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October 14, 2018

China’s global reach


October 14, 2018

In recent times, particularly after the official launch of the Belt and Road Initiative (BRI), China’s aid and investments in overseas infrastructure projects have come under intense scrutiny.

While the BRI was endorsed by numerous countries in Asia, Africa and Europe (particularly Nordic countries), it was bluntly rejected by big players, such as Australia, India, Japan, the US and the EU. Initially, the main apprehension of these actors was that it is primarily a geopolitical project and China aims to achieve its foreign policy goals via economic statecraft.

However, now these countries and a number of international organisations have added another aspect of their opposition to the BRI. These opposing stakeholders are of the view that connectivity initiatives need to follow international norms, good governance, openness, transparency and equality. There are concerns about financial soundness to avoid a future debt burden for communities, and unintended harmful ecological and environmental repercussions.

There are also serious doubts about China’s capacity to efficiently implement the BRI with minimal financial and ecological implications for the participating countries. In view of this, is China really a ‘rogue’ player when it comes to sustainability issues and norms? In a recent study, titled ‘Capturing the rains: a comparative study of Chinese involvement in Cameroon’s hydropower sector’, published by Johns Hopkins University’s China-Africa Research Initiative, has compared two partially-complete hydropower projects in Cameroon that have been financed and constructed in the last five years.

One is financed by China’s Exim Bank and the other is funded by a multilateral consortium led by the World Bank. The aim of a single-country case study is to examine whether China behaves differently or follows certain norms while funding and implementing infrastructure projects in developing countries. To this end, the study has focused on various aspects of China’s aid and on that of the WB-led consortium focusing on principal issues. These entailed the tendering and approval of the project; the implementation processes by the Cameroonian government; and examining how the different financing arrangements have influenced implementation and approaches to environmental and social impacts and mitigation. The detailed study has found that while the two projects show similarities in their adherence to domestic laws and organisational regulations, the degree and rigour of implementation, and the involvement of financiers in the whole process differs considerably.

Contrary to popular perceptions regarding Chinese-financed projects in Africa vis-a-vis environmental concerns, it has been found that China’s Exim Bank agreed to finance a less environmentally risky project than the one funded by the World Bank. This was because Exim Bank’s environmental policy demands an environmental impact assessment, which has to be approved as a condition for the disbursement of loans. In addition, the Exim Bank loan was approved much more quickly than that of the World Bank, which often follows a lengthy process of assessment and consultations.

However, whether good or bad, as per China’s policy of non-interference in domestic matters, Exim Bank followed the same approach by displaying compliance to domestic laws and regulations. In some cases, it fell short of compliance to internationally-recognised best practices.

For example, the study has noted that a representative at the Ministry of Forestry and Wildlife in Cameroon pointed out the differences in the attitudes of financiers toward monitoring and compliance. In the World Bank’s case, local authorities were “threatened” over certain issues such as gorillas and deforestation, and asked for a certified company to carry out the deforestation assessment. The Chinese were more flexible in this matter. They followed local norms and didn’t ask for assessment reports from certified and more expensive regulatory bodies.

The detailed study has summed up that “despite popular negative conceptions of Chinese dams and infrastructure in Africa, the reality on the ground is more nuanced”. In most cases, Chinese-funded initiatives complied with all legal and regulatory requirements and with those of the Exim Bank’s own guidelines and procedures.

Furthermore, existing research has shown that in other hydro-projects financed by Exim Bank in Africa – such as Bui Dam in Ghana and the Kamchay Hydropower Project in Cambodia – the host governments played a more critical role in determining standards for infrastructure projects rather than the dam contractors or financiers. In contrast, by working with international financial institutions (IFIs), such as the WB, one of the issues identified by an official was a long and cumbersome bureaucratic process that often imposed strict conditionalities.

However, if Chinese companies and contractors exhibited more flexibility in dealing with host governments, they were somehow less responsive to address unforeseen social and environmental repercussions in certain cases. The study has highlighted that when faced with unintended social and ecological implications, the degree of response adopted by both financiers varied. In such situations, the World Bank was more autonomous and the project enjoyed stronger capacity and enforcement mechanisms, and a willingness to use them to enforce compliance.

In view of China’s involvement in funding numerous projects in Africa, what are the lessons for Pakistan, as there are many Chinese financiers, companies and contractors engaged in multiple sectors of its economy? One of the key lessons is that the onus lies on the government of Pakistan to devise appropriate measures to mitigate the social and ecological implications of Chinese-funded interventions.

It is Beijing’s openly avowed policy to follow the norms of non-interference in the domestic affairs of its development partners. In the face of such a policy, it is the responsibility of host governments to safeguard the interests of its people and the ecosystem, and minimise any accompanied foreseen and unforeseen consequences.

The history of international aid and development has repeatedly shown that in the absence of clearly-specified benchmarks and indicators, even well-meaning development interventions fail to achieve the desired outcomes. Well-thought-out strategies that take into account the needs, aspirations and concerns of all key stakeholders are critical for any development policy to succeed in the long run. However, if a government and its numerous institutions at various levels are involved in the blatant violations of rules and regulations, how can it enforce international donors and investors to strictly implement such standards while implementing projects in the country?

The writer holds a PhD from Massey University, New Zealand. He teaches at the University of Malakand.

Email: [email protected]