• Business Day (South Africa): Emerging markets

Telecommunications | Group 642 |
FINANCIAL INTERMED. | FINANCIAL INTERMEDIATION | Sec J |
Financial intermediation, except insurance and pension funding | Div 65 |
Insurance and pension funding, except compulsory social security | Div 66 |
Activities auxiliary to financial intermediation | Div 67 |
REAL ESTATE ACTIVITIES | Sec K, Div 70 |
RENTING OF MACHINERY AND EQUIPMENT WITHOUT OPERATOR AND OF PERSONAL AND HOUSEHOLD GOODS | Sec K, Div 71 |
COMPUT. & RELATED ACT. | COMPUTER AND RELATED ACTIVITIES | Sec K, Div 72 |
RESEARCH & DEVELOP. | RESEARCH AND DEVELOPMENT | Sec K, Div 73 |
OTHER BUSINESS ACT. | OTHER BUSINESS ACTIVITIES | Sec K, Div 74 |
Legal, account., market research, consultancy | Group 741 |
Legal activities | Class 7411 |
Account., bookkeeping and audit.; tax consult. | Class 7412 |
Market research and public opinion polling | Class 7413 |
Business and management consultancy activities | Class 7414 |
Management activities of holding companies | Class 7415 |
Architectural, engineering and other tech. act. | Group 742 |
Advertising | Group 744 |
Business activities n.e.c. | Group 743, 745, 746, 747, 748 |
EDUCATION | Sec M |
HEALTH AND SOCIAL WORK | Sec N |
SEWAGE AND REFUSE DISPOSAL | Sec O, Div 90 |
ACTIVITIES OF MEMBERSHIP ORGANIS. N.E.C. | Sec O, Div 91 |
REC., CULT., SPORTING ACTIV. | RECREATIONAL, CULT., SPORTING ACTIVITIES | Sec O, Div 92 |
Motion picture, radio, tel., other entertain. activ. | Group 921, 922, 923 |
News agency activities | Group 924 |
Library, archives, museums, other cultural act. | Group 925 |
Sporting and other recreational activities | Group 926, 927 |
OTHER SERVICE ACTIVITIES | Sec O, Div 93 |
Not allocated |
Level 3 (NACE Rev. 1.1) |
Heading | Requested level of detail |
Total activity | Sections C to K |
Mining and quarrying | Section C |
Manufacturing | Section D All subsections DA to DN All divisions 15 to 37 |
Aggregates: |
High-technology (HIT) Medium-high-technology (MHT) Medium-low-technology (MLT) Low-Technology (LOT) | 24.4, 30, 32, 33, 35.3 24 except 24.4, 29, 31, 34, 35.2, 35.4, 35.5 23, 25-28, 35.1 15-22, 36, 37 |
Electricity, gas and water supply | Section E All divisions (40 and 41) |
Construction | Section F (Division 45) All Groups (45.1 to 45.5) |
Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods | Section G All divisions (50 to 52) Groups 50.1+50.2+50.3, 50.4, 50.5, 51.1 to 51.7 Groups 52.1 to 52.7 |
Hotels and restaurants | Section H (Division 55) Groups 55.1 to 55.5 |
Transport, storage and communication | Section I All divisions Groups 60.1, 60.2, 60.3, 63.1+63.2, 63.3, 64.1, 64.2 |
Financial intermediation | Section J All divisions |
Real estate, renting and business activities | Section K Division 70 Division 71, groups 71.1+71.2, 71.3 and 71.4 Division 72, groups 72.1 to 72.6 Division 73 Division 74, the aggregates 74.1 to 74.4 and 74.5 to 74.8 |
LEGISLATIVE FINANCIAL STATEMENT
Policy area(s): Statistics, Internal Market, Trade, Competition Activit(y/ies): Structural Business Statistics, Balance of Payments Statistics |
TITLE OF ACTION: PROPOSAL FOR A REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL (EC) NO ../.. ON COMMUNITY STATISTICS AND ACTIVITY OF FOREIGN AFFILIATES |
1. BUDGET LINE(S) + HEADING(S)
29 02 01 Statistical Information Policy
2. OVERALL FIGURES
2.1. Total allocation for action (Part B): € 2.150 million for the period 2005-2007
2.2. Period of application:
Yearly data collection and compilation starting from the year after entry into force of the regulation.
2.3. Overall multiannual estimate of expenditure:
(a) Schedule of commitment appropriations/payment appropriations (financial intervention) (see point 6.1.1)
€ million ( to three decimal places)
2005 | 2006 | 2007 | Total |
Commitments | 0.450 | 0.850 | 0.850 | 2.150 |
Payments |
(b) Technical and administrative assistance and support expenditure is 0.
Subtotal a+b | 2005 | 2006 | 2007 | Total |
Commitments | 0.450 | 0.850 | 0.850 | 2.150 |
Payments |
(c) Overall financial impact of human resources and other administrative expenditure (see points 7.2 and 7.3)
TOTAL a+b+c | 2005 | 2006 | 2007 | Total |
Commitments | 0.450 | 0.850 | 0.850 | 2.150 |
Payments |
2.4. Compatibility with financial programming and financial perspective
Proposal is compatible with existing financial programming.
2.5. Financial impact on revenue: [21]
Proposal has no financial implications (involves technical aspects regarding implementation of a measure)
3. BUDGET CHARACTERISTICS
Type of expenditure | New | EFTA contribution | Contributions form applicant countries | Heading in financial perspective |
Non-comp | Diff/ Non-diff | NO | YES | YES | No 3 Internal Policies |
4. LEGAL BASIS
- Council Regulation (EC) No. 322/97 on Community Statistics.
- Decision No. 2367/2002/EC of the European Parliament and of the Council of the 16 December 2002 on the Community Statistical Programme 2003 to 2007.
5. DESCRIPTION AND GROUNDS
5.1. Need for Community intervention [22]
5.1.1. Objectives pursued
This Council Regulation aims to make available harmonised statistical information on foreign-controlled affiliates in the reporting country (inward FATS). The feasibility of collecting harmonised statistical information on foreign affiliates controlled by the reporting country (outward FATS) will be tested in pilot studies. The information is needed for drawing up, monitoring and evaluating Community policies, in particular concerning the internal market as well as economic, trade, employment, research and development, competition and enterprise policies. Furthermore, international treaties such as that instituting the General Agreements on Trade in Services (GATS) require harmonised statistics in this area.
5.1.2. Measures taken in connection with ex ante evaluation
The feasibility of collecting the data, taking into account the benefits of the availability of the data in relation to the costs of collection and the burden of businesses was tested for the inward FATS part since reference year 1996 in yearly pilot studies on a voluntary basis.
The legal basis for the pilot studies was Annex 1 Section 10 of Council Regulation No 58/97 of 20 December 1996 concerning structural business statistics, also known as the SBS Regulation.[23] Up to now, 12 Member States participated and are participating in the project, providing data for several reference years (up to 2001). The scope of the pilot studies was extended over the years while introducing additional variables and increasing the level of country detail.
