48091 TRENDS AND POLICY OPTIONS No. 5 HELPING TO ELIMINATE POVERTY THROUGH PRIVATE INVOLVEMENT IN INFRASTRUCTURE Building Bridges China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Vivien Foster William Butterfield Chuan Chen Nataliya Pushak TRENDS AND POLICY OPTIONS No. 5 HELPING TO ELIMINATE POVERTY THROUGH PRIVATE INVOLVEMENT IN INFRASTRUCTURE Building Bridges China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Vivien Foster William Butterfield Chuan Chen Nataliya Pushak © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 5 12 11 10 09 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. 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For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. ISBN: 978-0-8213-7554-9 e-ISBN: 978-0-8213-7555-6 DOI: 10.1596/978-0-8213-7554-9 Library of Congress Cataloging-in-Publication Data Foster, Vivien, 1968- Building bridges: China's growing role as infrastructure financier for Africa / Vivien Foster, William Butterfield, and Chuan Chen. p. cm. -- (Trends and policy options ; no. 5) Includes bibliographical references. ISBN 978-0-8213-7554-9 -- ISBN 978-0-8213-7555-6 (electronic) 1. China--Foreign economic relations--Africa, Sub-Saharan. 2. Africa, Sub-Saharan--For- eign economic relations--China. 3. Investments, Chinese--Africa, Sub-Saharan. 4. Infra- structure (Economics)--Africa, Sub-Saharan. I. Butterfield, William. II. Chen, Chuan. III. Title. HF1604.Z4A3574 2008 338.91'5106--dc22 2008023785 CONTENTS AUTHORS ix ACKNOWLEDGMENTS x OVERVIEW xi GLOSSARY OF TERMS xx ABBREVIATIONS AND ACRONYMS xxi 1. INTRODUCTION 1 2. CHINA'S GROWING TIES WITH SUB-SAHARAN AFRICA 3 3. METHODOLOGY 9 Existing Information Sources 9 A New Project Database 11 4. THE EMERGENCE OF CHINESE INFRASTRUCTURE FINANCE 16 Headline Numbers 16 Sector-by-Sector View 19 Power 21 Rail 23 Roads 23 iii Information and Communication Technology 24 Water and Sanitation 25 Country-by-Country View 25 Nigeria 25 Angola 26 Ethiopia 27 Sudan 28 5. ECONOMIC COMPLEMENTARITIES BETWEEN CHINA AND SUB-SAHARAN AFRICA 29 The Infrastructure Side 30 The Natural Resource Side 37 6. THE FINANCING PERSPECTIVE 52 The Role of China Ex-Im Bank 52 Financing Terms 58 Country Indebtedness 62 7. THE CHANGING LANDSCAPE OF INFRASTRUCTURE FINANCE 66 Other Non-OECD Financiers 66 Comparison of OECD and Non-OECD Finance 68 8. CONCLUSION 73 BIBLIOGRAPHY 75 ANNEXES Annex 1. Methodology for Searching Factiva Database 79 Annex 2. Methodology for Creating Project Database 82 Annex 3. Summary of Chinese-Funded Infrastructure 85 Projects by Sector Annex 4. Summary of Chinese-Funded Infrastructure 110 Projects for Selected Countries Annex 5. Summary of Chinese-Funded Natural 120 Resource Projects iv Contents BOXES 1 A brief history of Sino-African engagement 5 2 Chinese involvement in petroleum sector development in Nigeria, Angola, and Sudan 49 FIGURES 1 Chinese trade with and foreign direct investment in sub-Saharan Africa 4 2 Chinese foreign economic cooperation in sub-Saharan Africa, 2002­05 10 3 Chinese-financed infrastructure projects in sub-Saharan Africa that could be validated from different sources, 2001­07 15 4 Estimated value of Chinese infrastructure finance commitments in sub-Saharan Africa, 2001­07 17 5 Number and size distribution of Chinese-financed infrastructure projects in sub-Saharan Africa, 2001­07 18 6 Confirmed Chinese infrastructure finance commitments in sub-Saharan Africa by sector, 2001­07 22 7 Confirmed Chinese infrastructure finance commitments in sub-Saharan Africa by country, 2001­07 26 8 Percentage value of multilateral civil works contracts in sub-Saharan Africa captured by foreign contractors according to their country of origin, 2005­06 35 9 Sectoral and geographic distribution of multilateral civil works contracts 36 10 Trends in sub-Saharan African share of exports of selected natural resources going to China and other major trading partners, 2001­06 38 11 Sub-Saharan African share of China's imports of selected natural resources, 2001­06 39 12 China's oil imports by source, for all regions and for sub-Saharan Africa, 2001­06 40 13 Natural resource exports to China by selected sub-Saharan African countries, 2001 and 2006 42 Contents v 14 Country shares of Chinese natural resource investment and finance commitments into power and transport in sub-Saharan Africa, 2001­07 47 15 Chinese infrastructure finance commitments in sub-Saharan Africa by source and type, 2001­07 53 16 Commitments by China Ex-Im Bank, 2001­06 54 17 Structure of "Angola mode" arrangement 56 18 Average grant element of Chinese lending to selected sub-Saharan African countries, 2002­06 62 19 Non-OECD infrastructure finance in sub-Saharan Africa, 2001­07 69 20 External infrastructure finance in sub-Saharan Africa, 2001­06 69 21 External infrastructure finance by sector in sub-Saharan Africa, 2001­06 70 22 Sectoral specialization of external sources of infrastructure finance in sub-Saharan Africa, 2001­06 71 23 Geographic specialization of external sources of infrastructure finance in sub-Saharan Africa 72 TABLES 1 Estimated upper bound of Chinese infrastructure finance commitments in sub-Saharan Africa, 2002­05 11 2 Chinese financing commitments into infrastructure projects in sub-Saharan Africa, by year of commitment and status at end of 2007 19 3 Top 10 Chinese infrastructure project contractors active in sub-Saharan Africa, 2001­07 20 4 Economic complementarities between China and sub-Saharan Africa 29 5 Indicators of infrastructure development in sub-Saharan Africa and other developing regions 30 6 Impact of unreliable infrastructure services on the productive sector 32 vi Contents 7 Estimated annual infrastructure investment and maintenance needs to meet Millennium Development Goals in sub-Saharan Africa, 2005­15 34 8 Shifting patterns of Sino-African trade in selected natural resources 41 9 Chinese investment commitments in natural resource sector in sub-Saharan Africa, 2001­07 45 10 Chinese-financed infrastructure projects linked to Chinese natural resource development projects 48 11 Chinese-financed infrastructure projects backed by natural resources, 2001­07 57 12 Chinese grant-financed infrastructure projects in sub-Saharan Africa, 2004­07 59 13 Average terms of all Chinese official loans to various sub-Saharan African countries, 2002­06 61 14 Financing terms offered by China and other creditors to sub-Saharan Africa and all developing countries, 2002­06 63 15 Comparison of debt relief with Chinese loan commitments, 2000­07 65 A3.1 Overview of Chinese financing commitments in confirmed power projects in sub-Saharan Africa, 2001­07 86 A3.2 Overview of Chinese financing commitments in confirmed transport projects in sub-Saharan Africa, 2001­07 93 A3.3 Overview of Chinese financing commitments in confirmed ICT projects in sub-Saharan Africa, 2001­07 100 A3.4 Overview of Chinese financing commitments in confirmed water projects in sub-Saharan Africa, 2001­07 106 A3.5 Overview of Chinese financing commitments in confirmed multisector projects in sub-Saharan Africa, 2001­07 109 A4.1 Chinese financing commitments in infrastructure projects in Nigeria, 2001­07 111 Contents vii A4.2 Chinese financing commitments in infrastructure projects in Angola, 2001­07 114 A4.3 Chinese financing commitments in infrastructure projects in Ethiopia, 2001­07 116 A4.4 Chinese financing commitments in infrastructure projects in Sudan, 2001­07 118 A5.1 Chinese financing interests in confirmed natural resource projects 121 viii Contents AUTHORS The authors are, respectively, Vivien Foster, lead economist, Sustainable Development Department, Africa Region of the World Bank; William Butterfield, formerly a consultant to the World Bank; Chuan Chen, lecturer in construction management, University of Melbourne; and Nataliya Pushak, consultant to the World Bank. ix ACKNOWLEDGMENTS This activity was funded by a grant from the Public Private Infrastructure Advisory Facility and undertaken by the Director's Office of the Sustainable Development Department of the Africa Region of the World Bank. The authors would like to thank all of our World Bank colleagues whose input and advice helped us understand these issues more clearly, including Eleodoro O. Mayorga Alba, Sudeshna Ghosh Banerjee, Philippe Charles Benoit, Harry Broadman, Francisco Galrao Carneiro, Astrid Hillers, Douglass Hostland, Wendy Hughes, Victoria Kwakwa, Charles McPherson, Pierre Pozzo di Borgio, Prasad Tallapragada, Silvana Tordo, Mark Williams, and Whenhe Zhang. We would also like to thank the development agencies that made their procurement data available to us in order to analyze activi- ties of Chinese contractors in projects funded by African Development Bank, Agence Française de Développement, KFW, and the World Bank. x OVERVIEW In recent years, a number of emerging economies have begun to play a grow- ing role in the finance of infrastructure in sub-Saharan Africa. Their com- bined resource flows are now comparable in scale to traditional official development assistance (ODA) from Organisation for Economic Co-opera- tion and Development (OECD) countries or to capital from private investors. These non-OECD financiers include China, India, and the Gulf states, with China being by far the largest player. This new trend reflects a much more positive economic and political envi- ronment in sub-Saharan Africa. Real gross domestic product (GDP) growth in the region has been sustained at 4 to 6 percent now for a number of years, and has benefited from an improved investment climate. The rise of the Chi- nese and Indian economies has fueled global demand for petroleum and other commodities. Africa is richly endowed with these and faces a historic oppor- tunity to harness its natural resources and invest the proceeds to broaden its economic base for supporting economic growth and poverty reduction. In this context, south­south cooperation