Desta, Asayehgn Ph.D., Sarlo Distinguished Professor of Business Economics, Dominican University of California
Africa has become more important, due to its growing role in supplying oil, gas, and non-fuel minerals to the world. In response, the United States has launched the Millennium Challenge Account (MCA) and the President’s Emergency Plan for AIDS Relief (PEPFAR). In addition, the United States has designed a new military command Africom, to counter attack the supposed terrorist cells in the Africa continent (Lake and Whitman, 2006).
In recent years, a number of African countries have shifted their focus to cooperative investments with private corporations or state-owned enterprises as sources of future dynamism. These investments are originating primarily in the industrializing or newly industrialized countries of Asia, rather than Western European and US multinational companies (GebreEgziabher, 2006). As a result of an exponential and sustained growth in its economy, the Peoples’ Republic of China (hereafter referred to as China), has positioned itself as a very vital and influential player in Africa’s cooperative pro-business investments. This has been accomplished using the South-South Cooperation (i.e., joint activities between the newly industrialized southern countries and the lesser-developed nations of the Southern Hemisphere). It has established no-strings-attached, bottom-up, multiple, bilateral projects with a number of African states.
Contrary to Western debt and assistance marked by various forms of economic and political overtones, China is in the process of bestowing a mix of loans with generous terms, debt forgiveness, infrastructure development, and other assistance to African nations so that they could be relieved from Western cultural, political, and economic hegemony (Habib, 2008). For example, Large argues “…a new Wind from the East is blowing across Africa, and is attracting unprecedented attention. This is driven in part by the wider resurgence of China in world affairs, but much is also the result of the recent visibility and interest in the growing presence, roles, and impacts of Chinese actors throughout the continent” (2008).
Unlike the Western investments, which have overtones of various forms of conditionality, such as the formation of free trade, building private companies, or loosening of government regulations, the Chinese investments in Africa’s infrastructure rejuvenation and the various types of venture investment projects are claimed to be based on flexible soft loans and are tailored to lift the overall economic performance of the borrowing and assistance-getting African countries. At the opening of the summit held in Beijing in October 2000, for example, the Forum on China-Africa Cooperation (FOCAC), President Hu Jintao of China promised to the 48 heads of African states that China would offer $3 billion in preferential loans and $2 billion in export credits over the next three years. In addition, China has also announced that in the future it would be doubling its foreign aid to African counties (BBC, November 2006, Corkin & Burke, 2008).
China’s deepening involvement across Africa can be viewed from two perspectives. The protagonists of political warfare theory argue that China’s policy in Africa is a nonviolent instrument of grand strategy. It involves coordinated activities that could precipitate in tangible effects on intended targets such as economic aid and development assistance, as well as training, equipping, and arming military and security forces to achieve political and economic clout. Given this thesis, the proponents of the political warfare theory argue that China’s investment in Africa is not only meant to fulfill China’s immediate convenience but is also as a grand strategy designed to give it clout and leverage to have access to and develop further business opportunities in Africa (Chau, March 2007). Based on this argument, the proponents of political warfare theory predict that China’s investment in Africa is nothing creative but rather is an offer of old wine in a new green bottle, tailored to establish China’s “new imperial power” in Africa. Chinese assistance to Africa is mainly in the form of colonialist projects that will perpetuate Africa’s underdevelopment through exploitation, extraction, and destruction of Africa’s resources and industrial capacity (Chau, March 2007).
In short, this thesis is based on the premise that Chinese investments in Africa in the twenty-first century are not only based on the need for natural resources, such as oil, timber, minerals, but are also focused on financial resources and political influence designed to pursue Chinese neo-imperialist objectives vigorously. Thus, the adherents of the political warfare theory argue that if the U.S. fails to design a profound strategic approach to emancipate Africa from China’s silver coated ulterior motives, China may eventually contribute to “doomsday” and the New African Scramble (Lake and Whitman, 2006).
Partially applying the opinion of the political warfare theorist to the Sino-Ethiopian situation, Leggett argues, “A poor landlocked nation…Ethiopia lacks the vast natural resources that have drawn China’s interest in other countries. But it has something else Beijing craves: geopolitical clout in the region. Ethiopia is the source of the Blue Nile, the river that slakes Egypt’s thirst. It is the meeting ground between largely Muslim North Africa and the Christian south. And it is the seat of the African Union, the political body that represents the continent” (March 29, 2005). Thus Chau argues that by providing free financial contributions and other infrastructural investments at opportune times, China is using political warfare to demonstrate Chinese support for the Ethiopian people, possibly gaining an immediate favorable impression and benefits in the future. Since late 1999, China’s political warfare led to fruitful opportunities at the grand strategic level in Ethiopia. Finally, Chau concludes that political warfare operations have helped China achieve the central objective of its grand strategy in Ethiopia (March 2007).
