Fact-checking critics of Chinese aid


November 29, 2017

Fact-checking critics of Chinese aid

by Alvin Camba, John Hopkins University

http://www.eastasiaforum.org

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Pundits and journalists have often argued that Chinese loans are expensive and harmful to recipient countries. But they fundamentally misunderstand how Chinese aid and investment works across different countries.

Criticisms of Chinese aid suffer from four crucial problems. First, Chinese interest rates have been higher than comparable loans from other OECD Development Assistance Committee (DAC) countries because China lends to states with low investment grades. Interest rates vary across different donors but loan parameters depend on the recipient country’s investment grade and the donor state’s funding program. Put simply, DAC interest rates could have also been higher had these states funded similar projects.

Second, DAC countries follow one set of criteria for loans while China follows another. For the DAC, a loan becomes a concessional project when interest rates and the grace period are about 25 per cent cheaper than a comparable market loan. Although China’s concessional loans operate according to some DAC criteria, China’s Export–Import Bank often subsidises the interest of the project. As a result, the interest is charged to the Chinese government’s external assistance budget. In this loan agreement, the recipient country pays for the actual price of the project instead of the interest on the loan, departing from the DAC’s model. In other words, some of China’s loans are cheaper than the DAC alternatives.

Third, because the World Bank and other DAC countries have moved away from funding large-scale infrastructure while Japan has been wary of funding energy-intensive schemes, there are no other external funders willing to finance such projects in developing countries. China was the only willing financier of some crucial infrastructure projects in many sub-Saharan African and Latin American states. Those arguing that Chinese interest rates have often been higher fail to acknowledge that unless a similar offer was put forward by alternative funders, ‘base’ market rates cannot be used for comparison. It is misleading to compare Japanese, Chinese and World Bank loans directly because the funding parameters of these projects were calculated under vastly different conditions.

And last, for all the criticisms that China gets, Western countries have been equally guilty of sending developmental aid and investment when these actions suit their national interest. The United States sends aid to states with questionable human rights records, including Saudi Arabia, Israel and Pakistan. Similarly, when they need to acquire strategic resources or cheap labour, the French and British invest in the Western Sahara and former colonies despite their questionable human rights and governance records. Indeed, the West remains the biggest source of debt, aid and investment for African countries.

Despite all this, China has been disproportionally painted as a ‘bad investor’ by major Western newspapers while drawing the public’s attention away from the involvement of Western companies.

Rather than a downward impact on GDP per capita or nominal growth rates, China’s rise in the global economy has pushed more countries from the periphery into the semi-periphery. Chinese companies invest in developing countries that are ignored by other major investors and target key sectors that have been overlooked by Western aid. China’s participation often increases competition among investors for key development projects, allowing recipient countries to bargain more effectively for better returns.

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This is not to say that China is the saviour of the developing world. Chinese aid brings potential negative implications, but it is important for recipient governments and their constituents to recognise the evidence-based dangers rather than popular arguments with minimal empirics.

While pundits often misunderstand aspects of China’s economic engagements, academics and researchers have long recognised and debated three main dangers of China’s aid and investment.

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China has asked for political returns in exchange for debt forgiveness. Apart from territorial expansion, China has been interested in acquiring ports located in the participant states of the Belt and Road Initiative, including in Sri Lanka, Djibouti and Malaysia. China’s territorial interests and port acquisitions have and will continue to elicit responses from competing states.

Another danger of Chinese investments and deals lies in the multiple actors involved in the process. China is not a monolithic actor, but comprises multiple state departments, state-owned enterprises, private corporations and citizens. While Chinese foreign direct investment has funded key strategic infrastructure, it has also spurred de-industrialisation and environmental degradation. Chinese aid and investors can be good or bad depending on the type of Chinese actor and the recipient governments’ response.

Finally, Xi’s China presents host states with a greater risk of falling into a debt trap. In previous cases when developing countries could no longer repay loans, China has allowed debt forgiveness and loan restructuring or has asked for specific and negotiable political or economic returns. Ironically, this is distinct from the policies of the World Bank and Western countries that put much of the developing world in a vicious debt trap in the 1980s. But with China’s economic slowdown, changes of leadership and geopolitical ambitions, China may not be as forgiving in the future.