provides a channel through which the ben- efits of economic development in Asia and the Middle East can be transferred to the African continent, through a parallel deepening of trade and investment relations. Chinese finance often goes to large-scale infrastructure projects, with a particular focus on hydropower generation and railways. At least 35 African countries are engaging with China on infrastructure finance deals, with the biggest recipients being Nigeria, Angola, Ethiopia, and Sudan. The finance is channeled primarily through the China Export-Import (Ex-Im) Bank on terms that are marginally concessional, though significantly less so than those associated with ODA. A large share has gone to countries that are xi not beneficiaries of recent debt relief initiatives. In some cases, infrastruc- ture finance is packaged with natural resource development, making use of a mechanism known as the "Angola mode." Chinese finance is on a scale large enough to make a material contribution toward meeting Africa's vast infrastructure needs. As such, it offers an important development opportu- nity for the region. Despite the importance of Chinese finance for African infrastructure, rel- atively little is known about its value. The main purpose of this study is to quantify the magnitude of these financial flows from China by collating pub- lic information from a wide range of Chinese language sources. On this basis, it becomes possible to document the geographic distribution of resources, the types of infrastructure involved, the size and financing terms of the projects, and the modalities through which finance is being provided. The findings raise deeper questions about the economic, social, and environmental impacts of the projects concerned. These lie beyond the scope of this research, but are undoubtedly important and merit future attention. Value of Chinese Infrastructure Finance China and Africa have a long history of political and economic ties, which have greatly intensified in recent years. Both bilateral trade and Chinese for- eign direct investment (FDI) in Africa grew about fourfold between 2001 and 2005, accompanied by a major influx of Chinese enterprises and workers into the region. The natural resource sector, principally petroleum and to a lesser extent minerals, has been the major focus for both Chinese FDI to Africa and African exports to China. Nevertheless, China remains a relatively small player in Africa's petroleum sector relative to the OECD countries. The growth in commercial activity between China and Africa has been accompa- nied by a significant expansion of Chinese official economic assistance to the region, which is focused mainly on infrastructure and typically channeled through the China Ex-Im Bank. To provide a clearer picture of the value and nature of this finance, a data- base of projects with Chinese finance was constructed, initially based on press reports and subsequently verified from public Chinese language Web sites. The database covers 2001­07. On the basis of this database, it can be esti- mated that Chinese financial commitments to African infrastructure projects rose from around US$.5 billion per year in 2001­03 to around US$1.5 billion per year in 2004­05, reached at least US$7 billion in 2006--China's official "Year of Africa"--then trailed back to US$4.5 billion in 2007. About half of the confirmed projects involved Chinese commitments of less than US$50 million. However, Chinese finance has shown itself capable xii Overview in about half a dozen cases of raising very large contributions of US$1 billion or more in value for single projects. Overall, at least 35 countries in sub-Sa- haran Africa have benefited from Chinese finance or are actively discussing funding opportunities. African leadership has typically welcomed China's fresh approach to devel- opment assistance, which eschews any interference in domestic affairs, empha- sizes partnership and solidarity among developing nations, and offers an alternative development model based on a more central role for the state. However, a number of civil society commentators have expressed concerns about the social and environmental standards applied. The China Ex-Im Bank has its own environmental standards, and its policy is to follow the environ- mental regulations of the host country. Sectoral Distribution of Chinese Infrastructure Finance In terms of sectoral distribution, a large share of the Chinese finance is allo- cated to general, multisector infrastructure projects, within the framework of broad bilateral cooperation agreements that allow resources to be allocated in accordance with government priorities. However, it is clear that the two largest beneficiary sectors are power (mainly hydropower) and transport (mainly railroads). In the power sector, China's activities have focused on the construction of large hydropower schemes. By the end of 2007, China was providing at least US$3.3 billion toward the construction of 10 major hydropower projects amounting to more than 6,000 megawatts (MW) of installed capacity. If com- pleted, these schemes would increase the total available hydropower genera- tion capacity in sub-Saharan Africa by around 30 percent. There have also been some activities in thermal generation and transmission, but on a much smaller scale. China has made a major comeback in the rail sector, with financing com- mitments on the order of US$4 billion for this sector. They include rehabili- tation of more than 1,350 kilometers of existing railway lines and the construction of more than 1,600 kilometers of new railroad. To put this in perspective, the entire African railroad network amounts to around 50,000 kilometers. The largest deals have been in Nigeria, Gabon, and Mauritania. In the information and communication technology (ICT) sector, China's involvement mainly takes the form of equipment sales to national incum- bents, either through normal commercial contracts or through intergovern- mental financing tied to purchases of Chinese equipment by state-owned telecom incumbents. An important focus has been the development of na- tional backbone infrastructure. In total in 2001­07, Chinese telecom firms Overview xiii supplied almost US$3 billion worth of ICT equipment, mainly in Ethiopia, Sudan, and Ghana. In the road and water sectors, China has been involved in financing a sig- nificant number of projects, but the sums involved are much smaller than in the other three sectors; no more than US$900 million overall has gone to the two sectors combined. Geographic Distribution of Chinese Infrastructure Finance In terms of geographic distribution, Chinese finance has been highly concen- trated, with about 70 percent going to just four countries: Nigeria, Angola, Ethiopia, and Sudan. China's involvement in Nigeria, dating back to 2002, began relatively mod- estly with a number of projects in the telecom and power sectors. A substan- tial scale-up took place in 2006, when US$5 billion of infrastructure projects were agreed upon, including the 2,600 MW Mambilla hydropower scheme and two major projects to upgrade and modernize the country's railway sys- tem. However, the status of these major rail and hydropower projects agreed to in 2006 is currently under review by Nigeria's new administration. In Angola, Chinese involvement dates back to the peace accords in 2002. The engagement was substantially scaled up in 2004, when a very substan- tial line of concessional credit was agreed on with the China Ex-Im Bank to allow the government to repair infrastructure and other sectors damaged in the country's 27-year civil war. This US$2 billion loan is known to have been backed by 10,000 barrels per day of oil exports. In 2007, China Ex-Im bank issued another US$2 billion loan to Angola, reportedly devoted entirely to in- frastructure needs. China's engagement in Ethiopia amounts to a total of US$1.6 billion. The main focus has been on the ICT sector, particularly the Ethiopia Millennium Project to create a fiber-optic transmission backbone across the country and roll out the expansion of the Global System for Mobile Communication (GSM) network. Most of these were financed under export seller's credit arrangements with the Chinese telecommunications operator ZTE for the sup- ply of equipment to the Ethiopian national telecommunications incumbent. In Sudan, China has financed close to US$1.3 billion of infrastructure proj- ects, including the development of more than 1,400 MW of thermal generat- ing capacity, the 1,250 MW Merowe hydropower scheme, and a number of other significant investments in the rail and water sectors. Economic Complementarities The growing ties between China and Africa, including China's emerging role as a major financier of infrastructure in the region, can be understood in xiv Overview terms of the economic complementarities that exist between the two parties. On the one hand, Africa counts among its development challenges a major infrastructure deficit, with large investment needs and an associated funding gap. China has developed one of the world's largest and most competitive construction industries, with particular expertise in the civil works critical for infrastructure development. On the other hand, as a result of globalization, China's fast-growing manufacturing economy is generating major demands for oil and mineral inputs that are rapidly outstripping the country's domes- tic resources. Africa is already a major natural resource exporter, and with enhanced infrastructure could develop this potential even further, accelerat- ing economic development in the region. Meeting Africa's Infrastructure Needs Sub-Saharan Africa lags behind other developing regions on most standard in- dicators of infrastructure development, prompting African leaders to call for greater international support in this sphere. By far the largest gaps arise