The pilot studies for inward FATS have proven that a breakdown of structural business statistics by ultimate controlling institutional unit of a foreign affiliate is possible. It has been shown convincingly that the data can be collected, that the statistics can be produced in a cost-effective way, and that the results are of great interest to users inside and outside the European Commission. It has been shown that it is possible accurately to compare the impact on foreign controlled affiliates not only with their nationally controlled counterparts, but also with the FATS of other countries.
Several publications presenting the results of the data collection so far have been produced. A publication and several Statistics in Focus on foreign-controlled enterprises have been published so far. Data are also available in Eurostat’s reference database, New Cronos, Theme 4, SBS Domain, FATS Collection.
The main limitation is the lack of coverage of all Member States. To evaluate the implementation of the GATS and the functioning of the Internal Market it is essential to have data for all EU Member States.
The benefits of the availability of the data have been measured against the costs of collection and the burden on businesses for the pilot studies. The burden on businesses was difficult to quantify, because there are not data existing in the Member States quantifying it. But it can be appreciated that it is not very heavy, because existing data are generally used for processing the FATS data sets and the data collection is based on already existing data collections. Therefore, the additional costs of FATS to business outside normal national statistics activity is restricted to occasional contact for clarification of ownership and control, or to a few additional questions on that theme in ongoing surveys.
The costs to the Member States of data collection and processing are also not very high, because existing registers are used and most of the data used to calculate FATS are available as part of the regular surveys. The only additional data collection necessary is for the allocation of control. Therefore, the costs to the Member States are restricted mainly to administrative and computer services expenses.
The implementation of new statistics always involves set-up costs as well as costs for the research and development of the data process in the implementation phase. If FATS can be produced automatically as part of an inquiry results process, for example, the costs will be restricted to register and inquiry analysis time. For the pilot studies the Commission contributed financial support to help cover the costs of the Member States.
The benefits of FATS are also difficult to quantify in figures. However, in the past few years the Member States and Eurostat have registered a growth in the number of requests for FATS-type statistics on both the services and manufacturing sectors from international organisations such as the OECD and UNCTAD as well as from economists, banks, foreign embassies, academics and other statistical offices.
5.1.3. Measures taken following ex post evaluation
According to article 12 of the proposed regulation it is envisaged that a report on the implementation of this regulation will be submitted within five years of the entry into force of the regulation, to the European Parliament and the Council. In particular, the report shall also assess the benefits accruing to the Community, the Member States, the providers and users of statistical information of the statistics produced in relation to the costs.
5.2. Action envisaged and budget intervention arrangements
The proposed Regulation describes the legal framework within which Member States’ National Statistical Offices or Central Banks will provide the FATS data. Both this regulation and future implementing regulations will be output measures, defining the statistical variables to be provided, but leaving Member States full flexibility in how to obtain the variables. In practice, many Member States will use existing data sources to obtain the results required.
The contribution from the Commission budget with respect to the work by the national statistical institutes or other national authorities responsible for Commission statistics represents only part of the total of the statistical work undertaken by the national authorities. In principle production and transmission of regular statistics, which form an integral part of the statistical programme, will be based on the subsidiarity principle, and the operational and administrative costs are borne by the national authorities. The regular data collection is based on existing administrative sources, but for pilot studies co-financing would be necessary to test the feasibility of the collection of the data requested by our main users but difficult to collect.
The Commission contribution will take the form of grants awarded on the basis of grant applications submitted by Member States in advance, which will include estimated cost statements. The pilot studies will be funded via the existing Community Statistical Programme 2003 to 2007. There will be no Community funding on the basis of the proposed Regulation after the year 2007. This funding only concerns co-financing of pilot studies. The population who should get budgetary help are the national authorities. According to Article 2 of Council Regulation (CE) No 322/97 on Community Statistics[24] national authorities shall mean national statistical institutes and other bodies responsible in each Member State for producing Community statistics. They should directly be given to the data processing institutes, namely statistical institutes and central banks.
Work by Eurostat to develop and document the Community methodology and to process, analyse and disseminate data will be covered in full. Additional costs are expected to be marginal.
Data will be provided annually. Eurostat will maintain a database for the data, and will publish FATS annually.
5.3. Methods of implementation
Management of the grants procedure and all data handling will be carried out by permanent Commission staff, with no externalisation.
6. FINANCIAL IMPACT
6.1. Total financial impact on Part B - (over the entire programming period)
