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TRADE-ZAMBIA: Is China Sneaking in Deals Through the Back Door?

Isabel Chimangeni

LUSAKA, Mar 27 2007 (IPS) - The recent state visit by Chinese president Hu Jintao has sparked renewed debates among Zambians about whether their country is receiving real benefits from its close economic relations with the Asian giant.

China has committed itself to writing off millions of dollars worth of Zambia’s debt, to build schools and a sports stadium, train agricultural experts and provide a loan for road construction equipment.

Hu also promised 800 million US dollars worth of new Chinese investment in mining, manufacturing and agriculture in Zambia during this year (2007).

In return, the Zambian government has established a special economic zone for Chinese investors in the Copperbelt town of Chambishi, north of the capital Lusaka. Chinese firms will be exempted from import duties and value added taxes.

‘‘This will go a long way in boosting economic development in our country,” Zambia’s president Levy Mwanawasa enthused at the time of Hu’s visit in February this year.

But others are more wary. The desire for foreign direct investment (FDI) has blinded Zambia’s leadership to the needs of the nation, argues Muweme Muweme, social conditions research project officer at the nongovernmental Jesuit Centre for Theological Reflection.

The way that China engages with Zambia does not help to build capacity among the local people, says Muweme. ‘‘FDI comes with vested interests, which is to make profit. It is time that the government stopped favouring foreigners with incentives.”

The government does not offer similar incentives to local investors. Zambian businesspeople have to battle with issues like access to capital and high production costs, Muweme points out.

The treatment of foreign versus local companies has been a contentious issue in global trade negotiations for several years. Rich countries have demanded that trade rules be changed so that their multinational companies receive the same treatment as local companies when they set out to invest in poor countries.

Developing states have resisted such measures at the multilateral level, but critics have warned that the issue could be sneaked in at the bilateral level. Developing states are even less able to stand their ground at the bilateral level because of unequal power relations.

While China is also a developing state, its booming economy has put it in a different league.

Muweme insists that the government should remember that Zambia with its rich mineral deposits have a lot to offer. ‘‘If the country had nothing valuable to offer, these people would not be coming here.

‘‘That is why the government should be careful with incentives because there are no modalities in place to ensure that a certain percentage of the profits are ploughed back into the country,” Muweme contends.

Member of Parliament for Lusaka Central, Guy Scott, regards Hu’s visit as merely about consolidating the economic gains for his country. The issue of Chinese investment in Zambia has become more complicated because of the incentives provided to Chinese business, says Scott.

Apart from repatriation of profits and tax exemption, Zambians are also worried about labour conditions in Chinese-owned factories.

The president of the Mineworkers Union of Zambia (MUZ), Raymond Mbulo, argues that China’s investment plans mean little ‘‘because of the poor employment conditions prevailing in most factories owned by Chinese people”.

For Mbulo, Zambia can only benefit from Chinese investment deals if the government checked the incentives and exemptions being provided. Most Chinese-owned firms pay Zambian workers as little as 200,000 kwacha, or 50 US dollars per month.

Before Hu’s visit, Federation of Free Trade Unions in Zambia (FFTUZ) President Joyce Nonde requested that the Chinese leader meets with unions to discuss labour concerns. But Hu ended his three-day visit without even mentioning labour conditions as trade unions had hoped.

Main opposition Patriotic Front leader Michael Sata has used the Chinese question to his political advantage. ‘‘You recruit Chinese doctors and they end up having Chinese restaurants in town. They are just flooding the country with human beings instead of investment and the government is jumping,” Sata told the local media.

‘‘We have to be very careful because if we leave them unchecked, we will regret it. China is sucking from us. We are becoming poorer because they are getting our wealth,” he said. Sata has close ties with Taiwan, China’s long-time competitor. He accused China of trying to intimidate Zambians so that they do not deal with Taiwan.

The Zambian government has reacted angrily to such sentiments. ‘‘It is not correct to suggest that the government is overzealous in attracting FDI or that we are doing so at the expense of local problems,” Zambia’s Information Minister Vernon Mwaanga retorts.

According to Mwaanga, the incentives that the Zambian government gives to foreign business are merely to enable them to pay back the loans which they had to get in order to invest in Zambia in the first place.

Mwaanga says it is absurd to suggest that the government did not have the interest of its citizens at heart. ‘‘As a government we are cautious about the issues that we handle on behalf of Zambians. The government will not engage in ventures that will disadvantage our people.”

Mwanawasa has warned civil society and opposition leaders against criticising Chinese business. Sata’s PF was barred from attending Hu’s functions.

 
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