China and India in Africa: challenging the status quo?
‘Equality and mutual benefit’ are reflected today in Chinese leaders’ frequent emphasis on aid as a partnership, not a one way transfer of charity, -quoted in Deborah Brautigam’s, China’s African Aid: Transatlantic Challenges\
India intends to be a partner in Africa’s resurgence- Prime Minister Manmohan Singh address to the Nigerian National Assembly in 2007
The rise of China and India has indeed created a new set of impulses in the international system. Not only are these two emerging giants making notable waves in the way that international finance, trade and investments are being shaped but also in the way that the rules, which govern the global governance regime are being influenced. Nowhere is this more apparent than in the realm of the international architecture on aid effectiveness. While the debate rages on around whether China and India are new or reemerging donors in the world today, their behaviour as development partners is certainly changing the global aid picture and most importantly in Africa.
Over the past several years, the politics of aid has been an overarching issue in Africa’s development debate. Since 2000 the Group of Eight industrialised rich states (G8) have been promising to double aid to Africa. Unfortunately these promises have largely been unfulfilled with the G8 countries opining that aid money has been misused by African recipients, or that African governments are not conforming to the conditionality of good governance and democratic reform. From the African side the prescriptive nature of the aid policy of traditional donors, their inertia and shifting of the goal posts around what constitutes this doubling of aid has been equally frustrating.
While the G8 and the DAC members are stumbling to find practical ways to ensure that aid is being effectively used to promote sustainable development across the continent, subtle changes are beginning to show with the increasing and deepening footprint of China and India across the continent. Their use of soft power coupled with generous financial packages, and notwithstanding the rhetoric of South-South cooperation has found traction amongst African leaders. But what really makes China and India attractive as development partners for many African governments is the parochial view that Beijing and New Delhi understand Africa’s development needs and are not preoccupied with setting high governance benchmarks that could undermine the delivery of aid, prolong the implementation of projects and emasculate development.
Welcomed by African governments as alternate sources of development finance and for their less cumbersome procedures, these two Asian partners have modelled their development finance on a framework of concessional loans and aid for resource security and infrastructure reconstruction. China’s development assistance to Africa best illustrates this.
China’s increasing penetration of the African market and role as an alternate development partner has raised significant issues regarding the impact this will have for Africa. Will it see new forms of aid dependency? Or does Beijing engender a more inclusive and cooperative engagement with its African partners? What dynamics underpin China’s development assistance to Africa and are African governments more pragmatic in their aid relations with China, drawing on their experience with traditional donors? Fundamentally is China’s use of development assistance entrenching Africa’s indebtedness, leading to a new form of debt risk for African governments? Finally is Chinese aid meeting the expectations of improving the livelihoods of Africa’s people?
Balancing China’s role in Africa is the increasing presence of India in the continent. Similar questions are being asked of India’s development assistance. But perhaps a more significant question is: who will be the better development partner for Africa?
Seemingly then China and India as Africa’s ‘new donors’ has certainly sparked a debate amongst western and African commentators alike. Much of the debate focuses around whether China and India disburse their aid differently and what implications this has for existing western donors in Africa. This is obviously motivated by the fact that China and India are non-DAC donors and somehow represent a challenge to the status quo. Indeed China and India have become significant development partners to most African countries, but their development assistance still remains a negligible portion to that of the DAC and multilateral donors who remain Africa’s main development partners.
DEFINING CHINA AND INDIA’S DEVELOPMENT ASSISTANCE
At the very outset it must be stressed that by not being DAC members, it is complex and perhaps cheeky to measure China and India’s aid through the lens of the DAC definition of Overseas Development Assistance (ODA) with its main objectives of promoting economic development and welfare at concessional financial terms, and loans including a minimum grant element of 25 per cent. But since no other structure exists by which to gauge China and India’s behaviour as donors or until such time both formalise their own evaluation frameworks, China and India will be measured against the DAC consensus. In so doing there maybe certain overlaps with the DAC definition of ODA, but for purposes of clarity and distinction we define China and India’s aid as development assistance mainly because of the controversy and sensitivities that surround this topic and in keeping with how both countries perceive their behaviour.
What makes China and India interesting developing partners is that both of them have until fairly recently been recipients of large ODA disbursements. In the last three to four years this situation has altered with a significant decline in their inward aid flows as a percentage of GDP (Gross Domestic Product), which has been offset by their concomitant rise as development partners. [Between 1990 and 2003, China’s aid as a percentage of GDP declined from 0.6 per cent to 0.1 per cent. During the same period India’s aid decreased from 0.4 per cent to 0.2 per cent. See Manning, R. (2006): ‘Will “Emerging Donors” change the face of International Cooperation’, Development Policy Review, 24(4), pp. 371-85] But this does not suggest that ODA flows have dried up altogether. Instead China and India continue to receive limited multilateral and bilateral aid simply because their rising global economic status, middle income profile and transition from aid recipients to aid donors has raised the bar around whether China and India continue to qualify for further international development assistance. To this end western donors are reviewing their country assistance programmes to both countries (Davies 2007, p. 33). And this is becoming more explicit in the Chinese case. The UK’s Department for International Development (DFID) China office recently had their programmes assessed in London to determine their success and set out what the next stage of their engagement with Beijing should be as China transitions into a fully fledged aid donor. Similarly, Japan, which is currently China’s largest bilateral donor, has indicated that they will be scaling down their aid programme to Beijing by the end of 2008.
