In 1950, Africa has the same level of development and living standard as Asia, in some famous examples given by World Bank, South Korea was poorer than the nation of Ghana while Taiwan in par with Congo at that time. All of them received foreign aid from the West, but while South Korea and Taiwanwere able to channel the aid into developmental projects that transformed themselves into one of the world`s most developed economies today, Ghanaand Congo remain in dark, poor and underdeveloped. Though Ghana considered a shining example throughout Africa, being one of its fastest growing economies in the continent, its living standard and per capita GDP, when translated into Asian measurement, would be one of the poorest.
To make things worse, the Taiwanese global share of industrial output is 1.1%, more than the entire African continent of 1%. Other Asian states like India (4.8%), Japan (4.3%), South Korea (2.5%), Indonesia (2.1%) and Thailand (1.1%) also single-handedly produce more than the 55 African nations combined.
Adjusted to inflation, the world provided $346 billion of aid to Asia since their independence 50 years ago. Today, Asia is the fastest-growing region, with explosive wealth creation and rapidly expanding industries. In 2010, Asia overtook Europe in number of millionaires, having 3.3 million of them compared to 3.1 million in Europe. North America has 3.4 million while Africa has 130,000 millionaires. The net income in Asia is expected to triple in the next 3 years, and the continent today is of sharp contrast than it was 50 years ago, with economies like China, Japan, Taiwan, South Korea now in turn giving aid to the world.
Outskirt Taipei, Taiwan 1950 and 2012.
The Asian states have collectively stacked up a reserves of $4 trillion, and their economies grew to such a state that India angered the UK last week by saying the GBP 280 million annual aid Britain transfer to India every year since 2005 is `peanuts` which India can survive without, as the country spends tens of billions on defence and hundreds of millions a year on a space programme. Seemingly, in times of European economic crisis, major Asian countries now view anything below $1 billion as `insignificant`.
On the other hand, in the 50 years since the first African countries won independence, the world has spent $568 billion on Africa. Yet Africans are poorer now than a quarter century ago, and much of the money has ended up on the road to nowhere. Ironically, if you take any of the two tiny Asian islands, Singapore or Hong Kong, and put them in Africa, they would be the second largest economy in the continent by GDP after South Africa (if you put in Taiwan it would be the largest). This dismal record is sparking a vigorous debate on how best to help the world`s poorest and most underdeveloped continent, and to what degree aid is the answer.
China believes it has a better model to help Africa than what the West had been doing all along.
hina`s African investments, as supplementary info, the trade value is $150 billion now
KAMPALA, Uganda -— China last month sent a senior official to symbolically hand over the keys to a nine-story twin tower that will house Uganda`s president and prime minister, a gift from Beijing.
The white structures with a sloping roof cost China $27 million to build. However, in a strategy that China is increasingly employing around Africa, Beijing didn`t just deliver the money and let Ugandan officials see the project through. Chinese workers in what aid watchdogs applaud as a model to help defeat the inefficiencies and cash-pocketing corruption associated with other systems of foreign aid delivery built it.
China has a growing economic footprint in Uganda and much of the rest of Africa, and some Ugandans natives complain of the rising number of Chinese arriving to set up shop. China`s strategic interest in this East African country has deepened at a time when Uganda hopes to become an oil producer.
On equal footings with South Korea and Taiwan 50 years ago, Ghana and Congo are now light years far behind their former counterparts.
However, the completion of projects like a modern hospital complex has softened China`s reputation, while Beijing`s efforts to produce turn-key projects are winning fans among Ugandans tired of seeing their officials ripping off foreign aid projects with impunity. Instead of giving cash, the Chinese government prefers to pay Chinese companies to build roads and structures, bypassing local politicians, powerbrokers and construction crews, and to deliver them completed.
“The China model is more effective. It`s less prone to corruption,” said Sven Grimm, the executive director of the Center for Chinese Studies at Stellenbosch University in South Africa. He said the approach also bolsters China`s economy, because “Chinese enterprises… go out and gain international experience.”
