China has spent a significant amount of money in investing in infrastructure development in Africa. Credit: Miriam Gathigah/IPS

By Miriam Gathigah
NAIROBI, May 21 2014 (IPS)

Janice Gacheri imports handbags and shoes from China which she sells on social media sites and by word of mouth to customers in Nairobi and neighbouring towns. 

“For a part-time business, the returns are encouraging. I am considering pursuing it full time and broadening the range of products that I sell,” Gacheri tells IPS.

Africa is indeed a leading destination for Chinese consumer products.

David Owiro, project officer at local think tank, the Institute of Economic Affairs (IEA), tells IPS that “[Chinese] prices are competitive and their products also meet African’s tastes and preferences compared to products from the West.”

However, experts warn that significant trade imbalances exist amid China’s growing presence on the continent.

According to the Chinese Ministry of Commerce, between January and October 2013, bilateral trade between China and Africa was worth 172.83 billion dollars. And it is predicted to reach 200 billion dollars by the end of this year. But, Owiro says, trade relations between Africa and the European Union (EU) are much more favourable.

“We buy more from China than they buy from us. The EU buys more from Africa and in bulk but Africa buys less from the EU,” Owiro explains.

African Economic Outlook, which provides comprehensive data on African economies, reveals that Africa accounts for a meagre five percent of China’s global trade and only three percent of foreign direct investment.

This comes amid Prime Minister Li Keqiang’s first visit to Africa since taking office in 2013. During the May 4 to 11 trip, Li attended the World Economic Forum on Africa in Abuja, Nigeria, and visited Ethiopia, Angola and Kenya.

During his visit to Kenya, Li and the government signed 15 deals — particularly relating to construction and agriculture. This included the controversial Standard Gauge Railway deal where China will fund and build a 3.8-billion-dollar railway from Kenya’s port of Mombasa to Nairobi in the project’s first phase. The railway will eventually connect Uganda, Rwanda, Burundi and South Sudan.

Under the terms of the agreement, Exim Bank of China will provide 90 percent of the cost and Kenya the remaining 10 percent.

“The project is too expensive and makes no economic sense. The period it will take Kenya to repay China for this loan has also not been made clear,” Owiro says.

But Alex Gakuru, chair of the ICT Consumers Association of Kenya and a member of the government’s Digital Transition Committee multi-stakeholder Task Force, says that China is responding to the huge infrastructural deficit that has hindered intra-African trade.

But Kenya is only one of the growing list of African countries that are increasingly looking to the East.

Although Owiro says that China is attractive to Africa because it comes with no conditions, “China’s interest in Africa is primarily based on Africa’s mineral wealth.”

He says that Angola is rich in diamonds and their longstanding relation with China is built on that natural wealth, adding that “Angola’s capital Luanda is home to nearly three million Chinese.”

“Nigeria is rich in oil and East Africa has been discovering oil and gas,” he says.

In 2013, Kenya discovered Niobium, rare earth deposits estimated to be worth 62.4 billion dollars.

“But the discovery of these minerals across Africa could also tip the scales in favour of Africa in as far as China-Africa bilateral relations go. China is interested in these minerals and they will have to import them from Africa,” says Owiro.

According to the Institute of Economic Affairs, Kenya’s energy sector could contribute an estimated 40 percent of the GDP once commercialisation begins, generating massive revenue for the country.

But Gakuru says that Africa stands to reap more than financial dividends from its interaction with China.

“It is no coincidence that the elusive peace deal in troubled South Sudan was brokered during this visit. Africa stands to reap peace dividends from this kind of regional approach,” he says.

Gakuru also says that Africa could benefit from transfer of technologies from China.

But, Owiro says, China is currently not transferring any technological knowledge “all the Chinese-driven construction in Africa is done by the Chinese themselves.”

“It is only after an outcry during the building of Nairobi-Thika Superhighway that the Chinese brought in a few Kenyans to do a few manual jobs,” he says.

Ken Ogwang, a Nairobi-based property developer and economic expert, says that there are about 2,500 Chinese firms in Africa, but the continent is still getting a raw deal.

