Where are Dani Rodrik's shamans and councils of elders to regulate China's activities in Africa?

Dani Rodrik recently posted a nice parable that seeks to capture a simplified version of the development process facing developing countries. He describes the development tale of a poor little fishing village beside a lake, and cut-off from the mainland by a dense forest tract, whose residents lived off the fish they caught and the clothing they sewed and who are slowly faced with the challenges of globalization.

The tale traces the challenges the villagers faced when the fishing stock in their lake plummeted (they responded with co-operatives that imposed fishing quotas), started trading dried fish in return for sewed clothes with the villages on the other side of the forest (fishermen got rich, while those who sewed clothes were flooded with cheaper and better quality garments - resolved by forcing fishermen to make higher contributions to the village feast), and when transportation facilities opened the floodgates for fishermen from outside (which depleted fishing stocks and was remedied with toll collection on outside fishermen).

One could easily replace the fishing village with any African country or Suriname and the foreigners from beyond the forest with Chinese migrants to represent the problems generated by massive Chinese economic and political activity in many emerging countries of Africa and Latin America. In fact, we could also substitute the shaman with local advisors and opinion makers and the council of elders with the political establishment in Africa. In this context, the recent events and trends relating to China's economic activities in Africa and Latin America provides an excellent and immediate test to managing globalization effectively following second-best approaches.

China has emerged as Africa’s biggest trading partner (crossing $120 bn in 2010) and has replaced Europeans as the most important external economic and political influence in these countries. In the past two years China has given more loans to poor countries, mainly in Africa, than the World Bank. China has invested more than $40 bn in the 2005-10 period in sub-Saharan Africa. The physical Chinese presence itself in many African countries is substantial and migrants now run everything from small factories to health care clinics and trading companies.

As the NYT reported, "for many budding Chinese entrepreneurs, Africa’s emerging economies are inviting precisely because they seem small and accessible. Competition is often weak or nonexistent, and for African customers, the low price of many Chinese goods and services make them more affordable than their Western counterparts."

Politically, Beijing sees a great opportunity to exercise some form of control, even pick up stakes, in strategic mineral and oil assets, and that too on the cheap, in these resource rich African countries. The big-ticket infrastructure contracts that are in any case inevitable for economic development, apart from being critical for the exploitation of these natural resources, form a major economic attraction for Chinese companies. These state-owned firms have developed massive economies of scale in heavy infrastructure equipment manufacturing and expertise in execution of huge road, railroad, irrigation, electricity, and urban infrastructure projects.

Though, such investments and labor migration has its beneficial effects on the host country economy, there remain serious concern, especially given the scale of China's interventions and historical experiences, domestically or from elsewhere, of previous such activity,

"Africans view the influx of Chinese with a mix of anticipation and dread. Business leaders in Chad, a central African nation with deepening oil ties to China, are bracing for what they suspect will be an army of Chinese workers and investors... When they arrive, will they bring their own workers, stay in their own houses, send all their money home?

In Zambia, where anti-Chinese sentiment has been building for several years, merchants at the central market in Lusaka, the capital, said that if Chinese people wanted to come to Africa, they should come as investors, building factories, not as petty traders who compete for already scarce customers for bottom-dollar items like flip-flops and T-shirts...

Africans in many countries complain that Chinese workers occupy jobs that locals are either qualified for or could be easily trained to do... The problem with the Chinese companies is that they reserve all the good jobs for their own people. Africans are only hired in menial roles. Another frequent criticism is that the Chinese are clannish, sticking among themselves day and night."

Though Chinese development assistance and cheap labor helps build roads, low-cost housing, set up renewables based power plants, promotes shrimp farming, and so on, there are several concerns, especially with the influx of significant Chinese labor (estimated to be over 10% of the country's population) in countries like Suriname,

"In parts of Suriname, concerns over whether some Chinese laborers illegally stay past the end of their visas has led to debate over whether Chinese companies should be allowed to bring their own workers to the country, possibly depriving some Surinamese of jobs... many of the new arrivals are visibly involved in commerce, standing in contrast to Brazilians, Suriname’s other fast-growing immigrant group, who work largely at remote gold mines in the interior."

The Economist has an article that highlights how Chinese business practices are creating tensions in many African countries,

"Chinese expatriates in Africa come from a rough-and-tumble, anything-goes business culture that cares little about rules and regulations. Local sensitivities are routinely ignored at home, and so abroad. Sinopec, an oil firm, has explored in a Gabonese national park. Another state oil company has created lakes of spilled crude in Sudan...

At Chinese-run mines in Zambia’s copper belt they must work for two years before they get safety helmets. Ventilation below ground is poor and deadly accidents occur almost daily. To avoid censure, Chinese managers bribe union bosses and take them on 'study tours' to massage parlours in China. Obstructionist shop stewards are sacked and workers who assemble in groups are violently dispersed. When cases end up in court, witnesses are intimidated."

However, unlike Dani Rodrik's fictional fishing village, which had a benevolent and wise shaman and a far-sighted and disciplined council of elders, not many African countries or Suriname enjoy the guidance of such institutions to help chart the vicissitudes of the development process. Can African governments, with a notorious reputation of being willing participants in the loot of their own countries, and its civil society summon the necessary foresight, commitment, and spirit of co-operation to guide their nations through the uncertainties like that posed by the increased role of China in their economies and societies?

Happily, Prof Rodrik also tries to provide some answers to these countries to face upto these challenges,

"The parable suggests that internal debate and deliberation can produce a reasonable compromise. The compromise does not entail the blocking of trade or high barriers, as some groups want. But it does entail accepting some transaction costs on external trade and a departure from complete free trade."

And underlining the departure from first-best solutions and embrace of second-best ones, he writes,

"It would be little comfort to the villagers to be told that they should resort to lump sum taxation, non-linear income taxes, or allocating property rights over the fish stock – when the practical implementability of such potentially more efficient solutions remains unclear...

When openness to trade raises overall national income, a properly structured political process should not have an anti-trade bias to begin with. And allowing greater "policy space" to individual nations will in fact make it easier to uphold the social bargains that enable openness to trade. A (small) deviation from the ideal of complete free trade (hyperglobalization) is a small price to pay for this."

Even assuming a second-best approach, the challenge still remains of formulating inclusive and reasonable policies that accommodate the interests of all sides, and then mobilizing the political support and commitment to implement them. In the absence of policies that can manange a "reasonable compromise", the fishing stocks will decline, fishermen will refuse to pay up their share for the monthly feast, and xenophobic sentiment against outsiders "stealing our jobs" will grow and explode. Does Africa have wise shamans and enlightened political elders who can prevent such damaging outcomes?

Post script

MR points to Chinese interest - massive investments and labor migration - into Caribbean too. Diplomatic concerns, arising from the need to out manouvre Taiwan, and economic interests may be the primary motivators here.

Mapping Chinese Investment in Africa

Like in practically every other continent, China has made itself a force to reckon with in Africa. I have thus had a very long string of posts [1, 2, 3, 4, 5, 6, 7, 8] examining its role and the views other have of China investing there. These range from the helpful and benign ("South-South cooperation") to the exploitative and malign ("the yellow man's burden"). While I still very much recommend Jian Ye-Wang's IMF research paper "What Drives China's Growing Role in Africa?" for those looking for a more comprehensive review, our friends at the World Policy Journal have a handy single-page geographic review depicting where and how much China is investing in various African nations.

Here's hoping you find it informative!

Why Remittances Matter So Much More Than Aid

This Thursday, Labour MP and Shadow Secretary of State for International Development Harriet Harman is going to give a talk at the LSE on the moral imperative for rich countries like the UK to devote 0.7% of their GDP to development aid. While the history of why we have this 0.7% aid target is an interesting one, let's also consider how aid figures into the larger scheme of capital flows to LDCs.

The graphic above (click for a larger image) from the UN International Organization for Migration's World Migration Report 2010 depicts workers' remittances alongside official development aid to developing regions. In every single region of the world expect for sub-Saharan Africa, remittances far outstrip official development aid as a source of capital flows. And, with innovations for sending international remittances to the region coming online, I believe it's only a matter of time before remittances to SSA edge past aid flows.

