Tag: World Bank

What Africa really needs from Development Aid is Socio-economic Transformation

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By George Musiime.

April 28-29 coincided with the 2024 International Development Association (IDA) for Africa Heads of States summit held in Nairobi Kenya and similar to the ones before, this year’s summit happened at a time when the continent was still struggling. Struggling to address challenges arising from infrastructure deficiencies,  funding gaps, security threats and threats from climate change, as well as the after-effects of the COVID-19 pandemic.  What was unique about  this summit though,  was that it  took place just a few months after the G77+China summit held in Kampala earlier this year. Thus, it came as no surprise when Africa made a bold call, more so, in a unified voice to IDA regarding what Africa truly needs to realize from Development assistance. This call was driven home through the speech of the Chairman of the G77+China and   Ugandan president, H.E Yoweri Museveni.

A history of the crisis in Africa: In his momentous speech that was in sync with the position of the G77+China, H.E Museveni noted that the crisis in Africa has been brewing since the dawn of Africa’s independence in the 1960s. Surprisingly, so little  had been achieved  in as far as resolving this crisis. In fact leaders at the summit wondered  how after 60 years, no African country had graduated out of the IDA. Moreover, for this little impact, the leaders faulted a financial system designed with profiteering in mind other than prosperity. In other words, leaders at the summit reiterated the pronouncement of the G77+China that the global financial system was out of date, out of touch and out of step with today’s global challenges. In an example, H.E Museveni cited the World Bank’s inclination to finance capacity building which might have rightly been a necessity in an Africa that was starting out on the daunting journey of self-governance. However, he expressed doubt in whether it was what the continent needed to day. Instead, he made the argument that following more than sixty years of capacity building , it was time to turn our focus towards socio-economic transformation.

In line with this, the summit concurred that Africa needed cost effective transportation, power generation, and low-cost manufacturing, as opposed to capacity building as a path to   a transformed Africa. Meanwhile, as the World Bank is ever more likely to fund projects that have minimal impact on the ordinary African, H.E Museveni gave props to China for not merely realizing the continent’s infrastructure needs but also becoming a leader in taking that direction as well.  Today, there is evidence of this all across the continent where Chinese funding has yielded over 13,000Km in new and rehabilitated railways, over 100,000Km in highways, more than 50 large scale power facilities two of which are in Uganda,  and several industrial parks all across  Africa.  Thus china’s cooperation in Africa targets some of the continent’s acute problems including socio-economic transformation and the age-old dilemma of trade deficits.

Moreover, related to China’s vision  of building a community of humanity with a shared future, the leaders agreed that more impactful development financing would work for equality and fairness, hence building a world where the IDA might not be needed. However, this to happen, the world have to be open to doing development financing that was driven by prosperity and not profiteering!

Therefore, in their solemn call  African heads of states   seemed to point it out   to the IDA and other Bretton Woods institutions that it was not hard to do transformative development financing. In fact, there is proof to the fact  that China has been doing the same for the past 20 years, driving socio-economic transformation across the continent through investments that address the  economic bottlenecks that have curtailed Africa’s progress since independence. Thus the leaders implored the IDA and World Bank to consider financing railways for cost efficient transportation alternatives, Hydropower projects, to address current and prospective energy needs of an industrialized Africa, irrigation to mitigate the growing challenges of erratic weather patterns etcetera. In reality, China has been doing this; with railways in Tanzania, Djibouti, Kenya, Nigeria, Ethiopia, etcetera. Also, hydropower stations in Uganda, Nigeria,  Ghana and elsewhere. Moreover, through  the China, FAO and Uganda South-South cooperation as one example, the whole length of the agricultural value chain is being changed and more Ugandans in beneficiary communities have been brought forth into the money economy-a shift from traditional subsistence production.