“Studies have shown that Chinese firms in Africa create very minimal sub-economies. Where Chinese companies have been building roads, you expect locals to begin earning from feeding the constructors, housing them and so on,” he tells IPS.

But, as Owiro explains, this does not happen.

“The Chinese build their own campuses, and bring in what they need. But as China’s role in the global economy continues to change, Africa can benefit from this shift,” Owiro says.

He says that China used to be the destination for outsourcing manufacturing and assembling but Chinese are now becoming involved in more technical and rewarding jobs. “Those less technical jobs are now going to neighbouring developing countries like Vietnam and even India.”

He says that Africa must have economic policies that “leverage them to tap into these jobs. Like China, Africa has abundant and cheap labour. Ethiopia has already begun tapping into these jobs.”

EU's Bernard Savage at a project site: Credit: EU mission

By Feizal Samath
COLOMBO, Aug 19 2012 (IPS)

Sri Lanka is in for some hard bargaining when it negotiates a new aid pact in 2013 with the European Union (EU), which withdrew a key trade concession  two years ago over this country’s human rights record.

Bernard Savage, head of the EU delegation to Sri Lanka and the Maldives, says political differences do not affect trade. “There are no specific irritants (at the moment) and I would like to stress that in the normal run of affairs political differences do not affect trade.”

Savage told IPS in an interview that the issue of withdrawal of  EU trade concessions was a specific case. “But, if you look at the broad spectrum of trade relations … that was not affected by short-term considerations.”

However, well-known human rights lawyer J.C. Weliamuna believes that trade and aid are invariably linked to human rights and corruption – two sectors where Sri Lanka has been asked to show tangible progress.

“What is promised on paper (by the government) is exactly the opposite of what is implemented on the ground,” the lawyer, a board member of Transparency International, told IPS.

The EU is among Sri Lanka’s largest providers of development assistance and has allocated an overall sum exceeding 478 million dollars for the  2007-2013 period for projects dealing with water and sanitation, housing, income generation, infrastructure, schools, health facilities, food security and others.

“The level of assistance for the next programme – 2013 to 2020 – will be more or less the same. It won’t decrease,” Savage said.

Sri Lanka had won generous tax concessions under the Generalised System of Preferences Plus (GSP+)  for the July 2005  – August 2010, but this facility was withdrawn over unaddressed human rights concerns.

EU investigations had found ”shortcomings in respect of Sri Lanka’s implementation of three United Nations human rights conventions – the International Covenant on Civil and Political Rights, the Convention against Torture and the Convention on the Rights of the Child.”

However, it was widely understood that the concessions were withdrawn owing to Sri Lanka’s failure to address alleged war crimes during the last stages of the country’s ethnic conflict.

The impact of lost EU concessions is now being felt with garments exports to Europe dropping by 15-20 percent in the five months up to May, said Rohan Abeykoon, chairman of the Sri Lanka Apparel Exporters Association.

Garments, Sri Lanka’s biggest export item, account for more than 50 percent of exports to Europe.

“It’s not the job losses that we are worried about because there is demand for labour, but lost contracts are affecting small and medium businesses,” Abeykoon said. “Local companies are losing out while those with multinational connections will shift production elsewhere.”

Abeykoom told IPS that he has urged the government to reapply for the facility, though there is no sign of that happening yet.  “With regard to GSP + we have had no request from the government for a new facility,” Savage confirmed.  

Trade unions are also backing the call for a revival of the  concessions. Palitha Athukorala, president of the Progress Union of Sri Lankan Apparel Workers, said the government seems unconcerned and has made no attempt to apply for GSP +.

“They (government) should ask for it. We are badly affected as small factories are closing and workers are losing jobs,” Athukorala told IPS.

Padmini Weerasuriya, coordinator of the Women’s Centre, a non-government organisation active in the country’s free trade zones, says there are no job losses owing to the loss of GSP + concessions, though this may change.  

“Our members (workers) have reported a drop in orders which then affects other incentives outside the monthly wage,” she said. Unions have already been campaigning for decent living wages.