Think about it: the World Bank estimates that $440 billion in remittances went to developing countries in in 2010. If so, why do remittances receive far less attention than aid? The white man's guilt is evident in efforts of celebrity activists of this world to shame rich countries into pumping more aid--a message that obviously resonates with politicians like Harriet Harman. Perhaps they ought to change their message in light of this economic reality. Although "send remittances to the world" may not have the same punch and emotional resonance as "feed the world," there is precious little to suggest that aid butters the bread of more LDCs than remittances.

Lastly, it reinforces how a truly globalized world should look like where goods, services, capital and labour are mobile instead of today's world where so many restrictions exist for the latter. The image above only begins to hint at the possible increases in global welfare from dismantling borders--quite possibly a doubling of global GDP--but let's say not everyone is ready yet for such a world. Still, instead of fighting tooth and nail for small reductions in trade barriers or increasing comparatively trivial amounts of aid, perhaps rich country politicians should consider how their migration regimes prevent such desirable outcomes if they're really interested in promoting development. So if there's an IPE issue that matters for the future, it isn't aid or trade but most likely migration.

Harriet Harman, are you listening?

Living Like a Refugee Is Not Easy

I had the luck to catch the Sierra Leone Refugee All Stars band last night in Manhattan. They formed in the refugee camps during the civil war of the 1990s, using their musical talents to stay alive and keep spirits high. They have since toured all over the world spreading their bright positive sound, which draws on a mix of influences from reggae to Nigerian high-life and American rap.

A pair of documentary filmmakers captured their story, and the band today leverages its success to help Sierra Leone recover and develop. When times are tough you have to dance, dance, dance.

WikiLeaks: Shell 'Infiltrates' Nigeria, Hugo Bossed

I can hardly believe that this is my third post on WikiLeaks. After cataloguing typical American double-speak on "Internet freedom" (whatever that is) and suggesting that WikiLeaks move to Montenegro if survival is its goal, we now have two interesting entries.

First, I have in the past featured the highly controversial activities of Royal Dutch Shell in Nigeria. To say that its activities in the Niger Delta and relationship with the Ogoni tribe are controversial is to put things mildly. Now we have these cables in which American officials claim that a Shell executive boasted of infiltrating the Nigerian government. From WikiLeaks' media partner The Guardian:

The oil giant Shell claimed it had inserted staff into all the main ministries of the Nigerian government, giving it access to politicians' every move in the oil-rich Niger Delta, according to a leaked US diplomatic cable.

The company's top executive in Nigeria told US diplomats that Shell had seconded employees to every relevant department and so knew "everything that was being done in those ministries". She boasted that the Nigerian government had "forgotten" about the extent of Shell's infiltration and was unaware of how much the company knew about its deliberations.

The cache of secret dispatches from Washington's embassies in Africa also revealed that the Anglo-Dutch oil firm swapped intelligence with the US, in one case providing US diplomats with the names of Nigerian politicians it suspected of supporting militant activity, and requesting information from the US on whether the militants had acquired anti-aircraft missiles.

There's another story that caught my eye. I have never been much of a fan of Venezuela's so-called Bolivarian Revolution insofar as it has done rather worse by its people in the aftermath of expropriating several Western oil companies. If you kick the foreigners out, I'd be a heck of a lot more impressed if you could at least sustain output at pre-nationalization levels. Let's just say Hugo Chavez hasn't achieved this feat. Talk about ideology trumping reality. Worse, for lack of technical expertise, it's said that he's asking same Western companies he kicked out to come back on terms more favourable to them. Not very impressive; Simon Bolivar probably wouldn't approve:

Venezuela's tottering economy is forcing Hugo Chávez to make deals with foreign corporations to save his socialist revolution from going broke. The Venezuelan president has courted European, American and Asian companies in behind-the-scenes negotiations that highlight a severe financial crunch in his government. Venezuela's state-owned oil company, PDVSA, is the engine of the economy but buckled when given an ultimatum by its Italian counterpart and has scrambled to attract foreign partners, according to confidential US embassy cables released by WikiLeaks.

The memos depict an unfolding economic fiasco and suggest some of Chávez's key allies – Argentina, Brazil and Cuba – are gravely concerned at Venezuela's direction. "President Chávez, for his part, is acutely aware of the impact the country's general economic trajectory has had on his popularity," says one cable...

However, in separate private conversations with the [American] ambassador, Patrick Duddy, industry figures detailed the parlous state of the industry. A senior manager from Chevron estimated the state oil company's output at 2.1m to 2.3m barrels per day, well below official declarations of 3.3m.

And then there's the humiliation of Hugo as he calls back the conquistadores:

Italy's ambassador to Caracas, Luigi Maccotta, told his US counterpart that [national] Italian oil company ENI squeezed PDVSA over an Orinoco belt deal in January this year knowing it had no one else to turn to. The Italians delayed the signing by two days to reinforce the Venezuelan government's "need for ENI". Paolo Scaroni, the company's CEO, then faced down Venezuela's oil minister, Rafael Ramirez, over changes to terms and conditions.

"Thirty minutes before the ceremony was supposed to begin Scaroni told Ramirez: 'Take it or leave it, I can get on my plane and move on.' Ramirez apparently used that half an hour to convince President Chávez to accept all of ENI's proposed changes or risk losing the deal," according to the US cable. The Italians said they would not pay PDVSA a standard signing bonus because the company already owed them $1bn.

Colour me unimpressed, Hugo.

Cash-Strapped West = Declining Aid to Africa

Who's to provide aid to Africa when many developed countries themselves could use some inflows? It seems this article is obvious enough: as more and more Western countries come under pressure to rationalize their fiscal policies, among the items on the "to-cut" list is overseas development aid. The trigger-happy UK coalition has supposedly "ring-fenced" foreign aid and then some, but the situation may not be the same in other countries once the reality of more austere times sets in. What are the geopolitical implications of bean-counting Western countries? Answer: African countries coming under the greater influence of free-spending China.

From the Nigeria's Daily Trust (c/o All Africa) comes this feature in which the Chief Economist of the African Development Bank Mthuli Noube cautions African states to prepare for this seeming inevitability:

Foreign aids inflow from donor countries are drying up and in the next 15 years, many poor African countries may not be able to access the window, Chief Economist of the African Development Bank Group (AfDB) Professor Mthuli Ncube has alerted. He attributed the new trend to several economic factors that are redefining economic relations around the world, some of which include the economic recession in Europe and America, and Africa's new economic partner - China.

Economic recession has forced some European countries like Britain, France, Germany, Ireland, Greece and Portugal to consider austerity measures with rising concerns that immigration and development budgets may be stifled. From 1960 to 2008, foreign donors have pumped over $650 billion in aids into the continent with a population of about one billion people...

Professor Ncube said African countries must focus on building infrastructure and strengthening intra-continent economic ties. China, he said, has introduced a new model to aid through its policy of 'resources for infrastructure'. Chief Investment Officer, Private Sector Department of AfDB Godfrey Mwindare told this reporter in Tunis that the entrance of China into Africa would create competition and fair deal, and that the continent is not currently benefitting from its extractive resources.

Africa's trade with China has doubled every three years since 2000 and hit $107 billion in 2008, eclipsing the United States as the biggest trading partner. Trade with China fell to $90 billion in 2009 because of the global recession. But the US Commerce Department said trade ties with Africa fell from $141 billion in 2008 to $86 billion in 2009.

Some 800,000 Chinese workers are now in Africa, according to a website that focuses on China in Africa, www.saiia.org.za. Addressing a press conference last Friday top economist and former CEO of France's international development agency, the Agence Française de Dévelopement Jean-Michel Severino said Africa has come of age to decipher its needs, and that the era of compassionate aids was over.

So the rise of China in relation to the West has manifold implications on other parts of the world. As we've asked many times before [1, 2, 3, 4, 5, 6, 7, 8], has the yellow man's burden replaced the white man's burden or do the Chinese something more constructive than the colonizers of yore? In particular, do proceeds from China's hunger for natural resources benefit more folks and create jobs in Africa?

Also see a recent post looking at historical aid flows from 1960 to the present.

Africa's Security, Governance & Development Nexus

I was very intrigued by this contribution from Knox Chitiyo from the Royal United Servicemens' Institute (RUSI) to our IDEAS maiden publication commemorating the launch of our African International Affairs programme. However, it's only now that I've had the chance to mention it. The general gist is that security, governance and development are interlinked in Africa. Whereas most tend to come at it from one of the three perspectives, it is perhaps better to view them as a set of overlapping challenges.

