Reflecting Africa-wide trend, China emerges as key investor in Chad

China has become the new lead developer in many African countries, out-funding the international financial institutions and other bilateral donors in some cases. Sino-African trade has ballooned from $10 million annually in the 1980s to over $55 billion in 2006, according to an article by Howard W. French and Lydia Polgreen that appeared in the New York Times last week. This trend has prompted questions about the practices that make such rapid growth possible. While the World Bank and many western countries have faced increasing pressure to uphold minimum standards of transparency, anti-corruption procedures and environmental protections in their lending, the New York Times reports that China has flouted many of these criteria and other requirements regarding borrowers' debt levels and fiscal policies, in its pursuit to sign business deals and secure rights to Africa's abundant natural resources.

Critics say that China’s involvement in African countries with weak governments or abusive regimes undermines multilateral efforts to fight corruption and poverty. Kenneth Roth, the executive director of Human Rights Watch, was quoted in the NY Times article commenting that “China’s no-strings-attached approach is problematic, particularly if its effect, if not its intent, is to undermine others’ efforts to change situations on the ground.” Others wonder whether the involvement of western donors and companies with the same problematic governments has demonstrably different impacts on the ground.

Chad, one of Africa’s least stable and poorest countries, is now entering into long term business partnerships with China in the oil industry, among other sectors. China has recently bought the rights to explore for oil in vast areas in Chad, and plans to develop an oil refinery and create a mobile telephone network in the country. The construction of an oil pipeline linking southern Chad to the Atlantic coast of Cameroon has turned the landlocked country of Chad into one of Africa's newest petro-states and made it a more attractive destination for capital investors interested in the "black gold," such as China.

In 2000, the World Bank funded a 665-mile, ExxonMobil-led oil development and pipeline project in Chad, on the condition that the petroleum revenues be used to reduce poverty. However, facing growing political instability and threats to his regime, Chadian president Idriss Deby has dismantled the Bank-mandated revenue management system, and, after threatening to shut off the pipeline if his demands weren't met, obtained a compromise from the World Bank that allows Chad to use more oil revenues to fund the military while eliminating savings funds for future generations. Tax payments from the oil industry have spiked this year, bringing nearly $1 billion direclty into Chad's treasury. Despite the government's growing budget, most of Chad's predominantly poor population have seen little if any improvements in their lives. Meanwhile, the Chadian government recently dissolved the committee established to manage the 5% of oil revenues earmarked for the producing region. It is unclear if any measures will be taken to replace the body, which was intended to help ensure that local people benefit from oil production. Worsening political instability in Chad and the erosion of the revenue management safeguards do not seem to have had much impact on the operations of the ExxonMobil-led consortium pumping oil in southern Chad. They are sending nearly 180,000 barrels per day to the Atlantic coast, through a pipeline which China, too, hopes to use in the coming years, if its oil exploration efforts prove successful.

While providing the funds to develop industry and business in Chad, China says that it abides by a policy of non-interference. The NY Times reported, “China considers other countries meddling in its affairs unacceptable, and it assumes its friends feel the same way.” While this may seem like a good deal for Chad, some are concerned that without requirements regarding transparent use of revenues or public oversight, the people of Chad will continue to be excluded from the benefits of investments, which will instead continue to enrich the private sector and government officials.

According to last week's NY Times article, Chadian business and government representatives who stand to make a direct profit seem to favor increased Chinese investment in the country, while Chadian civilians are more wary and fear being short-changed. A secretary general from a regional government office told the NY Times, “We have very high hopes. If the West does not want to invest in us, let the Chinese come. We welcome them. They don’t tell us what to do and they bring development. They are good partners.” In the same region, however, a community organizer said he was deeply skeptical about the benefits of Chinese investment. “Chad is maybe the most corrupt country in the world,” Mr. Saleh said. “We have a long history of human rights violations, of lack of transparency, of exploitation. China has a reputation for corruption. They are one of the worst human rights abusers. They have no record of transparency. What would we want with a country like that? Only to make our own problems worse.”