Alvin Camba is a doctoral candidate at the Department of Sociology, Johns Hopkins University. He also writes at the Alitaptap Collective.

 

The American Dream: Detroit’s resuscitation


April 4, 2016

The American Dream: Detroit’s resuscitation

by Shrey Srivastava

If one could epitomise the phrase “could have been” in one simple image, it would indubitably be the image of Detroit. The unyielding forces of time have taken a once great city and denigrated it to the status of one of not only one of America’s most economically destitute, but also one of its most dangerous regions. Nowadays, Detroit carries many of the hallmarks of the lesser developed countries of the world, especially with roughly 47% of the population being described as “functionally illiterate” by The National Institute for Literacy, a rate only 13.8% higher than that of Afghanistan. Despite this, Detroit still carries as much, if not more potential as it did in the 20th century, and is simply crying out for some economic solutions to its varied and diverse range of problems. Much of Detroit’s high crime rate can, in truth, be narrowed down to a high unemployment rate, leading to a lack of jobs for people to occupy themselves with, so even this ailment, is, at its core, financial. What this means is that there is still hope for this long-suffering city, as long as the relevant American policymakers act in a fashion that is both effective and sustainable; alas, it is clear to see that this has not happened thus far. Nevertheless, what I endeavour to achieve with this article is to perhaps shed some light on how Detroit can again become the bustling, cosmopolitan hub that it once was, through, primarily, the introduction of a special economic zone.

Special economic zones, which seem like a highly unusual step for a developed country such as the USA, may in fact be a simple and effective solution to revitalise the city of Detroit. The step of making the city a special economic, or more specifically, an industrial zone could potentially be the catalyst for a holistic revitalisation of the Detroit economy. In a nutshell, an industrial zone is a zone specifically made out for industrial development, where tax cuts and tax holidays, among other financial incentives, would incentivise corporations to set up operations in Michigan’s largest city.

Detroit’s unemployment rate was a whopping 29% during the worst that we saw of the 2008 recession, meaning that more than 1 in 4 people were unemployed at the time. Despite having reduced somewhat due to, among other causes, a steady outflow of people from the city, unemployment rates are still grossly high, and if Detroit wants to reverse its fall from grace, this is one of its first facets that need changing. The only way to do this, in truth, is by somehow persuading businesses to come to this dilapidated zone of urban decay, and invest in the revitalisation of the area. Now, feasibly, the only way in which this can happen is by supplying them with the aforementioned financial incentives to encourage them to locate in Detroit, supplying jobs for a great proportion of the population. This is the intuitive first step to Detroit’s regeneration.

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Functional illiteracy, as alluded to above, is also a major proverbial roadblock to the future success of Detroit. The solution to this is almost as obvious as its problems itself; to invest more in education. Despite politicians’ repeated assertions stating the importance of education, they themselves seem not to believe in what they say, the evidence of which lies in Detroit’s astonishingly abysmal literacy rates. Regardless, education is quite frankly one of the most important facets of any developed region, so for Detroit’s schools to be in the state they are in (as repeatedly shown by the mass media) is frankly shocking. Needless to say, this can only be solved through an increase in education spending in the city, which would give a better education to many residents of the city, thus giving them more transferable skills with which to work and earn money. In addition to this, education has a vital role to play in keeping school-aged adolescents off the streets, thus reducing crime rates, and making the city overall more attractive for people to relocate to. With the low house prices across the whole of Detroit nowadays, it could prove a popular location for many individuals desiring a lower cost of living, if only there was a basic level of security and educational services in the area. By spending more on education, many of Detroit’s fundamental problems could perhaps be ameliorated or even eradicated altogether.

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To make sure that Detroit does not fall prey to the same evils which caused its dilapidation decades ago, they need to learn from their various mistakes. The biggest of these was to rely far too much on the car industry, which turned into its Achilles heel when Ford Motors, among other corporations, left the city. Diversification is the key here to financial prosperity, as Detroit needs to ensure that when one industry perhaps fails in the city, there are many others to continue to back up the city financially. This was exactly the problem with the city before; they did not have a backup plan for when demand for automobiles lessened. The conversion of Detroit into an industrial zone and a renewed focus on education will only be sustainable if the city manages to provide wide-ranging sources of income; otherwise, they will simply consign themselves to the same fate as before. In addition, without diversification, a great deal of brain drain would occur, with talented residents leaving the city due to lack of opportunity in their chosen field of expertise. As such, it is crucially important for Detroit to spread its roots far, not deep, if they want to ensure their continued financial prosperity. Of course, in addition to the 3 economic reforms outlined here, much social reform needs to take place in the city before we can truly say that it has been regenerated, but these financial steps provide the building blocks to restore Detroit, again, into a great pillar of the USA.