While the likes of William Easterly think that traditional development scholars mucking about with security matters is beside the point--see his criticism of Paul Collier's advocacy of intervention [1, 2]--there may be a path that is less activist yet keeps security matters in sight as a precursor and not a side-issue to economic development:

The 2002 transition from the organisation of African Unity (OAU) to the African Union has been the catalyst for an African road map for Africa’s Security Architecture (ASA). The AU, and the regional and national organisations to which it is linked, have four main premises for Africa’s security.

First, although recognising the importance of partnership and assistance from external stakeholders, there is recognition that it is Africa which takes primary responsibility for its security.

Second, Africa’s security road-map requires a formal framework, agreed at continental level and implemented at various levels, if it is to have any real-world applicability. this has led to the consensus on an AU led African Security Architecture framework. The ASA articulated the challenges and opportunities for security in Africa, and offers a long-term road map for embedding security in the continent.

Third, in terms of its hard security parameters, the ASA recognises the need to build capacity for African forces to cope with peace and stabilisation efforts. this in turn requires the increased professionalisation of Africa’s militaries and improved coordination of continental, regional and sub-regional militaries for alliance operations. the establishment of the regional Africa Standby Force (ASF) brigades in each of Africa’s regions is intended to strengthen the work done by AU peacekeeping forces. AU forces have achieved a great deal in peace operations, but because they often operate as allied but national forces under an AU aegis, there have been long term problems of equipment interoperability, logistics (particularly lack of air power), command and control, standard operational Procedures (soP) and funding. the establishment of the AsF, with its permanent regional depots, is intended to build sustainable capacity and capability, as well as to shorten reaction times.

Fourth is the realisation that Africa’s security, governance and development are interlinked. In this regard, the AsA should be seen as part of what we might call a wider African Security, Governance and Development (ASGD) architecture. there are no rigid barriers between security, governance and development, Indeed, the conditions under which regional and continental forces can intervene include situations in which a governance and/or development crisis creates insecurity (for instance, military coups or extreme environmental crises). This securitisation of development, which recognises that security is a prerequisite for sustainable development, is important. Also important and often ignored is the ‘developmentalisation’ of security; i.e. the recognition that security forces can, and should on occasion, contribute directly or indirectly to development. this developmentalisation of security is already becoming the ‘new wave’ in the security-development nexus. It has been spurred by the global recession, by the growth of civil society in Africa, by the increasing professionalisation of Africa’s militaries and by questions regarding wealth distribution in Africa.

It relates to longstanding questions about the nature of the state in Africa, about the role of the military, and about whether militaries can engage in non-traditional projects such as state-building. This has been a major issue for allied forces in Afghanistan and Iraq – it is also a question which the ASF and Africa’s militaries will have to engage with. This is one of a number of challenges and opportunities for Africa as it creates an ASGD. the increasing interaction of Africa’s governance, security and development institutions is fundamental for the continent as it seeks to widen its footprint in the global system. This entails ending, or at least moderating, the traditional compartmentalisation and mutual distrust and antipathy which characterised relations between the security, justice, political and development sectors.

Time to Join the Fight Against Maritime Piracy

Later this morning I'll be off to the International Maritime Organization (IMO) headquarters here in London to participate in the launch of a new initiative called Seafarers' Rights International. In essence, it's a response by various stakeholder groups to the plight of seafarers travelling through the volatile Gulf of Aden where still-rampant piracy endangers not only crewmen but also world trade. While I'm not much of an activist, I'll make an exception here since my country sends somewhere between a fifth to a quarter of all seafarers worldwide. Not coincidentally, today (23 September) is also the UN-designated World Maritime Day. Here is a brief description of what we're up against from the press blurb:

Piracy and crime at sea have been problems throughout history. But, in recent years, there has been a dramatic upsurge in the threat to shipping and crews, particularly with attacks originating from the lawless coastal regions of Somalia. 2008 saw an increase in attacks on shipping in the Gulf of Aden from pirates operating out of certain coastal regions of Somalia. In that year 111 ships were attacked. By 2009, the number of ships attacked had increased to 217, with 47 vessels and 867 crew taken hostage.

Currently there are 354 people being held hostage (including Paul and Lynn Chandler). Their nationalities are Indian, Sri Lankan, Greek, Pakistani, Filipino, Sudanese, Ghanaian, Bangladeshi, Ukrainian, Yemeni, Burmese, Turkish, Vietnamese, Kenyan, Indonesian, Chinese, Korean and British. Sixteen vessels are also being held to ransom.

Twenty to twenty five thousand vessels pass through the affected area each year – that’s over 400 vessels and 6,000 seafarers at risk every week. In 2007, a piracy attack was reported approximately every 31 hours. There were 15 piracy related deaths in 2006, 11 in 2008 and nine in 2009. In 2008 the amount paid to pirates in ransoms was estimated at US$150 million. There are an estimated 600 to 1,000 pirates operating out of Somali waters.

And here are more details of the petition which you can of course sign on to online:

The petition (www.endpiracypetition.org) was launched just four months ago as the centrepiece of a campaign to persuade all governments to commit the resources necessary to end the increasing problem of Somalia-based piracy. Originally intended to achieve half a million signatures, it has far exceeded that figure and definitively proves that immediate action is needed.

At a time when 354 seafarers and 16 ships are being held hostage in Somalia, pirates are being released unprosecuted to kidnap, loot and maybe kill again, when it is impossible to use routes via the Suez Canal between Asia/the Middle East and Europe/North America without passing through a high risk area, the campaign calls on governments to:

• Dedicate significant resources and work to find real solutions to the growing piracy problem
• Take immediate steps to secure the release and safe return of kidnapped seafarers to their families
• Work within the international community to secure a stable and peaceful future for Somalia and its people

Since this is the IPE Zone, we must also consider the negative effects of piracy on world trade if ships choose to go around the Cape of Good Hope instead of passing through the Suez Canal or purchase increasingly costly insurance:

As well as the human cost in fear and trauma caused to victims, seafarers and their families, piracy creates additional economic costs which are ultimately passed on to taxpayers and consumers. Apart from military patrols, paid for by a handful of governments, ship operators have to pay to re-route ships, meet higher insurance premiums, hire security guards and install shipboard deterrent/protection equipment.

6.8 billion tons of goods are moved by sea each year, in a global trade cycle worth $7.4 trillion. European economies are those most affected in relation to trade through the Gulf of Aden. In August 2009 the Suez Canal reported a 20% drop in revenues, partly as a result of piracy.

Examples:

Re-routing a tanker from Saudi Arabia to the USA via the Cape of Good Hope means 2,700 extra miles on the voyage. Over a year this reduces the number of voyages the ship can do from six to five round trips (a 26% drop). Additional fuel costs over the year would be $3.5 million.

In 2002 maritime insurers tripled the premiums for tankers passing through Yemeni waters. The cost to insure the ship, not the cargo, for a typical supertanker that carries 2 million barrels of oil jumped from $150,000 to $450,000 for a single trip. That increase translated into an additional 15 cents a barrel on the delivered cost of the oil.

Re-routing on a liner trade would mean adding another ship to the service to maintain the schedule. On a Europe - Far East route, re-routing around the Cape of Good Hope would increase the costs by $89 million per year ($74.4 million in fuel and $14.6 million in charter expenses).

War risk binders for ships transiting the Gulf of Aden cost $20,000 per ship per voyage, excluding injury, liability and ransom coverage. Crew costs while the vessel is in the high risk area can double. The cost of hiring a security escort through the Suez Canal can be as much as $100,000. Yemen’s navy is charging commercial vessels up to $55,000 each for escorted transit through the Gulf of Aden.

Maersk Line is reportedly increasing the amount it charges for cargo in and out of East African ports by $50 to $100 per container. The company’s ‘war risk charges’ for containers transported through the Gulf of Aden are $25 for a 20 foot container and $50 for a 40 foot container.

The breakdown of what a typical ransom costs (Source: Miller Insurance Services Limited) is as follows:
Average ransom $2 to $5 million
Managing the pirates: approx $550,000
Managing the people: approx $600,000
Managing the business: approx $1 million
TOTAL = ransom + $2.15 million

Attacks on energy vessels account for a large proportion of piracy attacks (12% in 2006, 24% in 2007). Over 60% of all oil used worldwide is transported by sea.