(The method of calculating the total amounts set out in the table below must be explained by the breakdown in Table 6.2. )
6.1.1. Financial intervention
Commitments (in € million to three decimal places)
Breakdown | 2005 | 2006 | 2007 | Total |
Grants to national authorities for pilot studies | 0.450 | 0.850 | 0.850 | 2.150 |
TOTAL | 0.450 | 0.850 | 0.850 | 2.150 |
7. IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE
7.1. Impact on human resources
Types of post | Staff to be assigned to management of the action using existing resources | Total | Description of tasks deriving from the action |
Number of permanent posts | Number of temporary posts |
Officials or temporary staff | A B C | 2 3 | 1 | 2 4 | A-grades for implementation of the Regulation and methodological work, B-grades for data treatment and the maintenance of the informatics system. |
Other human resources |
Total | 5 | 6 |
7.2. Overall financial impact of human resources
Type of human resources | Amount (€) | Method of calculation * |
Officials Temporary staff | 648.000 | 6x108.000 |
Other human resources (specify budget line) |
Total | 648.000 |
Existing human resources will be reallocated for the management and the needs of the programme, no other resources are necessary.
7.3. Other administrative expenditure deriving from the action
No or only marginal increase in other administrative expenditure is foreseen. Expenditure on working groups and missions etc. are expected to continue at the current level.
8. FOLLOW-UP AND EVALUATION
8.1. Follow-up arrangements
The implementation of this Regulation will be treated in a comitology procedure. As specified in article 9 of this Regulation, Commission Regulations will be developed in relation to
- the adjustment to economic and technical developments in the collection and statistical processing of data, as well as the processing and transmission of results,
- the adjustment of the definitions, if necessary, according to economic and methodological developments,
- for adaptation of the level of detail listed in Annexes I, II and III of the proposed Regulation,
- for the definition of the proper common quality standards and the contents of the quality reports,
- to setting out the appropriate format and procedure for the transmission of results by Member States
- and to the implementation of the results of the pilot studies.
8.2. Arrangements and schedule for the planned evaluation
Each Member State will take all measures necessary to ensure the quality of the data transmitted according to common quality standards. Member States will supply the Commission with a report on the quality of the data transmitted. The common quality standards as well as the content of the quality reports will be specified by the Commission by comitology. The Commission shall assess the quality of the data transmitted on the basis of the quality reports transmitted by Member States, and shall define the periodicity of such exercise.
The Commission will, within five years of the entry into force of this Regulation, submit a report to the European Parliament and the Council on the implementation of this Regulation. In particular, this report will assess the quality of the statistics produced, assess the benefits accruing to the Community, the Member States, the providers and users of statistical information of the statistics produced in relation to the costs, assess the progress of the pilot studies and their implementation and identify areas for potential improvement and amendments considered necessary in light of the results obtained and the costs involved.
9. ANTI-FRAUD MEASURES
A revised system of internal management and control was put in place following the Commission’s Reform initiative on financial management. This system included a reinforced internal audit capacity.
Annual monitoring of progress with implementation of the Commission’s Internal Control Standards is designed to give assurance on the existence and functioning of procedures for prevention and detection of fraud and irregularities.
New rules and procedures have been adopted for the principal budgetary process: calls for tenders, grants, commitments, contracts and payments. The manual of procedures are made available to all those intervening in financial acts with a view to clarify responsibilities, simplify workflows and indicate key control points. Training on their use is provided. The manuals are subject to regular review and updating.
IMPACT ASSESSMENT FORMTHE IMPACT OF THE PROPOSAL ON BUSINESS WITH SPECIAL REFERENCE TO SMALL AND MEDIUM-SIZED ENTERPRISES( SMEs)
Title of proposal
Proposal for a regulation of the European Parliament and the Council on Community Statistics on the Structure and Activity of Foreign Affiliates.
DOCUMENT REFERENCE NUMBER
The proposal
1. Taking account of the principle of subsidiarity, why is Community legislation necessary in this area and what are its main aims?
Community legislation on statistics on the structure and activity of foreign affiliates is needed to set common statistical standards for data, with a high degree of comparability between data colleted in different Member States. Such comparability is requested by all users, not only at Community level, but also within Member States.
The aim of the proposed regulation is to establish common rules for the production of Community statistics on the structure and activity of foreign affiliates. The regulation defines a set of relevant statistical data, together with the most important definitions needed to ensure the comparability of the statistics. This is essential, for the calculation of EU aggregates, which are in great demand by users.
THE IMPACT ON BUSINESS
2. Who will be affected by the proposal?
- which sectors of business
NACE section C to K
- which sizes of business (what is the concentration of small and medium-sized firms)
As foreign control is exerted in general in big enterprises, the impact on small and medium-sized firms will be relatively small.
- are there particular geographical areas of the Community where these businesses are found
No.
3. What will business have to do to comply with the proposal?
In general, data for inward FATS can be collected from existing administrative sources, e.g. Structural Business Statistics, or statistical business registers in the Member States. Therefore the additional burden for businesses should be small.
