Dealing With Debt-trap Diplomacy

The motives for China’s infrastructural investment in developing nations are often portrayed as self-serving, but new approaches to development in Kenya may offer a blueprint for a fairer future.

Words: Florence Massena
Illustration: Cecilia Castelli

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or most of the last decade, the western world has looked on in discomfort as China’s economic and political ties with countries in the global south have expanded. Its Belt and Road Initiative has seen investments totalling hundreds of billions of dollars funnelled into infrastructure projects across 152 countries. The resulting rise in the nation’s geopolitical influence has been of great concern to the US in particular; the sour relationship between China and the Trump administration is no secret.

Those critical of China’s economic foreign policy have labelled their investment practices ‘debt-trap diplomacy’, implying that investing in infrastructure is simply a means to exert greater control over other sovereign nations. In 2018, after the last airline ceased flying from Sri Lanka’s Mattala Rajapaksa International Airport — a $210m project almost entirely financed by Chinese loans — critics suggested that the south Asian nation was the latest victim of China’s unscrupulous development plans (China is now responsible for 15% of Sri Lankan national debt). Sri Lanka is not the only nation showing signs of strain at the hands of Chinese investment. Ethiopia, Djibouti and Zambia have all faced similar problems as China extends its interests across the African continent.

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China is now the fifth largest investor in Africa, with $43bn invested in 2017 — behind France, the Netherlands, the US and the UK. Unlike its western counterparts, China’s investment has been steadily increasing. At the 2018 China–Africa Cooperation Forum, China announced it would be providing $60bn in financial support to Africa, and launched the China–Africa Infrastructure Cooperation Plan, co-written with the African Union. The plan states that China will strengthen its cooperation with Africa in infrastructure planning, design, construction, operation and maintenance, and will participate in the construction of railway, highway, regional aviation, port, power and telecommunications infrastructure in Africa. A separate plan outlines their collaborative plans over arms and military development.

China is already involved in important infrastructure projects such as the Addis Ababa–Djibouti railway, the Nairobi Mombasa Standard Gauge Railway, part of the greater East Africa Railway Master Plan, the Republic of Congo’s Special Economic Zone, an oil refinery in Nigeria, a new city in Egypt and the African Union headquarters in Addis Ababa, among others. China is now present at all levels of the African market and is currently the single largest investor in African infrastructure.

Much as this may alarm governments in Europe and the US, there is no clear evidence to support the idea that Beijing has a unified policy to lure the developing world, and Africa in particular, into unsustainable debt. The picture is more complex. “It’s really important not to treat China as an undivided entity,” says Lila Buckley, senior researcher at the International Institute for Environment and Development (IIED). “You have state-owned and private-owned enterprises, with everything from Chinese nationals already living in Africa to informal individuals wishing to invest there.”

Nevertheless, Chinese investors have often been under close watch, notably for the question of balance in their relationship with African nations, their appetite for natural resources and their lack of consideration for long-term African development. Their approach to dealing with local communities has also come under fire, as locals often fail to benefit from the investment on their lands.

“It’s really important not to treat China as an undivided entity. You have state-owned and private-owned enterprises, with everything from Chinese nationals already living in Africa to informal individuals wishing to invest there.”

But responsibility for this inequality is shared, and is in part attributable to weak national and local legislation. “What we saw [in our research] is that China has set up a range of laws to voluntarily regulate and help safeguarding with a social and environmental aim to their companies overseas,” says Buckley. “Of course there are regulation gaps. But instead of focusing on those gaps, we tried to find out what was actually influencing those companies. The first influence is the host countries’ own laws and regulations. The other factors are the policies of corporate and international finance organisations, such as the World Bank, as well as local institutional practices and norms.”

Stronger regulation driven by African nations could set a new paradigm for foreign investors on their land. “Governance is the key to a better distribution of money, so it doesn’t only benefit corrupt leaders,” says Buckley. “What is important for us is to be able to support local governance and civil society, as well as supporting the market areas where it’s possible to bring a positive influence from China.”