It's not fun stuff, I hope you'll agree.

Battle Rejoined on Climate Causing African Wars

While the publication Nature usually features stuff that interests research scientists rather than social scientists, this news item may be of interest to IPE followers as well. Two years ago, there was a well-publicized book called Climate Wars: The Fight for Survival as the World Overheats that made exactly the case that climate change triggered conflicts. In line with this idea, the economist Marshall Burke and his colleagues at UC Berkeley empirically investigated the relationship between indicators of climate change and conflict. Here is the abstract of their downloadable paper from last year:

Armed conflict within nations has had disastrous humanitarian consequences throughout much of the world. Here we undertake the first comprehensive examination of whether global climate change will exacerbate armed conflict in sub-Saharan Africa. We find strong historical linkages between civil war and temperature on the continent, with warmer years leading to significant increases in the likelihood of war. When combined with climate model projections of future temperature trends, this historical response to temperature suggests a roughly 60% increase in armed conflict incidence by 2030, or an additional 390,000 battle deaths if future wars are as deadly as recent wars. Our results suggest an urgent need to reform African governments' and foreign aid donors' policies to deal with rising temperatures.

So far, the pop notion of climate change triggering conflict is given some empirical support. However, a newer paper by Norwegian political scientist Halvarg Buhaug of the Peace Research Institute finds otherwise. Here's the abstract from his likewise downloadable paper in which he says climate is not to blame for Africa's civil wars:

Vocal actors within policy and practice contend that environmental variability and shocks, such as drought and prolonged heat waves, drive civil wars in Africa. Recently, a widely publicized scientific article appears to substantiate this claim. This paper investigates the empirical foundation for the claimed relationship in detail. Using a host of different model specifications and alternative measures of drought, heat, and civil war, the paper concludes that climate variability is a poor predictor of armed conflict. Instead, African civil wars can be explained by generic structural and contextual conditions: prevalent ethno-political exclusion, poor national economy, and the collapse of the Cold War system.

Which is correct? Beats me, pal. I haven't had the time to look over the methods and whatnot to form an opinion like, say, the one which made dubious claims that IMF structural adjustment caused tuberculosis deaths in Eastern Europe. As with many of these econometric studies, there are definitional issues: On the independent variable side, what constitutes an incident of climate change? On the independent variable side, what constitutes and incident of civil war? In its writeup Nature starts off with the later study...

But is there real proof of a link between climate change and civil war — particularly in crisis-ridden parts of Africa — as many have claimed?

No, says Halvard Buhaug, a political scientist with the Peace Research Institute Oslo in Norway. In research published today in Proceedings of the National Academy of Sciences1, he finds virtually no correlation between climate-change indicators such as temperature and rainfall variability and the frequency of civil wars over the past 50 years in sub-Saharan Africa — arguably the part of the world that is socially and environmentally most vulnerable to climate change. "The primary causes of civil war are political, not environmental," says Buhaug.

The analysis challenges a study published last year that claimed to have found a causal connection between climate warming and civil violence in Africa. Marshall Burke, an economist at the University of California, Berkeley, and colleagues, reported a strong historical relationship between temperature and the incidence of civil war. They found that the likelihood of armed conflict across the continent rose by around 50% in unusually warm years during 1981-20022. Projected future warming threatens to offset the positive effects of democratization and eradicating poverty in Africa, they warned.

...before discussing quarrels on method mentioned above:

The two rival groups are now disputing the validity of each other's findings.

Buhaug says that Burke's study may have been skewed by the choice of climate data sets, and by their narrow definition of 'civil war' as any year that saw more than 1,000 fatalities from intra-national conflict. The definition is at odds with conventional measures of civil war in the academic literature, says Buhaug: "If a conflict lasts for 10 years, but in only 3 of them the death toll exceeds 1,000, [Burke et al] may code it as three different wars...You'd really like to apply as many complementary definitions as possible before proclaiming a robust correlation with climate change," Buhaug adds.

Burke maintains that his findings are robust, and counters that Buhaug has cherry-picked his data sets to support his hypothesis. "Although we have enjoyed discussing it with him, we definitely do not agree with Halvard on this," says Burke. "There are legitimate disagreements about which data to use, [but] basically we think he's made some serious econometric mistakes that undermine his results. He does not do a credible job of controlling for other things beyond climate that might be going on."

Buhaug disagrees vigorously. "If they accuse me of highlighting data sets in favour of my hypothesis, then this applies tenfold more to their own paper."

I think regression models are too blunt a tool for answering this question. Disaggregating political and social variables was already hard enough before they threw ecological ones into the picture. Interaction effects, anyone? Judgement will inevitably play a role as this issue will become an increasingly more important one in national, regional, and international policy circles. Stata may help, but it isn't a substitute for clear-headed thinking.

Nigeria Dreams of "The Dubai of West Africa"

Two related threads are in evidence with the following story care of All Africa: First, despite being Africa's largest oil exporter, Nigeria has made limited development progress overall. Some call it the natural resource curse or the oil curse that limits many generously endowed nations' motivation to create productive industries instead of relying almost solely on revenues from extractive ones.

Second, there's still an ongoing debate about China's role in Africa. Some see it as neo-colonization, with the white man's burden being replaced by the yellow man's burden. Others believe in China's professed third world solidarity in bringing its "Beijing Consensus"-style development elsewhere. I tend to think the reality lies between these two extremes. While there is certainly a lot of self-interest involved in, say, China building football stadiums all over the continent, the Chinese tend to pay more attention than their colonial predecessors to infrastructure. That is, the Chinese are keen on putting up ports, roads, and other things that can facilitate commerce.

Of course, there's another debate as to whether China's construction projects benefit the local population since a lot of labour is often imported from China instead of being sourced locally. OTOH, Chinese officials I ask about this always mention that there is often a limited pool of local workers able and willing to help in construction projects. At any rate, what is described below is the emergence of an export processing zone (EPZ) near the capital of Lagos broadly modelled on China's exceedingly successful experiment with EPZs. If the Lekki Free Zone provides Nigeria with some diversification away from energy, hey, why not?

Nigeria is building a multi-billion dollar free trade zone with Chinese investors on the edge of its commercial capital Lagos to try to develop a local manufacturing base and help reduce its import dependence. The $5 billion first phase of the Lekki Free zone, a 3,000 hectare site on the eastern fringe of the city, is 60 per cent held by Chinese investors and 40 per cent by the Lagos state government, the deputy head of the project told Reuters.

The consortium will provide basic infrastructure including roads, power plants and water plants before manufacturing firms are invited to set up business, Lekki Free Zone Development Co (LFZDC) deputy managing director, Adeyemo Thompson, said.

"We have a number of Chinese companies which are coming in the manufacturing area," Thompson said in an interview. "They are coming to produce furniture, electronics, pharmaceuticals and heavy machinery. We are having a fair in November, that is when we kick off operations."

The Chinese shareholders in the project include China Railway Construction Corp., the China-Africa Development Fund Ltd and the China Civil Engineering Construction Corporation Ltd. A total of 16,500 hectares of land bordered by the Atlantic Ocean and the Lagos and Lekki lagoons has been earmarked for the whole free zone, which will include a deepwater sea port and a new international airport in close proximity.

The aim of the free zone is to make it easier for foreign investors, particularly manufacturers, to build a foothold in sub-Saharan Africa's most populous nation and second-biggest economy while still owning 100 per cent of their firms. It is modelled on free zones around China which have helped the Asian giant to develop its manufacturing base and economy over the past three decades.

"We have a one-stop shop ... No investor has to deal with any government agency directly. We license the enterprises. You can register your enterprise within a week, get permits and everything you need to run your business," Thompson said. "The free zone allows you to attract foreign direct investment into the country and investors are given some incentives ... It helps boost production, manufacturing, create employment and is a basis for sustainable infrastructure."

The manufacturing and agricultural sectors have been neglected since the 1970s oil boom, when Nigeria began making easy money from crude oil sales. Oil accounts for more than 80 percent of revenues and more than 60 percent of exports.

There's a slick promotional video too if you're further interested. Like China, Nigeria should be so Lekki...Lekki, Lekki, Lekki.

