chinese contracts and the reconstruction in rdc

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Chinese contracts and the reconstruction in RDC

• “Hence to fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy's resistance without fighting.”

• Sun Tzu, 544-496 BCE

S.Marysse

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‘Chinese contracts and the reconstruction in RDC’

1. Post-colonial de-and reconstruction of Zaïre/DRC: a reminder

2. China’s new geo-political ‘weight’

3. The chinese foreign policy towards Africa:the new agenda

4. The DRC-China: recent tendencies

5. An analysis of the chinese contracts in the DRC

6. Conclusion: Red imperialism or reconstruction boost?

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• The unprecedented regress by 30 years neo patrimonialism and 5 years of international war

• A relative succesful post conflict reconstruction (the first steps)

• But , too little too slow productive investments

1.Post-colonial de-and reconstruction of Zaïre/DRC: a reminder

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reproduction

Accumulation 1975

Good governance

Bad governance

Formal sector

SMMESurvival activities

Wild Capitalism

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reproduction

Accumulation 2003

Good governance

Bad governance

Formal sector

SMMESurvival activities

Wild Capitalism

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• Zaire/DRCongo, the implosion of the formal economy and the decline of the stateTableau1 Indicateurs économiques sélectionnés unité 1980 1999 Population mln. 27 55

GDP mln. USD 14922 5200 GDP % of 1980

GDP 100 35

Revenu de l’état (G) Mln USD 2000 150 Exportations mln. USD 2507 1050 Importations mln. USD 1117 540 Cuivre 1000 tonnes 468 (in 1988) 35 Ciment 1000 tonnes 485 (in 1988) 149 Diamant 1000 carat 18163 (in 1988) 26084

Source: World Bank, World Development Indicators and Lukusa, CEDAF, 1999


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1.Post-colonial de-and reconstruction of Zaïre/DRC: a reminder(ctd)

• Some background to the copper and cobalt sector- 1967: nationalisation of UMHK: the promise and

the demise-Belgian and Congolese actions/reactions

- Gécamines ‘the father and the mother of the congolese’ :rise and fall

- Property –production –management: the problem of political economy

- Some technical points

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1.Post-colonial de-and reconstruction of Zaïre/DRC:

a reminder

Contribution of Gécamines to the state budget (in %): 1980-2006

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• Some background to the diamond sector: evolution of artisanal/informal exports as % of total diamond exports

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• Some background to the diamond sector: evolution of artisanal/informal exports as % of total diamond exports

Exportations de Diamant (valeur en $million)

0

100

200

300

400

500

600

700

800

900

1000

1997 1998 1999 2000 2001 2002 2003

Officielles Frauduleuses

Exportations officielles de diamant

0

200

400

600

800

1.000

1.200

1.400

2003 2004 2005 2006 2007

Valeur (million US$)

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• Inflation and growth in the post conflict period

• Elections 2005: the nation has saved the state and now it is the state who has to save the nation


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But governance is still a serious problem

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2.China’s new geo-political ‘weight’

Table 1. Future evolution of the economic weight of different states (2000-2040)

(Group of) countries % of global production in 2000

% of global production in 2040

United States 22 14

EU (15) 21 5

India 5 12

China 11 40

Japan 8 2

South-East Asia (6) 6 12

Rest of the world 28 16

Source: Adapted from R.W. Fogel, “Capitalism and democracy in 2040: forecasts and speculations”, Working Paper, National Bureau of Economic Research, Cambridge MA, June 2007, p.2-4.

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• From Bandung (1955) to Focac (2006)/continuity and discontinuity - China’s stance for an independant South South

Cooperation, ‘Non Aligned countries (1954 Zhou en Lai) Five principles

- Forum for Chinese Cooperation with Africa convened 46 african countries in Beijing (2006) Non interference-respect for national sovereignty- no strings attached- mutual respect –mutual benefit (Win–Win relation)

3. The chinese foreign policy towards Africa:the new agenda (1)

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The evolution of African trading partners (1)


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The evolution of Chinese oil imports


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Chinese infrastructural investments in Africa

• Infrastructural works in exchange for mineral resources :barter reinvented?

• First national entreprises followed by market penetration

• Cheap, relative good quality• Few linkages for the local

economy (imported skilled & non-skilled workers, low salaries)

• Easy marketpenetration, low level of international competition for chinese companies.


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Chinese FDI in Africa: characteristics and importance

• A modest but increasing part: accumulated I during the last 3 years (1,5 billion $ whereas total FDI equals 47, 5 billion $ in Africa)

• Special characteristics- Chinese investment is state led (longer time horizon , less

transaction- and coordination costs-unity of command)- Chinese FDI is also linked to aid and geo-strategic choices –

access to mineral resources- Access gate to mineral resources is aid for infrastructural

(re)construction where China has a competitive edge (low cost-reliable execution…)and ample financial resources


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Evolution du commerce Sino-Congolais

0

50

100

150

200

250

300

350

400

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

mio d

e US $

Exportations de RDC en ChineImportations de Chine en RDC

4.The DRC-China: recent tendencies(4)

Composition des exportations de la RDC en Chine

0%

20%

40%

60%

80%

100%

199519961997199819992000200120022003200420052006Pér tot

Minerais de cobalt Minerais de cuivreAutres matières premières Matières raffinées

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5.An analysis of the chinese contracts in the DRC(1)

• 2008 Sino congolese contracts - 8.5 billion$ infrastructural investments (rehabilitate 3500 km of tarred roads and 3200 km of railways. What is more, 32 hospitals, 145 health centres, two universities and 5000 houses will be constructed 8.05 million metric tons of copper, 202,290 metric tons of cobalt and 372 metric tons of gold. Aggregate production has been valued at $3 billion dollars

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Characterisitics• It is a unique document which includes commercial

relations and investments, development cooperation and financing for a period of 30 years.

• barter principle as a new form of honest cooperation • ‘win-win’ principle • Chinese will have two thirds of the votes, while the

Congolese government has one third. • 30 years and the absence of coordination costs. • the extremely liberal exemption conditions. Article 6 of

the Protocol specifies that the companies will also be exempted from all possible taxes

5.An analysis of the chinese contracts in the

DRC(2)

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• The impact of the agreement on geopolitics: intensification and restructuration of international rivalries

• Quote from G.Forrest, the most important investor and employer of private formal employment in Le Monde “If we let them [the Chinese] go ahead, they are going to shut us out of Africa. The West talks about good governance and attaches some impossible conditions to its development aid. The Chinese niggle less and they are

taking the best parts”


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• The impact of the agreement on internal development • Trade: unequal exchange

• Tied aid-weak employment linkages-maintenance of infrastructure-no tax revenue-new debttrap-resource curse effects on governance


Table 2. Monetary evaluation of the counter value ($ million)

Resources Copper Cobalt Gold Total Quantity (in metal tons) 8,050,661 202,290 372

Value (in million dollars) 56.4 6.1 8.9 71.4

Source: Annex 1 of the agreement and http://www.metalprices.com/FreeSite/metals/cu/cu.asp.

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Conclusion

• Opportunities and challenges (unequal bargaining power in face of reconstruction needs)

• Red imperialism? • New geo political era

chinese contracts and the reconstruction in rdc

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