In India the situation appears more complex. New Delhi seems to have taken on a more aggressive engagement with its donor partners by asserting that it wants to exert more control over its aid flows. An early announcement in 2003 and following the 2004 Asian Tsunami disaster where India refused humanitarian assistance but instead provided disaster relief to its neighbours signalled New Delhi’s intentions to be independent and manage its own domestic affairs without interference from western donors. While there remains some donor activity, it would appear that the Indian government chose this symbolic gesture to demonstrate to its development partners that it still remains a sovereign state that must be respected (Price 2004, Jobelius 2007).
Both China and India have very similar aid strategies. It is a mixture of both monetary and non-monetary forms of assistance. According to McCormick:
‘Monetary aid includes grants and concessionary loans. Non monetary aid includes debt relief, ‘free’ or low cost technical assistance, access to scholarships or training programmes, tariff exemptions and outright gifts of buildings, equipment, or other capital goods (2008, p.79).’
Clearly Beijing and Delhi apply both types of aid in their development assistance packages to Africa. Based on this it can be concluded that there are some broad correlations with the DAC ODA definition, particularly where the promotion of economic development and welfare are the main objectives at concessional financial terms. To this end China and India concur that their development assistance to the developing world is precisely aimed at creating conducive conditions for economic self-sustainability and social development. In Africa this seems to be the official rhetoric for disbursing development assistance.
While there may be some broad overlaps with the DAC definition as applied by the traditional donors, there are some grey areas as well. In 2007/2008 the Centre for Chinese Studies based in South Africa conducted an assessment of China’s aid policy and practice to Africa where it became abundantly clear that no one approach can best encapsulate China’s aid policy or for that matter if there is an official aid policy (Davies, Edinger, Tay and Naidu 2008, p. 2). According to the authors:
‘In order to interpret China’s aid policy, one can take various different approaches. One approach assumes that the Chinese government defines aid according to two different formats: “co-operation” and “ODA”. One respondent differentiated between them by suggesting that “cooperation” refers to foreign direct investments and contracts with Chinese companies, while “ODA” refers to concessionary loans, debt relief and grants. Trade concessions may also fall into this category. However, there were conflicting views from other respondents, who identified only the transfer of funds between governments (including the funds involved in donations of aid in kind), as constituting “aid”. These conflicting definitions offered by both Chinese government and well positioned academic sources reflect the ambiguity in Chinese foreign aid policy circles. There is clearly no official definition of aid at present’.
On the other hand, India’s development assistance involves a cross sectoral provision of capacity building, skills development, credit lines and scholarships. While Delhi’s aid policy encompasses a broader range of aid distribution, it is also more limited in scope as it does not look to provide grants in aid (Indian Technical and Economic Cooperation Division, 2006) as traditional definitions would indicate. Rather it opts for development of human resources and education, which again results in complexities surrounding the conceptualisation of India’s aid policy.
In sum then, the provision of aid by China and India appear to align more closely to their rising global status, endowed by their historical experiences and underscored by the act of benevolence. [For a concise understanding of China’s aid system see Deborah Brautigam, op cit.] This is captured by the emerging logic of China and India’s involvement in the Non-aligned Movement (NAM) and the idea that as Beijing and Delhi become prosperous they will be able to give back to the poorer countries by assisting them to develop (Snow 1988, Glosny 2006). Nevertheless trying to pigeon hole or compartmentalise the aid policies of each country into neatly defined boxes proves difficult, particularly as China and India’s donor activities in Africa are often inextricably viewed together with their commercial interests and investment projects. Therefore, to develop some synergy with regard to how China and India interpret their development assistance and to make the distinctions less complex, especially in relation to the DAC ODA definition, McCormick’s paradigm of monetary and non monetary forms of aid is probably better suited in assessing China and India’s development assistance activities across Africa.
* Sanusha Naidu is the Research Director of the China in Africa Programme based with Fahamu in South Africa.
* Hayley Herman is the Research Manager at the Centre for Chinese Studies, based at Stellenbosch University in South Africa.
* Please send comments to [email protected] or comment online at http://www.pambazuka.org/
REFERENCES:
Africa-Asia Confidential (2008) ‘Delhi reaches out’, vol. 1, no. 4
Agrawal, S. (2007) ‘Emerging donors in international development assistance: the India case’, IDRC, Canada
Beck, L. (2007) ‘China factors changes rules of Africa aid game’, Mail and Guardian, May 18.
Bombay Chartered Accounts Society Newsletter (2006) http://www.bcasonline.org/webadmin/ContentType/attachedfiles/NlJuly06.pdf, accessed 10 July 2008.
Brautigam, D. (2008) ‘China’s African aid: transatlantic challenges’, The German Marshall Fund (GMF) of the United States, Washington (www.gmfus.org).