Experts say China`s model of donating buildings and roads might help it cut the risk of aid scandals like the one that rocked the $22.6 billion Global Fund to Fight AIDS, Tuberculosis and Malaria over the past year. The Geneva-based financier gets donations from wealthy donor nations and private sources like Bill Gates. But donors recoiled after the fund`s internal watchdog documented more than $50 million in losses due to corruption and other misuse and unauthorized spending, affecting much of Africa, including Uganda.
Western donors routinely threaten to cut aid to Uganda over corruption, which registers in millions of dollars every year. In February 2010, in the aftermath of scandals that shook the faith of donors in the government`s ability to cut wasteful spending and corruption, a World Bank official warned that corruption had become “endemic” in that African nation.
However, Western nations keep giving aid to Uganda, infuriating anti-corruption activists. “If I have abused your money and you give me more, it`s like you are applauding me, this is not right,” Cissy Kagaba, who heads a watchdog called the Anti-Corruption Coalition of Uganda, said.
Transparency International ranks Uganda among the most corrupt nations, at 143 out of 182 countries in its most recent survey. Public officials in high and low places are constantly looking for opportunities to steal or be bribed and the offerings of foreign governments and agencies have traditionally been easy to abuse, critics say.
U.S. and European aid money, for example, frequently funds workshops at expensive hotels. Participants of the “capacity building” programs are given free travel to the sites along with per diems and accommodation.
“Capacity building… is the easiest to steal because the only evidence is paper accountability,” said Augustine Ruzindana, Uganda`s former anti-corruption chief. “The people who pay also know what they are doing, and so it`s self-perpetuating. With the Chinese method it`s easier to show that something has been done. They do concrete things which can be seen by several generations, like the buildings and infrastructure.”
China`s aid is not always welcomed though, last month China opened the new African Union (AU) headquarter in Addis Ababa, Ethiopia – the US$200 million building was completely paid for by China as a gift to the African Union, but Rwandan President Paul Kagame called it “pathetic” that Africa accepted such a donation and asked why Africa couldn`t afford to pay for such a building itself.
While $200 million might seem to be a vast sum to some poorer African states, the Asian giant reportedly `did not blink` when African leaders gave it the building specifications and informed it about the potential cost. China then immediately sent in Chinese workers to work on the project.
In Uganda, as in other African countries where it has strategic interests, China has polished its reputation with muscular projects, which it then hands over as gifts. Prominent donations to Uganda include the headquarters of the ministry of foreign affairs and a sports stadium.
Even when the projects are tied to loans, such as in the planned construction of a four-lane expressway from the capital to Uganda`s international airport in nearby Entebbe, the Chinese insist on taking full charge instead of letting the Africans do the supervision. This has shut down avenues traditionally used by public officials to inflate costs while doing shoddy work, to get paid for work not done or to insist on bribes before endorsing certain projects, anti-corruption officials say.
“The Chinese model is better,” said Fred Guweddeko, a research fellow at the Makerere University Institute of Social Research in Kampala.
As recently as 2002, the African Union, an organization of African nations, estimated that corruption was costing the continent $150 billion a year, as international donors were apparently turning a blind eye to the simple fact that aid money was inadvertently fueling graft.
In 1978 former Zaire, known today as the Democratic Republic of Congo, Irwin Blumenthal (whom the IMF had appointed to a post in the country`s central bank) warned that the system was so corrupt that there was “no prospect for Zaire`s creditors to get their money back ever”. Still, the IMF soon gave the country the largest loan it had ever given to an African nation. And the result? According to corruption watchdog agency Transparency International, Mobutu Sese Seko, Zaire`s president from 1965 to 1997, is reputed to have stolen at least $5 billion from the country.
It`s scarcely better today. In 2009, Malawi`s former President Bakili Muluzi was charged with embezzling aid money worth $12 million. Zambia`s former President Frederick Chiluba was embroiled in a court case that has revealed millions of dollars frittered away from health, education and infrastructure toward his personal cash dispenser, but was acquitted of all charges. Yet the foreign aid keeps on coming to Africa.