The need to shake the  confrontational mentality: Whenever China addresses the world, it calls for cooperation and  peaceful co-existence. Two great examples of this are the principle of non-interference in affairs of sovereigns and the Belt and Road initiative which has a footprint almost in all continents of the world. Additionally, the proposal of building a community of humanity with a shared future is centered on building a global community that is beneficial to all of humanity and respect for the UN charter. Unfortunately, some of her peer competitors have assumed this security concept that “presence is deterrence” seemingly hell-bent on getting rid of China as a strategic objective before assisting with socio-economic transformation. At a time when China is calling on the rest of the developed world to cooperate in Africa, everyone else needs to shift their focus from addressing China’s growing influence on the continent towards taking a concerted efforts to  address the challenges Africa faces.

The voices of African heads of states at the IDA summit in Nairobi is the voice of an African continent that is conscious of what challenges the continent faces on its path to socio-economic transformation. In the same light, the props given to the People’s Republic of China is acknowledgement that China’s work on the continent is in sync with the aspirations of the continent.  Therefore, it is about time the rest of the developed world and all multilateral development agencies, if they are not duplicitous and truly mean to put prosperity above profiteering to stop viewing China as a rival on the African tuff but instead, cooperate with and where need be borrow a leaf from China’s approach if we are about building a resilient African continent.

George Musiime is a research fellow at the Sino-Uganda Research Centre.

 

The World Bank’s Scare Amid VP Kamala Harris’s Visit to Africa: BRICS Bank offers Hope to Global South

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By Alan Collins Mpewo

There was a time when the World Bank and its ilk ruled the world economy fluidity without much or any rivalry. In fact, this prompted them to dictate the loan terms and conditions (regardless of how steep) and the loan receivers only stood on the far side without any pleas being given much audience. The tides have significantly changed in the recent times with the rise of the Eastern economies. As the largest contributor and member of the BRICS (Brazil, China, India and South Africa) Bank or the New Development Bank, China has significantly led the league of dominant economies and as rightly foreseen by some analysts such as O’Neill, J. in his 2001 Economic Paper entitled; Building Better Global Economic BRICs. Goldman Sachs Global Economic, China has consequently become a scare to the world bank. It happens more often, as a rule on basic dominance that a stronghold for decades can run at unease with any challenge to their foundational dominance. It’s a proper adoption of the rules of the jungle. Survival for the fittest has greatly been undertaken by the West, while Beijing has constantly harnessed the “round circle” doctrine. This is to the effect that there shouldn’t be any dominance by whoever they seek to partner with, but rather a round table formation of diplomacy which enables having an all-round talk while setting fair attention to all pleas.

The President of the World Bank, David Malpass, has recently been skeptic on the loans issued by China to Africa. BBC was the medium of his scares, and he had a lot to state as regards to his worries for the growing economies in the Global South. His address was hinged on what he described as nontransparent terms and conditions. He added a call for such terms and conditions to be increased in transparency. However, if we critically analyse this, Malpass cherrypicked facts. For example, he ignored other facts such as that in most cases when countries are borrowing, they request to include privacy terms which cannot be unilaterally ignored by China because Malpass so suggested. Actually, such terms are common terms used by other lenders including  some members of Organisation for Economic Co-operation and Development (OECD). A March 2021 joint report by AidData, Peterson Institute for International Economics, Georgetown Law, Kiel Institute for the World Economy of Germany, and Center for Global Development concluded that seven percent of OECD official creditors sampled have some sort of privacy terms and use contract tools and repayment security devices to ensure loan repayments.

Of course, some onlookers will agree that Malpass’ statements have some validity, but without context, it all comes as distress signaling in as regards the World Bank’s long-standing economic dominance. So, for purposes of proper analysis, I’ve elected to dress my opinion with a juxtaposition in regards to ‘what was’, and ‘what is’, to better understand the outcry.

In what many would agree to, China has provided an alternative. Previously, there was basically one direction to look at for economic support, when domestic and regional interventions failed. The World Bank would then come with a pool of excess funding, but for their conditions. In fact, there isn’t much in most countries that they can show for what the funding then was being put to use for. To be fair, most was spent on lavishing the corrupt whims of those who sit in the highest echelons of the borrowers. Be that as it may, with most loans from Beijing, loan restructuring tries as much to encompass accountability on a ‘target/goal hit’ basis. Sometimes, it goes ahead to additionally offer expatriate support in order to secure the project completions. This modus is greatly parallel from how the World Bank has in recent times operated.