UPDATE: Also see this earlier interview regarding the hopes placed on Lekki. Apparently, it's been on the drawing boards for some time now. The key part concerns the role the PRC played in inspiring this EPZ and in funding initial outlays. Note the emphasis on hiring 4 Nigerians per Chinese worker to address concerns noted earlier:

How did the Chinese get involved with the free zone?

As you know, when the Chinese opened up their economy in the late seventies and early eighties, they established a number of free zones or economic zones to improve economic activity in their country. These zones helped to encourage investments into the country and improve the level of employment. My predecessors went round and talked to various people, looked at what was available and they were happy with what they saw in China. Four Chinese firms then came together to form a consortium and here they are now.

Lagos State Government is providing the land and this forms our equity. The Chinese consortiums are bringing in funds for the basic infrastructure for the first phase which will cover power, water, sewage and some roads and then the land will be leased to prospective investors. Proceeds from the land will be used for further development of the zone. Also, some money will be raised from local investors in due course.

The agreement we have with the Chinese is that there has to be some form of skill transfer to local Nigerians. For every Chinese, there should be four Nigerians working with him to acquire the necessary skills. Whatever jobs can be given to the local community will be given to them. One of the benefits of this project is employment creation and we will start with the local communities to garner their support for the FTZ.

Thank Serbia for Its Best Export: Football Coaches

With apologies to ABBA:

I'm nothing special, in fact I'm a bit of a Bora
If I show a formation, you've probably seen it before
But I have a talent; a wonderful thing
Cause everyone listens when I start coaching
I'm so grateful and proud
All I want is to manage it now...

It is with great sadness that we must lament the ouster of the brave Ghanian team at the hands of Uruguay under dubious circumstances. In the closing minutes of the game, the latter's scoring machine Luis Suarez who tallied 35 goals in 33 matches [!] for Dutch powerhouse Ajax handballed a surefire goal by Ghana. While rightly red carded, the subsequent missed penalty by Asamoah Gyan that hit the crossbar eventually set the stage for Uruguay triumphing on penalties. Such gamesmanship is unbecoming despite the favourable result, no?

Somewhat overlooked, however, was the role played by Ghana's Serbian coach Milovan Rajevac. When it comes to coaches plying their trade internationally, few compare to the Serbians' drive for adventure. There is something innately curious at work here, so much so that I must say Serbia's best-known exports are football coaches. Some greats ply their trade mostly at home like Ljupko Petrovic who led then-Yugoslavian side Red Star Belgrade to victory in the European Cup--today's Champion's League--in 1991.

However, there is a peripatetic legend who stands above them all: Bora Milutinovic. Our man Bora is justly famous for his international exploits. Together with the Brazilian Carlos Alberto Parreira, he is one of only two persons to coach five different teams at the World Cup: Mexico (1986), Costa Rica (1990), the United States (1994), Nigeria (1998), and China (2002). While he can't boast of winning a title like Parreira did in 1994 with Brazil, nobody has equalled his record of taking four different national sides past the group stage until he was unable to do so with China in 2006.

Now, some African players have expressed caution over the continued influx of Serbian coaches as they have made their way to Africa alike other parts of the world. A few months ago, this story made waves in the sporting media:

Rwandan star striker Jimmy Gatete has challenged the Tanzania Football Federation (TFF) to be careful in appointing the national team Taifa Stars coach and he expressed his reservations against Serbian tacticians. He said the TFF must avoid Serbian coaches at all coast for what he said they are not good enough.

Paradoxically, Gatete who features for St. George of Ethiopia is under the Serbian coach Milutin Sredojevic Micho. "I'm telling you this from experience. Serbian coaches are not good, they talk a lot but they hardly deliver," he said. "Tanzania should not hire coaches from Serbia. They are noise makers. They are not good enough; they do not live to their billing," he said.

Yes, whatever. Speak for yourself, pal. It turns out that Ghana's coach Milovan Rajevac--who led Ghana to victory over Serbia in the World Cup if you remember--worked under Bora himself prior to striking out on his own. What's more, he's taken some time to win over Ghanians, and, indeed the whole of Africa. Although Ghana was the youngest side in the competition, (Germany is second youngest--there's a lesson here), they almost made their way to the semis but for some crafty foul play. Here is the key bit from his FIFA profile:

Qualifying two unheralded Serbian clubs, FC Vojvodina and FK Borak, to the UEFA Cup were the achievements that earned him the notoriety to seek a national team job and when Ghana were looking for a replacement for Claude le Roy before the start of the 2010 FIFA World Cup qualifying campaign, Rajevac proved their choice, even though the public had never heard of him before and were somewhat sceptical. Rajevac signed a two-year contract and immediately set about taking the Black Stars to their second successive FIFA World Cup finals appearance. Ghana had some tough games in their first round group [of qualifying] but were surprisingly ruthless against much tougher opposition in their final group phase, thereby enhancing the reputation of the 56-year-old coach.

It is only fair to infer two things. First, Serbian coaches are pretty damn good at cross-cultural communication to be able to work in so many international contexts. Second, they obviously know a thing or two about coaching the sport. Unsurprisingly, previously obscure Coach Rajevac is now hot property after taking Ghana so far in the competition when much more fancied African sides fell by the wayside and did not even make it past the group stage. Remember, too, that Ghana didn't even have the talent of Michael Essien to call upon this time around and was bested by mighty Germany by only a goal.

Remember too that Ghana's 2006 squad was coached by another Serbian, Ratomir Dujkovic. Yes he had stars playing in top European competition like Sammy Kuffour, Stephen Appiah, and Michael Essien, but it takes some talent to make them gel with their countrymen. Ask France or Italy, for instance. That 2006 squad made it past the group stage, too, but Rajevac did them one better. To me, it's these stories of previously obscure talent unbeknownst to most fans making the most of their opportunities on the biggest stage that make the World Cup something special.

Before ending, then, here's a salute to Serbia for its best export--football coaches. Teaching the game across the globe, their work exemplifies cross-cultural communication at its finest. To paraphrase ABBA...

So I say thank you for Milutinovic
The plays they're making
Thanks for all the goals they're bringing
Who can live without them?
I ask in all honesty
What'd football be?
Without a free kick or penalty?
So I say thank you for Milutinovic
For bringing football to TV!

(Failed) White Man's Burden, Madagascar Edition

There's an interesting article in the Atlantic about the hubris of yet another American would-be social engineer, economist Paul Romer of New Growth Theory fame. In a very politically incorrect manner, he set out to demonstrate the theory that establishing rules of the game or institutions along Western standards is a key foundation for economic growth. In this respect he cites the well-known example of Hong Kong as a British colony.

As you will read below, he tried to apply his ideas in Madagascar, but political realities your typical economists fail to deal with eventually overwhelmed this would-be whiteocracy. Not only was Madagascar's then-ruler deposed, but the whole project fell into disrepair and, needless to say, disrepute.

Given the chance, there are a number of things I'd like to ask Romer about this White Man's Burden-ish enterprise:

1. Yes Hong Kong was a British colony, but is that the main contributing factor to its success? Were the other Asian Tigers Singapore, South Korea, and Taiwan still benefiting from the fruits of colonization?
2. Several generations of developing country elites who have studied economics at the most prestigious Western institutions--Stanford, Oxford, and what else have you--have failed to promote meaningful development in their home countries. What reason is there to believe that bringing over rich, white people to run poor peoples' countries will succeed where trying to transplant technoratic ideas drawn from the selfsame experts to the Third World have failed?
3. Given their current state of economic malaise, why would the UK and US be shining examples of progress and enlightenment for the developing world?

Contrary to Romer and similar to William Easterly, my inclination is to believe that other nations work things out for themselves and should not wait for manna from heaven to trickle down, whether it be from ostensibly well-meaning economists, multilateral institutions, or aid agencies. Anyway, to the key snippets of the article:

In the 1990s, Paul Romer revolutionized economics. In the aughts, he became rich as a software entrepreneur. Now he’s trying to help the poorest countries grow rich—by convincing them to establish foreign-run “charter cities” within their borders. Romer’s idea is unconventional, even neo-colonial—the best analogy is Britain’s historic lease of Hong Kong. And against all odds, he just might make it happen...

