.com

Review of African Political Economy articles recently

And some emerging empirically-grounded research

Understanding context and conditions: China

• Externalization of Chinese system of accumulation – ‘go out’

• Resource and energy security – long-term viability of Chinese development model

• Foreign exchange reserve accumulation use of reserves move away from risky financial assets and more into ‘real’ assets strategically designed to support China’s growth path

• Rhetoric and reality of historical links with Africa and the ‘South’ – diplomatic and strategic alliances

Accumulation of international foreign exchange reserves (US$ million)

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Brazil

China

India

In Africa... Growing discontent with ‘tradition’ aid system: some responses

• Changes in global aid architecture (Paris and Accra declarations and beyond) – unlikely in medium term / too many unfulfilled promises

• Breakdown of OECD policy consensus – contingently possible at country level

• Effective use of rents: ‘resource’ (Angola), ‘geo-political’ (Ethiopia) or ‘demonstration’ rents (Mozambique)

• ‘Emerging’ donors (mainly China, India and Brazil) and competition ‘revival of triangulation’ (Large) and increasing leverage for recipient countries?

Some hypotheses about implications of Chinese aid to Africa for the political economy of aid

• Hypothesis 1: More policy space and bargaining power for African governments if additional aid reduces dependence on ‘Anglo-American’ like-minded donor bloc

• Hypothesis 2: Following China’s example - for technical cooperation at level of long-term strategic planning etc.

– learning from concrete lessons of Chinese experience? More suitable/relevant technical assistance? Alternative view in the political economy of development?

Some hypotheses about implications of Chinese aid to Africa for the political economy of aid

• Hypothesis 3: financing necessary development of infrastructure that is neglected in current Western aid agenda – renewed focus on economic infrastructure

• Hypothesis 4: Good governance agenda to be neglected China’s reputation around its alleged support to ‘rogue’ states (e.g. Sudan, Zimbabwe, Chad): a threat to good governance ‘achievements’?

Yes, impressive growth…

Source: Brautigam (2009, p. 170)

Put all that in perspective:the relative magnitude of Chinese aid to SSA

US$ million - commitments

Source: own elaboration from DAC database and Brautigam (2009)

Chinese aid: $1.4bn in 2007; $1.8bn in 2008 and perhaps $2.5bn in 2009 (Brautigam)

Putting China’s aid magnitude in perspective

• Also note that relative importance of Africa for China’s go out strategy may be smaller than assumed (in terms of both FDI and aid)

• NB: US$20bn credit line to Venezuela in 2010

• Investments in OECD countries through M&A, financial assets and purchase of equity

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Hypotheses 1 and 2: A Beijing policy consensus for Africa?

• Importance of capital accumulation• Economic nationalism• Large-scale infrastructure: ‘to end poverty build a road’• Coordination governance capabilities and centralisation• Experimentation (no single recipe)• Focus on (rural) industrialization and manufacturing skills• Careful management of foreign capital and competition• The economic, political and social challenges of growing inequality

• BUT… China’s ambivalence towards promoting any development model: (a) no interference in policymaking; (b) ‘uniqueness’ of Chinese development path; (c) but belief in alternatives to hegemonic neoliberalism

Hypothesis 4: A threat to ‘good governance’?

• What governance? Short-term moralistic/fiduciary vs long-term development concerns

• Empirical proof: One would have to empirically show that any ‘progress’ made on GG in Africa before China’s rise has been ‘reversed

• Double standards: ‘good governance’ record for OECD donors Ethiopia, Rwanda, Senegal, Uganda, Mozambique, etc. – aid-governance nexus is murky and open to manipulation

• And note:– China, albeit unevenly, works in 43 SSA countries and is gradually

moving away from old alliances (Zimbabwe) and assuming new mediating roles (Sudan)

– Forms of aid ‘in kind’ (Chinese aid ‘packages’) reduce options for theft/diversion of funds (little or no funds are actually transferred)

So, can ‘emerging’ donors (China) make the difference?

1. Volume matters

2. Co-optation by DAC blocs avoided? Not all emerging donors similar (eg Brazil)

3. Active promotion of ‘alternative’ economic policies?

4. Perception of increasing bargaining power matters for agency

5. Much depends on how African governments:– use their bargaining power to strike better deals with China and– they use potential policy space (and added infrastructures) to induce changes in DAC donors’ practice

Some examples

• Senegal: China not so important but access to Arab funding opening space for Wade’s regime to pursue its large infrastructure projects while main economic policies remain unchanged

• Angola: policy space achieved and used before China’s rise through private finance

• Ethiopia: Success in playing off donors and using geopolitical rent to attract US aid while engaging China at various levels