New friends, old friends? World Bank and Africa when the Chinese

New friends, old friends?
World Bank and Africa when the
Chinese are coming
dr Dominik Kopiński
University of Wrocław
Polish Center for African Studies
What is my motivation?
What are my reservations?
World Bank vs. China/Chinese policy banks
What is my motivation? 1/2
• China Development Bank and China Export-Import Bank
signed loans of at least $110bn to other developing country
governments and companies in 2009 and 2010. The World
Bank made loan commitments of $100.3bn from mid-2008
to mid-2010
– Financial Times Research Team
• China Export-Import Bank extended $12.5 billion more in
loans to sub-Saharan Africa in the past decade than the
World Bank. EXIM bank lent about $67.2 billion to the
world’s poorest region between 2001 and 2010 compared
with the World Bank’s $54.7 billion
- Fitch Rating
What is my motivation? 2/2
• Finance: China is countering the financial power
of the World Bank and challenges its position as a
preferred creditor in Africa
• Knowledge: Chinese financial leverage in Africa is
undermining credibility of the World Bank’s
advice and expertise
• Ideology: China is undercutting policy reforms
and development strategies prescribed by the
World Bank (good governance, human rights,
environmental sustainability); „Beijing
Consensus” vs. „Washington Consensus”?
What are my reservations?
• Comparing the World Bank with Chinese policy banks
(EXIM Bank and China Development Bank) is a bit like
counting „apples and lychees” (D. Brautigam)
• What volume of financial flows/aid from China we are
actually talking about? How many lychees?
• Even if figures are correct (apples are lychees?!) – does
it really matter for development/poverty reduction?
Programme vs. project support
• World Bank uses both modalities - programmes
(development policy lending) and projects
(investment loans)
• China does not sponsor programmes or budget
support or balance of payment support and offer
only project-type of aid
• Projects are easier to implement, especially in
countries lacking good governence
• … but projects are falling out of grace in the aid
community because of the aid prolifaration
problem (too many projects, duplication, lack of
coordination, blame-sharing)
Investing in infrastructure
• Desperate state of African infrastructure (see the
last report by WB Africa’s Infrastructure. A Time for
• World Bank and other Western-driven aid agencies
have long ago moved to financing “soft”
• China chooses to finance „hard” development (not
so original by the way – e.g. World Bank in 1950s
and 60s)
• Example: infrastructure is the core of China Exim
Bank’s concessional lending - approximately 80
percent of projects approved have involved
infrastructural development
No strings attached vs. conditionality
and ownership
• Non-interference principle: China does not interfere in
domestic affairs and responds to needs articulated by
recipient governments
• Quite ironically, China may be a champion of
ownership principle (?) enshrined in the Paris
Declaration, which states that aid recipients forge their
own national development strategies with their
parliaments and electorates (although, China does not
believe in cash aid)
• China: a demand-driven approach, whereas in Bank…
both (supply and demand interplay with different
• World Bank: PRSP (Poverty Reduction Strategy Papers)
and country ownership; World Bank as a vintriloquist
Fast-tack implementation, lack of
Issue of corruption
• China's ties with Africa have been a magnet for critics
worried about corruption
• However, most of Chinese aid/loans seems to be
corruption-neutral. Why?
• With projects financed by China (policy banks) usually
recipient government does not even see the money
(there are exceptions though) + grants are „in kind”
• World Bank usually issues aid funds to bank accounts
controlled by the government
• „Donors are still giving on agarage of 68 percent of
their aid to countries ranked at the bottom of the
corruption scale”
• The picture is more murky with Chinese companies;
Chinese saying: „if the water is too clear,you don’t
catch any fish”, corruption in bidding for tenders
Structure of Concessional Loans by
China EXIM Bank
Signing agreement
Submitting an application to
China EXIM Bank
Signing a project
loan agreement
with the EXIM
Submitting the
invoice and
Submitting a drawing
application, invoice
and progress report
M. Davies, How China is influencing Africa’s development, Background Paper for the Perspectives on Global Development 2010
Shifting Wealth, OECD, Paris, April 2010
• China has been challenging the World Bank
position as a preferred creditor in Africa
(finacially, ideologically and knowledge-wise)
• Cooperation?
– Memorandum of Understanding signed between the
World Bank and China EXIM Bank in 2007
• Competition?
– The World Bank in 2011 launched a new instrument
called Programme-for-Results Lending which would
allow countries to sidestep “dozens of tough, and
expensive, social and environmental safeguards which
recipients of World Bank loans must normally meet”.
Cooperation or competition?
Thank you!