On the political front, Sri Lanka this month did a major about-turn to invite the U.N. Human Rights Council to visit the country to review the human rights situation.

Earlier, Sri Lanka had even refused entry to a EU team examining Sri Lanka’s application for a renewal of GSP+ benefits.

The government has prepared an action plan on human rights and sent it to Geneva, five months after the U.N. passed a United States-backed resolution urging Sri Lanka to address alleged human rights abuses.

The March U.N. motion had called on Colombo to address violations of international humanitarian law; implement the recommendations of a local commission that probed the conflict; and encourage the U.N. Human Rights office to offer Sri Lanka advice and assistance and the government to accept such advice.

Sri Lankan President Mahinda Rajapaksa has repeatedly denied claims of large-scale civilian casualties during the last stages of the battle against Tamil separatist rebels that ended in May 2009.

Strained relations with the West have forced the government to rely on allies in the neighbourhood like China, Iran, Libya and India for war-related and development aid.

Constant international pressure and the March U.N. resolution – which was backed by India, a long-time Sri Lanka supporter – has  forced Sri Lanka to make conciliatory gestures to the West.

The respected Sunday Times newspaper said on Aug. 5 that the government’s decision to implement the full U.N. resolution and allow a U.N. team to visit the country would pave the way for a long-standing visit by U.N. Commissioner for Human Rights, Navi Pillay, considered a vocal critic.

Weliamuna said issues in which the international community is concerned – human rights, declining rule of law, growing impunity and corruption – are relevant. “The government knows it cannot continue in this manner and is trying to convince the world that it has changed,” he said.

Abeykoon says the devaluation of the Sri Lankan rupee against the US dollar,  which has pushed the  rupee down to 132 per dollar, against 110 in February, has helped the garment industry. “If not, our exports (to the EU) would have worsened.”

For Savage, the GSP + is a “closed chapter”, using a phrase borrowed  from Sri Lanka’s external affairs minister Gamini Lakshman Peiris. “The fact is GSP+ was withdrawn and Sri Lanka has not reapplied. We need to move on,” Savage said.

A Kashmiri trader who deals in saffron and almonds. Credit: Athar Parvaiz/IPS

By Athar Parvaiz
SRINAGAR, Jul 30 2012 (IPS)

As part of recent confidence building measures aimed at minimising tensions between India and Pakistan, which arose largely due to conflicting claims over Kashmir, the two countries have decided to make the Valley an economic bridge, rather than a bone of contention.

But merchants who have long been trading across the Line of Control (LoC), which separates Indian-controlled territory from Pakistan Administered Kashmir (PAK), are fearful that efforts to normalise relations between the two countries will be disastrous for small traders, who will effectively be cut off from the benefits of bilateral trade.

Soon after the inception of a composite dialogue in 2004, initiated after a war crisis in 2001-2002, both states agreed to reopen the Srinagar-Muzaffarabad road in April 2005 to allow families splintered by the LoC to visit each other.

Still, merchants continue to lament the lack of adequate trade-related infrastructure, which they say limit what could otherwise be a highly lucrative flow of goods.

The nuclear neighbours have already fought three full-scale wars over Kashmir while an armed insurgency and counter-insurgency in Indian Kashmir that erupted in 1989 has claimed 47,000 lives to date, according to official estimates.

The insurgency fanned hostility between the two states, but in recent years, especially in the aftermath of the September 11^th attacks on the United States, the relationship has been changing.

In October 2008 a series of confidence building measures (CBMs) that included resumption of cross-LoC trade for the first time in over 60 years began to ease restrictions in the flow of agricultural and horticultural products like rice, maize, fresh fruits, vegetables, wooden furniture, medicinal herbs, handicrafts, mattresses, pillows and cushions out of Kashmir. At the close of 2011 trans-LoC trade amounted to roughly 37 million dollars.

But more than three and a half years down the line, cross-LoC traders say they are yet to enjoy basic trade facilities.

“When trade between the two sides was first announced, international media equated it with the falling of Berlin Wall,” Rashid Wani, a trader who uses the barter system to send consignments of wooden handicrafts to PAK in exchange for mattresses, cushions and pillows, told IPS.

