Unwelcome Dragon’s Gift

The Dragon’s Gift is an interesting new addition to the growing literature on China’s foray into Africa. The paperback edition is just out, a year after the book was originally published. The author, Deborah Brautigam, a Washington based American professor, studied Chinese when learning Chinese was not the in-thing, and did research in more than a dozen countries in Africa. No surprise, Stanford economist, Ronald McKinnon says, ‘In learning about China in Africa, Deborah is hard to beat. She uses more than thirty years of experience from personal contacts on both the Chinese and African sides to develop great institutional insights into their economic interactions’.

China is not in Africa for charity. The howls of moral outrage often heard these days in the West over Beijing’s economic conquest, are therefore to be taken as just howls- a side show without an entry ticket. Anyhow, the West is no white knight in shining armour since it has done, and is still comfortable in doing business with regimes where decision making is concentrated in one person or a father-son with brothers thrown in for additional comfort.

Yet, Brautigam’s magnum opus doesn’t succeed where it should – in removing doubts about the Chinese business practices as the modern merchant of Venice, Shylock. Some of her observations, and the way she appears to accept the Chinese line that the failures are due to the locals are distressing, to say the least, because on her blog (http://www.chinaafricarealstory.com) as recently as April 2011, she frankly stated, ‘China also has a lot of corruption in infrastructure at home, and infrastructure is known worldwide as a sector rife with corruption. It is not surprising that some of the hundreds of projects constructed between 2004 and the present under what has now become a $10 billion infrastructure programme have problems’.

Her contention as noted in the Dragon Gifts and in the blog postings is that the Chinese have a long-term sense of responsibility for projects financed under their aid program because aid is an important tool of diplomacy. Why similar sense of responsibility is not extended on export credits? She doesn’t field the question but goes on to observe that the quality of projects financed under the official aid program is usually very good.

Take the case of Angola’s Luanda General Hospital. Work on the 100-bed $8 million hospital started in July 2004. It was inaugurated by visiting Chinese Premier Wen Jiabao the same year. In June 2010 serious cracks developed in the walls. The patients were evacuated, the hospital was closed; the Chinese experts after ‘investigation’ put the blame on ‘inaccurate geological data’ provided by Angolan government for the project site.

The team was silent on why Beijing depended on local input in as vital an areas as geological soundness of the site since the strife torn Angola is a weak state. Leading human rights activist and local journalist Rafael Marques de Morais says many Chinese projects in his country have problems with quality. Weak monitoring and enforcement capacities and a lot of corruption have become the hallmark of Chinese works.


One question arises in this context, and it is of interest to all countries which are recipients of Chinese aid or its exim credits. It is that if China agreed to build the Luanda General Hospital, it ought to bear the responsibility for the quality, safety and reliability of the facility. To put the blame on the Angolan workers for the cracks that appeared on the walls of the hospital is unacceptable. The tendency shows an unwillingness to think beyond the concept – ‘doing well in Africa could do well for China’.

Besides quality, price and inflated costs are a problem dogging the Chinese projects in Africa. And it came upfront a year before the Angola Hospital had a short-lived gala opening. One example will suffice. Namibia agreed to buy $55.3 million worth of Chinese-made cargo scanners under a big low-interest loan granted by visiting Chinese President Hu Jintao in February 2007, when, like the Yan Emperor (a legendary Han Chinese ruler) he declared ‘Sky is the limit. Just ask what you want’.

Junior Hu was then heading the scanner maker, Nuctech, in Beijing. The company was set up in 1997 as an off-shoot of Tsinghua University where both Hu and his son studied engineering. Now, even as a bribe scandal has enveloped the deal, Namibian critics say that their government had grossly overpaid for the scanning equipment, and that the excess payments have ended up mostly in private hands, including those of some Namibian politicians.

These two examples illustrate what New York Times terms as the aura of boosterism, and backroom deals that China today stands for, and treats as state secret. Its preferential loans at low rates of interest must be used to buy goods or services from companies, many of them state-controlled, that Chinese officials select themselves. Competitive bidding by the borrowing nation is discouraged, and China pulls a veil over vital data like project costs, loan terms and repayment conditions. Even the dollar amount of loans offered as foreign aid is treated as a state secret. Transparency and competitive bidding are not part of Chinese lexicon.


Sri Lanka’s Hambantota port experience bears this out. It looks like a repeat of Angola hospital story. The approach channel of the port was to be 16 metres deep. But it is no more than nine metres even after the first phase has become operational. Entrance of the channel is a solid rock bed. Unless the rock is blasted, the port cannot entertain bigger ships and this defeats the very raison d’etre of building the port on a major shipping route. So far not much business has come the Hambantota way owing to factors like inadequate inland facilities and crane services.

Like in Angola where they could not get away by blaming the locals for ‘inaccurate geological data, the Chinese cannot claim to be ignorant of rock layer at Hambantota. Just as you don’t build a hospital without studying the soil condition, you don’t get into a port project without a survey of the area for water depth and rock formations. Chinese sales pitch of easy credit mesmerises recipient nations and makes them miss the fine print since it is accompanied by assurances of diplomatic help vis-a-vis the West on contentious issues like human rights.

The Rajapaksa government is in a catch 22 situation. It is saddled with additional costs to fulfil its dream of a magnificent port where green back rains in sunshine and shower. Otherwise it is saddled with a white elephant. Compounding the dilemma, the Chinese have pushed up the bill for works like to bunkering facilities and tank farm. The present projection is up by at least 30 per cent from the original estimate of $76.5 million. For close observers of Chinese business practices, neither the cost escalation nor the reasons trotted for the new bill come as a surprise. It is another Africa repeat this time from Namibia.

Official China stand is that the cost of laying a network of pipelines to transport oil from the port to the tank farm has not been factored in the original cost estimate. If there is no pipeline, the bunkering farm will not get oil supplies. And without bunkering facility no ship will bother to come here. It is not a question of choosing either or postponing them to some other day. Both are the basic features of the port.

So much so, who are the Chinese trying to fool with their argument? If they are rank incompetent as this episode shows or if they are caring for ‘the good for China’ alone with no care for ‘the good of Ceylon’, as the inevitable inference can be, well that is not the way special relationships are built in the 21st century where mutuality of interests governs bilateral relations.


The ignoramus in Colombo, who had cleared the Hambantota venture with the Chinese without reading the fine print, deserves no sympathy. He should be hauled up on burning coal since the Port and the ancillary industries coming there are President Rajapaksa’s gift to his constituency.

Once bitten twice shy is the old adage. Not in these ‘byte’ days. Otherwise China Merchant Holdings could not have been asked to develop the Colombo South Harbour Container Terminal. And rewarded with corporate tax holiday for 25-years and some other tax breaks. A $500 million tax free port zone is coming up outside the Colombo port to attract ship building, ship repair and warehousing ventures. The China contractors are speaking of 30-40 per cent escalation in costs.

Analysts aver that the overall project cost will now zoom past US $ 2 billion mark. While it makes an interesting reading as a repeat of China’s Africa Shylock story, Colombo will be jittery even to see a question mark over another dream project.

What leaves a taste of sea water in the mouth is the interest on China’s loan. At six percent, the interest is at least three times higher than the soft loan interest rate offered by ADB, World Bank, and India.

Certainly, it won’t be a Dragon Gift that Sri Lanka will like to enjoy.