For outward FATS, resident owners should supply information on the activity of their affiliates located in extra-EU countries. Additional variables should be supplied with respect to FDI surveys, although FATS only consider controlled affiliates while FDI considers affiliates with more than 10% of equity capital.
4. What economic effects is the proposal likely to have?
- on employment
None.
- on investment and the creation of new businesses
The statistics which will become available via this Regulation will assist enterprises in finding attractive destinations for setting-up foreign affiliates. This Regulation may therefore help businesses in investment decisions.
- on the competitiveness of businesses
The statistics which will become available via this Regulation will assist enterprises who wish to benchmark their operations against the industry average. This Regulation may therefore help to promote the competitiveness of businesses.
5. Does the proposal contain measures to take account of the specific situation of small and medium-sized firms (reduced or different requirements etc)?
Pilot studies have shown that foreign-controlled affiliates are rather big enterprises. Thus, small and medium-sized firms are less concerned by the data collection.
CONSULTATION
6. List the organisations which have been consulted about the proposal and outline their main views.
The National Statistical Offices, the National Central Banks and other competent national authorities responsible for data collections have been consulted on many occasions during the preparation of this text. A draft of a legal act was first presented to a FATS Task Force in September 2002 and was then presented and discussed at the meetings of the FATS Joint Working Group in January 2003, where both groups of data providers, National Statistical Institutes and Central Banks, were present. Based on the discussions in this working group meeting, a revised version was drafted and sent for written consultation to the FATS contacts in March 2003. The draft proposal was amended on the basis of written consultation and a revised version was presented to the BSDG and the CMFB in June 2003. There was general support in both groups for the regulation. The draft Regulation was discussed at the meeting of the SPC on 17 September 2003. Several delegations supported the proposal. The main areas of concern for some delegations were especially outward FATS, exchange of individual data and the level of detail requested. A series of consultations with Member States were conducted; specifically, discussions in the SBS Steering Group in November 2003 and in the CMFB in January 2004 and three written consultations of the members of the FATS Joint Working Group in November 2003, January and March 2004 and one written consultation. These resulted in revisions of the act, and finally the agreed text of the present proposal. In particular, the article on exchange of individual data has been deleted, outward FATS are now planned as pilot studies and the level of detail of inward FATS has been reduced. The draft Regulation was presented to the SPC for opinion in May 2004. The members of the SPC generally supported the proposal.
[1] General Agreement on Trade in Services
[2] Statistical Classification of economic activities in the European Community
[3] Committee for Monetary, Financial and Balance of Payments statistics
[4] Business Statistics Directors Group
[5] OJ C , , p. .
[6] OJ C […], […], p. […].
[7] OJ C , , p. .
[8] OJ L , , p. .
[9] OJ L 14, 17.1.1997, p.1 . Regulation as last amended by Regulation (EC) No 1670/2003 (OJ L 244 , 29.09.2003, p. 74)
[10] OJ L 76, 30.3.1993, p.1.
[11] OJ L 310, 30.11.1996, p.1.
[12] OJ L 52, 22.2.1997, p. 1.
[13] OJ L 184, 17.7.1999, p. 23. Regulation amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council (OJ L 284, 31.10.2003, p. 1).
[14] OJ L 76, 30.3.1993, p. 1.
[15] OJ L 181, 28.6.1989, p. 47.
[16] OJ L 59, 6.3.1991, p. 19. Decision amended by Decision 96/174/EC (OJ L 51, 1.3.1996, p. 48 ).
[17] OJ L 344, 18.12.1998. Regulation amended by Commission Regulation (EC) No 1670/2003, OJ L 244, 29.9.2003, p. 74.
(*) Variables 22 11 0 and 22 12 0 shall be reported every second year. If the total amount of turnover or the number of persons employed in a division of NACE Rev. 1.1 Sections C to E represent, in a Member State, less than 1% of the Community total, the information necessary for the compilation of statistics relating to characteristics 22 11 0 and 22 12 0 need not to be collected for the purposes of this Regulation. If necessary for Community policy requirements, the Commission may, in accordance with the procedures laid down in Article 10(2) of this Regulation, request ad-hoc collection of this data.
(**) For NACE Rev. 1.1 division 65 turnover will be replaced by production value.
[18] OJ L 344, 18.12.1998.
[19] "Provisional code that does not affect the definitive denomination of the country to be attributed after the conclusion of the negotiations currently taking place in the United Nations"
[20] Council Regulation (EEC) No. 3037 of 9 October 1990 on the statistical classification of economic activities in the European Community, and Commission Regulation (EC) No 29/2002 of 19 December 2001 amending Council Regulation (EEC) No 3037 on the statistical classification of economic activities in the European Community.
[21] For further information, see separate explanatory note.
[22] For further information, see separate explanatory note.
[23] Council Regulation (EC, EURATOM) No. 58/97 of 20 December 1996 concerning structural business statistics (OJ No. L 14, 17.1.97)
[24] OJ L 52, 22.02.1997.
01.40.10.00
General, financial and institutional matters
Provisions governing the institutions
General
16.20.00.00
Science, information, education and culture
Dissemination of information
Information and verification
of document: 15/03/2005
of transmission: 15/03/2005; Forwarded to the Council
end of validity: 20/06/2007; Adopted by 32007R0716
dissemination of information
information system
statistical method
Community statistics
economic statistics
financial statistics
European Commission
Proposal for a regulation
European Community
12002E285
-P1
12002E251
COD 2005/0016
Adopted by
32007R0716
Relation
52005AB0016
OJ L 62, 9.3.2005, p. 21–21 (ES, CS, DA, DE, ET, EL, EN, FR, IT, LV, LT, HU, NL, PL, PT, SK, SL, FI, SV)
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Document CELEXE0020071216e37500cjk
for better or worse? COURTING AFRICA