in the power sector, with generation capacity and household access in Africa at around half the levels observed in South Asia and about a third of the levels observed in East Asia and the Pacific. Unreliable power supply leads to losses in industrial production valued at 6 percent of turnover. Furthermore, Africa's limited infrastructure services tend to be much costlier than those available in other regions. For example, road freight costs in Africa are two to four times as high per kilometer as those in the United States, and travel times along key export corridors are two to three times as high as those in Asia. It is estimated that Africa's deficient infrastructure may be costing as much as 1 percentage point per year of per capita GDP growth. Since 1999, China's construction sector has seen annual growth of 20 per- cent, making China the largest construction market in the global economy. The competitiveness of Chinese contractors can be gauged by examining how well they fare in international tenders for projects funded by multilateral aid agencies such as the World Bank and the African Development Bank. In re- cent years, they have accounted for more than 30 percent by value of civil works contracts tendered by these two multilateral agencies, which makes them substantially more successful than contractors of any other nationality. Chinese contractors have been particularly successful in the road and water sectors and in countries such as Ethiopia, Tanzania, and the Democratic Re- public of Congo. Addressing China's Natural Resource Requirements China's natural resource imports from sub-Saharan Africa reached US$22 bil- lion in 2006. Petroleum alone accounts for almost 80 percent of this trade, Overview xv with the balance being timber and minerals. As a result, China now depends on Africa for around 30 percent of its oil imports, 80 percent of its cobalt imports and 40 percent of its manganese imports. Overall, Angola is by far the largest trading partner, followed by Republic of Congo, Equatorial Guinea, Sudan, and South Africa. Even so, it is important to remember that this expansion takes place from a very low base. China's oil companies remain relative latecomers to petro- leum exploration and production in Africa. In recent years, China's oil com- panies have secured oil exploration and drilling rights in Angola, Chad, the Republic of Congo, Côte d'Ivoire, Equatorial Guinea, Ethiopia, Gabon, Kenya, Mali, Mauritania, Niger, Nigeria, São Tomé and Príncipe, and Sudan. However, the US$7.5 billion of Chinese oil sector investments recorded in this study are less than a tenth of the US$168 billion that other international oil companies have already invested in the region. Moreover, most of Africa's oil exports continue to go to OECD countries. Over the 2001­06 period, 40 percent of Africa's oil production was exported to the United States and 17 percent to Europe, compared with 14 percent to China. Similarly, Chinese companies have secured projects for minerals (including copper, iron, chromium, and bauxite) in countries such as South Africa, Dem- ocratic Republic of Congo, Gabon, Guinea, Zambia, and Zimbabwe. The Chinese investment commitments associated with minerals are estimated at around US$3 billion. In some cases, official assistance has simultaneously been used to provide transport and power generation infrastructure needed to facilitate export of minerals such as iron in Gabon or phosphate in Mau- ritania. However, only 10 percent of Chinese infrastructure finance is directly linked to natural resource exploitation; most of the resources are directed to broader development projects. Financing Aspects China's approach to financial assistance is different from that of traditional donors, and forms part of a broader phenomenon of south-south economic cooperation among developing nations. The principles underlying this sup- port are therefore ones of mutual benefit, reciprocity, and complementarities and are grounded in bilateral agreements among states. Unlike traditional ODA, Chinese infrastructure finance is channeled not through a development agency but through the Ex-Im Bank, which has an explicit mission to promote trade. Given the export promotion rationale, the tying of financial support to the participation of contractors from the financing country is a typical feature. A similar approach is being taken by the India Ex-Im Bank and has in the past been used by export credit agencies of other countries. xvi Overview The vast majority of infrastructure financing arrangements discussed in this study were financed by the China Ex-Im Bank, which (like any Ex-Im bank) is devoted primarily to providing export seller's and buyer's credits to support the trade of Chinese goods. These credits, along with international guaran- tees, reached a total of US$26 billion in 2006, making the China Ex-Im Bank one of the largest export credit agencies worldwide. In addition, the China Ex- Im Bank is the only Chinese institution that is empowered to provide conces- sional loans to overseas projects. The China Ex-Im Bank is increasingly making use of a deal structure-- known as the "Angola mode" or "resources for infrastructure"--whereby re- payment of the loan for infrastructure development is made in terms of natural resources (for example, oil). This approach is by no means novel or unique, and follows a long history of natural resource-based transactions in the oil industry. In the case of the China Ex-Im Bank, the arrangement is used for countries that cannot provide adequate financial guarantees to back their loan commitments and allows them to package natural resource ex- ploitation and infrastructure development. The study documents eight re- source-backed deals of this kind (including the credit line to Angola) worth more than US$3 billion and covering petroleum, mineral resources, and agri- cultural products. The China Ex-Im Bank's terms and conditions are agreed on a bilateral basis, with the degree of concessionality depending on the nature of the proj- ect. The World Bank's Debtor Reporting System offers some insight into Chi- nese lending to sub-Saharan Africa, including both infrastructure and noninfrastructure loans. On average, the Chinese loans offer an interest rate of 3.1 percent, a grace period of 4 years, and a maturity of 13 years. How- ever, there is significant variation around all these parameters across countries with interest rates ranging from 1 to 6 percent, grace periods from 2 to 10 years, and maturities from 5 to 25 years. Measured according to official def- initions of concessionality defined by the OECD Export Credit Agreement, and used by the International Monetary Fund (IMF) in The Poverty Reduc- tion and Growth Facility (PRGF) performance criteria and the International Development Association (IDA) in the context of debt sustainability, on av- erage these loans are considered to be nonconcessional including a grant ele- ment of only 18 percent relative to a concessionality threshold of 35 percent. Given the wide variation in financial terms across countries, a subset of the loans do fall above the concessionality threshold. In addition to lending, the Chinese Ministry of Commerce's database for Chinese contractors provides some data on grant-funded projects, each of which is typically less than US$30 million in value. Overview xvii In the context of recent debt relief initiatives, Chinese lending to Africa has prompted a renewed discussion about debt sustainability. A comparison of recent debt relief figures with estimates of potential indebtedness to China suggests that some of the major beneficiaries of Chinese finance, accounting for more than one-third of the total, were countries that did not benefit from Western debt relief initiatives, such as Angola, Sudan, and Zimbabwe. The only beneficiaries of Western debt relief that have contracted relatively large debts to China are Guinea, Mauritania, and Nigeria. It is also worth noting that China has itself provided US$780 million of debt relief to African coun- tries in recent years. The Wider Landscape China is by no means the only major emerging financier for infrastructure projects in Africa. India has also been using its Ex-Im Bank to support the de- velopment of power projects in countries such as Nigeria and Sudan, where it is developing natural resource interests. Indian infrastructure deals in Africa averaged US$0.5 billion per year in 2003­07, associated with significant nat- ural resource investments. In addition, Arab countries provided an average annual US$0.5 billion for infrastructure finance in Africa in 2001­07. This has taken the form of relatively small projects (on the order of US$20 million) with a heavy emphasis on road investments. Overall, infrastructure resources provided to Africa by the emerging finan- ciers jumped from around US$1 billion per year in the early 2000s to around US$8 billion in 2006 and US$5 billion in 2007. These flows are now broadly comparable in magnitude to the ODA of OECD donors (amounting to US$5.3 billion in 2006) and to the resources emanating from private participation in infrastructure, or PPI (amounting to more than US$8 billion in 2006). Resource flows of the magnitude provided by the emerging financiers are large enough to make a material contribution toward meeting Africa's infra- structure financing needs. The contribution is most material in the power sec- tor. In ICT, emerging financiers' contribution is less significant and, moreover, comes on top of already abundant sources of finance from PPI. In transport and water, the contribution of emerging financiers remains relatively small in relation to needs. Notwithstanding some overlap, there is a significant degree of complemen- tarity in the main areas of focus for each of the three major sources of exter- nal finance. PPI seeks the most commercially lucrative