Memorandum by Ivan Lewis, MP, Parliamentary
Under-secretary of State, Department for International Development
THE EU, CHINA
AND AFRICA
1. What is the Chinese view of development,
the rule of law and good governance in Africa; and how far does
this approach correspond to that promoted by the UK and the EU?
What scope is there for greater cooperation between Africa, China,
and the EU on meeting the MDGs in Africa?
China released a White Paper on Africa in 2006 which
stated that its policy was to promote peace and stability, development
and common prosperity. Key principles within this are non-interference
in domestic affairs, mutual trust, respect of sovereignty, political
equality and mutual benefits. China sees investment, trade and
aid as all contributing to development. China has been a strong
supporter of the MDGs and in particular in pushing developed countries
to meet the commitments they have made in bodies such as the G8 to
increase resources for international development.
There are differences in approaches between
the EU and China. China does not meaningfully engage with attempts
at donor harmonisation in Africa. China does not link its own
conditionality with those of other donors. China does not publish
detailed information on its aid. Chinese investment in Africa
does not come with good governance conditionality but with a range
of conditions related to how loans will be repaid and concessions
that China will be granted as a result of the investments. This
is an entirely different approach to most (although not all) of
the OECD. China does not regard a dialogue on rule of law and
governance as being appropriate within its partnerships with African
countries. It resists this because of its principles of political
equality but also because it would not countenance any interference
in these areas in its own country.
In recent years China's position with regards
to working with others to promote development in Africa has been
evolving. In recent years China's EXIM Bank has signed Memoranda
of Understanding with the World Bank, the Asia and the African
Development Banks. In 2007 China also became a donor for
the first time to the 15th IDA replenishment. Its $30 million
contribution was modest (the UK provided £2.1 Billion),
but it showed China's acceptance of its global role in dealing
with international poverty reduction. China also contributed $120 million
to the 2008 replenishment of the African Development Fund.
China is interested in working with the African Union.
Despite the differences in approaches to development,
the EU has identified strong shared interests in promoting development
in Africa. At the 10th China-EU Summit held in November 2007,
the EU and China strongly welcomed the idea of trilateral cooperation
which was later endorsed in a communication from the European
Commission. There is huge scope for cooperation which could bring
together strengths from both sides, for example China's expertise
in agriculture and infrastructure and the EU's strengths on institutional
and organisational building.
2. From an EU perspective, what are the main
development issues that arise with regard to China's approach
to Africa?
The EU recognises the importance of China's
contributions to infrastructure, initiatives on health and contributions
to peacekeeping as well as the benefits arising from the growth
in trade and investment between Africa and China. There are concerns.
These mostly relate to transparency and an unwillingness of China
to share information with other international partners. There
is a strong desire for China to work closely with the EU so that
synergies can be explored.
3. Do African countries as well as their citizens,
generally welcome and benefit from China's role in Africa?
Politics is integral to China's relationship
with many African countries. This stems from many decades of high-level
political contact and dialogue and mutual support particularly
in independence struggles and post-colonial nation building. Whilst
political ties remain important, economic relations have grown
dramatically since 2003. African leaders have warmly welcomed
China's approach which stresses the opportunities for economic
development and mutual benefit in Africa. African leaders have
contrasted China's approach to the West which they see as being
focused on poverty, poor governance and corruption. African leaders
welcome China not linking its support to issues such as human
rights and governance. Finally African governments have welcomed
the speed at which China disburses its support and its cost relative
to other donors.
As China has expanded its activities in Africa,
it has experienced problems. There are concerns that African contractors
do not employ enough local labour or source local inputs. Chinese
companies have developed a reputation in some countries for low
wages and for poor working conditions. Civil society in Africa
is very concerned about a lack of transparency related to the
deals that African leaders have signed with China. China has recognised
many of these issues. It has issued new guidelines on the behaviour
of Chinese firms in Africa, organisations such as the China Africa
Business Council are encouraging Chinese companies to pay more
attention to community outreach and to employing more Africans
in skilled and senior positions.
THE EU-CHINA-AFRICA
"TRIALOGUE" ON
DEVELOPMENT ISSUES
4. What is the Government's assessment of
the recent European Commission proposals to create a three-way
"trialogue" between Africa, the EU and China on development
issues? What progress is being made in this area? To what extent
should this be a priority for the EU?
The UK Government supports the European Commission's
proposals. Trilateral cooperation offers the potential to develop
synergies between China's support to Africa and that from the
EU. The EU has been building political support for the trialogue.
Its Commissioners for Development and External Relations have
included this as a key agenda item in their discussions with counterparts
in China. This has yielded results. During Premier Wen's visit
to Europe and Foreign Minister Yang's visit to Portugal in January
2008 both issued positive statements about trilateral cooperation.
The EU has sought the endorsement of the African
Union to the "trialogue". A Committee from the AU is
now considering a formal response. In the meantime EU Delegations
in African capitals have been exploring options for cooperation
with African governments and Chinese embassies. There might well
be options for cooperation with the EU and possibly the UK stemming
out of China's interest in working with the Infrastructure Consortium
for Africa.
