The world economy was until recently a cozy club of the countries of the Organization of Economic Co-operation and Development (OECD – a grouping of 30 of the world’s biggest and more prosperous states) and of the multilateral organizations that they largely finance and control, including the World Bank. However, that coziness could now be disappearing, as the role of non-OECD countries in aid, foreign investment, and trade has been expanding over the past few years, with Chinese activity especially notable.
Aid to Africa is a case in point. Total official development assistance (ODA) from the rich European, North American, and Pacific countries that make up the OECD Development Assistance Committee (DAC) to sub-Saharan Africa was about $23 billion in 2005. (Estimates are that 2006 figures will be the same or slightly lower.) Such largesse is of course welcome, but problems sometimes arise when these OECD donors go to Africa and say “do such and such, or else….” Though such ‘advice’ is sometimes reasonable, when political or economic conditions are imposed, the countries receiving assistance comply with difficulty, or at least go through elaborate games pretending to tow the line; otherwise, precious aid could be lost.
Donors from Western and other developed economies abide by certain, more or less, stringent rules and guidelines set by the OECD DAC. Not so non-OECD members, including the Chinese, let Africans take money without accepting any excess baggage in thorny areas such as governance.
Africa’s Silk Road, a book just published by the World Bank on Asia’s new African economic frontier, sums up this new situation by stating that: “China’s economic support to Africa has recently exploded.” In 2002, China officially gave just under $2 billion in development aid to African countries. Since then, official reporting of such figures has ceased, but preliminary estimates from the World Bank suggest that much of China’s official economic aid to Africa to support development of infrastructure is in the form of China Export-Import Bank loan financing and amounted to close to $13 billion in 2003 to 2006 – mainly, in the power, telecom, transport, water and sewerage sectors. At the same time, China is using debt relief to assist Africa, effectively turning loans into grants. The new World Bank book stated: “Since 2000, Beijing has taken significant steps to cancel the debt of 31 African countries. That year, China wrote off $1.2 billion in African debt; in 2003, it forgave another $750 million.” More recently, China’s Africa policy white paper, released in early 2006, foresees additional multi-billion dollar debt relief as part of the country’s economic assistance strategy to Africa, a point it underlined when hosting 48 African countries in Beijing last November at a conference promoting closer co-operation and trade.
The policies of China at home, social stability, industrial investment, and national unity, are more vital to Beijing than political liberalization or the rule of law, so it is unsurprising that the latter aims are downplayed in dealings with Africa. China has cultivated close ties with countries that provide it with commodities and raw materials, regardless of their political records. Recent examples include Sudan and Zimbabwe, which both trounced the threat of international sanctions in part because of Chinese action.
Partly as a result of closer ties with China, African economies generally look better, buoyed by strong demand in China for everything from Zambian copper to gold from South Africa and Angolan oil. This helps to explain African exports to China growing by 48% annually in the past half-decade, compared to 14% during the 1990s, with 10% of Sub-Saharan exports now going to China.
African-Chinese FDI is also rising rapidly, but the volume of such flows is more modest than that of trade. As of mid-2006, the stock of China’s FDI to Africa is estimated at $1.2 billion, with Angola, Nigeria, Mozambique, Sudan, and Zimbabwe accounting for over 80% of the total, and flows to the power sector making up about 40% of all commitments.
China has more or less surpassed Japan, Russia, EU states, and India in terms of economic, military, and political power. This leaves Beijing second only to Washington on the world stage, so China will now enjoy the status of a semi-superpower between America and others, with all the privileges and obligations that implies. Among the latter will be aid, which is still badly needed in Africa and other developing regions. However, the question increasingly posed for the rest of the decade will be: aid on what terms? As the Chinese evolve, with greater wealth and power, their assistance to Africa will also develop, possibly in the direction of more conditionality. Meanwhile, Beijing’s seemingly unencumbered largesse has helped it slip smoothly into Africa – a place in which the West is still struggling.
Riad Khoury is an economist, director of MEBA Ltd Amman and a Senior Associate at BNI inc New York