An Opportunistic Ally

Shinn, David H

3,389 words

1 July 2007

Harvard International Review

HIR

52

Volume 29; Issue 2; ISSN: 07391854

English

© 2007 Harvard International Review. Provided by ProQuest Information and Learning. All Rights Reserved.
China's Increasing Involvement in Africa
Chinese officials, think tank researchers, and representatives of state-owned companies frequently refer to a "win-win" outcome when discussing Chinese-African relations. Most of my interlocutors during visits to Beijing and Shanghai this year sincerely seemed to believe that China and Africa have had, and will continue to have, a mutually beneficial relationship. China and Africa have been trading partners for many centuries. The Chinese Communist Party formed close ties with African liberation movements in the late 1950s. However, its engagements with the continent over the past 10 years have greatly exceeded earlier contact. As the quantity and intensity of these relationships have increased, China has been subjected to the realities of dealing with Africa and has come under criticism for some of its government policies and business practices. So far, China has shown an unusual ability to react constructively and mitigate problems caused by its policies. Indeed, if China continues its deft foreign policy in Africa, popular discontent among Africans will likely remain manageable.
Chinas Strategy in Africa
In general China has sought to portray itself as the world's largest and most powerful developing country, while it describes Africa as the continent with the largest number of developing countries. It considers Chinese and African economies as highly complementary with strong prospects for cooperation. China's January 2006 African Policy statement proposed a decades-long comprehensive agenda that has been well received by African leaders. This statement emphasized non-interference in internal affairs, equality, mutual benefit and support, and, most critical to Beijing, an acceptance of the one-China principle.
This principle assigned a premium to high-level exchanges in all spheres of activity. It called for a new international political and economic order that would safeguard the legitimate rights and interests of developing countries. China promised to facilitate the entrance of African products into the Chinese market, increase investment in Africa, and intensify agricultural cooperation. It began to encourage Chinese enterprises in order to help build infrastructure in African countries, something the West has been reluctant to do in recent years. And it promised to help Africa raise the level of tourism, reduce its debt, and increase economic assistance. The policy statement called for comprehensive cooperation in the fields of education, science and technology, culture, medicine and health, media, the environment, and disaster relief. It offered training assistance to African military personnel as well as support to internal defense building and African peacekeeping operations. Finally, the statement noted that China would promote cooperation with African judicial, law enforcement, and immigration departments while addressing non-traditional security threats such as terrorism.
The Forum on China-Africa Cooperation (FOCAC), launched in 2000, is the vehicle through which China manages this relationship. The Third Ministerial Conference of FOCAC took place in Beijing in November 2006. Ml 48 Mrican countries that have diplomatic relations with China sent senior delegations, most of them led by dieir respective heads of state. Only five countries-the Gambia, Malawi, Swaziland, Burkina Faso, and Sao Tome and Principe, all of which have formal relations with Taiwan-did not participate.
The Beijing Action Plan resulting from the last FOCAC conference was ambitious in both its depth and breadth. Specific decisions included a Chinese pledge to increase from 190 to 440 the number of items from Mrica's least developed countries that are permitted to enter China duty-free. China said it would establish a China-Africa Development Fund capitalized at US$5 billion to support investments in Mrica by Chinese companies. It also promised to double the value of its 2006 development assistance program by 2009 and cancel some states' government interest-free loans that were due at the end of 2000.
In addition to these economic initiatives, China agreed to train 1 5,000 African professionals over the next three years and to increase the number of Chinese government scholarships for African students from the current 2,000 to 4,000 by 2009. It will help establish 100 rural schools, send 100 agricultural experts to Africa, and setup 10 agricultural technology demonstration centers. It pledged to build 30 hospitals and 30 demonstration centers for the prevention and treatment of malaria and will continue to send medical teams and supplies to Africa.
This February, President Hu Jintao made his third visit to Africa since coming to power in 2003. His twelve-day, eight-country tour focused on trade, aid, and investment. Hu canceled debt during stops in Cameroon, Liberia, Sudan, Zambia, and Mozambique, and he pledged soft loans and grants to Cameroon (totaling US$100 million), Sudan (US$1 1 7 million), Namibia (US$139 million), and Seychelles (US$35 million). He also inaugurated a major mining partnership in Zambia's copper belt and pledged a new "strategic partnership" with South Africa. The visit illustrated China's way of using high-level personal contact to reach out to virtually every country on the continent with which it has diplomatic relations. The Chinese Communist Party also maintains regular contact with ruling Mrican political parties and even some opposition parties.
Forces behind China-Africa Ties
While China's strategy in Africa plays down the importance of its quest for Mrican natural resources to fuel its fast-growing economy, most observers believe that its desire for Mrican energy, minerals, and timber is the single most important factor driving the relationship. One-third of China's oil imports come from Mrica, and this proportion is growing. But the relationship also provides benefits for Africa, including Chinese aid and direct investment, reasonably good quality manufactured goods at low costs, and some technology transfer. Granted, China will not cure poverty in Mrica, but it is certainly making a positive contribution.
China's foreign aid, loans, technical and military assistance, export credits, high-level exchanges, Confucius Institutes, and debt cancellation policies all support its efforts to increase its influence in Africa. China is working hard to develop meaningful relationships with all 48 African countries that recognize Beijing and has a resident embassy in every African country with which it has diplomatic relations except for Somalia, where the security situation precludes one. Indeed, even the United States does not have resident diplomatic presence in small island nations like the Seychelles, Comoros, and Sao Tome and Principe.