 

 

Message to Malaysian Civil Servants–Stand Up and be Counted


February 27, 2016

Message to Malaysian Civil ServantsStand Up and be Counted

by Pola Singh

 Malaysian Civil Servants–Pak Turuts and  Pak Hunggoks

FOR some unexplained reason, civil servants are reluctant to be seen with the rakyat in championing certain causes; no matter how worthy they are. Something is preventing them from showing their support.

Take for instance preserving and protecting the remaining green lungs in KL city; Bukit Kiara (BK) located in the heart of the city is a good example.

At the national level, the Cabinet in 2007 agreed to gazette 189 hectares to turn it into a public park. But things moved at a snail’s pace with parcels of land being given out to the well-connected through the years.

We now learn that the Government will finally gazette Bukit Kiara next year and not surprisingly only 159ha will be gazetted. The rakyat is also not sure whether this hectarage figure will remain intact when it comes to crunch time.

So in order to send a strong message to the powers that be to uphold their promise to gazette Bukit Kiara speedily, Friends of Bukit Kiara (FoBK) has so far organised three “Save Bukit Kiara” walks. Although a sizeable crowd turns up, there are hardly any civil servants participating in such an event. Why? If they don’t seem to be interested, why are the heads of departments not encouraging their officers and staff to support such worthy causes especially when they are in line with their own policies and what they expound.

For instance agencies such as the Economic Planning Unit (EPU) and ministries such as the Natural Resources and Environment Ministry have formulated clear green and environmental policies while City Hall (DBKL) and Jabatan Landskap Negara have developed the KL Master Plan to implement.

When announcing the sound policies, promises are made and assurances given that they will actively engage the key stakeholders to ensure the successful implementation of the policies.

But when such opportunities arise they are nowhere to be seen. It appears as if they are disinterested to push forward their policy agenda.

Now it looks like that only the NGOs and public support such causes while the policy formulators who should be actively involved at the ground level appear indifferent.

Why are the civil servants so reluctant to turun padang but instead seem content watching from a distance? After all it is their cause that the rakyat is supporting. By right they should be turning up in full force as well as helping in organising such events.

Is it fear? Are they afraid for reasons best known to them, to be seen mingling with personalities from NGOs? Or could they think that they might incur the wrath of certain well-connected people? Or is it simply a case of plain apathy?

Whatever it is, the mind-set has to change. Heads of departments should encourage their officers and staff to take part in such meaningful events as well as intermingle with like-minded rakyat. More importantly these departments and agencies must walk the talk.

On an individual personal basis and as a concerned citizen, aren’t they prepared to play their part to protect and preserve the green lungs so that their children, grandchildren and future generations can enjoy what they are currently enjoying.

http://www.thestar.com.my/opinion/letters/2016/02/26/stop-being-indifferent/

Apandi, The Legal God, clears Prime Minister Najib Razak of Any Criminal Wrongdoing


January 26, 2016

Apandi, The Legal God, clears Prime Minister Najib Razak of Any Criminal Wrongdoing

by V. Anbalagan, Assistant News Editor

Attorney-General Tan Sri Mohamed Apandi Ali says today no one will be prosecuted in relation to the probes into SRC International and the RM2.6 billion channelled into the prime minister's bank accounts. – The Malaysian Insider pic by Nazir Sufari, January 26, 2016.

Dato’ Seri Najib Razak has been cleared of any criminal wrongdoing, the Attorney-General said today, after close to six months of investigations into the RM2.6 billion channelled into the prime minister’s bank accounts and into Finance Ministry-owned firm, SRC International Sdn Bhd.

Tan Sri Mohamed Apandi Ali, who is also public prosecutor, today told a packed press conference at his office in Putrajaya there was “insufficient evidence” to implicate the Prime Minister.

