China trade outweighs corruption fears for Africa

BEIJING Thu Nov 5, 2009 1:47pm EST

Related Topics

BEIJING (Reuters) - China's ties with Africa have been a magnet for critics worried about corruption and human rights on a continent struggling with both, but its investments are bringing more growth than risk for countries starved of trade.

Two-way trade flows have ballooned tenfold since 2000, to $107 billion last year, as China builds infrastructure, sells cheap goods and buys much-needed energy and mineral resources.

These deals have drawn criticism from activists and politicians, often Western, who say China is stripping Africa of raw materials while shoring up corrupt and oppressive regimes.

But African and Chinese businessmen and academics say Beijing is filling a yawning need for key infrastructure, and Chinese firms are also shaking up moribund markets where Western companies were doing little to develop local economies.

"We always talk about trade being more important than aid," said Adrian Davis, the China head of Britain's Department for International Development (DFID), which works with Beijing to support development in Africa.

"This is money going into Africa ... We are investing in health and education, but Africa also needs physical infrastructure which we in the West haven't been doing."

China's critics also say they are concerned about what it is funding, and how, as roads, stadia and government buildings built with Chinese cash spring up around the continent -- some of them aid, some of them trade, but many something in between.

Beijing entwines business and assistance more closely than Western governments, using infrastructure to pay for resources and often disbursing donated funds through the Commerce Ministry.

This makes it hard to put a figure on handouts, and the only official number for Africa covers all spending from 1949 to 2006.

"We put everything into a very big basket called economic cooperation; investment, humanitarian assistance, contracts. So it is difficult to figure out what belongs purely to aid," said He Wenping, an Africa expert at an official Beijing think-tank.

CUTTING OUT CASH

But Beijing is aware of the risk to its reputation and market access if projects are derailed by sleaze and its bankers have used their trade-aid model to curb dangers, experts say.

Bypassing host governments and paying Chinese firms directly to build a road or hospital, which is handed over when completed, cuts opportunities for the most predatory graft that often left other aid projects unfinished.

"The Chinese say: 'We will take your gold and put in so many schools, we will take your copper and put in a railway line'," said Kwaku Atuahene-Gima, a Ghanian citizen who is Professor at the China Europe International Business School.

"If that happens, that is a more effective way of developing the system than giving loans and aid money that go into the pockets of politicians and other people who squander it."

One Chinese firm has been caught up in a large African graft probe this year.

Activists say they are more concerned about the secrecy that surrounds China's investments than the actual deals.

"There is no inherent problem with offering access to oil or other resources in return for infrastructure, but complex, opaque deals bring a huge risk of corruption," said Diarmid O'Sullivan, corruption expert at resource activist group Global Witness.

A DIFFERENT IDEOLOGY

China, which has pulled hundreds of millions out of poverty under a one-party central regime, is skeptical of the Western emphasis on democracy and transparency as key to prosperity.

The money it gives in aid or in return for resources usually comes with no strings attaching it to human rights or governance standards, in line with Beijing's long-standing pledge of "non-interference" in the affairs of other nations.

Critics say this undermines efforts to force bad governments to clean up. But those efforts have met with limited success.

"Major Western governments and institutions haven't been able to contribute to a quantum leap in controlling corruption," said Fredrik Galtung, chief executive of Tiri, an NGO that seeks practical ways to improve integrity.

"The continent is littered with international projects...that didn't deliver anything. Look at the billions Nigeria borrowed -- and look at its electricity supply," he added, referring to the West African state's notoriously patchy flow of power.

Many in China and Africa see greed, double standards and fear about losing influence and market share in their former colonial strongholds behind Western criticisms.

They point out that Chinese firms invest far more in other parts of the world, with the same labor and environmental standards, but those operations are far less scrutinized.

"It is only around Africa because the vested political interests are so much larger. I think that's the realpolitik view of why this hostile stance has developed," said Martyn Davis, head of Stellenbosch University's Center for Chinese Studies.

Major western firms today -- like Chinese counterparts -- still do business in countries with oppressive governments and have been caught up in multi-million dollar bribery scandals.

U.S. oil companies including Exxon Mobil (XOM.N) have invested in Equatorial Guinea, a tiny West African state where petrodollars help prop up a regime recently criticized by campaign group Human Rights Watch for "corruption, mismanagement, and callousness toward its own people.

This year KBR Inc (KBR.N), the former engineering subsidiary of Halliburton Co. (HAL.N) pleaded guilty to charges that it paid $180 million in bribes to Nigerian officials in a decade-long scheme to secure $6 billion in contracts.

"Just because another competitor has arrived doesn't warrant this specter of the Chinese resource monster stomping all over Africa you see in the media," said one Western banker in Africa.

(Editing by Alex Richardson)

FILED UNDER:

Track China's Leaders