Fast-forward several centuries, and Henry the Lion’s would-be heir is Paul Romer, a gentle economist at Stanford University. Elegant, bespectacled, geekishly curious in a boyish way, Romer is not the kind of person you might picture armed with a two-handed flanged mace, cutting down Slavic marauders. But he is bent on cutting down an adversary almost as resistant: the conventional approach to development in poor countries. Rather than betting that aid dollars can beat poverty, Romer is peddling a radical vision: that dysfunctional nations can kick-start their own development by creating new cities with new rules—Lübeck-style centers of progress that Romer calls “charter cities.”

By building urban oases of technocratic sanity, struggling nations could attract investment and jobs; private capital would flood in and foreign aid would not be needed. And since Henry the Lion is not on hand to establish these new cities, Romer looks to the chief source of legitimate coercion that exists today—the governments that preside over the world’s more successful countries. To launch new charter cities, he says, poor countries should lease chunks of territory to enlightened foreign powers, which would take charge as though presiding over some imperial protectorate. Romer’s prescription is not merely neo-medieval, in other words. It is also neo-colonial...Romer’s New Growth Theory opened the window onto a sunnier worldview: a larger number of affluent people means more ideas, so prosperity and population expansion might cause growth to speed up.

So that's the theory. How did it work out in practice?

In July 2008, Romer made his first trip to Madagascar’s bustling capital, Antananarivo. Madagascar’s government was anxious to attract foreign investment, and it understood that a credibility deficit held it back. In an earlier bout of openness, the island had lured in foreign garment firms, but then the political climate turned hostile and the firms fled; now the government was having trouble enticing them to come back. Faced with this obstacle, the Malagasy authorities were open to unconventional arrangements. To boost investment in agriculture, they were ready to lease a Connecticut-size tract of land to Daewoo, a South Korean corporation, for 99 years...

Even as Romer was meeting with Ravalomanana, the president’s main political opponent was sniping at the proposed lease of farmland to Daewoo, and the idea of giving up vast swaths of territory to foreigners was growing increasingly unpopular. The arrangement was denounced as treason, and public protests gathered momentum, eventually turning violent. In late January 2009, protesters tossed homemade grenades at radio and TV stations that Ravalomanana owned; looters ransacked his chain of supermarkets. In February, guards opened fire on marchers in front of the presidential palace, killing 28 civilians. At this, units of the army mutinied. Soon, Ravalomanana was forced out of office.

The first action of the new government was to cancel the Daewoo project, and Romer’s plans in Madagascar were put on hold indefinitely. But the larger question was what, if anything, this disappointment signified for Romer’s whole approach. The riots appeared to demonstrate the explosive sensitivities surrounding sovereignty and land—sensitivities that are not confined to Madagascar. Indeed, versions of the Daewoo story have played out elsewhere. In the late 1990s, for example, Fiji’s government decided to bring in a British nonprofit to manage its mahogany forests, and an indigenous leader launched a revolt under the slogan “Fiji for the Fijians.” The rebellion was hypocritical: as the Oxford economist Paul Collier recounts in his book The Bottom Billion, the indigenous leader had himself backed a rival foreign bid to manage the mahogany. But the venality of the rebels’ motivation didn’t change the fact that a demagogue could easily attract support by railing against territorial concessions to foreigners.

It would be funny if it weren't for the highly deleterious consequences. What did they say was paved with good intentions?

Largest World Cup Patrons are...the Americans

Most people--including the Americans--believe that the US is indifferent to football or what they call "soccer." Certainly, the big money in American professional leagues is in American football, baseball, basketball, and to a lesser extent, ice hockey. There's also the impression that the American soccer leagues are where washed-up players go to finish off their careers Sunset Boulevard-style. Think of David Beckham. The current England coach, Italian Fabio Capello told Beckham that to have any chance at playing for his country, he had to come back and play in ["real"] European competition. Becks' injury ended such hopes, but still.

This interesting contribution I came across by Scott Gulbransen, Senior Director of Global Public Relations for Sony Online Entertainment, begs to differ with this impression. He says that Americans not only have paid the most for TV rights, but their contingent of fans in South Africa is the largest one. Further, he suggests that increasing popularity of the sport in America is due to a continuing influx of Latin immigrants:

There is no doubting that soccer is popular and growing in the United States, with the influx of immigrants from Mexico, Central and South America. With that increase in popularity, the World Cup is becoming a bigger deal here in the U.S.. More and more Americans are joining their neighbors from all parts of the globe to live the spectacle that is the Cup.

This year’s Cup in South Africa has a very American feel to it. Not only does the United States have its best chance to advance in the tournament in 60 years, but Americans are flocking to the country buying up tickets and wielding our substantial financial influence.

In fact, U.S. fans have bought more tickets than any other nation outside of South Africa. U.S. television networks have also paid the highest media rights fees of any nation. The US is a finalist to host the World Cup (in either 2018 or 2022) for the second time ever. The last time (1994) was the first and only time every ticket to every game was completely sold out. American affluence and hunger for the sport fueled the greatest financial success FIFA had ever seen.

With that in mind, you’d think FIFA would be excited about the fact the US is driving such interest in the sport. You'd think the "sleeping giant" of U.S. soccer would excited the governing body. Not so says one of its leaders.

And here is an interesting quote that demonstrates that football's high priests understand IPE [!] UEFA President Michel Platini argues that unlike the World Bank or the IMF, football governing bodies are much more egalitarian to Third World interests. Even the IMF blog tells you the IMF is in need of reform. Hence, the commercial clout of US broadcasters, fans, and sponsors (it needs to be mentioned) should not sway matters too much in America's direction--especially as it bids to host another World Cup according to the powers-that-be:

With that in mind, you’d think FIFA would be excited about the fact the US is driving such interest in the sport. You'd think the "sleeping giant" of U.S. soccer would excited the governing body. Not so says one of its leaders.

"You may be confusing the world of football (soccer) with the IMF or the World Bank," says Michel Platini, a top executive of FIFA, the international governing body of international soccer. "When it comes to decision-making in international football, the U.S., like Germany or China, has as much power as San Marino, Vanuatu or Belize."

Whether Platini admits it or not, the World Cup needs the US more than ever. With a global recession, Americans and their wallets – including the large television networks – throw more money at the tournament than everyone else combined. FIFA and the World Cup increasingly need American interest and money to keep the expensive show afloat. Yes, it might be the world's most popular sport, but America is its richest and most important benefactor.

The Washington Post reports that FIFA figures do indeed show Americans have bought the most tickets to the events after the host nation.

To Cow a Dictator: Zimbabwe and Blood Diamonds

It is heartening to know that corporate social responsibility (CSR) efforts can work on even some of the most despotic regimes with the worst financial management. For those of you who have yet to come across it, the Kimberley Process Certification Scheme (KPCS) grew out of a United Nations effort to staunch the flow of so-called "blood diamonds" in international trade. That is, its intention was to certify diamonds as not being sold by militants to finance wars--especially those from Africa. While third world governments are not usually fans of measures largely devised in the West, KPCS has largely succeeded because even despotic regimes generally welcome efforts to quell armed movements and blockage of trade in diamonds. Just look at its globe-spanning participant list.

As a child of the Global South, I have long held a keen interest in third world solidarity. While he is regarded nowadays as a tyrant and even a laughingstock by the West, I have always viewed Robert Mugabe in less Bushian black-or-white terms common to Anglo-Saxon commentators. Hard as it is to believe now, Comrade Bob was widely lauded as a pan-African hero in his heyday in the independence movement. That the intervening years have proven him no better at improving conditions in Zimbabwe is a real shame, but still. To paraphrase current PRC doctrine on Chairman Mao, Mugabe is 70% bad, 30% good. And, the more he clings on tenaciously to power, it seems the balance gets worse.

Now, there has been much blowback from the Zimbabwean government lately over the Kimberley Process trying to force Mugabe's hand in appointing a monitor over the Marange diamond fields. It's a long story but it basically goes like this: when De Beers' mining concession expired in 2006, another was given to British firm African Consolidated Resources (ACR). However, Mugabe's government has since declined granting ACR its rights to mine the area and has even set up rival interests. In the interim, opportunists began scouring the area. As a response, sponsored "security" forces have been implicated in human rights violations to solidify their grip on the region and make sure the cut flows in their direction. So, witnesses report beatings, torture, and worse.