“Based on facts and evidence, no criminal offences have been committed by the PM in relation to three investigation papers. I hereby order the MACC (Malaysian Anti-Corruption Commission) to close the investigation papers,” Apandi said.

The three papers are one on the RM2.6 billion donation and two on SRC International which had taken a RM4 billion loan from the Retirement Fund Inc or KWAP. Apandi today also cleared Najib of any wrongdoing in relation to SRC International.

Apandi said that based on evidence from witnesses and supporting documents submitted by the MACC, the sum of US681 million (RM2.08 billion) deposited into the personal accounts of the prime minister between March 22, 2013 and April 10, 2013 was a personal donation to Najib from the Saudi royal family which “was given to him without any consideration”.

“MACC in their investigation personally met and recorded statements from witnesses, including the donor, which confirmed that the donation was given to the PM personally,” he said.

Apandi said he was satisfied that there was no evidence to show that the donation was a form of gratification given corruptly.

Najib and Rosie2

No Case to Answer–NFA

“Evidence obtained from the investigation does not show that the donation was given as an inducement or reward for doing of forbearing to do anything in relation to his capacity as a Prime Minister,” said Apandi who read a statement from a prepared text.

Furthermore, the A-G said the Prime Minister returned US$620 million (RM2.03 billion) to the Saudi royal family in August 2013 because the money was not utilised.

“There (is) no evidence to show that Yang Amat Berhormat PM had any knowledge and, or was informed that the monies had been transferred into his personal accounts from the accounts of SRC International.There (is) no evidence that YAB PM had given any approval for the transfer of monies from the account of SRC International into his personal accounts,” Apandi said.

Based on the evidence, the A-G said he was satisfied that no criminal offence had been committed in relation to the said RM2.08 billion.

MACC last year opened investigations following reports in The Wall Street Journal and Sarawak Report in July last year alleging that of the RM2.6 billion donation, RM42 million had originated from SRC International, a subsidiary of Najib’s brainchild, 1Malaysia Development Bhd (1MDB).

This was according to documents on the money trail provided by Malaysian investigators, WSJ and Sarawak Report said.A larger tranche of US$681 million was also transferred ino Najib’s accounts, originating from a British Virgin Islands company and going through Falcon Private Bank in Singapore, they reported.

MACC had recorded statements from more than 100 witnesses, including Najib and the individual who allegedly gave RM2.6 billion. The agency first submitted investigation papers to the A-G on December 31, and had the papers returned with requests for more explanations on January 18. It resubmitted the papers last week.

MACC’s Deputy Director of Operations Dato’ Séri Mohd Shukri Abdull earlier said the RM2.6 billion probe was still incomplete as investigators needed to collect documents and statements from individuals from several overseas financial institutions. Shukri added that the commission filed a request with the A-G to obtain mutual legal assistance (MLA).

Apandi said today since no criminal offence had been committed, there was “no necessity” for Malaysia to make a request for an MLA to any foreign states to complete the investigation by the MACC in relation to the donation.

 

The Poorest Among the Poor in Kuala Lumpur


October 22,2014

The Poorest Among the Poor in Kuala Lumpur

The Poorest Among the PoorWhat is their Future?

I got this from a friend who is living abroad. I can now understand why he chose to make a living overseas. I thank him for taking the trouble to send this SABM article (below) and for reminding me that we have plenty to do to eradicate poverty.

This thread is an eye open opener for all us regardless of colour, race and religion. We have the poorest among the poor in our midst right here in Kuala Lumpur. The pictures you see tell a sad story. Our country which hopes to be a developed nation in 2020 cannot deal with the plight of our poor citizens. See how they live. Sorry to spoil the Divali party.–Din Merican

http://sayaanakbangsamalaysia.net/index.php?option=com_content&view=article&id=808&catid=40&Itemid=76

 

MB Azmin Ali: Off to a Good Start


October 5, 2015

MB Azmin Ali: Off to a Good Start

by Terence Netto@www.malaysiakini.com

COMMENT: PKR supporters must have felt a frisson of delight over photographs of Selangor Menteri Besar Azmin Ali clambering onto to dump trucks, peering into clogged drains, and peeking into makeshift homes of illegal residents as the newly-installed state CEO took his touch to the streets in the last few days.

