Ethiopia's partnership with China
30 December, 2011 | Deborah Bräutigam, The Guardian (blog)
---------------------------------------------------------------------------------
China sees Ethiopia as a land of business opportunities, but
the African country remains in charge of any deals
based industrial cluster Ethiopia is developing to better utilise its
livestock population, Africa's largest.
Within weeks, a delegation of Chinese had arrived in Addis Ababa.
Among them was the privately owned Huajian Group, which
produces 16 million pairs of leather shoes per year. By October,
Huajian had decided to invest in Ethiopia.
Huajian's general manager arrived in November, hired 50 Ethiopian
technical school graduates and sent them off to China for training.
"The machinery is already on its way to Djibouti," Habros told me,
adding that Huajian was leasing a factory site in Ethiopia's Eastern
(Oriental) Industrial Zone.
Ethiopia at the end of 2011 reflects the surprising complexity of
Chinese engagement in Africa, how it differs from that of the west
and – possibly of more significance to the continent – how central is
the role of African agency.
China is no newcomer here. In 1972, China financed the Wereta-
Weldiya road across Ethiopia's Rift Valley. Between 1998 and
2004, the Chinese contributed 15% of the cost of Addis Ababa's
ring road (Ethiopia paid the rest).
But when Ethiopia's economy began to grow at Asian rates, the
Chinese saw increased opportunities. Not all were in the direction
stereotypes would have predicted. Yes, China's state-owned
petroleum companies explored for oil, but they departed empty-
handed. Rather, the Chinese unleashed a variety of state-sponsored
tools for building economic ties.
Most of these do not involve China's relatively modest foreign aid.
The China-Africa Development Fund has made equity investments
in a leather factory, a cement plant and a glass factory. The Eastern
Industrial Zone is being built and run by a private Chinese company,
with performance-based subsidies from China's economic co-
operation fund. Chinese telecoms firm ZTE teamed up with Chinese
banks to provide a $1.5bn commercial suppliers' credit (at Libor –
interbank lending rate – plus 1.5%) to roll out cellular and 3G
service across the country.
A preferential export buyer's credit is paying more than half of the
$612m cost of a toll road that will cut travel time between Addis
Ababa and Djibouti, whose port now provides landlocked Ethiopia
access to the sea. The tolls will help repay the loan over 20 years.
In a twist on a financing mode popularised in Angola, where
infrastructure loans were repaid with Angola's main export, oil,
China's Eximbank has provided commercial loans for electricity
distribution lines, cement factories, and other projects, secured (and
repaid) out of Ethiopia's exports to China: mainly sesame seeds.
These credits are known (in Chinese) as hu hui dai kuan, or "mutual
benefit loan". A Chinese company gets the business, Ethiopia gets
finance for development: at Libor plus 2-3%.
To the west, Ethiopia typically conjures up images of drought and
starving children; we want to save Ethiopia. To the Chinese,
Ethiopia, with a fast growing economy and 90 million consumers,
looks like good business. While western official engagement with
Ethiopia's authoritarian but development-minded government is still
largely limited to foreign aid, the Chinese offer multiple ways to
make co-operation economically attractive.
Of course, there are downsides to China's engagement. Chinese
banks continue to show interest in financing large hydro-power
projects with daunting environmental and social challenges.
Reportedly, working conditions were so onerous at the enormous
African Union complex being built by a Chinese firm that some
Chinese workers went on strike. Ethiopians complain about the
quality of ZTE's technology.
At the same time, observers sometimes accuse China of sins it has
yet to commit. In July, Günter Nooke, German chancellor Angela
Merkel's Africa adviser, said that in Ethiopia, China's "large-scale
land purchases" were partly to blame for a devastating famine.
Ironically, the California-based Oakland Institute had reported just
a month earlier, after an exhaustive four-month "land grab" study,
that the Chinese were "surprisingly absent from land investment
deals" in Ethiopia.
Ethiopia is clearly in charge in this engagement. Chinese traders and
shopkeepers, who are fixtures across many African cities, are
absent on Ethiopia's streets. These positions are reserved for locals,
and Ethiopians enforce their rules.
And China listens. A decade ago, Chinese companies building the
ring road complained they couldn't find enough local skilled
workers. The Ethiopian government asked China to establish a
college that would focus on construction and industrial skills. The
fully-equipped Ethio-China Polytechnic College opened in late
2009, funded by Chinese aid. Chinese professors offer a two-year
degree with Chinese language classes alongside engineering skills.
Chinese companies are waiting to hire its first crop of graduates.
