The Chinese Conundrum



The Chinese have become one of the foremost investors in Ethiopia, not to mention the number one bilateral creditor of the nation. But there are drawbacks to such dependency on a single country, in debt accumulation or the loss of policy sovereignty, writes Ambessaw Assegued (assegued@anfilo.com).


At the poolside of a plush resort, a waiter is fastidiously arranging the lawn chairs, wiping tables, picking up stray leaves and is otherwise busying himself while two Chinese businessmen look on without expressions. Behind the businessmen stands a servant holding their personal effects and issuing rapid orders to an unhurried waiter on how to arrange the chairs, at what angle to place the tables and to be swift about it.

Exasperated that his commands are going unheeded, the servant finally discharges the waiter and tackles the job himself. With the familiarity of a trained butler, he tends to all the needs of his employers. He meticulously lays the towels on the lawn chairs, unscrews water bottles and places them on the table. He secures their watches and mobile phones and hands the goggles and earplugs that the businessmen wear as they get ready to swim.

China is everywhere in Ethiopia. Large chunks of land from Oromia to Amhara and the Southern States are fenced off for Chinese development projects. The old Debre Zeit Road is under heavy construction by Chinese companies.

Chinese firms are building the railroad from Djibouti to the capital. Large tracks of farmlands around Aqaqi and Qaliti are run by Chinese operators that cultivate vegetable crops and supply the central produce market in Addis Abeba.

There are big and small Chinese firms bidding projects in the private sector. Whole Chinese neighbourhoods, restaurants, stores and training centres have sprouted around the capital and elsewhere. As if to herald their arrival brazenly, most of these enterprises display large Chinese characters that prominently subordinate the Amharic and English letters on their storefronts.

And then, of course, there is China Daily Africa, the free newspaper that is omnipresent in supermarkets and hotel lobbies touting the achievements and glories of China in Africa.

But it has not stopped there. Coat-tailing the Chinese, sweatshop gurus from Sir Lanka, Bangladesh and India have jumped on the band-wagon to come here and teach us the rigours of industry, as is related in a March 2018 article by Bloomberg BusinessWeek entitled, “China is Turning Ethiopia into a Giant Fast-Fashion Factory”.

The article describes the Chinese inflow in Ethiopia declaring, “The industrialists who set up shops here are exempt from tax for their first five years of business and absolved from duties or taxes on the import of capital goods and construction supplies.

“Ethiopia can swing such largesse because it gets lots and lots of money from China: 10.7 billion dollars from 2010 to 2015, according to China-Africa Research Initiative at John Hopkins University School of Advanced International Studies. Right now, much of the money is being spent on lucrative contracts for Chinese companies that, with help from Ethiopian labour, are building dams, roads, and cellular networks.”

The former US Secretary of State, Rex Tillerson, tries to warn that debt accumulation by cash-starved nations will result in an unfavourable dependency on a single creditor, China. He is echoing the concern of many European and American think-tanks that argue debt financing by China is what is fueling the engine of growth in developing economies.

The most important message that Tillerson and these institutions convey is that a borrowing country will drown in its debt, unable to pay back its loans. If Ethiopia is unable to pay its debt in hard currency, it may come to terms with China to pay the loans and interests in kind.

China’s role is not limited to be the lender of record; it is also the financier, project developer, designer, contractor, material supplier, project manager, superintendent, and supervisor of the development activities.

It begs the question then, as to who is overseeing the interest of the owner, which in this case is Ethiopia?

It is doubtful that Ethiopia accrues much benefit when prime land, developed by Chinese borrowed money, is cheaply leased to Indian companies that pay no income taxes, and are exempt from customs duties on imported capital goods and supplies. To boot, these foreign “investors” have rushed here because of cheap labour, lax environmental and social rules and regulations, and huge profits – not to teach us the rigours of industry.

Meanwhile the man-servant attends diligently to the needs of his bosses while a family of more Chinese men, women and children approach the swimming pool ushered in by the waiter. We are becoming a debt-ridden country of low-wage labours as benefits flow to our Chinese, Sir Lankan, Bangladeshi, and Pakistani “investors.” The influx of foreign investments should be accompanied by measurable and meaningful benefits that lift Ethiopia into self-sufficiency and advancement, not just the creation of low-wage jobs.



By Ambessaw Assegued (assegued@anfilo.com)


Published on Apr 28,2018 [ Vol 18 ,No 939]


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