Cost of Chinese aid to Malawi

The generosity of the Chinese to Malawi poverty is not without long term implications as the many infrastructural projects they are currently funding will require exclusive maintenance close to the time the taxpayer in the country shall have begun to service the hefty concessional loans.

Experts say maintenance of the Chinese funded and Chinese built state of the art infrastructure shall in future require importation of spare materials and expertise from China at a cost.

At the moment, however, China is a special distant neighbor of Malawi as in just under four years of diplomatic courtship, every corner of Malawi has had a feel of their presence although the extent of relevance of their presence in some situations remains a highly contentious subject.

In fact, a recent bill passed in parliament stipulating qualifications for business investors to Malawi is largely seen as a government control measure against an influx of Chinese nationals who penetrated the remotest of the country’s trade centers doing what Malawians already do.

While introducing a single fee for all traders to avoid impeding potential business owners, parliament has set at US$ 250,000 the minimum capital investment for foreign investors.

However, on the bilateral front, the large-scale projects by the Chinese in Malawi is without doubt aiding infrastructure development although some equity experts have warned that the cost of the present day decisions could have adverse effects on the citizenry in the future.

In the four years, China has made avail¬able huge concessional loans for; a magnificent parliament building, a five star hotel, a modern stadium, a politically sensitive bituminized road in Karonga, a university campus in Thyolo, a modern primary school and college in Salima.

In Balaka district, a cotton ginning factory that is buying from close to 25,000 small holder farmers is said to be transforming lives. But is this all for nothing to the Chinese people?

Elsewhere, such approaches to diplomatic relations are being seen as an attempt by China to secure its resource needs for the future which could turn out costly for the host African nations.

Dalitso Kubalasa, Executive Director at the Malawi Economic Justice Network (Mejn) says “there is more than meets the eye in normal circumstances” in the case of Chinese aid to Malawi although the implications are both positive and negative considering the situation of the country.

” The loans and payments are “tied”. That is to say they are cast in stone, with recipient Malawi obliged to spending the money within China on Chinese companies for all raw materials. Largely no single cent is transferred to Malawi to cushion our Balance of Payment as is the case with others,” says Kubalasa.

He observes that with this kind of aid arrangement, tied aid at times leads to shoddy work done or overpriced projects as there is no competition where a successful firm is picked.

Kubalasa says as creditors, often they set wrong priorities for the recipient countries, as they mostly tend to be more appealing to politicians than the citizenry when a comparison is made of the return on such investments.

” A big challenge bemoaned largely in recent debates on Chinese aid has been the issue of Transparency and Accountability – as the Chinese government is touted to be anything but transparent about its money as the Chinese main lenders, allegedly publish no figures about their vast loans to poor countries,” Kubalasa said.

He observed, for example that although some Malawians are allowed to work along the Chinese on projects with funds from China, Malawi’s ability to maintain the start of the art infrastructure could also require importation of materials from China at Malawi’s cost.

He said although some of the Chinese workers are naturalizing themselves after the infrastructures are put up, Chinese aid to Malawi is acceptable as it is more targeted for specific projects, less bureaucratic, with lower transaction costs, more efficient with lower costs, seemingly flexible as it allows more policy space and increases the bargaining power.

Nonetheless, the loans will be repaid by future Malawi generations with high inter¬est rates. Meanwhile, the details of the loans themselves are shrouded in secrecy although it is clear that the long term benefits would be for future Chinese generations.

“What this tell us is that the gap between the poor and the rich will remain if not grow. You are getting a loan from the rich Chinese on the understanding that your child should repay to the child of the Chinese. Effectively, your child will work for the Chinese,” said an¬other renowned economist who choose to keep his identity to himself.

Professor Brautigam, director of the international development programme at John Hopkins University who also authored ‘The Real Story of China in Africa’, however, said at Citywire in Berlin this year that there are misconceptions about what China investment is about in Africa.

“In the west, the belief is our aid is about altruism,’ she said. ‘We want to save Africa and doing what is right for them by controlling them through governance. The Chinese views it very differently, they believe it is about mutual benefit, diplomacy and soft power,” Brautigam said.

In an interview with The Daily Times, Chinese Ambassador to Malawi Pan Hejun said his government is proud to be associated with Ma¬lawi as “a partner and not a donor”.

Ambassador Pan said in cases where some Chinese nationals are found trading or investing where they should not, it is likely because of the laxities in existing rules and regulations.

However, one local political scientist says “the cheap and not so durable infrastructure” the Chinese are putting up in the country is nothing but mere response to cheap political ambition and vision of local leaders whose sight stops where that of their successors would soon start.

She said “most of the Chinese in Malawi are into trade and not really investment”.

But Malawi Information Minister Moses Kunkuyu says while his government cherishes and appreciates relations that have led to for¬eign aid and investment in Malawi, expectation is that there would be tangible growth “not only in imports but in exports as well and also job creation.

“They should employ Malawians and produce baking flour and let Malawian mandasi women access the baking flour at low prices as well as export, employ Malawians and open big breweries and let locals run the bottle stores. Hire local cobblers open shoe manufacturing companies and let Malawians access designer shoes at cheap prices and export. We are monitoring,” says minister Kunkuyu.

Long term benefits of the deals Malawi enters into with other countries remain critical to determining what actual deals she should go into as over-looking this could create chaos for generations to come, said Martin Mmangisa a farmer from Mchinji who wonders why Chinese should sell him chickens.

Ironically, while we have experienced riots and revolt against the presence of small-scale Chinese business people in some parts of the country, in others, they are very welcome.