Meles returned from China with fistful of dollars: No time to worry about the debts! By Keffyalew Gebremedhin
Prime Minister Meles Zenawi was one of the high-level guests of the Chinese government at the opening of the 26th Summer Universiade in Shenzhen, China. The competition would run through 23 August. Universiade is sports competition, organized every other year by the International University Federation, ever since its first game in 1959 in Turin, Italy, where it adopted its name as Universaide from the Italian.
In attendance at the Shenzhen events have been Mozambican President Armando Emilio Guebuza, Bolivian President Evo Morales, Fiji’s President Ratu Epeli Nailatikau, Sri Lankan President Mahinda Rajapaksa, Romanian Prime Minister Emil Boc and UNESCO Director-General Irina Bokova. Whereas mixing business with pleasure is not that bad after all, Universaide is only a pretext for these dignitaries, with the real purpose of their visit being business with the Chinese government.
For instance, Ethiopia’s Finance Minister Sufian Ahmed, who has accompanied the prime minister, has signed a loan agreement of $500 million with China’s Export and Import Bank. It is indicated that the loan would be used to implement 15 development projects, as part of the growth and transformation plan (GTP), according to http://www.theafricareport.com/. After the signing the agreement, Sufian noted, “The projects to be implemented have already been finalized and will be discussed with the Chinese government.”
In this brief remark meant to thank the Chinese government, what Sufian meant in his reference to ‘discussion’ with China on the finalized projects has not been clarified. It is not clear whether China would like to be involved as partner in joint venture or would like to discuss details of equipment to be purchased, or experts to be sent.
In this context, it should be mentioned that, in a country with huge unemployed labor that could have been utilized to accelerate the country’s development with resources secured in loans from foreign countries, such as China, it is reported that more than 20,000 Chinese have already been working in various development projects around the country. There is no doubt that China has contributed a great deal to Ethiopia’s infrastructural development. But the relationship has been business, not grant based. This should put Ethiopia as both beneficiary developing country and a partner that pays its debts promptly and in need of building its capacity. Therefore, China has to see to it that it that the benefits are mutual. It is time for Ethiopia too to make a bit more effort to get that point of view across.
So far, perhaps the drawback is on both sides. China’s is due to their lack of experience in this type of relations with a recipient country. On the Ethiopian side the main shortcoming seems to me its encumbrance by an excessive Ethiopian sense of ውለታ/ወሮታ (boundless gratitude and indebtedness) for the possibility that existed, for the many kms of roads, power lines, efforts in telecommunications and the availability of loans. Excessively being laden by this is misplaced consideration, which even the counterpart can neither fully take notice of nor appreciate.
Consequently, if technology transfer were to take place from China to Ethiopia, the current modality of archaic economic and development cooperation would have to be revised, if not revamped. There are also Chinese experts who recognize this and have started speaking openly. The political cooperation has so far been given so much consideration, as it should be, but at the same time for a country for which time has been running out fast, it is also important to ask a little more of the mutton.
Meles casts his nest wide
During the meeting on 12 August 2011 with President Hu Jintao in Shenzhen, Guandong, Meles “thanked China for its indispensible role in promoting economic growth of Ethiopia,” according to Xinhua. He also added, “Since the two countries forged official ties, especially in recent years, bilateral relations have seen smooth growth as communication between the governments, political parties and people of the two countries continued to increase.”
The prime minister then “expressed the wish that the two sides further strengthen cooperation in the areas of politics, trade, economy, investment and infrastructure development so as to lift bilateral links to new heights.” I do hope that Meles was talking in a diplomatic language the same thing I am hinting here, when he mentioned ‘new heights’.
Aloof as he always seems, Hu responded in generalities—a language diplomats employ either when they have nothing concrete to say or they decline a request. In this case, I do not know for sure in which category he would fall, but he stressed, according to Xinhua, “China-Africa relations have made new progress due to the effectiveness of the China-Africa Forum. He said the two sides are working on developing a new strategic partnership that features mutual trust in politics, win-win cooperation in economy and exchange and mutual learning in culture.”
Of course, one cannot turn a blind eye to what sounded like more of an amplification to the above remark: “China is ready to have even closer communication and cooperation with Ethiopia and all other African countries to advance China-Africa strategic partnership in an extensive way.”
More distinct, however, a report on the Meles-Hu meeting is the one by the Forum on China-Africa of 12 August. It quotes Hu saying, “China is ready to work with Ethiopia to expand political communication and dialogue, continue to support each other on issues concerning major interests of their own and deepen pragmatic cooperation in the areas of trade, investment, infrastructure development, education and culture. He expressed the willingness to further advance bilateral friendly cooperative relations to new stages.”