The starting point of the Ills had always been with the propagation of the loan disbursement to be through either the Euro or dollar currencies. In turn, and sadly a reality for most of the world borrowers, loan repayment has often been expensive due to the changes and fluctuations in the contract currencies in light of the economic instabilities globally. While the World Bank cited Zambia and Ghana as examples to support its allegations, it was inconsiderate in noting that Beijing has since recent times lent debt writing off for not only both countries, but also numerous other countries in the global south. In March 2021, researchers at Johns Hopkins University noted that between 2000 and 2019, China wrote off accumulated arrears of 94 interests’ free loans for African countries that totaled over 3.4 billion USD. A move by the same bank would in the past still hinge on some undesirable conditions. It was always a winner and left no much room for the Global South in the bargain. While rules on international lending are a guidance on desirable practices, the same rules have often been penned by the allies and this has been a major point of disagreement for China. Debt management shouldn’t be a tool at a disposal for wanton sinking of other global players, but perhaps with a facelift, should be looked at, and used, as a way of supporting the not so economically sound nations.

While this has been China’s objective, to the West, it has always been met with antagonism. This has been witnessed by the visit of the U.S Vice-president Harris Kamala to over 3 countries in the global south, in a move to pulling those nations and possibly their neighbors through promises of economic support. Promises were among other countries, made to Tanzania and Ghana, and evidently, the tone in U.S’ tone towards Africa is significantly changing from “what the U.S can do for Africa,” to “what Africa and U.S can do together.” With the various turns in international politics, there’s much attention on what this new tone would seek to mean to the Global South. It’s in the alternative evident from the climate change trends and rapid alliances, that there’s a great need for natural resources as a move for mitigation of the effects. Nickel still ranks among the most sought minerals, and without a doubt, Africa is still a virgin ground with isolated deposits. For leading manufacturers of electric cars as alternatives to carbon emitting machinery, the visit to isolated nations has raised eyebrows and rather than agreeing with China’s mutual respect doctrine of diplomacy, a move to merely discredit Beijing through channeled antagonism. Arms crossed for what’s next.

Alan Collins Mpewo, is a lawyer and a Senior Research Fellow, Development Watch Centre.

China’s Global Development Initiative can revert IMF’s 2023 grimy global outlook

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By Marvin Hannington Kalema.

 On Tuesday this week, the International Monetary Fund (IMF) released its 2023 global growth forecast in which it painted a grimy picture stressing that the world’s three largest economies will “continue to stall”, and warned “the worst is yet to come, and for many people 2023 will feel like a recession.”

Stressing that conditions could worsen significantly next year with more than a third of the world’s economy contrasting, IMF cut its 2023 global growth forecast to 2.7 percent, which is lower than the Fund’s 2.9 percent July 2022 forecast.

Further, the forecast reduced US’ growth this year to 1.6 percent which is a 0.7 percentage point downgrade if compared with the Fund’s July forecast. This drop can be attributed to an unexpected second-quarter GDP contraction in the US. For the year 2023, IMF predicted that US’ growth forecast will be 1%.

China, the world’s second largest economy on the other side is predicted to register to register a 4.4% growth in 2023, down from 4.6%.

Sky rocketing energy prices in Eurozone growth will further affect economic growth in the region with IMF predicting a 0.5% growth in 2023 which will leave the region’s key economies like Germany and Italy entering what IMF called “technical recessions.”

The IMF further argued that a promising economic future, is subject to a delicate balancing act by central banks to fight inflation without over-tightening, which could push the global economy into an “unnecessarily severe recession” and cause disruptions to financial markets and pain for developing countries.

All the above, if critically analysed, it is increasingly becoming clear that achieving United Nations 2030 Agenda for Sustainable Development will be very difficult especially for developing countries.

As Chinese president Xi Jinping observed in his remarks to during the 76th session of the UN General Assembly address, “right now, COVID-19 is still raging in the world, and profound changes are taking place in human society. The world has entered a period of new turbulence and transformation. It falls on each and every responsible statesman to answer the questions of our times and make a historical choice with confidence, courage and a sense of mission.”