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While stories of crippling debt and poor international relations are common, Buckley cites two projects in Malawi and Uganda whose trilateral relations could serve as a blueprint for positive Chinese development in Africa. The first involves new Chinese-funded agricultural developments in Uganda that have allowed one of the nation’s staple crops, cassava, to be grown more effectively with less water and fewer resources. The second, in Malawi, has seen Chinese aquaculture expertise used to cultivate the versatile tilapia fish to great effect, offering a valuable new source of nourishment to local communities.

“What worked in these two instances, compared to others, is that they were trilateral collaboration projects involving different actors,” says Buckley. “China and the host countries’ governments were involved, as well as a third party, an international development consultancy organisation based in Beijing that implemented the projects. Its team decided to go through local NGOs that did research on the ground, helped out with translation, informed and communicated with the population, assessed the needs and had a say at all levels of the process.”

China is now the fifth largest investor in Africa, with $43bn invested in 2017 — behind France, the Netherlands, the US and the UK.

Adopting this kind of approach at scale is likely to take time, says Hannah Ryder, China representative of China Africa Advisory, an independent advisory firm consulting on sustainable development in Africa. Her reasoning is as much cultural as practical. “It is hard to discuss failure in China,” she says. “People always want to promote success, so it’s difficult to talk about what didn’t work in order to learn from experience and share better examples.”

But the situation is improving. Chinese investors’ “understanding of how the world functions is constantly evolving and people do seek advice and consultancy,” Ryder says. “For example, the railway project from Naivasha to Mombasa via Nairobi needed local knowledge in order to avoid local animals being hit by trains and some crossings have even been added as a result. But at the same time, Chinese contractors didn’t realise how big a problem it would be not to hire local workers. It caused an uproar from the population and the government had to renegotiate the contract to include a local workers’ quota. It’s an evolving relationship and it takes time and practice to get to better methods.”

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The Chinese approach is often to do things as cheaply as possible. “If you don’t ask for really high standards, costs will be cut down to the minimum due to a very business-minded approach,” says Ryder. “You have to be very specific about what you want and ask for because China has all quality levels. But they will meet demands if it’s possible, so the host countries’ standards have to be improved.”

China would perhaps do well to learn from some of the grassroots development organisations appearing across the African continent. Kounkuey Design Initiative (KDI) is a community development and design nonprofit based between the US and east Africa, notably in the slums of Kibera in Nairobi. The organisation is based on a “bottom-up” approach.

“Come tell us what you need and we’ll work to translate that into projects,” explains Vera Bukachi, research director at KDI. “We start by sending out proposal requests, we shortlist them, work to understand groups and sites by an active observation on the ground, then pick the most appropriate projects.” It takes a minimum of three months of workshops and engagement activities to really understand local people and their needs and let go of preconceived ideas about solutions.

“Let’s take the example of a group who asked for better sanitation and employment opportunities,” Bukachi says. “We had to see if the group already existed before talking to us and what the rest of their community needed. Our research revealed that there already were sanitation facilities. What came up is the need to design them in a safer way for children and women facing more risks of bacterial contamination through the way they use them.” With KDI’s help, the community worked to redesign their sanitation facilities, and jobs were created in the form of ongoing janitorial duties.

This bottom-up approach, while more time-consuming, is less exploitative than the way China has typically dealt with development. KDI regularly meets with local government in order to share an understanding of what resources are needed and where. Intermediary partners like these are often necessary to establish priorities on large-scale projects, and local NGOs could play an important role in speaking up for local communities as well as deepening the understanding between them and Chinese investors. Such an approach could rid China of accusations of debt-trap diplomacy once and for all.

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This original article appears in Weapons of Reason’s seventh issue: Inequality.

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Weapons of Reason is a publishing project to understand and articulate the global challenges shaping our world by Human After All design agency in London.

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