Beijing's ties are especially intense with those countries that are current or potential suppliers of raw materials for the Chinese economy. Angola, Sudan, Congo-Brazzaville, Equatorial Guinea, Gabon, Nigeria, Algeria, and Chad all sell significant amounts of oil to China. Soutii Africa, Zimbabwe, Zambia, Ghana, Congo-Brazzaville, Namibia, and the Democratic Republic of the Congo provide minerals, while Gabon, Congo-Brazzaville, Equatorial Guinea, Cameroon, and Liberia are suppliers of timber.
It would, nevertheless, be a mistake to conclude that China considers Africa only as a source of raw materials. China also views Africa, which contains 14 percent of the world's population, as a potentially important market for its exports and a destination for Chinese investment. Trade between China and Africa reached US$50.5 billion in 2006, up 30 percent over 2005, and it is expected to reach US$100 billion by 2010. China is now Africa's third largest trading partner after the United States and France, and by the beginning of 2007, Chinese investment in Africa reached US$12 billion. Although increasing rapidly, this amount is modest compared to Western investment and has been concentrated in oil and extractive industries.
African countries constitute well over a quarter of the United Nations' 192 members and are thus an essential component of China's efforts to play a more important global role. China and Africa tend to support each other in international forums on human rights issues and those of special concern to the developing world. China has been most appreciative of Africa's strong advocacy for its one-China policy and looks for future backing on other contentious political and economic issues. China is developing broadbased strategic partnerships with key African countries such as Egypt and South Africa, and it has been looking to develop a similar relationship with Nigeria.
Except for announcing its numerous high-level military exchanges, China tends to avoid commenting on its military and security relations with Africa, which are almost as strong as its economic ties. The Beijing Action Plan said nothing about military cooperation other than expressing continued support for UN peacekeeping operations in Africa. Chinese military linkages with Africa are historically based on strong support for liberation movements, and military ties continue to be significant today in Algeria, Sudan, Zimbabwe, Nigeria, Angola, Egypt, Ethiopia, and Tanzania. The major recipients of Chinese military equipment, training, and cooperation are frequently important sources of strategic raw materials. China's long-standing military relationship with Tanzania and its somewhat more recent relationships with Egypt and Ethiopia are exceptions to this trend. Although China is a major supplier of small arms to Africa, since 2000 it has remained well behind Russia and Germany in the total value of arms it transfers to the continent. China has become a significant participant in UN peacekeeping missions in Africa, where it now has more than 1 , 3 00 personnel. Its largest involvements are in the Democratic Republic of the Congo, where it has mining concessions; Liberia, which provides timber; and Sudan, where it has large oil investments.
As China considers its future global security interests, analysts wonder if it intends to develop a "blue water" navy. One expert on this subject estimates that China could have such a fleet by 2020. The Chinese navy sent two of its ships to Africa for the first time in 2000 when they called at ports in Tanzania and South Africa, and as part of its first roundthe-world cruise in 2002, Chinese ships visited Alexandria, Egypt. These developments suggest that China, a growing regional military power, may eventually build a fleet that does not have to rely on US protection of the sea lanes between China and Africa.
China as a Development Model for Africa?
As Beijing expands its influence in Africa, many Westerners are concerned that China is attempting to serve as a development model for African countries. Indeed, some observers argue that this goal is implicit in the Beijing Action Plan. A few African leaders have suggested that China's experience can guide their development strategies. The 2006 Declaration of the Beijing Summit at the FOCAC Conference stated that "African countries are greatly inspired by China's rapid economic development."
However, China has not made any particular effort to convince Africans to follow its development path. Chinese experts on Africa insist that China is not an appropriate development model for the continent, explaining that the two regions have very different historical traditions and important structural differences. Even within China, there are widely varying development models, depending on the level of education, available skills, and capital. While some regions rely on small and medium sized companies, others emphasize large enterprises that export most of their production.
Most African countries do not have the economic advantages that can be found in China, such as significant investment initiatives from a broad diaspora community. Furthermore, China has a higher savings rate and level of education than virtually every African country. Indeed, an African ambassador in Beijing with whom I spoke may have provided the best answer to the development model debate. He argued that while China is not a model for Africa in the macroeconomic sense or from a political point of view, African countries might still be able to effectively emulate individual Chinese policies such as its initiative to provide universal primary education.
Facing Reality and Criticism
The more it engages with Africa, the greater the likelihood that Beijing will have to face the reality of doing business on the continent. Nearly every African government is pleased with China's increasing presence on the continent. China offers an alternative, whether actual or potential, to traditional Western assistance and political support. Based on anecdotal evidence, most ordinary Africans seem to welcome China's attention as well. However, reality is beginning to confront both Africa and China in this area. It is not just Western countries and organizations that criticize China's unwillingness to improve environmental practices and confront human rights abuses, corruption, and poor governance in Africa. African civil society organizations, opposition parties, and even occasional government leaders are expressing concern that China is either complicit or too silent on these controversial issues.
China has received the most criticism for its strong economic, political, and military support of Sudan and Zimbabwe - two countries with very poor records on human rights. Sudan is the greater challenge for China because of the conflict in Darfur, which has been labeled genocide by the United States. China has large investments in the oil industry and receives about seven percent of its imported oil from Sudan. Western countries have long accused China of not putting sufficient pressure on Khartoum to change its policy in Darfur. China has moved from almost unconditional support of Khartoum to quiet pressure for a larger UN peacekeeping role - a message that President Hu Jin tao conveyed to Sudan's President, Omar Al Bashir, at the Beijing summit last November and during his visit to Sudan in February. This signals a slight retreat from China's policy of non-interference in African internal affairs. Yet at the same time, Hu cancelled some of Sudan's debt and offered to build a presidential palace. The United States complained that this sent a mixed message, expressing disappointment that China did not apply more diplomatic pressure on Sudan to reform.