Arguably, the questions of our times now must answer how can the world recover from this economic meltdown without leaving any country behind? What should be done to achieve the 2030 UN Agenda for Sustainable Development?

While UN’s 2030 Agenda calls for global sustainable development, the current reality calls for more ingredients for it to achieve its main objectives.

Therefore, recalling urgent need for a better and functioning world amidst economic uncertainties as highlighted by IMF in their 2023 global outlook forecasts, embracing China’s proposed Global Development Initiative (GDI) is very important at this time since it addresses all key challenges that have potential of failing a balanced economic recovery for all countries while putting people at the centre.

Indeed, while proposing GDI, president Xi explained the “need[s] to foster global development partnerships that are more equal and balanced, forge greater synergy among multilateral development cooperation processes, and speed up the implementation of the UN 2030 Agenda for Sustainable Development.” He reasoned those challenges like global economic meltdown, and food and energy insecurity are likely to hinder the achievement of the UN’s 2030 Agenda for Sustainable Development due to economic recoveries countries are taking.

Specifically, Xi explained that different countries have resorted to individualistic economic recoveries, leaving poor and developing countries’ concerns unattended, which risks widening the south – north development gap. “We must get a good grasp of the overarching development trend in the world, firm up confidence, and act in unison and with great motivation to promote global development and foster a development paradigm featuring benefits for all, balance, coordination, inclusiveness, win-win cooperation and common prosperity,” stressed Xi.

With IMF’s warning that “a promising economic future, is subject to a delicate balancing act by central banks to fight inflation without over-tightening, which could push the global economy into an unnecessarily severe recession” which the Funder explained would “cause disruptions to financial markets and pain for developing countries,” to squarely counter this challenge, there is need central banks and governments across to work together in identifying viable and practical policies and suggestions for all.

With GDI for example, President Xi emphasized that it is a sure way for the world to a chieve a balanced development if countries agree to work together in promoting economic recovery, “For us to break through the mist and embrace a bright future, the biggest strength comes from cooperation and the most effective way is through solidarity…The hardships and challenges are yet another reminder that humanity is a community with a shared future where all people rise and fall together…” Xi noted as he introduced GDI.

In total support of Xi Jinping’s call for inclusive rather than individualistic development, one ought to note that even the preamble of the UN 2030 Agenda for Sustainable Development highlights development ‘partnerships’ as one of the agenda’s five most critical areas of importance. Simply put, the agenda notes that formation of such partnerships is not only a foundational principle for all the SDGs, it is also the only viable way by which such SDGs can be effectively. This re-echoes Jinping’s assertion that SDG targets, of which global economic sustainability includes, cannot be achieved in isolation.

China’s Global Development Initiative is an example of development campaigns tailored in resonance with the UN’s SDGs hence the IMF ought to consider its promotion and sensitization in its bid to avert the impending global economic crisis. The GDI, significantly anchored on collective efforts of development manifests SDG 17 that was specifically and intentionally adopted to promote development partnerships.

This goal according to scholars like Haywood & Funke (The Sustainable Development Goals in South Africa: investigating the need for multi-stakeholder partnerships), is premised on the assertion that a successful sustainable development agenda requires partnerships between governments, the private sector and civil society. This is the exact message being pushed by Beijing’s GDI project and in light of growing selfish and individualistic development approaches that often affect the global south more adversely, all global development stake-holders must consider it.

“We need to jointly build international consensus on promoting development. It is important that we put development in front and center on the international agenda, deliver on the 2030 Agenda for Sustainable Development, and build political consensus to ensure everyone values development and all countries pursue cooperation together,” added Xi.

The IMF 2023 global outlook predicts that for next year, most of developing countries people will feel like a real recession. This means that though major economies will not be much better, there is need for them not to abscond from their commitments of helping developing countries development and economic recoveries programs. Indeed, as he promoted GDI, Xi emphasized the need for developed countries to fulfill their obligations and deepen cooperation stressing that in development efforts, “no country or individual … behind.”