This should be a priority for the EU. On a practical
level trilateral cooperation offers the potential for China and
the EU to learn from each other. It can help build trust and mutual
respect. Importantly it can help avoid political competition for
supporting development in Africa.
5. What are the channels for EU-China-Africa
trialogue on development issues in Africa, both at headquarters
level and in the field? Does the EU delegation to the African
Union in Addis Ababa maintain contacts with Chinese officials
about development issues in Africa?
The EU and China have undertaken exchange visits
of senior officials responsible for development policy. A number
of EU delegations are also exploring options with Chinese embassies
in African capitals. The EU delegation to the African Union is
in discussions with Chinese officials in Addis Ababa.
AID EFFECTIVENESS,
GOOD GOVERNANCE
AND HUMAN
RIGHTS
6. What is the Chinese government's approach
to the question of aid effectiveness. Is China a signatory of
the Paris Declaration on aid effectiveness, and to what extent
is it implementing its commitments in Africa?
China signed the Paris Declaration. But it signed
as a recipient rather than a provider of aid. China has generally
not supported the harmonisation agenda. It does not endorse the
DAC approach, preferring instead to strongly differentiate itself
from western donors. Currently it has no interest in joining the
OECD. China attended the High Level Meeting in Accra in 2008 and
the 2008 Financing for Development meeting in Doha. But its
objectives were to reinforce that developed countries should meet
their commitments on aid rather than to endorse and support harmonisation
and transparency efforts. In late 2008, China agreed to join with
the OECD's Development Assistance Committee to prepare a study
on China's aid to Africa.
It is difficult to examine in detail the extent
to which China has implemented the commitments it made in 2006 towards
Africa because China has not publicly released such information.
For some of the targets, such as a doubling of aid, it is impossible
to measure progress since baselines are unknown. However, public
statements by Chinese leaders including by Premier Wen at the
UN MDG Summit in September 2008 and more recently by President
Hu during his 2009 visit to Africa, suggest that China will
deliver and exceed the vast majority of the commitments it made
in 2006 during the China Africa Summit.
7. To what extent is the role of China and
Chinese companies in African countries with poor records on human
rights such as Sudan, the Democratic Republic of Congo, Nigeria
and Zimbabwe an obstacle to the EU's efforts to promote good governance,
the rule of law, democracy and human rights?
Chinese activity in Nigeria is a relatively
recent development and there are few examples of China's impact
yet. However, we expect that China's impact will be limited—China
is not the cause of corruption/poor governance etc in Nigeria,
and Chinese activity in Nigeria is unlikely to add significantly
to the level of corruption. Nevertheless, it would be helpful
if China were to sign up to the EITI, thus helping increase transparency
on Chinese businesses' activity in Nigeria, especially in the
oil and gas sector.
GoDRC appears to share the UK's position that
the assistance provided by China and traditional partners is strongly
complementary and hence we currently do not perceive China's involvement
as an obstacle to the promotion of broader governance and human
rights objectives. The DRC's development needs are enormous and
the Government of DRC is publicly committed to working both with
China and its traditional partners to maximise the support the
DRC receives. China's planned investments are focused on roads
and broader infrastructure projects while traditional donors like
the EU offer a much broader package of support, including emergency
assistance to stabilise an economy hit hard by the global economic
crisis and efforts to help the DRC reach HIPC completion point.
8. To what extent have China's investments
and political influence contributed to the development of Nigeria
and the DRC including to progress on the MDGs? What discussions
have the EU delegations in Nigeria and the DRC had with Chinese
officials and corporations about these matters, and with what
outcome?
Chinese activities in DRC have so far been limited
to relatively small investments by small and medium-sized Chinese
companies (mainly in Katanga Province and Kinshasa) and the Chinese
development programme and therefore the impact of the Chinese
development programme in the DRC on MDGs has been limited. The
big 'minerals for infrastructure' deal that has received attention
in the international media is still at a very preliminary stage,
pending the completion of a feasibility study on copper and cobalt
resources in Katanga Province. Given the proposed focus on roads
and infrastructure projects we expect that, when started, the
deal's potential impact on the MDGs will be highly significant,
particularly through stimulating growth in the agriculture and
mining sectors. This will generate employment, raise incomes and
provide the GoDRC with increased revenues to fund essential services.
In Nigeria there is no evidence yet of any specific
contribution to date on the MDGs. Chinese priorities in Nigeria
are energy, telecommunications, agriculture, infrastructure and
manufacturing. Many of these investments have the potential to
support growth and employment. There are concerns that there is
insufficient public information about many of the deals agreed
between China and Nigeria. Without this information it is difficult
to assess the consequences from the deals for issues such as debt
sustainability.
We are not aware of any structured discussions
that have taken place between the EU delegations in DRC and Nigeria
with Chinese corporations and Chinese officials.
DEBT
9. What is the extent of Chinese lending to
African countries, is this on favourable terms for the Africans?