China watched and clearly understood such African imperfections; it however, does not plan to interfere with the existing system in place. As the workshop of the world, million tonnes of raw materials must be delivered to factories in China everyday, and Africa, a continent endowed with massive natural resources, is an essential supplier (the Democratic Republic of Congo, for instance, has a reserves of natural resources worth $33 trillion, 2 times the GDP of United States).
Any interruption or delays of raw materials supplies may cost upwards billion of dollars damages for the Chinese industries everyday, hence getting into arguments with the ruling governments is not in the best interests of China.
The Chinese though, have no plan to engage in African `bureaucratic-bribing` games, by which an original $1 million project can be inflated into $3 million.China is competing with the world`s industries and had scheduled itself to overtake the United States as the world`s largest economy by 2025, such wastage and cost-inefficiencies is certainly not within its appetite. Hence the conditions for Chinese investments; the contract is to be awarded to Chinese companies, the cost and accounting supervised by the Chinese, and the jobs are to be done by the Chinese.
Despite that, the model is not without its problems. Unlike the West who simply send in aid money, China physically engage with the Africans. As parts of the agreements with local governments, Chinese companies agreed to hire a certain quota of African workers. There are however, growing cases of conflicts between Chinese supervisors and African workers due to different work ethnics. In China, hard work and working long hours are accepted as norms in life, and it is not surprisingly for individuals from lower income groups in Hong Kong, Shanghai and other Chinese cities to take 2-3 jobs with only 3 hours sleep per day. It is also common for Chinese managers and executives to stay late in office even up till 2pm midnight, planning business strategies or working out ways to secure business deals, due to this, the `Chinese takeaway`, where people would bring food to workplace and eat while work, becomes popular.
Such working culture though, is deemed as abuse to African workers, who adopted a more relaxed stance in works. Resentment against the Chinese has also grown after they setup businesses catering for local markets. Chinese businesspersons believe in economies of scale and maximum return on investment, and since they are coming to Africa for construction works, companies` joint and shared costs to open restaurants and retail stores bringing in cheap imports from Chinese manufacturers. African businesses complained that they cannot compete and are put out of jobs.
Another problem China faced is the low labor productivity in Africa. The global share of African industrial output is only 1%, while China`s 21.6% (or $5.33 trillion worth of goods), with China having a total active labor workforce of 816.2 million and Africa 463.1 million, which could be more but many of them invalidated by starvation, wars and diseases. By this calculation, the average Chinese workers are more than 12 times more productive than the average African workers (on another comparison, the average German workers are 3 times more productive than Chinese workers, while the Japanese, whose productivity have been falling as its industries lagged behind, are 2.6 times more productive than Chinese workers).
Japan during its economic growth in 1960s-1980s faced similar dilemma, and though African wages are lower, Japan choose to setup factories in Southeast Asia (especially Thailand), instead of Africa, despite its largest export markets was Europe, and setting up factories in Africa can allow faster shipments of goods to Europe. Japan factored in African labor productivity and work ethnics last time, and so does China now.
China, the country who recently built a 30-storey hotel in 15 days HERE, noted that Africa couldn`t even get its Cape to Cairo Railway (a British vision to connect the northern (Egypt) to southern (South Africa) tip of Africa) completed 50 years after independence, while China had constructed 110,000km of railways in this 50 years (distance from Earth to moon: 380,000km) China cannot be convinced that using African labors would be the best utilization of resources, hence continued to bring over Chinese workers into Africa. The Africans regard this as racialist selection in employment, critics also point to land grabs and mistreatment of African workers on Chinese-funded projects.
The Chinese are more inclined to believe in `survival of the fittest` theory, after all, they compete, and successfully grab market share from Western and Japanese industries. This put them in clashes with the Africans, who feel more towards native entitlement and long lived under the protection of indigenisation policies. Uganda in 1972 expelled all Indians as they `controlled too much of the economy`, while Zimbabwe recently seized White-owned farms.
