Emerging donors (China), new finance, new ideas?
Implications for governance and development
Addis Ababa Residential School on Governance and Development
CARLOS OYA
Development Studies, SOAS, University of London
Email: co2@soas.ac.uk
Addis Ababa, 28 March 2012
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Some preliminary considerations on
the China-Africa complex
• ‘Chinafrique’ represents a complex set of vectors
(processes, linkages and relations)
– Essentially: 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)
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Literature on China in Africa:
a preliminary assessment
• Significant amount of junk until fairly recently:
biased, anecdotal, methodologically flawed,
naïve  ‘China bashing’
• Good news: some serious scholarship emerging
 Brautigam, CCS-Stellenbosch, SOAS (Large,
Corkin), Mohan-Power, many PhDs, etc.
• Bad news: still early days to assess ‘impact’ of a
complicated process with multiple facets, lack
of comparative analysis, still room for
speculation
3
Some antidotes against poisonous ideas…
http://www.chinaafricarealstory.com
Review of African Political Economy
China Quarterly
articles since 2008
And some emerging empiricallygrounded research
4
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
5
Accumulation of international foreign exchange reserves (US$ million)
2,500,000
Brazil
China
India
2,000,000
1,500,000
1,000,000
500,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
6
In Africa... Growing discontent with ‘traditional’
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), ‘geopolitical’ (Ethiopia) or ‘demonstration’ rents
(Mozambique)
• ‘Emerging’ donors (mainly China, India and Brazil)
and competition  ‘revival of triangulation’ (Large)
and increasing leverage for recipient countries? 7
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’ likeminded donor bloc
• Hypothesis 2: Following China’s example –
potential of technical cooperation at level of longterm strategic planning etc.
– learning from concrete lessons of Chinese experience?
More suitable/relevant technical assistance? Alternative
view in the political economy of development?
8
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’?
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Yes, impressive growth…
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Source: Brautigam (2009, p. 170)
Put all that in perspective:
the relative magnitude of Chinese aid to SSA
US$ million - commitments
30,000
25,000
20,000
DAC donors, total
Multilateral
China
15,000
10,000
5,000
2007
2008
Chinese aid: $1.4bn in 2007; $1.8bn in 2008 and perhaps $2.5bn in 2009 (Brautigam)
Source: own elaboration from DAC database and Brautigam (2009)
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12
Zimmermann and Smith 2011
Information from recent China ‘white
paper’ on aid
“Financial resources provided by China for foreign aid mainly fall into
three types: grants (aid gratis), interest-free loans and concessional
loans. The first two come from China’s state finances, while
concessional loans are provided by the Export-Import Bank of China as
designated by the Chinese government. By the end of 2009, China had
provided a total of 256.29 billion yuan (around US$40 bn in total) in aid
to foreign countries since 1950, including 106.2 billion yuan in grants,
76.54 billion yuan in interest-free loans and 73.55 billion yuan in
concessional loans.”
http://www.scio.gov.cn/zxbd/wz/201104/t896900_2.htm
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Complex architecture
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Certainly not all about aid (especially if
accurately defined) ...
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Putting China’s aid/investment magnitude in
perspective
• So, note that relative importance of Africa for China’s
go out strategy (in terms of both FDI and aid)
• Questions about the sustainability /contingency of
China’s surge in Africa (check Chinese internal
economic and political dynamics)
• China not the only significant non-DAC donor:
consider Arab agencies and other ‘Southern’ donors
(Brazil, India, Venezuela...)
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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
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However, negotiating capital may be
enhanced by emerging donors (China etc.)
• No policy strings  a threat to ‘good governance’?
• Focus on basic economic infrastructure and investment projects
with long maturity  hitherto neglected by DAC donors
• Less bureaucracy and transaction costs  more cost-effective
and faster delivery  ‘aid tying ‘may be inconsequential given
competitive advantages
• Potential for technical cooperation at level of long-term strategic
planning – learning from Chinese experience?
• But is magnitude and current engagement enough to induce
radical changes?
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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, Senegal, Uganda, Mozambique, etc. – aidgovernance nexus is murky and open to manipulation as
discussed yesterday
• And note:
– China, albeit unevenly, works in 43 SSA countries and its presence in
‘rogue states’ much less important than usually assumed
– Showing capacity to adapt and change (Sudan-Darfur issue)
– Forms of aid ‘in kind’ (Chinese aid ‘packages’) reduce options for
theft/diversion of funds (little or no funds are actually transferred)
– Chinese ‘aid model’ far from unique  replication of Japan’s aid
experience in China
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Perceived comparative advantage:
a potential division of labour?
Who among the following partners are typically most effective at meeting the development objectives of the country?
Source: http://www.voxeu.org/index.php?q=node/6741 and African Economic Outlook 2011 p. 109
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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. Whither donor harmonization?
4. Active promotion of ‘alternative’ economic policies?
5. Perception of increasing bargaining power matters for
agency
6. 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
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induce changes in DAC donors’ practice