Broadman, H. (2007) ‘Africa’s silk road: China and India’s new economic frontier’, World Bank, Washington
Davies, M., Edinger, H., Tay, N. and Naidu, S. (2008) ‘How China delivers development assistance to Africa’, Centre for Chinese studies, Stellenbosch
Davies, P. (2007) ‘China and the end of poverty in Africa – towards mutual benefit?’, Diakonia, Sweden
Domain-B (2005) ‘Exim Bank extends $30-million LoC to Burkina Faso’, 15 October, http://www.domainb.com/finance/banks/exim_bank/20051015_extends.html, accessed 10 July 2008.
Ellis, J.L. (2007) ‘China EXIM Bank in Africa’, China environment forum, Washington, Woodrow Wilson centre for scholars
Engineering News (2008) ‘China leads new financiers in Africa – World Bank’, Reuters, 11 July
Foster, V., Butterfield, W., Chen, C. and Pushak, N. (2008) ‘Building bridges: China’s growing role as infrastructure financier for sub-Saharan Africa’, trends and policy option no. 5, World Bank and PPIAF, Washington
Engineering Export Promotion Council, http://www.eepcindia.org/exim-bank.asp, accessed 10 July 2008
Exim Bank of India annual report 2005-2006, http://www.eximbankindia.com/ar06.pdf ,accessed 10 July 2008
Exim Bank of India website http://www.eximbankindia.com/press040707, accessed 10 July 2008
Exim Bank of India press release archive, http://www.eximbankindia.com/old/whatsnew-main.html , accessed 10 July 2008
Eximius: Export Advantage, http://www.eximbankindia.com/exp-adv-mar08.pdf , accessed 10 July 2008
Glosny, M.A. (2006) ‘Meeting the development challenge in the 21st century: American and Chinese perspectives on foreign aid’, China Policy Series, national committee on United States-China relations, no. 21.
Indian ministry of external Affairs, http://www.meaindia.nic.in/ , accessed 10 July 2008.
Indian Technical and Economic Cooperation Division (2006), ‘A note on Indian Technical and Economic Cooperation (ITEC)’, New Delhi ministry of external Affairs, http://itec.nic.in/about.htm accessed 12 July 2008
InfoDrive India, http://www.infodriveindia.com/Notifications/Exim-Bank-s-Line-of-17475.aspx, accessed 8 July 2008
Jobelius, M. (2007) ‘New powers for global change? Challenges for the international development cooperation: the case of India’, FES briefing paper five
Manning, R. (2006) ‘Will “emerging donors” change the face of international cooperation?’, in Development Policy Review, vol. 24, no.4, pp. 371-385
McCormick, D. (2008) ‘China and India as Africa’s new donors: The impact of aid on development’ in Review of African Political Economy. vol. 35, no. 1, pp. 73-92
Naidu, S. (2008): ‘India’s growing African strategy’, Review of African Political Economy, vol. 35, no. 115, pp. 116-128
Nigerian Exim Bank, http://www.neximbank.com.ng/NEXIM%20Bank%20and%20Exim%20Bank%20India%20Sign%20Line%20of%20Credit.htm, accessed 10 July 2008
OECD website, http://www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html, accessed 10 July 2008
Price, G. (2004) ‘India’s aid dynamics: from recipient to donor?, Asia programme working paper, Chatham House
Reserve Bank of India, http://www.rbi.org.in/home.aspx, accessed 10 July 2008
Snow, P. (1988) The Start Raft: China’s Encounter with Africa, Great Britain, Weidenfeld & Nicholson Ltd
The Hindu (2008) ‘Involve more nations in DCA’, 21 June, http://www.thehindu.com/2007/06/21/stories/2007062151151700.htm, accessed 10 July 2008
The Hindu (2007) ‘India provides line of credit to Gabon’, 5 July, http://www.thehindubusinessline.com/2007/07/06/stories/2007070652741000.htm, accessed 11 July 2008
The Hindu (2006) ‘Exim Bank’s line of credit to Cote d’Ivoire’, 7 January, http://www.hindu.com/2006/01/07/stories/2006010704141603.htm, accessed 10 July 2008
The Hindu (2005) ‘Exim Bank to extend $26.8 m LoC to Mali, Ivory Coast’, 15 September, http://www.thehindubusinessline.com/2005/09/16/stories/2005091602150600.htm , accessed 10 July 2008
The Hindu (2005) ’Exim Bank extends $15-m LoC to Equatorial Guinea’, 11 September, http://www.thehindubusinessline.com/2005/09/12/stories/2005091202611200.htm , accessed 10 July 2008
The Hindu (2003) ‘Exim Bank extends line of credit to Djibouti bank’, 25 July, http://www.thehindubusinessline.com/2003/07/26/stories/2003072601261000.htm , accessed 10 July 2008
The Somaliland Times (2007) ‘India gives $20million funding for Djibouti cement plant’, 26 April, http://www.somalilandtimes.net/sl/2007/275/4.shtml , accessed 8 July 2008
Wang, J.E (2007) ‘What drives China’s growing role in Africa?’, IMF working paper WP/07/211, August