opportunities in ICT. Emerging financiers focus on productive infrastructure (primarily power gen- eration and railroads). Traditional ODA focuses on the finance of public goods (such as roads and water supply) and plays a broader role in power sys- tem development and electrification. A similar pattern of specialization xviii Overview emerges with respect to geography, with different countries relying to differ- ing degrees on the various sources of finance. Conclusion The advent of China and other emerging players as important financiers rep- resents an encouraging trend for Africa, given the magnitude of its infrastruc- ture deficit. The investments made by these emerging financiers are unprecedented in scale and in their focus on large-scale infrastructure projects. With new actors and new modalities, there is a learning process ahead for borrowers and financiers, both new and old alike. Salient issues are the de- velopment of national capacity to negotiate complex and innovative deals, and to enforce appropriate environmental and social standards for project development. In sum, the key challenge for African governments is how to make the best strategic use of all external sources of infrastructure funding, including those of emerging financiers, to promote growth and reduce poverty on the continent. Overview xix GLOSSARY OF TERMS Angola mode A financing scheme in which the repayment of a loan is linked to natural resource exports Concessional According to OECD-ECA (Export Credit Agreement) defi- nition, concessional finance is defined as having terms that provide an equivalent grant element of 35 percent or more relative to what can be secured on the commercial market FDI Foreign direct investment captures private equity invest- ments of foreign companies FEC Foreign economic cooperation captures overseas construc- tion contracts, labor exports, consulting services, and non- financial FDI (as such, it does not correspond to either FDI or ODA) ODA Official development assistance captures concessional, financing for projects with a clear development purpose PPI Private participation in infrastructure captures FDI in infra- structure sectors under contractual arrangements in which the private sector assumes operational responsibilities and bears business risks xx ABBREVIATIONS AND ACRONYMS ASB Alcatel Shanghai Bell CAAC Civil Aviation Administration of China CABC China-Africa Business Council CADF China Africa Development Fund CATIC China National Aero-Technology Import & Export Co. CCECC China Civil Engineering Construction Company CCS Chambishi Copper Smelter CCT China-Congo Telecom CDB China Development Bank CDMA Code Division Multiple Access CEIEC China National Electronics Import and Export Corporation CGC China Geo-Engineering Corporation CGGC China Gezhouba Group Corporation CHICO China Henan International Cooperation Group CITCC China International Telecommunication Construction Corporation CITIC China International Trust and Investment Corporation CMEC China National Machinery & Equipment Import & Export Corporation CMIC China Machine-Building International Corporation CNMC China Nonferrous Metal Mining (Group) Co. Ltd. CNOOC China National Offshore Oil Corporation CNPC China National Petroleum Corporation COVEC China National Overseas Engineering Corporation CRBC China Road and Bridge Corporation CRCC China Railway Construction Corporation xxi CREGC China Railway Engineering Group Co. Ltd. CWE China International Water & Electric Corporation CWHEC China National Water Resources and Hydropower Engineering Corporation DAC Development Assistance Committee of the OECD DLX Dalian Xinyang High-Tech Development DRC Democratic Republic of Congo DRS Debtor Reporting System ECCO Economic and Commercial Counselor's Office ECA Export Credit Agreement Ex-Im Bank Export-Import Bank FDI foreign direct investment FOCAC Forum on China-Africa Cooperation GDP gross domestic product GNI gross national income GNPOC Greater Nile Petroleum Operating Company GPRS General Packet Radio Services GSM Global System for Mobile communications HPEC Harbin Power Equipment Company Limited ICT information and communication technology IDA International Development Association IFC International Finance Corporation IMF International Monetary Fund JDZ Joint Development Zone JIETDC Jilin Province International Economy & Trade Development Corporation JISCO Jiuquan Iron & Steel Company JNMC Jinchuan Group Limited MOFCOM Ministry of Commerce of the People's Republic of China MDG Millennium Development Goal MOU memorandum of understanding MW megawatt NEC National Electricity Corporation of Sudan NNPC Nigerian National Petroleum Corporation NRPT National Rural Telephony Project ODA official development assistance OECD Organisation for Economic Co-operation and Development ONGC Oil and Natural Gas Corporation xxii Abbreviations and Acronyms PPI private participation in infrastructure PRGF The Poverty Reduction and Growth Facility RII Rites and Ircon International SEPCO Shandong Electric Power Construction Corporation SINOPEC China Petroleum and Chemical Corporation Sino U China Nuclear International Uranium Corporation SOE state-owned enterprise SONITEL Niger Telecommunications Company SSA Sub-Saharan Africa SSI Sonangol Sinopec International WIETC Weihai International Economic & Technical Cooperative Co., Ltd WITS World Integrated Trade Solution WSS Water supply and sanitation YNCIG Yunnan Copper Industry (Group) Co. Ltd. ZPEB Zhongyuan Petroleum Exploration Bureau ZTE Zhong Xing Telecommunication Equipment Company Limited Abbreviations and Acronyms xxiii 1. INTRODUCTION China and Africa have a long history of political and economic ties, which have greatly intensified in recent years. Both bilateral trade and Chinese for- eign direct investment (FDI) in Africa grew about fourfold between 2001 and 2005, accompanied by a major influx of Chinese enterprises and workers into the region. The natural resource sector, principally petroleum and to a lesser extent minerals, has been the major focus for both Chinese FDI to Africa and African exports to China. This growth in commercial activity between China and Africa has been accompanied by a significant expansion of Chinese official economic assis- tance to the region, which is focused mainly on infrastructure and typically channeled through the China Export-Import (Ex-Im) Bank. Although this as- sistance is widely reported in the press, there are no official statistics on its overall value. Various attempts to estimate volumes have been speculative at best, but suggest a multibillion-dollar scale. Given the conclusion of the Com- mission for Africa that there is a need to double the estimated historical (pub- lic and private) financing flows of around US$10 billion per year to Africa's infrastructure development, there is no doubt that the opening of a major new source of infrastructure finance is of material importance for the region. Chinese official economic assistance often takes the form of loans pro- vided by the China Ex-Im Bank to specific African governments for the de- velopment of infrastructure projects. In line with the typical practice of export-import banks, support is partly tied to participation by contractors from the financing country. The resulting infrastructure remains the property of the African governments and their parastatals, which are responsible for 1 the subsequent operation and management of the assets. Reflecting priorities identified by the beneficiary countries, the focus of projects to date has been in the area of productive infrastructure, including power, rail, and informa- tion and communication technology (ICT) as well as some high-profile con- struction projects. While it is known that the China Ex-Im Bank provides a significant volume of concessional financing to Africa for such infrastruc- ture development, the details of the associated financing terms are not typi- cally disclosed. There is therefore a need for the international community to improve its understanding of the new role that China is playing in the development of Africa's infrastructure, and its implications for Africa's development. The ob- jective of this report is to contribute to such an understanding by providing more solid estimates of the overall volume of finance, as well as an analysis of its composition. The report focuses on sub-Saharan Africa, which is where infrastructure financing needs are particularly critical and where the bulk of the Chinese activity has taken place. The starting point for this endeavor is the construction of a database that documents each of the projects reported to have Chinese financing, which are subsequently verified through a range of Chinese and international sources. The report is structured along the following lines. Section 2 provides an overview of the growing economic ties between China and Africa, in partic- ular the extent of our current understanding of Chinese infrastructure finance in the region. Section 3 examines the data available from official Chinese gov- ernment sources and discusses the methodological challenges inherent in quantifying the extent of official assistance for infrastructure finance. Section 4 presents the headline estimates on the value of Chinese finance based on the projects database developed for this report. Section 5 details the economic complementarities that exist between China and Africa, based on Africa's need for infrastructure and China's natural resource import requirements. Sections 6 and 7 present a more detailed profile of Chinese-financed infra- structure projects in Africa on a sector-by-sector and country-by-country basis. Section 8 presents the available information on financing mechanisms and terms, and considers the overall impact on country indebtedness. Section 9 places the phenomenon of Chinese infrastructure finance into a broader international perspective, comparing it with flows provided by traditional OECD financiers and other emerging players such as India and the Arab coun- tries. Finally, section 10 draws out the main conclusions and implications. 