A few weeks ago, Mines Minister Obert Mpofu mirrored Robert Mugabe's hardline stance on the Kimberley Process of, we'll go elsewhere if they won't accommodate us in light of a June 2010 deadline to shape up set by the Kimberley Process after finding much amiss in Marange, including the appointment of someone to monitor the situation:

Mines minister Obert Mpofu has reiterated government threats to pull out of the Kimberly Process (KP) if the body refuses to endorse the country’s bid to freely trade diamonds extracted from the disputed Marange fields. Allegations of human rights abuses and the claimed involvement of security services in the exploitation of the Marange diamonds in eastern Zimbabwe resulted in the country being brought before the KP, a joint government, industry and civil society initiative aimed at stemming trade in so-called “blood diamonds”.

Trade in diamonds produced from Marange has since been stopped and the country was given a June 2010 deadline to comply with a number of stringent requirements which include the appointment of a KP country monitor. However Mpofu told journalists at the Bulawayo Press Club that Zimbabwe would pull out of the Kimberly Process if government efforts to comply with its requirements are not endorsed.

"If the KP is unsatisfied with our efforts and says we have failed to comply with their requirements (and) bar us from diamond trade, we will not lose sleep. We are ready to just pull through and not lose anything. The KP does not own the diamond trade markets. Zimbabwe will pull out of the KP and sell its diamonds to those markets,” Mpofu said adding that membership of the organisation was in fact voluntary.

President Robert Mugabe also said recently that Zimbabwe would find other ways of trading its diamonds if the country continued to encounter problems with the Kimberly Process. Human rights organisations and sections of the global diamond industry have been pushing for the country’s suspension from the KP claiming that the Marange stones are being used to enrich government officials and fund rights abuses in the country.

But, more recently, the Mugabe-led government caved in, most likely fearing a ban of the sale of diamonds from the Marange diamond fields:

The guidelines include the demilitarisation of the diamond fields, which has not happened, with rights groups reporting that there is still strict military control of Chiadzwa and the villagers there. According to the guidelines there is also supposed to be an independent monitor in place to oversee the sale of all stones from Chiadzwa. Abbey Chikane, the head of the South African Diamond Board and a former Chairman of the Kimberley Process Certification Scheme, was finally appointed as a monitor for the diamond fields after four months of fighting over a suitable candidate.

Chikane arrived on Monday, and was expected to visit the Marange fields in the east of the country on Tuesday, the state-run Herald newspaper reported. Chikane has reportedly already met with mining ministry officials, as well as representatives of Mbada Diamonds and Canadile Miners, the firms given state authorisation to mine the diamond fields.

Meanwhile, the now-nefarious Mr. Mpofu has just been hauled before the Zimbabwean parliament to face suspicions of profiteering by Mugabe cronies in the governance vacuum:

Mpofu had for weeks refused to appear before the committee, insisting the issues they wanted to take up were the subject of litigation. But he finally relented after the Attorney General’s office confirmed that a refusal to testify to Parliament could result in legal charges. Economic Planning Minister Elton Mangoma confirmed the cabinet approved the controversial Marange deals though he said certain issues need a closer look.

Committee sources said Mpofu was quizzed over issues including an aborted January auction of 300,000 carats of diamonds, which was halted after the office of Prime Minister Morgan Tsvangirai got wind of it. The sale had not been approved by Harare or by the Kimberly Process Certification Scheme, which was scrutinizing diamonds from Marange due to alleged human rights abuses...

The state entity has said that since it began to exploit the Marange field in 2006 it has produced only 3,000 carats worth US$12 million. But the committee has determined that Mbada and Canadile have extracted 7.1 million carats of diamonds. The panel says evidence indicates Zimbabwe has lost millions to top officials.

CSR researchers should take note of features that make the Kimberley process successful where other efforts have not. Nearly universal buy-in from both diamond buying and selling countries due in no small part to self-interest has helped ensure even the most recalcitrant characters eventually walk the line. While there are some loopholes, KPCS is noticeably effective on the balance. Wouldn't it be nice if more UN initiatives were like this one?

Energy Matters I: Quenching Thirst for African Oil

Here is more in-house stuff that should pique your interest, especially if you're interested in African political economy. After featuring so many posts on Chinese energy interests in Africa, regular readers should be forgiven if they think China is the only player scouring the continent for energy. Well, today, I'm here to tell you that China is far from the only country staking claims on its energy demands against African supplies. A few days ago, I made an apparently well-received post featuring a contribution I made to our IDEAS newsletter and, sometime before that, one from our Southeast Asia programme which I am part of. Recently, IDEAS launched our sister unit covering Africa. Hopefully, you will receive it as nicely as you've taken to our output on Southeast Asia which is geared towards a general audience.

In their first newsletter, I am particularly interested by the contribution of Alex Vines OBE, director of regional and security studies at Chatham House, in their maiden issue. For those of you unfamiliar with it, Chatham House is the British equivalent of the American Council on Foreign Relations. In his write-up, he explores the once-again active race to tap comparatively healthy oil reserves in Africa. Back for another round are the usual suspects--Europe and the United States--but they're now joined by the likes of China, India, and even South Korea. Here are some excerpts:

Africa currently supplies about 12 percent of the world’s oil, boasts significant untapped reserves and has surpassed the Middle East as the largest regional supplier of crude oil to the United States. Individually, Nigeria is America’s fourth largest oil supplier, Angola is the sixth and Algeria is the seventh. Recently the National Intelligence Council estimated that the US imported 18 percent from sub-Saharan Africa, almost the same amount as Saudi Arabia. This amount is expected to increase to 25 percent in the next ten years. Africa offers diversification away from Middle East oil for both the US and Europe and also access to new gas reserves.

It is not just the US and Europe that are vying for access to African oil. China’s continued economic growth, a key factor in the country’s stability and the Communist Party’s legitimacy, requires the import of substantial supplies of energy, minerals and other materials. China’s leaders have concluded that it is too risky to just compete on the open market after the UNOCAL debacle in 2005, in which the US blocked the sale of the Union Oil Company of California to the Chinese National Offshore Oil Corporation(CNOOC) before approving a merger with the American multinational Chevron. Diversifying energy sources is also seen as important for spreading risk. China’s 2003 National Energy Strategy and Policy remarked that ‘oil is the key factor in the creation of public wealth, and also one kind of most important commodity infuencing (sic) the global political pattern, economic order and military operations.’

Having first become a net importer of oil in 1993, in 2003 China became the world’s second largest consumer of petroleum products behind the United States, and the third largest importer. Although some 55 percent of African oil and gas went to Europe and the US in recent years and only 16 percent went to China this is changing. China is projected to surpass the US in 2015. China currently receives around 33 percent of its imported crude oil from Africa. In March 2008, one senior Chinese official said Beijing aimed to increase this figure to 40 percent over the next five to ten years.

Nine out of ten of China’s top trading partners in Africa in 2008 were oil producing states, the exception being South Africa. The continent’s value of Chinese oil-company investment in Africa amounts to 8 percent of international oil company (IOC) investment and only 3 percent total oil company investment there. Chinese companies currently only produce in Sudan (225,000 barrels a day) but Sinopec’s purchase of Addax for $7.6 billion in 2009 has bought China access to current Nigerian oil production. Angola was in 2009 the second largest supplier of crude to China after Saudi Arabia.

The Prize never stops being such, it seems. At any rate, the other features are well worth a read if their topics interest you. Certainly, they help me improve my understanding of what is happening in Africa given our in-house expertise:

Introduction: African Challenges and Opportunities|
Sue Onslow
Head of LSE IDEAS Africa International Affairs Programme

Prospects for Growth in Africa: Learning from Patterns of Long-Term Economic Change|
Morten Jerven
Assistant Professor in International Studies, Simon Fraser University

Political Stability: Crucial for Growth?|
Ben Shepherd
David Davies of Llandinam fellow, Department of International Relations,LSE

Emerging Powers and Africa|
Christopher Alden
Senior Lecturer in International Relations, LSE

African Security and the Securitisation of Development|
Knox Chitiyo
Head of Africa Programme, RUSI

China in Africa: A Backlash Against PRC Investment

We've already had a long series of posts looking at the thorny question of China's involvement in Africa from several angles [1, 2, 3, 4, 5, 6, 7]. What we have here is yet another sceptical take on what the Chinese are doing in Africa. While it is well-known that Chinese construction crews building infrastructure projects there do not typically hire locals and thereby provide employment--see my previous feature on China's stadium-building diplomacy in Africa--it appears that matters are further-reaching than previously thought. As Chinese entrepreneurs move their way down to smaller scale businesses in the region, many African countries are beginning to set limits of this budding friendship. That is, small- and medium-scale businesses may increasingly be off limits even to Africa's newest, bestest friends:

Namibia has announced it will ban foreign investment in medium-sized public transport business and hair beauty salons. Citing growing Chinese involvement in the businesses, Namibia's Trade and Industry minister, Hage Geingob, last week announced that the government would enforce legislation and make foreign investors obtain permits to invest in any form of retailing in a bid to protect local jobs and the country's economic well-being. "Much of this concern has been sparked by activities of Chinese business persons," the minister was quoted by Bloomberg as having said.