“But nothing much happened after that media-hype. Doing trade without basic facilities in the 21^st century makes no sense.”

“Our traders can’t even make a phone call to their counterparts in PAK as the government of India is yet to lift the ban on telephonic communication from this side to Pakistan,” Mubeen Shah, president of the Joint Chamber of Commerce and Industries (JCCI), a committee comprised of members from both sides of the LoC, told IPS. “Similarly, we can’t make any transactions through banks.”

Cross-LoC Traders at Risk

Late last year, Pakistan granted India Most Favoured Nation (MFN) trade status, evoking mixed reactions from residents in the valley.

“This is the first time since 1965, when India and Pakistan fought the second war, that trade ties seem to be improving between them,” Khursheed Mahajan, professor of commerce at the Kashmir University, told IPS.

Early this year, the two countries decided to phase out the negative-list trade regime, which had previously included thousands of items, and limited the number of restricted products to just 1,200.

The move was a bid to normalise trade relations between the two sides, but it only caused consternation among Kashmiri traders who fear that competition from large-scale industries will threaten cross-LoC trade.

“We have been observing that both the countries are working towards improving bilateral trade, which will have a negative impact on cross-LoC trade,” said Zulfikar Abbassi, former president of the JCCI.

Earlier this month, Abbassi led the traders’ delegation from Pakistan Administered Kashmir to Srinagar for a two-day conference to discuss the two sides’ future trade strategy.

“The principles that are applicable to Indo-Pak trade should be made applicable to cross-LoC trade also. They have developed bilateral trade to the extent that few items are in the negative list now. We hope the same policy is applied to our trade as well,” Abbassi told IPS.

However, early signs indicate that this may not be the case.

“Even among the 16 items that they have declared (legal) for cross-LoC trade, three to four of them, like gabba (woolen mats) and khraw (wooden footwear) have absolutely no demand on our (Pakistan’s) side of the LoC.”

According to Abbassi, the two-decades long conflict in Kashmir has turned the paradise on earth into a hell of extreme poverty. According to the 2011 census, 3.2 million people, 21 percent of the total population of Kashmir, live below the poverty line, while the unemployment rate is a staggering 11 percent.

“So the governments of India and Pakistan need to encourage trans-LoC trade. This would enable Kashmiris to overcome the economic deprivation of decades,” Abbassi said. While no comprehensive research exists, modest estimates say cross-LoC trade could be in the millions of dollars if allowed without restrictions, employing thousands of youth.

Abbassi’s counterparts in Indian Kashmir are equally vehement in their demands.

“The traders from this part of Jammu and Kashmir are not being allowed to visit PAK. There has to be actual trade and it would only happen when the traders of both the parts of the State are allowed to interact and meet each other,” Shah told IPS.

Currently, the entire LoC trade system operates on a barter basis. Since bartering requires physical marketplaces, the entire operation is held hostage by restrictions on freedom of movement.

Only those 10,000 “broken” families, with members on either side of the LoC, manage to barter their goods on a regular basis.

If not for the many hurdles, cross-LoC trade would have created “great economic dividends”, Shah told IPS. “During the 18th century, this route would handle trade worth millions of dollars in present value.”

According to Shah, the trading community in 2008 supported opening cross-LoC trade on the premise that transit trade would eventually be allowed.

“We had hoped that our goods would travel to central Asia, Russia, China, Turkey, Indonesia, Afghanistan, Iran and the Middle East. This would surely have made trade flourish. But nothing of the sort happened,” Shah added.

After the joint conference, traders from both sides of the LoC prepared a list of recommendations for the meeting of the India-Pakistan working group on cross-LoC confidence building measures, held in Islamabad on Jul. 19.

The final statement of the Joint Working Group read: “The two sides reviewed the progress since the last meeting of the Joint Working Group on cross-LoC CBMs and discussed modalities for strengthening and streamlining the existing trade and travel arrangements across the LoC.”

But Kashmiri traders say that they have heard these statements several times, though without any positive action.

“We still hope that something positive emerges. Let us wait and see,” Shah told IPS.

(END)