Azmin in Jokowi styleTo them, these are welcome days of vim and vitality after eight months of embarrassing public feuds and excruciating backroom follies that had engulfed the party’s effort to have Khalid Ibrahim replaced as MB of the state. It seems like the arrival of springy sunlight after a long dark passage during which it often seemed that things could not get any worse; that things were rock bottom, until someone or something was heard tapping underneath. It’s not that bad stretches don’t occur in politics; it’s when they threaten to be unending that the trapped feel the joke is on them. Emerging from these straits, they are apt on seeing a vigorous point man blazing a trail, to react like travelers in a desert would upon discovering an unexpected oasis.

Nizar JamaluddinThus photos of Azmin in full kinetic stride stirred memories of the early days of Nizar Jamaluddin (left), the post-tsunami Pakatan Rakyat MB of Perak, a man of torrential energy, reformist passion but evanescent.

No doubt, cynics would be unimpressed at Azmin’s display of new broomism until, perhaps, apprised that in the Kuala Selangor village where Khalid was born, Azmin’s predecessor only had piped water supply installed after he was beaten by competitor Manikavasagam to the chairmanship of the division in PKR’s long drawn out internal polls that ran from late April to early August.A leader that tardy at provisioning a hamlet where he was born is hardly the sort that could succeed at passing off as authentically PKR, as different to an UMNO rethread masquerading in the tricolors of the party born in revulsion at UMNO.

Off to good start

If it takes an infrastructure and drainage inspector’s mentality to be seen as a more effective MB better than Khalid, then Azmin’s off to a good start. After all, wasn’t it a rebuke hurled at Pakatan that the credits Khalid was racking up for their brand in good governance was spoilt by the state chalking up the highest rates in dengue fever incidence.

Rubbish in SelangorA Common Sight in Selangor

Mounds of rubbish uncollected; drains and canals clogged; roads pot-holed badly enough to imperil the life and limb of users, were caveats flung in Pakatan’s face whenever reports appeared that the excellence of Khalid’s management of state finances were set to attain stratospheric heights.

Having breached the RM3 billion in reserves level before the onset of his troubles, it seemed that the man was a genius at conserving money for the state. But to what end when dengue menaced the otherwise healthy, a hard bump on a wet night imperiled unwary road users, clogged drains and canals and stinking refuse heaps made it hard to keep in mind when visitors or residents were in the richest state in the country?

So pictures of Azmin, in what is now being billed as Jokowi-like acrobatics, not only pumps the adrenaline in PKR and Pakatan veins, it should also stir voters and residents of Selangor to refreshed expectations of their MB.The new man has not committed a single misstep, though it appeared he had done so when he ordered a stop to the special aid meant for the needy elderly in his predecessor’s parliamentary seat of Bandar Tun Razak and state seat of Port Klang.

On a second look, the aid has not stopped; it has been rerouted through the PKR-appointed point man for the two constituencies, KhalidKhalid Ibrahim3 having been expelled from the party. There’s nothing wrong with the rerouting.

Of course, tougher issues are up ahead, like the matter of the seized bibles, the water agreement between Putrajaya and Selangor, and the proposed tolled highways that would crisscross prime residential districts in the state.

These are matters of considerable complexity and won’t yield to easy resolution. But a more consultative MB than Khalid, and a more solicitous CEO for the concerns of the public, party (PKR) and coalition (Pakatan) ought to see Azmin in rather better stead than Khalid eventually contrived to be.

It’s hard to see how Azmin could go grievously wrong on these matters unless, of course, he becomes abruptly amnesic or blurry. That happened to Khalid as when he seemed to have lost sight of what the public interest, as distinct to his personal interest, was matters ancillary to and concerning the Putrajaya-Selangor water agreement; and where his corporate persona had to yield to political calculations, as in issues ranging from salary increases for state assembly persons and executive councilors to tolled highways and seized holy books.

If Khalid was often a corporate persona lost in a political thicket, like deer caught in headlights, Azmin looks to be a hardened veteran of the subterranean alleyways in which political battles are sometimes waged. If he can avoid the skullduggery that is a constant temptation of these battles, he may find the MB-ship of Selangor a long-waited opportunity for the display of latent powers.

In that event, for PKR and Pakatan the exercise would amount to a grand retrieval from the doghouse the two were consigned to as the Selangor MB crisis raged for eight shriveling months.