Sino-US storm clouds gather over Africa aid

Sino-US storm clouds gather over Africa aid
Kristin Jones in New York
South China Morning Post, Oct 31, 2010

At ground level, it seemed to be a happy harmony of Chinese, Western and
African interests. After a Chinese construction firm won a contract to
build a US-funded and much needed airport terminal in Mali's capital,
officials from all three nations brought their pomp to a groundbreaking
ceremony last month.

The event topped the national news. But what plays well in Bamako can
strike an ill chord in Washington.

Even before the cornerstone was laid, wheels were in motion in the United
States to make sure this kind of deal never happens again.

Senator Jim Webb, a Democrat from Virginia, learned in July that the
state-owned firm Sinohydro had won the US$71.6 million airport contract.
Over the summer, he fired off a couple of angry letters to the CEO of the
Millennium Challenge Corporation, the American foreign aid agency that
awarded it.

"I am concerned that the funding of Chinese state-owned companies with US
taxpayer dollars harms American business, foreign policy, and development
interests abroad," Webb wrote.

US development assistance should not be used "to enhance the spread of
Chinese influence", he added.

Webb got his way. From now on, money from the corporation will no longer
line the pockets of Chinese government firms. The agency announced last
week that state-owned businesses would not be eligible to bid on any
future contracts.

The decision does not single out Chinese firms, said Patrick Fine,
vice-president for compact operations at the corporation. Webb's concerns,
as well as a separate complaint by a US company, were taken into
consideration, he said. But the board wrote the new rule primarily to
level the playing field for all competing firms.

The new policy is in line with standards set by the US Agency for
International Development, a primary avenue for American aid. As a rule,
USAID avoids awarding contracts to state-owned firms, though it sometimes
makes exceptions. "State-owned enterprises have advantages that private
firms don't have," Fine said.

However, some observers paint the decision as purely political, and
question a policy that may add costs to crucially important development
projects.

"I don't think it's an issue of ownership. I think it's that it's
Chinese," said Martyn Davies, CEO of Johannesburg-based consulting firm
Frontier Advisory, which advises Asian firms on access to African markets.
"Increasingly, we're seeing geopolitical frictions between China and the
US play out in Africa."

The US has often viewed Chinese investment and aid to Africa with
scepticism, even rancour. US diplomats, careful to couch criticism of
China in other arenas, can sound undiplomatic on this point.

"It would be a good thing if China decided to take its focus on
Sub-Saharan African nations in directions that spoke to good governance
... [and] peaceful infrastructure development, as opposed to just getting
in and taking out raw materials to fuel the mother ship here," Jon
Huntsman, US ambassador to China, said in a webcast last week.

Chinese officials have portrayed their actions in African countries as
mutually beneficial, pointing out that Chinese aid and investment have
built infrastructure in places where it is desperately needed.

The Millennium Challenge Corporation's new policy will not affect existing
contracts. A creation of former US president George W. Bush's era meant to
reward good governance with development assistance, the US agency has made
several other contracts with Chinese state-owned enterprises, including
agreements with Sinohydro to build roads and canals in Tanzania and Mali,
and with China Railway Group (SEHK: 0390) for highway work in Ghana. All
told, Chinese state-owned and private corporations had won contracts
totaling US$325 million, Fine said.

In his letters, Webb questioned Sinohydro's environmental and safety
record, pointing to previous criticism by the Chinese government and
foreign critics. One of the builders of the Three Gorges Dam, the company
is also involved in constructing the Merowe Dam in Sudan, a project that
is expected to displace thousands of people.

Sinohydro could not be reached for comment, but its executives have said
in the past that they are dedicated to sound environmental practices and
social responsibility.

Even some critics of Chinese influence in Africa question the wisdom of
eliminating potential bidders by rejecting state-owned corporations
outright.

"If there are companies that want to develop infrastructure in Africa at a
cheaper price, God bless them," said Joshua Eisenman, senior fellow for
China studies at the American Foreign Policy Council, a think tank.

"If they can make the US taxpayer dollar go further, all the better."

Ironically, the new policy will not stop US taxpayer money from reaching
state-owned firms - Chinese or not - through other avenues.

The World Bank, which receives a chunk of its budget from Washington,
regularly makes deals with state-owned enterprises. Its recent awards
include a US$129 million contract with Sinohydro last year for the
construction of the Felou dam in Mali.

The World Bank Group also regularly offers guarantees to state-owned firms
for investment in developing countries.

"We think it's critically important to engage the state-owned players in
Africa," Kevin Lu, Asia-Pacific regional director for the World Bank's
Multilateral Investment Guarantee Agency, said.

Lu said he was perplexed by the Millennium Challenge Corporation's policy
change.

Chinese state-owned enterprises have played an important role in investing
in Africa, Lu said. "We see it as our job to work with them to make sure
the investments ... are made in a responsible way."

For those directly affected by the airports, roads and canals that are
built with foreign aid and investment, questions of environmental safety,
corporate influence and official corruption are real, said Joseph Asunka,
research associate at the Centre for Democratic Development, a Ghana-based
NGO. But these concerns are not the domain of any one actor, he said.

Private and state-owned firms, local and foreign, can easily evade
environmental and social responsibilities without adequate safeguards. "I
think they should have looked at the economics of it rather than the
politics alone," Asunka said.

When it comes to projects as basic as access to foreign and domestic
markets, what matters most, he said, is "getting the biggest bang out of
the buck".
________________________________________________

This is International Rivers' mailing list on China's global footprint, and particularly Chinese investment in
international dam projects.

You received this message as a subscriber on the list: chinaglobal@list.internationalrivers.org

To be removed from the list, please visit:
http://salsa.democracyinaction.org/o/2486/unsubscribe.jsp