The Dragon’s Gift by Deborah Brautigam

Author:Deborah Brautigam
Language: eng
Format: epub
Publisher: Oxford University Press
Published: 2009-03-25T16:00:00+00:00

Cars, Calf, and Cows

The Friendship textile mill is the struggling face of China’s earlier aid system, a relic of 1969, still on life support from the Chinese government forty years later. But in the 1990s, using the Ministry of Commerce’s new joint-venture and cooperation fund and the concessional loans from the Eximbank described in Chapter 4, China began to increase aid for industrial ventures, financing (among other projects) a new cement plant, and a woolen knitting factory in Zimbabwe, a bedding factory in Botswana, an ice-making factory in Cameroon, a copper-processing factory in Zambia, and a pharmaceutical factory in Kenya. Two aid-funded factories were reportedly set up in Sudan to produce medical gauze and embroidery, and the Chinese gave aid to establish at least four tractor and farm machinery assembly joint ventures in an assortment of countries. In Ghana, Chinese aid funded ventures in cocoa processing (Calf International Cocoa) and fish nets and rope (Ghana Shandong Netting Company).

Information on these projects is scarce and fragmented. In my travels in Sierra Leone, for example, I was surprised to find the Okeky Agency still chugging along in its 1985 arrangement with a Chinese fishing company, Magbass still producing sugar, and the Chinese-built hydropower station still producing electricity. People I asked in Freetown were not always aware of what was happening in the hinterlands of their own country. We do know, however, that some of the Eximbank concessional loan projects launched in the first round of the new aid system set up in 1995 failed, mainly because politics entered into the decisions on aid.

In Côte d’Ivoire in 1997 the Chinese embassy (responding to the call from above for more joint ventures) played a large role in bringing together two Chinese companies and a local firm as a partner in a joint venture to set up an automobile assembly plant in Abidjan. The Eximbank gave the project a concessional aid loan. But the Chinese companies assumed that because this was an aid project it was “political,” and they did not need to consider the economics closely. As a Chinese researcher who investigated the project concluded, they ignored their own responsibility for appraisal, “thinking that the government would fix any problems that arose.”30 None of the joint-venture partners apparently noticed that import duties on finished automobiles and on components were the same: 29 percent. No one noticed that competition was already fierce in the automobile market, which was relatively small. And the cost of water, local labor, and electricity were all higher in Côte d’Ivoire than in China, giving the new company no cost advantage at all.

The Calf Cocoa International cocoa processing factory in Ghana was also overtly political.31 In 1998, Ghana received one of the early Eximbank concessional lines of credit for RMB 150 million ($18.1 million). The Rawlings government used the loan to fund Ghanaian participation in three private joint ventures with Chinese investors: a gold mine, a fishing net and ropes factory, and the Calf Cocoa project. The Calf Cocoa project, built

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