2 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa 2. CHINA'S GROWING TIES WITH SUB-SAHARAN AFRICA China's growing economic ties with Africa have attracted increasing interest from the policy community and spawned a burgeoning literature. In just the last year, a wide variety of international agencies and think tanks have pub- lished studies documenting different aspects of China's engagement in Africa.1 The issue has also been discussed by African institutions and civil society or- ganizations (see, for example, the special Pambazuka News Issue in 2006). The most extensive studies to date have focused on understanding the trade relationships between Asia and Africa, with a particular focus on China (Broadman 2006 and Goldstein et al. 2006). According to IMF Direction of Trade Statistics, by 2007, the total value of trade between China and Africa reached US$59 billion, up from less than US$10 billion in 2001 (figure 1). Africa's exports to China consist mainly of oil, minerals, and other natural resources such as timber, needed to fuel the dramatic growth of China's man- ufacturing sector. China's exports to Africa consist mainly of manufactured consumer goods. China's share of Africa's trade has jumped from 2 percent to 6 percent, making it the region's third largest trading partner after the United States and France (Alden and Rothman 2006). 1 These include Agence Française de Développement (Jacquet et al. 2007), Carnegie Endowment for International Peace (Kurlantzick 2006), Center for Global Development (Moss and Rose 2006), Center for Strategic and International Studies (Glosny 2006 and Gill et al. 2007), Cor- porate Council on Africa (Shelton 2005), Department for International Development (Univer- sity of Stellenbosch 2006), East West Center (Zhang 2006), International Rivers Network (Bosshard 2007), Organisation for Economic Co-operation and Development (Goldstein et al. 2006), and the World Bank (Broadman 2006). 3 Figure 1: Chinese trade with and foreign direct investment in sub-Saharan Africa Source: IMF Direction of Trade Statistics (2008) and Ministry of Commerce (2006). Complementing the growth in trade has been an expansion of Chinese for- eign direct investment in Africa, particularly in the natural resource sector. According to the Ministry of Commerce, the volume of Chinese FDI to Africa increased from around US$50 million per year in the early 2000s to around US$400 million per year in 2004­05. In parallel with the deepening commercial ties described above, a number of authors comment on the substantial growth of official economic assistance provided by China to African governments (see, for example, Glosny 2006 and Kurlantzick 2006), and document the rapid growth of the China Export- Import (Ex-Im) Bank to become one of the world's largest export credit agen- cies, as well as its emergence as the privileged channel for Chinese overseas concessional lending (Moss and Rose 2006). Chinese official assistance to Africa has a history dating back to the 1960s. Brautigam (1997) notes that by 1975 China had aid programs in more African countries than did the United States, and that total Chinese aid to Africa over the period 1960 to 1989 has been estimated at US$4.7 billion. During the early decades of the PRC, Chinese aid efforts in Africa focused on small-scale agricultural development projects on highly concessional terms of finance, typically accompanied by transfer of Chinese know-how. 4 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa BOX 1 A brief history of Sino-African engagement China's engagement in Africa goes far back in history and includes trade along the Silk Road (which through the Arab peninsula and India also reached Africa) as well as Admiral Zheng He's travels to eastern Africa in the 15th century. China's contemporary engagement with Africa has its roots in the mid- 1950s, notably in the Bandung Conference, where Asian and African states reinforced nonalignment and sought to promote Afro-Asian economic and cultural cooperation. Chinese Premier Zhou Enlai's tour of 10 African coun- tries between 1963 and 1964 offered support to Africa's people and leaders, and Chinese overseas development assistance became a feature of relations, focusing on infrastructure development as well as technical and student ex- change visits (particularly in the field of medicine). The most notable example of the cooperation was construction of the Tazara railway, linking Zambia to the coastal port of Dar es Salaam in Tanzania and thus providing Zambia with an alternative route to the sea. After Deng Xiaoping's reforms took off in 1978, Sino-African cooperation became less prominent for some time, but regained momentum in the 1990s. President Jiang Zemin, who toured Africa in May 1996, presented the Five Points Proposal establishing the contours of a new relationship with Africa, centering on a reliable friendship, sovereign equality, nonintervention, mutu- ally beneficial development, and international cooperation. In October 2000, the first Forum on China-Africa Cooperation (FOCAC) was held in Beijing. The forum reached consensus on a wide range of issues and culminated in the adoption of two policy documents--The Beijing Declaration and the Program of Cooperation on Economic and Social Devel- opment. Thereafter, the ministerial conference became a triennial event convened alternately in China and Africa. (continued) With the notable exception of the 1,860-kilometer Tanzania-Zambia Railway (Tazara) completed in 1976, Chinese aid during this period did not typically focus on infrastructure. Following the economic reforms of the 1990s, Brautigam notes that there was a major shift in overseas development assistance policy toward a more market-based approach with a move away China's Growing Ties with Sub-Saharan Africa 5 BOX 1 (continued) In November 2004, China established the China-Africa Business Council (CABC) jointly with the United Nations Development Programme as a public- private partnership aiming to support China's private sector investment in sub-Saharan Africa. The second FOCAC conference was held in October 2006 in Beijing, marking the culmination of China's "Year of Africa," with more than 40 African heads of state in attendance. At this event, China pledged US$3 billion in preferential loans and US$2 billion in export credits to African states over the next three years, created a special fund of US$5 billion to encourage Chinese investment in Africa, and established the China-Africa Joint Chamber of Commerce. Source: Authors. from zero interest lending, and a greater focus on the economic rationale for aid projects. This led to a scale-up in financial assistance in the early 2000s with a par- ticular focus on infrastructure projects. Indeed, China's officials declared 2006 China's "Year of Africa," marked by intensive diplomatic outreach, includ- ing a series of official visits by the Chinese premier and culminating in the heads of state Forum on China-Africa Cooperation (FOCAC) held in Beijing in October 2006, where the Chinese government pledged US$5 billion dollars of aid to Africa over the next three years. China's African policy highlights "mutual benefit, reciprocity and common prosperity" as a guiding principle for China's activities in the region (King 2006). Commentators agree that China's role in infrastructure finance in the re- gion is substantial, though no precise figures exist. A few studies have at- tempted to provide first-order estimates of the value of Chinese finance for African infrastructure projects. At the low end of the spectrum, Agence Française de Développement estimates Chinese financing in the range of US$1.6 billion and US$2.2 billion for 2004 (Chaponniere 2007). They arrive at this conclusion by taking total foreign economic cooperation in Africa of US$2.6 billion for the same year (official Chinese numbers), and netting out both (a) the value of contracts won by Chinese contractors from multilateral 6 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa agencies and (b) an estimate of private sector activity. At the high end of the spectrum, the Center for Global Development (2006) estimates (based on in- ternational press reports) that Chinese-financed infrastructure projects in Africa amounted to at least US$7.5 billion over the period 2004­05. A recent study by Stellenbosch University (2006), while not attempting to provide an overall estimate of the value of Chinese infrastructure finance, does document the existence of a US$2 billion credit line for Angola alone. Although inconclusive, these estimates point to the substantial scale of Chi- nese financing. They can be compared, for example, with commitments of around US$5 billion of official assistance to infrastructure projects in sub- Saharan Africa by Organisation for Economic Co-operation and Develop- ment (OECD) countries in 2006 (Infrastructure Consortium for Africa, 2007). The Chinese contribution also appears to be material when set against esti- mates of the overall infrastructure financing needs of sub-Saharan Africa, and the associated funding deficit. Chinese financing flows typically involve projects implemented by Chinese contractors that are funded through bilateral loans from the China Ex-Im Bank to the government of the beneficiary country. Because the Chinese contractors involved do not risk equity capital nor gain control over any foreign affiliate, the loans do not qualify as FDI. While the financing terms are often described as concessional, exact details are not typically reported. Thus, it is not clear whether or not they would qualify as concessional based on the OECD's offi- cial definition of official