Today, the GDI has been cited and supported by the United Nations and other international organizations, and nearly 100 countries. Now that it seeks to address challenges IMF has pointed at, one can argue that it’s high time IMF adopted GDI as the world races to arrest global economic meltdown and build a community of common prosperity and shared prosperity.

Marvin Hannington Kalema is a Senior Research Fellow at the Development Watch Centre and a law student at University of Johannesburg, South Africa.

 

Seven Years of China’s Belt and Road Initiative: How are Developing Countries Benefiting?

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By Ssemanda Allawi.

In 2013 – seven years ago, Chinese president Xi Jinping gave a set of speeches where he announced the proposal of the now famous Belt Road Initiative (BRI). Xi delivered the first speech about BRI during his visit in Kazakhstan, elaborating his desire and vision of restoring the ancient silk road which offered routes from Peoples Republic of China, through Central Asia to the far Europe. In October, 2013 during his speech to Indonesian parliament, president Xi announced his maritime silk road concept to Indonesians to facilitate trade and ease movement of goods and services.

In the seven years of the project’s implementation, BRI has registered considerable achievements seeing over 29 International Organisations and over 71 countries sign or joining it. This means that more than a third of global GDP and more than two thirds of world’s population are part of the project!  This means that upon completion, the project will make the world’s largest market easy to access and traverse on both road and sea which are key in transportation and mobility of goods and services.

However, this is not without critics especially from some parts of western world with the U.S leading critics of the project with claims such as lack of transparency from Chinese authorities especially its financing while others branding the project is part of what they call China’s debt diplomacy.

However, research indicates that claims of lack of data on funding of the projects are largely wrong as a number of studies and research work  have given a clear view  of funding of this project.

Critics of China and BRI project in particular have often claimed the project is too expensive and will see developing countries fall in what they call China’s “debt diplomacy” with some western capitals branding the project Beijing’s debt trap. Many of critics have always cited Sri Lanka’s Hambantota which was leased to a Chinese firm for 99 years to help repay the country’s debts. The claims that Hambantota port was seized by China are also ambiguous considering the current state of the port if compared to how its state before the Chinese firm invested in it.

Washington has also been very critical of BRI project and generally China’s funding of infrastructure development in different parts of the world claiming that many of Beijing’s clients are  pariah states. 

However, some of these claims seem to be political with Washington screed of China’s growing relations with the rest of the world which they see as one way of antagonising U.S’ strategic interests. A case in point is citing Beijing’s growing relations with African state of Djibouti. In 2018, U.S’ top military commander in Africa, Marine General Thomas Waldhauser told U.S’ House Armed Services Committee that China’s state-owned China Merchants Port Holdings owning shares in Djibouti’s meant that U.S military could face “significant” consequences. Djibouti is one of many countries China considers part of its Belt Road Initiative.

In regard to Beijing’s infrastructure assistance going to undemocratic states, this is largely wrong. Most of Beijing’s borrowers are democracies with countries such as South Africa, Tanzania, Brazil, Kenya, and Tanzania. Other democratic countries that that have benefited from China’s infrastructure loans include United Kingdom (UK). China is a major investor in UK’s Hinkley Point Nuclear power plant in Somerset.

Therefore, despite critics of BRI, it can be argued that the project so far is a success. Indeed, in 2019, a study by World Bank entitled; “Belt and Road Economics: Opportunities and Risks of Transport Corridors” analysed transportation projects along the BRI routes and concluded that benefits to recipient countries and the entire world would benefit from the project. In Kenya for example, as a result of Belt Road Initiative project, the country built a 470 km railway line from Kenya’s capital, Nairobi to the coastal city of Mombasa which shortened travel time from 10 hours to five, created over 46,000 jobs and helped the country’s GDP by 1.5%.

Despite the study reporting more cases of policy impediments than infrastructure impediments – such as customs delays, bureaucracy, red tape, imports tariffs and corruption which increase trade costs, the study is a proof that BRI will play a significant role toward both social and economic development of the world.

