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Kenya asked to work closely with trade negotiators

Published date:
Wednesday, 04 November 2009

Development experts in Kenya are proposing ways to benefit from China’s growing interest in Africa even as latest trade figures show widening trade gap in favour of the Asian nation.

China is primed to experience the fastest economic growth in the post-recession world with the International Monetary Fund’s latest figures predicting her 2010 rate at nine per cent.

Legal experts

This week, a team of government and business leaders joins delegates from other African countries at a Chinese investment forum in Egypt to bargain for the continent’s fair share in the gravy train.

While the Chinese engagement with the continent has led to the revival of some collapsing industries and rekindled the west’s interest in the region, experts want the regional leaders to tread carefully in the new-found partnership.

“The government must equip itself with topnotch trade negotiators and legal experts to ensure that all agreements with China are crafted in such a way that maximises the underlying opportunities while mitigating against the incidental risks,” Prof Dorothy McCormick, a lecturer at the University of Nairobi’s Institute of Development Studies (IDS) said.

Of late, China has caught the world’s imagination with its no-strings-attached foreign aid advanced to Africa with latest figures also indicating that direct investment inflows to the continent defied the ravaging global recession, rising between 78 to 81 per cent during the difficult period.

A study — China-Africa Economic Relations — released in Nairobi this week by IDS indicates that 80 per cent of the Chinese aid was extended to the oil and mineral rich nations of Angola, Nigeria and Zimbabwe.

Similarly, fuel and minerals constitute 85 per cent of Africa’s exports to China.

Trade in manufactured goods is skewed in favour of China, whose imports from the region are between 10 and 20 per cent every year.

The 2005 expiry of the Multi Fibre Agreement – an instrument that initially prevented Chinese textile from accessing the American market under concessionary terms offered in the instruments like Agoa — has been singled out as a major reason behind the slow death of the continent’s textile industry.

“Africa gets hurt in her relations with China as governments do not have coherent investment policies to protect themselves from such easy engagement,” said Prof McCormick

Kenya, which mainly exports scrap metal, tea, textile fabrics, vegetables to China imports telecoms equipment, motor vehicles, electronic apparatus and cotton from the Asian nation.

“The problem with most of the Chinese imports is that most of the products are similar but cheaper than what is produced locally, leading to cases such as the 2000-2005 period when Kenya’s textile exports to Uganda and Tanzania dropped by 55 per cent,” said Dr Joseph Onjala of IDS, who co-ordinated the study on the impact of the country’s bilateral relations with China.

A Ministry of Trade official, who takes part in trade negotiations but cannot be named because he is not the government’s spokesperson, said most of the restrictive clauses in the Chinese agreements usually pass unnoticed because technical experts at foreign affairs and trade ministries do not get the chance to review them before acceptance.

Government officials

“Chinese usually come into the country as a high-powered delegation specifically to sign an agreement about an already identified project, meaning only top government officials get the opportunity to negotiate with them,” the official.

Among the economic conditionalities usually hidden in the Chinese agreements are demands that all projects be handled by Chinese corporations and that a country increases her uptake of Chinese goods in exchange for their services in projects like road construction.

In the Export Processing Zones – special economic enclaves established to attract foreign capital while promoting technological skills transfer – the IDS study notes that most Chinese are hired without any specialised skills, gain the requisite skills within the precincts of the companies that they work and later apply for their licenses to set up their own firms in within the zones.

On the other hand, however, the IDS study notes that it is due to good bilateral relations with China that Kenyan companies like Kenya Airways now has landing rights in several Chinese cities with direct flights to Hong Kong and Guangzhou from Nairobi.

“This move has transformed the airline into a premier duo strategic instrument for African business penetration into china as it connects large number of destinations like Abidjan, Lagos and Kinshasa to Chinese industrials cities like Guangzhou,” said Dr Onjala

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