development assistance (ODA), which entails "flows to developing countries provided by official agencies which have a clear devel- opment purpose and are at least partially concessional in nature." Comparisons with traditional ODA can be misleading. On the one hand, traditional ODA constitutes concessional finance from high-income countries to lower-income countries for development purposes, usually delivered through bilateral or multilateral aid agencies with an explicit mission to re- duce poverty in the recipient country. These flows are guided by the agree- ments made under the OECD Development Assistance Committee, which over a number of decades has sought to reform practice to ensure that ODA delivers the maximum benefit to the recipient country, for example, by unty- ing contracts, developing safeguards, and harmonizing procedures. On the other hand, support from emerging players such as China (and India) consti- tutes official financing between lower-income countries, and is delivered not through development agencies, but rather through Ex-Im banks with an ex- plicit mission to promote trade and development in the originating country. Given the lower income level of the originating country, it makes sense that this financing is designed to bring benefits to the financier as well as to the China's Growing Ties with Sub-Saharan Africa 7 borrower. The export promotion logic of the financing provided also explains the prevalent practice of tying this to contractors from the financing country, which is standard for Ex-Im banks. African leadership has typically welcomed China's fresh approach to de- velopment assistance, which eschews any interference in domestic affairs and emphasizes partnership and solidarity among developing nations (King 2006; Pambazuka 2006). However, a number of civil society commentators have expressed concerns about the social and environmental standards applied in Chinese-funded projects in Africa (Alden and Rothman 2006; Bosshard 2007, 2008; Glosny 2006; Kurlantzick 2006; Pambazuka 2006). These re- late primarily to the import of Chinese laborers and the resettlement proce- dures associated with the construction of large dams. China Ex-Im Bank has its own environmental standards; its policy is to respect the environmental regulations of the host country. At the same time, the Chinese approach is seen to provide a viable alternative development model based on a much more central role for the state that often appeals to African governments (Gill et al. 2007). 8 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa 3. METHODOLOGY Estimating the extent of Chinese financing of infrastructure project in Africa presents numerous methodological challenges because official Chinese data sources do not produce figures at the level of disaggregation required to doc- ument this specific issue.2 Existing Information Sources The China Export-Import (Ex-Im) Bank, which is the main financier of Chi- nese infrastructure projects in Africa, publishes data on the overall volume of its export financing. The total value of commitments for worldwide export credits and guarantees, pegged at close to US$26 billion in 2006,3 has quadru- pled since the year 2000. However, data on concessional lending--the relevant financing mode for African infrastructure projects--are not typically dis- closed. The Ministry of Commerce publishes annual statistics on "foreign eco- nomic cooperation," which is a broad concept encompassing the value of overseas contracts, labor exports, consulting services, and nonfinancial for- eign direct investment. These statistics, which are broken down at the coun- try level, indicate that new contractual commitments to projects in sub-Saharan Africa tripled from just under US$2 billion in 2002 to just over 2Statements about the value of Chinese aid are occasionally made by senior political figures but are difficult to interpret or reconcile with respect to officially determined categories. 3Includes approved US$17.5 billion of export seller's credits, US$4.24 billion of export buyer's credits, and US$4.4 billion of international guarantees (from China Ex-Im Bank's annual report 2006, http://english.Ex-Imbank.gov.cn/annual/reportall.jsp, pp. 19­23). 9 Figure 2: Chinese foreign economic cooperation in sub-Saharan Africa, 2002­05 Source: Ministry of Commerce, PRC (2006). US$6 billion in 2005 (figure 2a). Around half of this cooperation went to four countries: Mauritania, Nigeria, Angola, and Sudan (figure 2b). These official statistics on foreign economic cooperation merge together three distinct types of projects: those financed from official Chinese sources (which are of central interest to this study), those undertaken by Chinese con- tractors but financed by multilateral agencies (such as the World Bank), and those undertaken by Chinese enterprises in association with overseas private contractors (AFD 2006). It is possible to make some crude adjustments to these figures to get closer to a true approximation of the likely value of Chi- nese-financed projects by subtracting from these totals the known value of Chinese FDI in sub-Saharan Africa, as well as the known value of multilat- eral contracts awarded to Chinese firms, over the same period (table 1). This yields estimates that increase from US$1.8 billion in 2002 to US$5.3 billion in 2005. Data for 2006 were not available at the time of writing. This figure provides a likely upper bound for Chinese government­financed infrastruc- ture projects in the region, because in addition to network infrastructure this will include other construction projects that China has undertaken in Africa, including sports stadiums and residential housing, as well as presidential palaces and parliamentary buildings. Finally, during a six-nation tour of Africa in June of 2006, Premier Wen Ji- abao said China has offered more than US$44 billion in aid over the past 50 10 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 1: Estimated upper bound of Chinese infrastructure finance commitments in sub-Saharan Africa, 2002­05 (US$ millions) 2002 2003 2004 2005 Foreign economic cooperation in 1,869.2 3,128.6 5,283.9 5,941.0 sub-Saharan Africa Less Chinese FDI in sub-Saharan Africa 62.8 107.4 432.0 345.6 Value of multilateral contracts in sub-Saharan Africa secured by Chinese contractors 30.2 24.0 259.9 276.2 Yields Estimated upper bound of Chinese 1,776.2 2,997.2 4,592.0 5,319.2 infrastructure finance commitments in sub-Saharan Africa Sources: Ministry of Commerce,World Bank,African Development Bank. years to finance 900 infrastructure projects.4 In 2005, he stated that the Chi- nese government provided US$950 million in aid to Africa. During 2007, China's top leaders visited about half of the 48 African countries with which China has diplomatic ties,5 signing debt relief and aid agreements with 28 countries.6 A New Project Database In view of these difficulties, the approach developed in this paper is to build up a project-by-project estimate of the total value of Chinese infrastructure finance, triangulating from as many different sources as possible and draw- ing upon both international sources and Chinese sources. In a first round of data collection, international press reports were system- atically reviewed and attempts were made to verify them through World Bank channels. The starting point was international English language media. The Factiva media database was used to perform a systematic search of newspaper articles 4"Benin Offers Incentives to Chinese Companies Exploring for Oil." Dow Jones International News, August 28, 2006. 5(2007) AFRICA-CHINA: Hu's Tour Africa Research Bulletin: Economic, Financial, and Tech- nical Series 44 (1), 17243A­17245C doi:10.1111/j.1467-6346.2007.00723.x. 6China Ministry of Commerce (http://xyf2.mofcom.gov.cn/aarticle/workaffair/200712/ 20071205263642.html). Methodology 11 covering Chinese infrastructure projects in Africa over the period 2001­07. Factiva, a Dow Jones & Reuters company, is a database of international news- papers, magazines, and business press releases that uses more than 10,000 dif- ferent sources. Annex 1 provides a detailed discussion of search terms. The newspaper reports were used to construct project records detailing the date, country, sector, Chinese agency involvement, nature of project, type of financ- ing, amount of financing, and current status. Annex 2 provides a detailed de- scription of the database structure. To understand the linkages between infrastructure projects and natural resource development, a parallel database was created documenting natural resource projects using the same method. While this approach was effective in generating a rapid overview of proj- ects underway, it suffers from a number of shortcomings. To the extent that the media may cover the initial announcement of a financing commitment, but fail to indicate whether or not the commitment follows through over time, the newspaper reports may be overstating the real extent of Chinese finance. To the extent that the media may focus on larger (more newsworthy) projects, the newspaper reports may be underestimating the extent of Chinese finance by overlooking smaller projects. In some cases, media reports are incomplete, documenting the existence of a project but not providing details on the value of financial commitments. Subsequently, interviews were undertaken with World Bank operational staff who had direct engagement in the countries and sectors where the proj- ects had been identified through the media search. Through these interviews it was usually possible to establish whether or not the announced projects were actually going ahead, and in some cases the projects' overall value. This provides a first screening of the newspaper material that serves to increase the level of confidence in the reports. In addition, the project list was checked against the World Bank's Debtor Reporting System (DRS) up to 2005, which is based on information provided by borrowing countries on their bilateral debts. In a second round, Chinese press reports were systematically reviewed and all projects identified from both Chinese and international sources were sub- jected to a validation process using the official Web sites of the relevant Chi- nese government institutions and state-owned enterprises. The Chinese press search was conducted using a powerful Chinese search engine (www.baidu.com), as well as a commercial database, Chinese Journal Web, which consists of different databases such as Chinese Journal Full Ar- ticle Database (including 7,300 types of Chinese journals from 1994) and Im- portant Chinese Newspaper Full Article Database (including 430 types of Chinese newspapers from 2000). Newspapers proved to be more valuable than journals in providing useful and up-to-date information for this study. 