Zambia is a second example of a case in which Chinese investment has sparked criticism - this time domestic. China reopened a large copper mine eight years ago that initially engendered considerable goodwill due to high job creation. Then there was a serious mining accident in 2005 followed by allegations of poor safety conditions, slashing of workers' benefits, and discouragement of union formation. As a result, the leader of the opposition party whipped up anti-Chinese sentiment before last year's presidential election. And even though he lost, the event created a permanent atmosphere of animosity toward China. President Hu, upon learning that miners planned to protest, canceled his proposed February visit to the mine at the last minute.
China and Mrica are, in many respects, rather unlikely partners. Africa has 900 million people; China has 1.3 billion. Africa's total gross national income is only about one quarter of China's. The gross national income per capita in China is more than US$1,500, while the average in Mrica is well under half that amount. China's share of world trade is about nine percent, Mrica's is only about two percent. Mthough most of China is still poorly developed, there is no part of Mrica, with the possible exception of South Mrica, that is comparable, even on a small scale, to China's highly developed and industrialized coastal region.
And although trade between China and Africa has generally had positive consequences, it has also generated increasing problems. China has major trade deficits with the five Mrican countries that sell it large quantities of oil and moderate deficits with the half dozen states that sell it significant amounts of minerals and timber. It has large trade surpluses with nearly all the remaining countries, which include many of Africa's poorest states. Total Chinese-Mrican trade is nearly in balance, although Chinese exports to Mrica are growing faster than its imports from Africa. For example, in 2006 China had a surplus of more than US$1.5 billion with South Mrica. There is growing pressure to redress this imbalance. This situation led South Mrican President Thabo Mbeki to warn that "China cannot only just come here and dig for raw materials and then go away and sell us manufactured goods."
The problem has been especially severe for Mrican countries that produce textiles. The end of the World Trade Organization's Multi-Fibre Agreement in 2005 eliminated any advantage held by the Mricans. It permitted more efficient Asian, especially Chinese, producers to undercut Mrican textiles and flood Mrican markets. Chinese textile exports have seriously harmed industries in Lesotho, Swaziland, Ghana, Uganda, Kenya, South Africa, Zambia, and Morocco. Many African textile factories have been shut down, resulting in the loss of an estimated 250,000 jobs and 37 percent of Africa's textile capacity.
A related problem is the growing number of small Chinese traders and business persons residing in Africa. Chinese officials explain that many of these businesses come to Africa from third countries over which China has no control. In South Mrica alone, such business persons are estimated to number between 100,000 and 300,000. They often undercut small African traders, forcing them out of the market and generating hostility toward the Chinese. In addition, construction projects financed by China occasionally result in an influx of Chinese laborers, which sometimes sparks complaints from Mrican workers who feel that they are entitled to such jobs. Nor is the Chinese community immune to conflicts in Mrica - early this year Nigerian gunmen abducted five Chinese telecommunications workers in the volatile Niger Delta.
Africans are generally quick to criticize the conditionality of Western assistance and praise the Chinese for eschewing it. For example, Ethiopian Prime Minister Meles Zenawi pointed out that one cannot buy good governance in Mrica; such developments can only come from inside the country. The Chinese, he added, understand this fact. On the other hand, Western donors, the World Bank, and the International Monetary Fund worry that unconditional aid from China is harming their efforts to achieve economic and political reform in Mrica. World Bank President Paul Wolfowitz expressed concerns last year about the lending practices in Mrica of Chinese banks that ignore a code of conduct for meeting social and environmental standards. Environmental groups are especially critical of the environmental implications of the Merowe dam in Sudan, where Chinese companies are the primary contractors.
The lines are now drawn on most of these issues. China realizes it faces challenges and some criticism from both Mricans and the West. It has already begun to respond to Mrican trade complaints and Western concerns over its reluctance to put pressure on Sudan concerning Darfur. As its global role grows, China will probably move further away from some of the principles in its 2006 African Policy statement and the Beijing Action Plan. It will not, however, jeopardize relations with African governments in control of critical oil and mineral exports that fuel China's economy. However, if China hopes to be able to maintain its strong influence on the continent and continue to reap the benefits of the close relationships it has established with African states, it will have to balance its own economic and strategic interests with the complaints and criticisms that continue to be levied against it.
"AFRICANS ARE GENERALLY QUICK TO CRITICIZE THE CONDITIONALLY OF WESTERN ASSISTANCE AND PRAISETHE CHINESE FOR ESCHEWING IT."
Chinese officials, think tank researchers, and representatives of state-owned companies frequently refer to a "win-win" outcome when discussing Chinese-African relations. China and Africa have been trading partners for many centuries. The Chinese Communist Party formed close ties with African liberation movements in the late 1950s. In general China has sought to portray itself as the world's largest and most powerful developing country, while it describes Africa as the continent with the largest number of developing countries. It considers Chinese and African economies as highly complementary with strong prospects for cooperation. China and Africa are, in many respects, rather unlikely partners. Africa has 900 million people; China has 1.3 billion. Africa's total gross national income is only about one quarter of China's. The gross national income per capita in China is more than US$1,500, while the average in Africa is well under half that amount. China's share of world trade is about nine percent, Africa's is only about two percent.
Copyright Harvard International Relations Council Summer 2007 | DAVID H. SHINN is an adjunct professor at the Elliott School of International Affairs at George Washington University. Previously he was Ambassador to Burkina Faso and Ethiopia.
Document HIR0000020070814e3710000i