Meanwhile, Meles spent time in search of funds to finance development projects, including joint ventures, mostly in an effort to lure Chinese investors to set up businesses in Ethiopia. There are promises, but nothing concrete is reported so far that could be translated into something programmatically translatable.
During the prime minister’s visit to China, China Daily—the country’s second popular newspaper after The People’s Daily, reported that Chinese aid volume to Africa has since September 2009 notched up to 76 billion yuan ($12 billion). It is possible to see that, of this the share of Ethiopia is estimated to be roughly $4 billion in loans that have gone, among others, into the building of telecommunication infrastructure and road projects.
The meeting with Premier Wen Jiabao not only reaffirmed an additional 353.2 million yuan (about $55 million) in emergency food aid to drought and famine stricken Horn countries, which President Hu already had hinted would arrive shortly. But also Wen pledged China’s “support to Ethiopia’s economic development plan.” He elaborated that by saying China would enhance cooperation in electricity and communication, expand industrial investment and technology transference, and help Ethiopia to build an efficient agricultural sector. No details have been released.
Wen also said that China would stimulate the Group of 20 to establish a sound environment for Africa’s stability and development, according to CCTV report of 15 August. The purpose of this, according to the Chinese prime minister is to press the international community to “focus on settling the imbalance between the North and South as a starting point and target for coping with global economic imbalance.”
A Chinese expert speaks out
Chinese aid is varied, but its gives little wiggle room for a recipient country. These varied forms of Chinese, according to China Daily of 16 August 2011, ranged from common commodities [sic] and technology to medical care and debt relief. Without going to the details of Chinese aid to Africa, Deng Yanting, a researcher on African studies with the Chinese Academy of Social Sciences, observed that aid to some African countries should be optimized. In elaborating that, he said, “China’s aid should be more focused on capability-building of African people, instead of pure ‘project delivery’.”
This is a very encouraging direction, if the Chinese government shares that view. It is a recognition that has gone a step forward from those that we have heard of so far. Deng makes sensible case for that by arguing: “Because of the extreme imbalance of knowledge and understanding on the continent, China still has a lot to learn from some mature aid systems while staying cautious of their drawbacks.”
Incidentally, in the 2011/12 Ethiopian government budget, the amount of external loan is capped at ETB 6.6 billion ($388 million), as I indicated in my article, http://transformingethiopia.wordpress.com/2011/08/02/it-is-one-thing-to-transition-to-complex-program-budgeting-system-another-to-govern-by-principles-of-transparency-accountability-2/ of 2 August 2011. As far as the federal government’s 2011/12 budget is concerned, that limit has been long breached, if one takes the various sources of foreign loans that of late have entered the country.
Surely, there is no need to show this in the official budget, since there are the so-called development agencies such as EPPCO, other energy and mining projects, ET, in addition to the various channels of government ministries and agencies that receive foreign funding. Most of these have so far been free from oversight by parliament and citizens. In the last few years, some well-intentioned economists in parliament raised the question of debt that the Meles government has been kept away from oversight by parliament. Meles attacked them right there in parliament as traitors working with the enemy including Eritrea to silence them.
Fortunately, this question has not died down today. This very same question was raised on 5 July during the budget reading in parliament. The prime minister glossed over the issue saying that any Ethiopian can ask to see their audited books as a matter of right. However, he never responded to the specific question of parliamentary oversight of the development agencies that roll hundreds of millions in foreign loans.
In this situation, who knows, how and when too much debt is too much for Ethiopia? In their report Debt Sustainability Analysis (DSA), the IMF and World Bank have given the Meles regime a free ride on debts, stating it would be manageable. They wrote, “Ethiopia‘s external debt stock is rising largely due to the surge in public enterprises external borrowing. The DSA indicate that the Present Value of debt to GDP and Debt to Exports are projected to rise from 13.5% and 119.1% in 2010 to 18.3% and 129% respectively in 2011, before declining in subsequent years.”
I am not certain one should take comfort from that. Given what the risk of sovereign debts are doing to the global economy today, an indication of IMF failure to carry out its surveillance mandate of the health of the economies of its 187 member states, under Article IV of its Articles of Agreement, as revised, prudence is the message for Ethiopians.
While cautiously concurring with the IMF and WB as far as the Debt Sustainability Analysis (DSA) report is concerned, nonetheless, the African Development Bank (AfDB) forewarned, “While external debt indicators are still within the thresholds and Ethiopia‘s risk of debt distress has been lowered from moderate to low [by IMF & WB], the situation will require close monitoring, especially public enterprise borrowing (Ethiopia: Country Strategy Paper 2011-2015, April 2011. In the face of the little it can do to change, amend or reverse, what the big guys have asserted as a position for Ethiopia, AfDB’s caution makes good sense
Nonetheless, the timely question for all Ethiopians should be how should we know before external debt breaks our country’s back?