12 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Chinese newspapers can be divided into two categories: national newspapers, including some industry-specific/professional newspapers; and provin- cial/municipal/private newspapers with a more local or regional focus. The next stage was to validate press reports by matching them up against information provided through the Web sites of relevant government institu- tions and state-owned enterprises. In all cases, the information provided from these sources is official in nature and can be regarded as the most reliable and accurate Chinese source of information. However, in some cases, the data are limited in terms of project coverage and level of detail. First, the Ministry of Commerce of the People's Republic of China (MOF- COM) publishes all foreign aid projects (that is, grant-funded projects) for bidding among Chinese contractors online. The announcement includes the description of the project and the short list of prequalified bidders. The release of the information is required by law. Second, MOFCOM also has local Economic and Commercial Counselor's Offices (ECCOs) housed within the network of Chinese embassies across Africa. The ECCOs normally have well-maintained Web sites reporting local projects with Chinese involvement, and are in close contact with events on the ground. Third, the Ministry of Foreign Affairs as well as the State-Owned Assets Supervision and Administration Commission of the State Council also report project-specific information from time to time on their Web sites, especially relating to large projects. Fourth, as a state policy bank, China Ex-Im Bank reports significant infra- structure projects with concessional loan or export credit-backed projects in its annual report. The final stage was to look at the Web sites of those Chinese contractors that were identified as being active in Africa through the English language media search. Because only a few of these contractors are listed on stock mar- kets, annual reports are normally unavailable. However, some information can be found from material posted on their corporate Web sites. Although this type of information is the least official among the three, it is considered to be usually reliable. Nevertheless, in many cases, none of the sources alone provides the whole picture on a specific project, but instead they can be complementary. For example, the contractor may report the cost of a project, but this can be less than what the African government receives from China; hence the importance of conducting cross-checks among the Chinese sources cited. To summarize, the different methods of data collection and validation de- scribed above can be grouped into two categories. The first is the press re- ports (both Chinese and international), which provide a general picture of Methodology 13 what is happening, but which on their own are of questionable accuracy. The second are the official sources, whether World Bank or Chinese govern- ment, which are used to cross-check the accuracy of the project details iden- tified through the press. Figure 3 illustrates the percentage of the full set of investment commit- ments identified by the Chinese and international press that could be con- firmed from different sources. In value terms, it proved possible to verify 76 percent of the financing commitments reported in the press through the var- ious official sources. In numerical terms, however, the percentage of finance commitments cases that could be confirmed is substantially lower, represent- ing only 59 percent of the total number in the original press reports. This finding is not entirely surprising, and simply indicates that it proved harder to verify data on the large tail of small commitments than on the more lim- ited number of large commitments. Given the uncertainty that exists, the study will take a conservative ap- proach and report only on projects reported by the Chinese press whose val- ues could subsequently be confirmed from official Chinese sources. In value terms, 76 percent of the projects identified could be confirmed by Chinese sources, and the remaining 24 percent by international sources only (see fig- ure 3). About 60 percent of the projects' overall value identified could be con- firmed both by Chinese and international sources. However, it is important to note that even the signature of an intergov- ernmental agreement does not guarantee that the project will eventually go ahead, and there have been some important cases of such projects sub- sequently being questioned or halted. Moreover, the status of projects under agreement but not yet commenced is often subject to frequent changes so that it is difficult to reach a final verdict on the status of these projects. Unfortunately, it is often some of the larger projects that have the greatest uncertainty associated with them, and this can substantially affect the overall totals. The approach taken here, therefore, is to count all proj- ects that have been confirmed as signed in the totals, but to comment in the text on those projects whose implementation remains in question at the time of writing. It is important to clarify that all the infrastructure projects captured in the database are projects with official financial assistance and do not consti- tute FDI. That is to say that the projects are entirely debt financed, typically by the China Ex-Im Bank. There are also some grant projects funded by the Ministry of Commerce. In none of these cases do the enterprises involved put in any of their own equity, which is a key element of the definition of FDI. The only possible area of ambiguity relates to the projects (a) equity financed by 14 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Figure 3: Chinese-financed infrastructure projects in sub-Saharan Africa that could be validated from different sources, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). the China Africa Development Fund, established by the China Development Bank as a commercial financing institution (Davies et al. 2008) and (b) fi- nanced directly by Chinese state-owned companies, without recourse to offi- cial financing sources (although oftentimes availability of such a recourse is plausible but cannot be confirmed). However, these account for only about 5 percent of the values under consideration (see figure 15). In later sections, the paper also presents some estimates of Chinese fund- ing for natural resource development in sub-Saharan Africa. These constitute equity flows by Chinese (private and state-owned) corporations and can there- fore properly be considered FDI. Finally, all the values reported throughout this paper relate to financing commitments rather than actual disbursements. This is common practice in the reporting of official development assistance financing. Methodology 15 4. THE EMERGENCE OF CHINESE INFRASTRUCTURE FINANCE Based on the methodology described in the previous section, this section pres- ents estimates of the total envelope of Chinese official financing commitments for infrastructure projects in sub-Saharan Africa. More detail is then provided concerning the sectoral and geographic composition of the projects identified. Headline Numbers Applying the methodology described in the previous section, it is possible to provide estimates for the total volume of Chinese finance for infrastructure projects in Africa. It is relevant to note that the estimates presented here are well within the upper bound determined through the official statistics on For- eign Economic Cooperation presented in the previous section (see table 1). The findings are that new commitments of Chinese infrastructure finance, which had oscillated around US$500 million per year in the early 2000s, grew substantially after 2003, stepping up to around US$1.3­1.7 billion per year in 2004 and 2005, topping US$7 billion in 2006 (which was the Chinese "Year of Africa"), and tailing back to around US$4.5 billion in 2007 (figure 4). It is interesting to compare these confirmed financing figures with the total envelope reported in the press. This evidently cannot be regarded as an esti- mate of actual finance, but provides a good barometer of the intensity of deal- making activity. The correspondence between press reports and confirmed estimates is relatively close except for 2006, when a divergence on the order of US$2.3 billion (or 25 percent) opened up between the two (see figure 4). This no doubt reflects the intense coverage of Chinese activities in Africa prompted by high-level intergovernmental meetings as part of the Chinese "Year of Africa." 