Features

Export credit finds a way in Africa

2,367 words

1 July 2007

Trade Finance

TRAFIN

English

Copyright 2007 Euromoney Institutional Investor PLC
The key to export finance in sub-Saharan Africa (SSA) is to be flexible. The push by Western export credit agencies (ECAs) to become more flexible is growing with the UK's ECGD recently simplifying its rules on foreign content and becoming more flexible regarding the rules for UK exporters looking for support for contracts involving non-UK firms. ECGD is the latest in a long line of ECAs from predominantly service-based economies that have become more adaptable.
Danish companies manufacture wind turbines in India and EKF will cover it. Eriksson can be 'Canadian' and eligible for EDC cover. The only people who are not likely to move and be more flexible are the US – due to their strict mandate concerning US jobs – but innovation can be found in other areas.
Sub-Saharan Africa (SSA) is certainly an area of focus for export finance and it is those institutions showing the most flexibility that are able to work in this challenging market. The focus for ECA work is supplying capital goods for infrastructure and commodity extraction work. While much of this work has in recent years drifted towards the syndicated loan business or structures involving development financial institutions, thereby declining proportionally, in terms of the SSA trade business a fair amount is being done.
Mining
The real focus of ECA business at the moment is mining. This is being led by the usual suspects of EDC, JBIC, ECIC, EFIC and Kexim. There is little evidence of large-scale Chinese ECA involvement yet but it will come. Mining does provide the impetus for a number of other projects and offshoots, so South Africa's Transnet will be involved in building the lines and transporting the coal to port from a number of mines and will use ECA techniques. To date this has largely been done by JBIC untied loans.
Similarly while bankers say they have yet to see large scale Chinese involvement in mine development, they are active in the related transportation sector. These are not enormous projects but deals can reach the hundreds of millions of dollars in size. The equipment is durable and easily fixable and ideal for the SSA market.
Ulrich Vukovich, vice president export and agency finance at Citi in London, states: "There are several big financings in the metals and mining industry in the pipeline at the moment. We are advisers to Guinea Alumina on their $3 billion alumina refinery project in Guinea. There will definitely be a multilateral and
ECA angle to this. There will also be a lot of activity over the next couple of years in countries such as the DRC or Zambia."
Oil & Gas
In terms of oil and gas, as crude oil prices remain above $70/barrel you do not see much ECA business as you do not need it. However, like mining there is scope for the more flexible end of ECA work. Untied aid from JBIC, not linked to Japanese content, but with the idea that there will be Japanese offtake is proving to be the way forward for Japan.
Piers Constable, director of structured trade and export finance at Deutsche Bank in London comments: "JBIC is investing hugely in the oil and gas sector across the board in Southern and West Africa. This fits in well with its remit and on the untied side they have much more competitive terms and they're lending larger sums than the other ECAs come up with."
Also remaining flexible is China Exim. In 2006 Nigeria agreed to give China four oil drilling licences in exchange for a commitment to invest $4 billion in infrastructure. At the same time, another agreement set up a $500 million export credit from China Exim to Nigeria for infrastructure development. In return, China National Petroleum Company was offered first refusal at an auction for four oil field exploration blocks, which it subsequently won. The company also agreed to invest $2 billion in the 110,000bpd Kaduna refinery not only pledging to refurbish it, but also increase capacity.