Analysts say the dilemma facing the southern Africa nation is likely to be replicated in other African nations including Kenya, thanks to the latest wave of forays into the continent by fast rising economic powerhouses such as China. "It is going to be a contentious issue going forward especially when the foreign investors begin moving into areas way beyond the comfort zones of locals. For instance here in Kenya we are already seeing disenchantment among road and construction contractors who claim they have been locked out by the Chinese," an analyst, Mr Robert Shaw told Business Daily.

The Sino-Africa trade and investment pacts have grown significantly over the last 10 years driven by a quest by China to find resources to support its vibrant economic and industrial growth and market for its manufactured products. Africa has become a perfect match for the Asian economic tiger because consumers in poor countries on the continent prefer the more affordable goods and equipment from the Asian nation. Statistics showed that in 2008, total trade between the two blocs was valued at $106.8 billion.

According to Prime Minister Wen Jiabao, China invested $875 million in Africa in the first nine months of 2009, marking a 77.5 per cent year- on-year growth. China also pledged $10 billion in November 2009 in fresh low-cost loans to Africa over the next three years. The data further showed that while trade volumes inevitably suffered in the first half of 2009, Chinese enterprises signed $22.45 billion of new labour service contracts in Africa, up 25 per cent and completed $11.53 billion of business volume, representing a 61.1 per cent year- on- year growth.

In Kenya alone, the economic connections with China have grown by leaps and bounds with the Economic Survey 2009 saying that Kenya exported goods worth Sh2 billion to mainland China in 2008 compared with imports worth Sh63 billion. Projections released in December by the Chinese ambassador, Deng Hongbo, further said that between January and October 2009, the value of bilateral trade between his country and Kenya stood at $1.02 million compared to $1.2 million realised over 2008. The performance in 2008 marks a 30.4 per cent leap over the previous year, indicating a firm run in the value of bilateral trade between the two countries. Chinese enterprises have also shown interest in key sectors of the Kenyan economy including energy and roads construction where some of them are already operating.

The firms are also showing interest in smaller sectors such as apparels trade. Barely a fortnight ago, some local contractors protested against alleged domination of the construction sector by Chinese firms. "Though the concerns raised by the Kenyan contractors may be contested on the basis that their Chinese counterparts offered better services, it provides an indication of the locals coming to feel that the foreigners are pinching beyond comfort levels," Mr Shaw said. He further said: "The Chinese here in Kenya may not get to low economic sectors such as those contested by Namibia but caution must be taken for the sake of any eventualities..."

Helping fellow developing countries or the yellow man's burden? The debate continues, and I myself am not quite decided.

The Varieties of Chinese Finance in Africa

There's interesting commentary coming from Chris Alden and Riaan Meyer suggesting that not all Chinese finance in Africa is the same. Contrary to the image that China is a one-stop shop for dictators wishing to obtain infrastructure improvements, aid and forex in exchange for natural resources the PRC needs, they argue that a more nuanced picture needs to be made. That is, there are many modes of Chinese finance that cannot be lumped into a simple view of it being an extension of the non-interference principle. They also envision China's activities in Africa being part and parcel of a wider drive to build alternatives to the dollar as a vehicle currency for trade:

The conventional view of Chinese finance in Africa is that it is a lump sum concessional loan, negotiated in secret between Beijing and the host government, built around the twin pillars of a substantive Chinese investment in infrastructure in exchange for access to African resources. The idea is that it is all wrapped in a commitment to non-interference and peopled by Chinese companies, unskilled labour and supplies.

Such is the power of this image that African leaders themselves have been seduced by it. Former leaders Olusegun Obasanjo of Nigeria, Omar Bongo of Gabon and, most recently, Guinea’s Moussa Dadis Camara all believed that this was the definitive Chinese approach and pursued arrangements with Beijing on this basis. And in the main, their efforts to secure such deals have been dogged by controversy.

Chinese financing towards the continent, in fact, has always been more diverse than is commonly assumed. Financial restrictions on Chinese banks in the past have been placed by Beijing, which have limited their role to operating in the domestic setting when coupled with smaller reserves at the time and lack of experience. Following a series of policy innovations – especially after the establishment of national policy banks in 1994 and the subsequent opening of commercial banking – the scope for involvement abroad widened considerably.

Today, the spectrum of Chinese financial institutions operating in Africa ranges from those with direct ties to the government and its largesse to that of an emergent group of private banks and investment houses.

Those with the closest links to Beijing, such as the China Development Bank, are involved in conventional project finance as well as some more politically-motivated projects, such as the China Africa Development Fund.

China Eximbank, though obviously a policy bank and involved in large-scale infrastructure projects, nonetheless has increasingly sought to emulate the practices and conventions found in other leading national export banks.

Industrial and Construction Bank of China (ICBC), the world’s largest by market capitalisation, has pursued a joint venture strategy since 2007, purchasing 20 percent of Standard Bank and benefitting from its established position across Africa. It has been taking the lead in structured project finance deals and, through Standard Bank, is poised to use its financial resources to expand into retail banking.

Private finance like China Merchant Bank is testing the waters in Africa while the murky Chinese International Fund (CIF) is pursuing its own joint venture strategy in Guinea and Zimbabwe.

Understanding this diversity of Chinese financial actors is important not only for African policy makers and corporations, but it also sheds light on the changing nature of China’s business engagement with Africa.

With increasing Chinese government financing linked to real projects awarded to Chinese companies, the flow of these funds needs to be managed. Yet the presence of Chinese banks abroad and in emerging markets in particular is limited as these institutions are unable to handle remittances and advances in African countries. The pressure to have a more meaningful presence in Africa is to a large extent driven by the corporate customers of Chinese banks in the domestic market. Such customers would much rather be dealing with Chinese banks or banks that have partnered with Chinese banks.

A series of recent initiatives by Beijing has bolstered the exposure in Africa of Chinese financial institutions.

At the Forum on China-Africa Cooperation meeting in Egypt late last year, China announced it would support Chinese financial institutions in setting up a special loan of U.S. $1 billion for small- and medium-sized African businesses. This is a clear sign that Beijing wants to encourage them to take a credit view on local companies. This was further supported by a Chinese commitment to cancel debts associated with low- or interest-free loans that were due to mature by the end of 2009, paving the way for improved credit terms in the future for these countries.

The broader implications of Chinese experience in the financial sector in Africa and other parts of the developing world are manifold. Chinese corporates have seen a movement to conduct overseas trade on open-account rather than the more traditional letter-of-credit terms with overseas customers. Moreover, in the wake of the global financial crisis, China has demonstrated a willingness to play a much more assertive role in international finance by proposing alternatives to the U.S. dollar in settling international trade transactions.

China is currently piloting international trade settlements in renminbi (yuan) in a number of Chinese cities. The pilot scheme allows for 400 approved Chinese enterprises in five approved cities, including Shanghai, Guangzhou, Shenzhen, Dongguan and Zhuhai, to settle trades with their counterparts in Hong Kong, Macau and Asean member countries.

If the renminbi is finally allowed to trade freely it is only natural that a large part of international trade will be conducted in renminbi. For Africa, whose trade is rapidly shifting eastward but is still dominated by the dollar (except in Francophone West Africa) the switch to renminbi will be a natural progression if the current trends in trade continue.

Clearly then, as Chinese corporates evolve and their banking system becomes more internationalised, these changes seen in the developing world will be increasingly reflected in global trends in international finance.