Should the EU be concerned about the debt levels of African countries
due to Chinese lending?
China does not publish details of the loans
that it provides to African governments. Zero-interest loans are
provided by the Ministry of Commerce. Concessional loans (terms
unknown) are provided by China's Export Import Bank (EXIM). Commercial
loans are provided by EXIM and the China Development Bank. When
asked, Chinese officials say that debt sustainability is a key
element of their due-diligence procedures before approving loans.
The lack of transparency on the terms of loans make it hard to
determine whether they are provided on favourable terms. A 2008 World
Bank study "Building Bridges: China's Growing Role as Infrastructure
Financier for Sub-Saharan Africa" found that on average,
Chinese loans for infrastructure contain a grant element that
comfortably meets the DAC criteria for determining whether a loan
is concessional.
A rapid accumulation of new borrowing (from
all sources, not just China) could reduce the benefits of recent
global debt relief efforts. It is vital that all international
creditors (including China) and multilateral institutions should
lend in a transparent and responsible way. The EU along with African
governments and the UK should continue to encourage China to be
more transparent about its loans to Africa and encourage it to
engage more directly with the IMF and World Bank debt sustainability
framework mechanisms.
THE ROLE
OF CHINESE
CORPORATIONS OPERATING
IN AFRICA
10. To what extent does the Chinese government
have control or influence over Chinese corporations operating
in Africa? Is the role of these corporations a matter of concern
to the EU with regards to their impact on development? If so what
can and should the EU do to encourage them to play a more responsible
role?
China's commercial presence in Africa predominantly
consists of small to medium sized enterprises that are privately
owned and which have little or no relationship to the Government
of China. There are a small number of large, state-owned enterprises
that have focused on the extractive and infrastructure sectors.
The Chinese government is very active in supporting the extractive
and infrastructure sectors through the provision of credits, concessional
financing and diplomatic support. In 2007 China established
a $5 Billion investment fund under the China Development
Bank. This fund has now started operations and is building up
a diverse portfolio.
Formally China's Ministries of Commerce, Foreign
Affairs and Customs authorities have supervisory roles on Chinese
companies that operate in Africa. State owned companies are also
controlled by the government, but in many cases their management
teams have considerable autonomy when it comes to developing business
strategies. Chinese officials recognise that there are challenges
in performing adequate supervision because of a lack of capacity,
particularly in Africa. New standards on the behaviour of Chinese
companies in Africa have recently been promulgated.
The EU should be concerned to promote a dialogue
with China on supervision of corporations in Africa, but this
should involve a genuine attempt to share best practice and experience
on European supervision of its companies in Africa. It should
also involve relevant authorities from the African countries.
11. Have any Chinese corporations in Africa
signed up to the EITI? If so, to what extent are they implementing
their commitments under the initiative? Is this an issue the EU
should be concerned about?
No Chinese companies have officially endorsed
EITI. The Chinese government has also not endorsed EITI. China's
official position is that its companies will abide by EITI-related
legislation in countries where such legislation is in force. The
EU is a supporting organisation of EITI. Like the UK, the EU should
encourage China to support EITI. It should seek to build on the
momentum generated following the 2009 EITI Annual Conference
which has seen EITI's transformation from a start-up initiative
to a global transparency standard.
FOOD SECURITY
12. To what extent is China trying to increase
its food security through acquisitions of land and other relevant
assets in Africa? What effect is this having on Africans? What
other issues arise with regard to food security in Africa from
an EU perspective?
China has just 7% of the world's arable land,
but 22% of the world's population. This has led to concerns that
China will increasingly look to land acquisition in African and
other countries as a means to maintain its food security. The
International Institute for the Environment and Development (IIED)
has looked in depth at Chinese land acquisitions in Africa. It
has warned against overplaying the Chinese food security argument
as a motive for Chinese investment in Africa. Its research shows
that China remains a net exporter of cereals and it has set itself
limits to avoid importing more than five per cent of its grain
needs in the future. It has observed that products from Chinese
farms in Africa, apart from timber, are marketed locally. The
UK Government and China are currently in discussions about how
they can work together with China on food and agriculture issues
in Africa.
ENERGY
13. What proportion of China's energy imports
come from Africa, and what effect is this having on the ability
of Africans to meet their own energy requirements? What other
issues arise with regard to energy in Africa from an EU perspective.
Africa currently possess around 9% of the world's
proven petroleum reserves compared to almost 62 percent for
the Middle East. But African reserves remain largely unexplored
and may well be the source of future discoveries. China sources
around 33% of its oil from Africa. Oil accounts for around 80%
of Africa's exports to China.
China is an important and growing market, probably
accounting for around 14% of Africa's exports. However the EU
and the US are more important, accounting for 36% and 33% respectively
of oil exports from Africa. The EU is keen to promote dialogue
with China on EITI to promote greater transparency. The EU wants
to see open and fair competition in the energy sector and a dialogue
with China to promote environmental standards and corporate social
responsibility.
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