While Africans commonly blamed their governments for the lack of advancement, the problems run deeper than just a simple government mismanagement, it also involved African work ethnics and their perception of progress. South Korea and Taiwan for instance, were pretty much a dictatorship with corruption problems when their industries took off in 1970s. It ain`t the government, but that their people built up a strong private industries which later turned the countries into major exporters. China in its current form is likewise autocratic and plagued by high-profile corruption cases. The development of China is credited more to its people than government.
African competitiveness can also be witnessed by comparing Hong Kong andSouth Africa. During colonial times, the British, unsurprisingly, controlled a huge amount of assets in Hong Kong, with the Jardine Matheson, a company responsible for the opium-tea trade in China in 1830s, which resulted in the opium war and the ceding of Hong Kong to Britain, as one of the most powerful companies in the island.
After the handover in 1997, Jardine Matheson, fearing uncertainties, immediately re-domiciled itself to Bermuda, but the new Hong Konggovernment adopted open and meritocratic business policies, which encouraged free competition, with the best and most capable, thrive. The World Bank today ranked Hong Kong the second most business-friendly economy in the world after Singapore, and Jardine Matheson is now a Fortune 500 company. 9 of the top 10 richest men in Hong Kong are now the Hong Konger Chinese themselves, and the remaining one (the 6th richest) a White Jew – all built up under fair but tough, competitive environment.
With the collapse of the apartheid government in South Africa in 1994, the Whites, likewise, controlled a majority of the economy. The new South African government`s solution was to enact a Black empowerment policy, which favored the Black race. South African economic growth has slowed compared to the apartheid-era, while foreign investment remains a struggle and unimpressive. Among the worse, 10% of Whites in South Africa now live under poverty level.
While the Hong Kong Chinese compete in equal terms and prospered. 9 out of 10 richest person in South Africa remains Whites or White Jews, with the remaining (and 4th richest) being a direct beneficiary of the South African government`s Black Economic Empowerment policies.
Today the West and Indians proceed cautiously and hesitatingly when investing in Africa, making China the continent`s biggest foreign investor. Bilateral trade between the Asian nation and the continent has reached over $150 billion, a jump from less than $10 billion a decade earlier.
While critics say it is a new “Scramble for Africa”, China sees itself helping African economic development. At a time when Europe and the United States are mired in economic turmoil, Japanese fortunes sinking, Middle East rocked by political instability, India hit by high inflation and falling currency, Latin America, Southeast Asia, Russia and Australia pretty much have enough resources of their own, China is a crucial customer for the resource-export dependent continent.
For the past decade, Africa has recorded economic growth of an average of 5 percent but its under-developed infrastructure has in part hindered its capacity to develop further. Chinese companies are changing that, by building roads, investing in the energy sector, and are active in areas such as telecoms and technologies – all these investments in Africa which otherwise are shunned by most of the world as the continent is not an attractive investment destination of its own. The Chinese tied these investments to African resources.
A number of African officials discarded the critics, Africa had 50 years to show the world it can develop by its own, but nothing much resulted. Now at least the Chinese are coming in to build up the infrastructure, albeit it would be exchanged with resources. “The future prospects of our partnership are even brighter,” Ethiopian Prime Minister Meles Zenawi said. “China – its amazing re-emergence and its commitments for a win-win partnership with Africa – is one of the reasons for the beginning of the African renaissance,” he added.
The Democratic Republic of Congo`s ambassador to Washington, agreed, “some critics say that Africa has been manipulated and exploited by China, these people think Africans are still like children who can be easily manipulated. The good thing about this partnership is that it`s give and take, China takes our resources but give us infrastructure, a catalyst for future development,” he affirmed. Economies like Singapore, South Korea and Taiwan, who were once poor, set aside most of their budgets to build up strong infrastructure, leading to further development and industrialization, which transformed them into advanced economies.
However, the question is, taking into account of African productivity and competitiveness; does Africa possess the capabilities and progressive traits required for similar achievements?