CHINA’s Belt and Road Initiative (BRI) is the country’s flagship foreign policy exercise. More than $US 800bn has already been committed to BRI projects across its six corridors. China has also signed 170 BRI cooperation agreements with 125 countries and 29 international organisations across Asia and Europe as well as Africa, Latin America and the South Pacific.
BRI has already spawned new cross-border railways from China to Myanmar, the penultimate section of which opened last month, and to Laos, which opened in December. Work is underway to extend this line to Thailand. Elsewhere, Chinese firms are leading the project to build a new high-speed line in Indonesia as well as a metro in Lahore.
These projects have delivered improved connectivity in countries where the cost and practicality of building new infrastructure is difficult. Yet BRI has been criticised in the west as a means of spreading Chinese economic and political influence at the expense of local autonomy.
The G7 group of the world’s largest economies has even pledged to try and combat BRI, finally launching the Partnership for Global Infrastructure and Investment in June. This programme promises an initial $US 600bn for infrastructure projects in developing countries over the next five years. The United States alone will contribute $US 200bn.
China’s growing influence is most evident in Africa. A rapid investment and building programme over the past 15 years or so has seen Chinese companies construct new railways, roads, ports, and airports across the continent. African governments, desperate to improve infrastructure and show progress to their electorate were attracted by the quick execution and favourable financing conditions offered by the Chinese and quickly signed up.
The outcome has been far from optimal. These projects have been largely built to Chinese standards by Chinese contractors and often in the interests of China rather than local governments. Kenya’s $US 3.2bn Standard Gauge Railway project – the country’s largest single infrastructure project since independence – emphasises the problems.
Funded by China’s Exim Bank, a single free feasibility study was conducted by the same Chinese group that built it. No competitive bidding was permitted, despite local objections. The 592km line was completed in 2019 but it is only carrying a fraction of the promised traffic. Losses have mounted and efforts by the government to require shippers to use the line after it seized control were thrown out in court. The country is even at risk of defaulting on the loans for the scheme.
Outcomes like this are not palatable for either side, and China, mindful of the risks of loan defaults, has reduced investment in Africa since 2019. However, there are signs that the wider infrastructure investment landscape is changing.
At more than $US 20bn, Angola has the greatest debt burden to China of any African country. Plans to tie the supply of oil to repayments backfired following the oil crash of the mid-2010s. But under the presidency of Mr João Lourenço, Angola has instituted sweeping legal and regulatory reforms to clean up a culture of corruption and attract outside investment as it attempts to diversify its economy away from oil. Privatising the operation of key infrastructure is central to this strategy.
The news on July 19 that a consortium of Swiss commodities trader Trafigura, Portuguese construction group Mota-Engil, and Belgian private railway operator Vecturis had beaten a Chinese group to win a concession to operate and maintain the Lobito corridor in Angola was eye-catching.
Speaking about his experience of the tendering process, Mr Eric Peiffer, managing director of Vecturis, who has been active in Africa since the 1990s, says the professionalism shown, particularly from the country’s regulator, was encouraging. He says all the legal questions had been addressed. Bidders even had to fill in pre-set forms and expand on their plans at four separate meetings held a week apart, a situation he does not think sat well with the Chinese.
“We had many issues to address to satisfy the terms of reference in the tender,” he says. “This was good for us as it did not open the door to interpretation or vague arguments. There was also no room for influence or rumours, it was all objective figures.”
Peiffer adds that working with internationally reputable companies such as Vecturis as well as Motal-Engil and Trafigura offers reassurance to global lenders of the bankability of African infrastructure projects. Attracting private finance is a key objective for Angola, according to transport minister, Mr Ricardo Santos D’Breu.
Peiffer does not believe that Angola is trying to exclude China; the choice was “positive” he says, with the government attracted by the winning bid’s emphasis on wider social development, interaction with local communities and the transfer of know-how. The fact that his company is independent and not tied to a mining or government interest also helps its cause.
For now, Angola’s approach appears to be the exception rather than the rule. However, if China does lose more tenders, it will adapt, and there are signs that this is happening, albeit in the wider Belt and Road.
A study of Chinese contractors working on the Ferrogrão project in the Brazilian Amazon by the Carnegie Endowment for International Peace, published in August 2021, reveals that the Chinese have worked successfully with their Brazilian peers to adapt to the country’s strict environmental regulations and changing socio-political climate.
The need to improve African infrastructure is as strong now as ever, particularly in the fight against climate change and in the face of rapid urbanisation. With western governments joining China to provide the financial support necessary to get projects off the ground, a golden age for African infrastructure development might be on the horizon.
It is imperative then that these governments learn from recent experience. Only by standing up for their own interests by enforcing their own laws and regulations, as Angola appears to be doing, will they reap the maximum possible rewards.