From the above and findings of this study, it is evident that improving investment climate is a key complementary when it comes to supporting and investing in infrastructure sector. This can be realised through deep trade agreements such as the proposed Africa Continental Free Trade (AfCFTA). On Global scale, agreements such as BRI, AfCFTA and the recently reached trade liberalisation agreement between China and ASEAN, Australia, South Korea, New Zealand and Japan can help to eliminate tariffs which sometimes are barriers of trade.

Therefore, critics of infrastructure development should not look at infrastructural development in lenses of competition but rather putting in place facilities to aid trade. In particular, those criticising BRI branding the project a debt trap or debt diplomacy should reconsider their exaggerated claims. For example, countries that do borrow funds from China have also on many occasions borrowed from the so-called traditional donors or World Bank, IMF as well as other private bond holders. This means these countries diversify their sources of finances and thinking that they are beholden to China is ignoring key and glaring facts.

However, whereas it is very hard to present facts of the so-called debt diplomacy, there are genuine concerns when it comes to debt sustainability especially to African countries. However, these concerns should not only be tied to borrowing from China but rather all relevant lenders. This is because, unlike domestic debt, foreign debt has to be serviced using exports and this way, there are clear limits that point at how much borrowing developing or poor countries may take and continue to thrive.

In addition, the impact of Covid-19 pandemic on global economies feared to cause recession has should serve as a warning that many developing countries may find it hard to sustain their debts. Almost all countries that were projected to continue with a positive economic growth curve before covid-19 now are IMF analysis shows these countries projections were negatively impacted by covid-19 which has caused negative impact on countries exports and affected their GDP growth and hence, raising questions if these countries can sustain their debts. Indeed, many of China’s clients in Africa are in debt distress.

Early this year, China joined G20 in offering developing countries debt relief as a way of helping countries affected by Covid-19 pandemic recover. Among countries to benefit from this plan include 40 from sub-Saharan region. Despite this effort, debt moratorium alone may not be a magic bullet for Africa and other developing countries. Debt restructuring or write-downs. The challenge is that such arrangements often are done through the Paris Club of which China is not a member. However, if China wants to write-down debts on some African countries and developing countries in general, it can since it has done it before. 

On the other hand, the US announced a new development finance institution, also known as U.S. Development Finance Corporation (USDFC) to compete with China in offering infrastructure funding to development countries.  Though this is a positive development, this initiate alone will not bring swiping changes. Most of developing countries prefer to use Chinese funding when it comes to infrastructure funding. Though they may look generous, traditional funders and their multinational banks prefer to fund sectors such as administration, social services and the so-called democracy promotion instead of funding the much-needed infrastructure programs. For example, at first 70% of World Bank’s funding went to infrastructure but has been reducing to recently 30% despite huge funding gaps in infrastructure sectors in developing countries.

It is important to note that developing countries are still faced with shortage of funding especially in infrastructure projects which are key for development. A study by World Bank and McKinsey Global Institute found that funding for infrastructure projects such as transport and electricity is lacking, noting that to ensure a socially inclusive development by 2030, there is need to spend more than $3.3 trillions annually of which 60% of this must go to developing countries in Africa. African Development Bank (ADB) on the other hand estimates that to meet demands of their growing population, replace aging infrastructure, African countries must spend between $130-$170 billion annually on infrastructure. Also, a 2017 study by World Bank “Why We Ned to Close the Infrastructure Gap in Sub-Saharan Africa” suggested that if these countries reduce funding gaps for infrastructure, the region’s GDP per capital will grow by 1.7% and hence. All the above shows that any infrastructure assistance to developing countries should not be underestimated and hence, the view that BRI project is a positive initiate for developing countries world over.

In conclusion therefore, as studies have indicated, BRI project has more benefits if compared with challenges it may bring. Instead of critiquing the project largely to Geo and Global politics, China’s critics especially the U.S should back the project and where possible embrace and support new trade agreements such as AfCFTA to improve trade and investment climate in developing countries than only negatively criticising funders that fund developing countries projects. Also, the U.S may champion calls to reform the The Bretton Woods institutions and offer attractive alternative funding to developing countries, reduce their anti-China rhetoric and instead participate with China whenever there are efforts to offer debt relief.

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