Robert Kappel Shanghai June, 2010 Development Cooperation with Africa - China and the Western Experience

Development Cooperation with Africa Economic Situation China global economic power: growth rate about 10%/year Other regional powers (Brazil, India etc): high growth economies Africa also grows: 5-6% growth/year since 2000 Europe, USA growth rates very low (1-2%) Africa’s growth partly dependent on China’s demand for raw materials. Significant shifts in world trade, FDI global economic and political power shift.

Development Cooperation with Africa Topic of lecture -African development -African reforms -China – Africa Relations -Western experience in Africa -How can China, Germany and Africa cooperate to raise efficiency and reduce poverty?

Africa is different, but how different? No longer the 80s (lost decade) GDP growth rates increasing (ca. 5-6%) New investors, China, India, Brazil, South Africa (but EU, US most important). Africa: more options than ever before in history Biggest problems: deficient infrastructure (Energy, water, roads, railways, ports, air ports) >> huge constraint for catching up. Chinese state enterprises‘ investment. Africa‘s institutions weak, but change: new technocrats in some countries

Africa‘s economic situation Poverty on the rise, will stay - subsistence economy and informal sector: Dominant economies, but no support for this economy of the people -small manufacturing sectors donot grow, exc. South Africa, but manufacturing decisive for growth and catching up. Hope: Chinese investors, which transfer technology and raise productivity -Both low productivity, high population growth: rising poverty

Hypotheses Chinese engagement in Africa: -more options for Africans: business, development aid, political activities -Welcome of Chinese activities Western experience in Africa: mixed results, but progress (capacity building, institutions, participation, integration) More options for African development and poverty reduction: 1. when Africans consequently act for own modernisation and development. 2. when China, Africa and Western countries cooperate

China’s interest in Africa Interest in raw materials, exports, secure investment in future markets, and network activities of Chinese migrants, international development strategy, incl. poverty reduction Key elements of FOCAC: Forum on China-Africa Cooperation  China-Africa “strategic partnership” based on political equality and mutually beneficial commercial interaction;  Increase support in achieving the UN’s Millennium Development Goals;  No political conditionalities: Instead, focus on practical, realist and achievable objectives  China’s commitment to develop Africa’s infrastructure, education, agriculture and economic development is interpreted as proof of China’s long-term intentions to assist Africa

China’s interest in Africa Specific proposals to “forge a new type of China- Africa strategic partnership.” 1.Double its assistance to Africa by 2009; 2.Provide preferential loans and buyer credits to Africa 3.A China-Africa development fund, to encourage Chinese companies to invest in Africa; 4.Debt cancellation of interest-free loans in HIPC; 5.Opening of China’s market for African products 6.Establish new trade and economic co-operation zones in Africa; 7.Build hospitals, schools and double the number of Chinese scholarships offered to African students.

Economic relations China and Africa China 2nd important trading partner of Africa (EU biggest); Trade: about 50 Billion $. Trade is growing, esp. trade in raw materials. One quarter of China‘s oil imports from Africa $ 40 Billion new Chinese investments ( ); about 1000 chinese firms investing in Africa: Banks, agriculture, oil, gas, mining, tobacco, leather, food, service sector. New pioneers. African enterprises also export manufactured goods to China, China-African Trade corridor in Shenzen About 500 thousand to one million Chinese migrants live and work in Africa. Mostly small entrepreneurs and their families.

Western experience Long-term experience in cooperation (trade (Cotonou, AGOA), cultural exchange, development expertise since the 1960s. Experienced project managers, capacity building experts, concrete poverty reduction assistance, Research shows: Institutions matter, technology transfer, human capital, skills, pro-poor growth… Complex African reality: state, bureaucracy, institutions are not the best.

Western experience in Africa: What matters most for poverty reduction What matters most for poverty reduction?  Institutions: better institutions, transparency, anti-corruption, capacity building, manpower in administration, reliability, accountability, Good Governance.  Participation of actors: state and non-state actors: participation of entrepreneurs, farmers, of civil society, NGOs.  Sustainable development (protection of environment)

Are trilateral cooperation projects between China, Africa and Germany useful? Yes, because  1. both have experiences that, given they cooperate, might be useful, helps to reduce cost, raises efficiency and complements other activities.  2. Cooperation might help China to avoid mistakes that were made by Europeans (today industrial clusters, horizontal and vertical cooperation, knowledge transfer, participation and integration of actors, local people, institution-building, environmental sustainability)  3. Cooperation might help Africans to get better results. Africa has own interests: incl. Joint-venture (JV) options; local procurement; support for local SME, technology transfer; integration of SMEs in global value chains, skills enhancement programmes  4. Cooperation might help Germans to share Chinese experience: learn from China’s poverty reduction success, learn from fast decisions, focus on clear objectives, concrete and pragmatic activities, from unorthodox set of institutions.

Are cooperation projects between China, Africa and Germany useful? Yes: 1.There are many overlapping interests 2.All sides have an interest in avoiding efficiency losses in development cooperation = better knowledge about activities, failures and successes, focused consultation, dialogue, in order to learn from each other 3.Regarding poverty reduction: all sides have something to bring in: -China’s successful model of poverty reduction in own country -European experiences with inclusive growth strategies -Africa: activities of actors, farmers, SMEs.

Are cooperation projects between China, Africa and Germany useful? My idea: Let us make an experiment for a trilateral cooperation project, incl. active joint-research of China, Africa and Germany -Workshops in order to identify agenda for activities, incl. research - Feasibility study in 1,2,3 countries - Involving relevant actors