• Deborah Bräutigam is senior research fellow at the
International Food Policy Research Institute, and professor at
American University's School of International Service,
international development programme. She is the author of
The Dragon's Gift
Courtesy
30 December, 2011 | Deborah Bräutigam, The Guardian (blog)
---------------------------------------------------------------------------------
China sees Ethiopia as a land of business opportunities, but
the African country remains in charge of any deals
- In late November, Habros
Seguar, an Ethiopian
industry ministry official,
told me how the ministry
had just landed a major
Chinese investment. During
his August trip to China,
Prime Minister Meles
Zenawi had visited the
Pearl River Delta, where
higher costs are driving
manufacturers offshore. He
invited the Chinese to visit
based industrial cluster Ethiopia is developing to better utilise its
livestock population, Africa's largest.
Within weeks, a delegation of Chinese had arrived in Addis Ababa.
Among them was the privately owned Huajian Group, which
produces 16 million pairs of leather shoes per year. By October,
Huajian had decided to invest in Ethiopia.
Huajian's general manager arrived in November, hired 50 Ethiopian
technical school graduates and sent them off to China for training.
"The machinery is already on its way to Djibouti," Habros told me,
adding that Huajian was leasing a factory site in Ethiopia's Eastern
(Oriental) Industrial Zone.
Ethiopia at the end of 2011 reflects the surprising complexity of
Chinese engagement in Africa, how it differs from that of the west
and – possibly of more significance to the continent – how central is
the role of African agency.
China is no newcomer here. In 1972, China financed the Wereta-
Weldiya road across Ethiopia's Rift Valley. Between 1998 and
2004, the Chinese contributed 15% of the cost of Addis Ababa's
ring road (Ethiopia paid the rest).
But when Ethiopia's economy began to grow at Asian rates, the
Chinese saw increased opportunities. Not all were in the direction
stereotypes would have predicted. Yes, China's state-owned
petroleum companies explored for oil, but they departed empty-
handed. Rather, the Chinese unleashed a variety of state-sponsored
tools for building economic ties.
Most of these do not involve China's relatively modest foreign aid.
The China-Africa Development Fund has made equity investments
in a leather factory, a cement plant and a glass factory. The Eastern
Industrial Zone is being built and run by a private Chinese company,
with performance-based subsidies from China's economic co-
operation fund. Chinese telecoms firm ZTE teamed up with Chinese
banks to provide a $1.5bn commercial suppliers' credit (at Libor –
interbank lending rate – plus 1.5%) to roll out cellular and 3G
service across the country.
A preferential export buyer's credit is paying more than half of the
$612m cost of a toll road that will cut travel time between Addis
Ababa and Djibouti, whose port now provides landlocked Ethiopia
access to the sea. The tolls will help repay the loan over 20 years.
In a twist on a financing mode popularised in Angola, where
infrastructure loans were repaid with Angola's main export, oil,
China's Eximbank has provided commercial loans for electricity
distribution lines, cement factories, and other projects, secured (and
repaid) out of Ethiopia's exports to China: mainly sesame seeds.
These credits are known (in Chinese) as hu hui dai kuan, or "mutual
benefit loan". A Chinese company gets the business, Ethiopia gets
finance for development: at Libor plus 2-3%.
To the west, Ethiopia typically conjures up images of drought and
starving children; we want to save Ethiopia. To the Chinese,
Ethiopia, with a fast growing economy and 90 million consumers,
looks like good business. While western official engagement with
Ethiopia's authoritarian but development-minded government is still
largely limited to foreign aid, the Chinese offer multiple ways to
make co-operation economically attractive.
Of course, there are downsides to China's engagement. Chinese
banks continue to show interest in financing large hydro-power
projects with daunting environmental and social challenges.
Reportedly, working conditions were so onerous at the enormous
African Union complex being built by a Chinese firm that some
Chinese workers went on strike. Ethiopians complain about the
quality of ZTE's technology.
At the same time, observers sometimes accuse China of sins it has
yet to commit. In July, Günter Nooke, German chancellor Angela
Merkel's Africa adviser, said that in Ethiopia, China's "large-scale
land purchases" were partly to blame for a devastating famine.
Ironically, the California-based Oakland Institute had reported just
a month earlier, after an exhaustive four-month "land grab" study,
that the Chinese were "surprisingly absent from land investment
deals" in Ethiopia.
Ethiopia is clearly in charge in this engagement. Chinese traders and
shopkeepers, who are fixtures across many African cities, are
absent on Ethiopia's streets. These positions are reserved for locals,
and Ethiopians enforce their rules.
And China listens. A decade ago, Chinese companies building the
ring road complained they couldn't find enough local skilled
workers. The Ethiopian government asked China to establish a
college that would focus on construction and industrial skills. The
fully-equipped Ethio-China Polytechnic College opened in late
2009, funded by Chinese aid. Chinese professors offer a two-year
degree with Chinese language classes alongside engineering skills.
Chinese companies are waiting to hire its first crop of graduates.
• Deborah Bräutigam is senior research fellow at the
International Food Policy Research Institute, and professor at
American University's School of International Service,
international development programme. She is the author of
The Dragon's Gift
Courtesy
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