The South-South development cooperation school of thought, on the other hand, views China’s increased aid, trade, and investment in Africa as a means to foster Africa’s self-sufficiency and sustainable development in the 21st century (Naidu, 2008). The protagonists of the South-South Cooperative (SSC) model of development forcefully argue that China should be left alone to forge its unique partnership with Africa and the West must simply learn to compete. According to Okonjo-Iweala, the former Nigerian Finance Minister, China, “…the new economic giant…knows what it means to be poor and has evolved a successful wealth creation formula that it is willing to share with African countries” (October 24, 2006). China’s growing investment commitment in Africa is more likely to boost the huge infrastructure deficit of the continent (Ezekwesili, July 11, 2008). In short, the proponents of the SSC model argue that China is acting as a model for Africa’s approaches to international and domestic problems.
The thrust of Africa’s interest in following China’s model of development emerges because prior to 1949, “…China was devastated by war, and levels of ‘development’ in certain African states were above that of China and other East Asian countries, today China offers an impressive, if highly mixed demonstration of a developing yet already significantly advanced economy (Large, 2008).” Following the FOCAC Summit and the third Ministerial Conference of 2006 held in Beijing, it is no wonder that China has not only emerged as a model for development but has spearheaded pro-business cooperation investments throughout Africa.
For instance, according to Xinhua News Agency, China has proposed to focus on three key projects in Ethiopia that could be very “vital to foster…bilateral cooperation, referring to an agriculture technology demonstration center, an all packed economic and trade project including the construction of hydropower stations, and the establishment of an oriented industrial zone to attract investment from Chinese companies” (Nov. 11, 2008).
For instance, Gessesse states that in 2007/8, in terms of the number of projects, the Chinese are the number one investors in Ethiopia. Out of 328 foreign investments that began operations in Ethiopia, 30 percent were from China compared to 8 percent from America (August 19, 2008). According to Ethiopia’s Foreign Minister, Mr. Mesfin, the Ethio-Chinese joint-partnership projects are not only related to agricultural projects and capacity building but are very vital for generating the harmonization of common strategies for the two countries (2008). In addition, Ethiopia’s Prime Minister Meles Zenawi ascertains that with the establishment of a new strategic partnership with China, the Ethiopian workers are reasonably paid and their working places are environmentally friendly. Also, the Prime Minister highlights that Ethiopia’s exports have added value and have resulted in dividends for the joint-venture partners. “Ethiopia’s exports to China have jumped following China’s declaration of duty-free market access to African goods. Ethiopia admires China’s technological level and expects China to expand technical assistance to Ethiopia” (October 17, 2006).
Based on theoretical synthesis, the political warfare theorists argue that the so-called “cooperative” investments undertaken by China in Africa are devastating and exploitative. In contrast, the position of the South-South Cooperative school of thought (on China’s cooperative assistance programs to Africa and particularly to Ethiopia) seems to be drenched with lofty phrases and promises. Therefore, before romanticizing on illusions, the practical synthesis of the theories of the two schools of thought needs to be systematically and empirically tested. For example, China’s respect for the sovereignty of the aid-getting African nations and not interfering in the internal affairs seems to be a very commendable. But we need to take into consideration Alves’ point that China is “coddling human rights violators, undermining international efforts to improve governance standards, and contributing to potentially unsustainable debt levels” (2008). In addition, it worth testing the validity of Habib’s argument that by turning a deaf ear to human rights violations and being blind to the existence of human rights violations in its aid engagement scheme, China is contributing to adverse consequences for some of Africa’s citizens (2008).
Therefore, the empirical part of this study will be to advance the understanding and rationalization of the various Chinese investments in Ethiopia. More specifically, the central motive of the pursuing study is to investigate if the opportunities and challenges of Ethio-Chinese investments are based on a win-win strategy. Thus the first part of the paper reviews existing studies in order to explore the conceptual framework needed to map out the determinants of South-South Cooperative ventures. After identifying the salient components of cooperative investment envisaged by the founders of the South-South cooperative model, the second portion of the paper will scrutinize the appropriateness of Chinese capital and technological flows to Ethiopia. Finally, after summarizing the main findings of the study, the paper concludes by drawing some relevant policy implications and suggests relevant future research directions.