16 Figure 4: Estimated value of Chinese infrastructure finance commitments in sub-Saharan Africa, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). The number of projects has been close to 30 per year in the last few years compared to fewer than 10 per year in the early 2000s (figure 5a). The num- ber of projects reported in the press has tended to be about 50 percent higher on average. This reflects the existence of a large tail of small projects that could not be readily verified through official sources. The size distribution of the identified infrastructure projects with Chinese finance is skewed toward a large number of relatively small projects of less than US$50 million in value (figure 5b). Nevertheless, there are some half a dozen megaprojects of US$1 billion or more in value, demonstrating the abil- ity of Chinese financing sources to raise very large contributions to individual projects. Overall, at least 35 countries in sub-Saharan Africa have benefited from Chinese finance or are actively discussing funding opportunities. The financing values reported above relate only to projects on which some formal agreement has been reached or that are further along in the project pipeline. Status is classified according to one of the following mutually ex- clusive categories: "agreed," "under construction," "completed," or "under The Emergence of Chinese Infrastructure Finance 17 Figure 5: Number and size distribution of Chinese-financed infrastructure projects in sub-Saharan Africa, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). reconsideration." The "agreed" projects are those for which some kind of formal intergovernmental memorandum of understanding (MOU) has been signed. The projects "under construction" are those for which implementa- tion has already commenced, and the "completed" projects are those that have already been finished. Finally, the "under reconsideration" category refers to projects that have been agreed but are for some reason paralyzed in implementation. Table 2 shows the Chinese finance commitments for all confirmed proj- ects by the year the commitment was made and the status of the project at the end of 2007. Overall, about 35 percent of the projects by value are either completed or under construction, a further 31 percent have been agreed on but not yet ini- tiated, and the remaining 34 percent are classified as "under reconsidera- tion." The latter category relates primarily to some major power and rail projects in Nigeria that are currently being reassessed by that country's 18 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 2: Chinese financing commitments into infrastructure projects in sub-Saharan Africa, by year of commitment and status at end of 2007 (US$ millions) Cumulative total Status at end of 2007 2001 2002 2003 2004 2005 2006 2007 2001­07 Agreed 0 0 0 500 780 858 2,787 4,926 Under construction 280 250 400 180 733 487 1,709 4,039 Completed 194 19 224 660 206 200 0 1,503 Under reconsideration 0 0 0 0 0 5,500 0 5,500 Total 474 269 624 1,340 1,720 7,045 4,496 15,968 Source: World Bank­PPIAF Chinese Projects Database (2008). authorities and to Souapiti Dam in Guinea. The projects documented in this report have been largely implemented by Chinese contractors. Table 3 iden- tifies the 10 largest Chinese project contractors for the official finance proj- ects included in this study, detailing the estimated volume and distribution of their activity. In the power sector, there are numerous significant players, in- cluding Sinohydro, Gezhouba Group, Shandong, and CATIC. In the trans- port sector, CCECC, China Guangdong Xinguang, and Transtech are the three largest players. In the information and communication technology (ICT) sector, the key player is the state-owned ZTE. Sector-by-Sector View Regarding the sectoral distribution of confirmed financing commitments, the share of about 14 percent went to "general" infrastructure projects without any clearly identified sectoral allocation, including the US$2 billion line of credit earmarked for multiple infrastructure projects in 2007. Of the remain- ing financing commitments, about 33 percent went to electricity, 33 percent to transport, and 17 percent to telecom. Therefore, it appears safe to say that most of China's activities were divided fairly evenly between two main sectors: power (especially hydropower) and transport (especially railroads), followed by the ICT sector (mainly equipment supply). Water projects attracted the least amount of activity. A more extensive profile of Chinese-funded projects in each of the major infrastructure sectors is provided below. In addition, the sectoral tables in annex 3 provide details of the individual projects recorded in each sector. The Emergence of Chinese Infrastructure Finance 19 Table 3: Top 10 Chinese infrastructure project contractors active in sub-Saharan Africa, 2001­07 Total value (US$ m) Sectors Major countries China Civil Engineering 2,500 Transport Nigeria Construction Corporation (CCECC) China Hydraulic and 2,242 Electricity Congo, Dem. Rep. of, Hydroelectric Construction Congo, Rep. of; Ghana; Group Corporation Guinea; Sudan; Togo (Sinohydro Corporation) Zhong Xing Telecommunication 2,101 Telecom Angola; Central African Equipment Company Limited Republic; DRC; Côte (ZTE) d'Ivoire; Ethiopia; Ghana; Kenya; Lesotho; Mali; Mauritania; Niger; Nigeria; Sudan China Geo-Engineering 1,024 Electricity, Cameroon; Nigeria Corporation (CGC) water China Guangdong Xinguang 1,000 Transport Nigeria International Group China Gezhouba Group 1,000 Electricity Nigeria Corporation (CGGC) Shandong Electric Power 810 Electricity Sudan, Nigeria Construction Corporation (SEPCO) China National Machinery & 721 Electricity, Angola; Congo, Rep. of; Equipment Import & Export transport, Ethiopia; Nigeria; Sudan; Corporation (CMEC) telecom Senegal; Zimbabwe Transtech Engineering 620 Transport Mauritania Corporation China National Aero-Technology 500 Electricity Zimbabwe Import & Export Co. (CATIC) Source: World Bank­PPIAF China Projects Database (2008). Note: Total value is the sum of the project total Chinese financing commitments for all the projects the con- tractor is involved with. 20 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Power The sector attracting the largest amount of Chinese financing has been the power sector, with more than US$5.3 billion in cumulative commitments at present. Much of this effort has been concentrated in hydroelectric schemes. As of the end of 2007, the Chinese were involved in financing 10 major dams in 9 different African countries. The total cost of these projects is estimated to be more than US$5 billion, of which the Chinese were financing over US$3.3 billion. The combined generating capacity of these plants amounts to more than 6,000 megawatts (MW) of electricity, a significant fraction of the 17,000 MW of hydropower generating capacity that exists today in Africa. Indeed, four of these projects will more than double the total electricity-generating capacity in the host countries where they are located. The largest hydropower project on this list is the 2,600 MW Mambilla scheme in Nigeria, implementation of which is now uncertain. The second largest is the 1,250 MW Merowe Dam in Sudan, already at an advanced stage of construction. In Zambia, too, more than 1,000 MW of hydropower capacity is being developed between the Kafue Lower Gorge and Kariba North projects. In 2006, the China Export-Import (Ex-Im) Bank expressed an interest in financing Mphanda Nkuwa dam on the Zambezi River in Mozambique. In September 2007, the six-year 1,200 MW project with an estimated cost of US$2.3­3.2 billion was awarded to the Brazilian operator Camargo Correa and partners who have yet to choose the project's financiers. Natural resources are being used to secure some of the financing. The Congo River Dam in the Republic of Congo and Bui Dam in Ghana, which are currently under construction, are being financed by the China Ex-Im Bank loans backed by guarantees of crude oil in case of the Congo River Dam, and cocoa, in the case of Bui Dam. The Poubara hydropower dam in Gabon is to be built by Sinohydro as part of the US$3 billion Belinga Iron Ore project; however, the amount of Chinese financing committed into the project is not known. Finally, the loan for the Souapiti Dam in Guinea will supposedly be linked to mining (bauxite) revenues. Despite the fact that an MOU for the construction of the dam was signed in 2006 by Guinea authorities, China Ex- Im bank, and Sinohydro, the current status of the deal remains unclear. Outside of hydropower, China has also been active in building thermal power stations, the most significant of which have been in Sudan and Nige- ria. In 2005, the Shandong Electric Power Construction Corporation agreed to build three separate thermal power stations in Sudan: a 500 MW coal-fired The Emergence of Chinese Infrastructure Finance 21 Figure 6: Confirmed Chinese infrastructure finance commitments in sub-Saharan Africa by sector, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). power plant in Port Sudan, a 300 MW gas-fired power plant in Al-Fulah, and a 320 MW gas-fired power plant in Rabak. Earlier, the Harbin Power Equip- ment Company had agreed to build the E1-Gaili Combined Cycle Power Plant. In Nigeria, the federal government is constructing, with the help of a credit line from China Ex-Im Bank, three gas-fired power stations: Papalanto (335 MW) in Ogun state developed by Shandong Electric Construction Cor- poration (SEPCO); Omotosho (335 MW) in Ondo, developed by China Na- tional Machinery & Equipment Import & Export Corp. (CMEC); and Geregu (138 MW) in Kogi state developed by Siemens. Other than electricity generation, Chinese companies CMEC and China Machine-Building International Corporation (CMIC) have occasionally got- ten involved in electricity transmission through major projects in Tanzania and Luanda (Angola), respectively. Thus, at present, China's central focus is on the construction of large hy- dropower projects. Given the current power supply crisis in Africa, and the fact that the region has developed barely 5 percent of its identified hydro po- tential, these schemes are critical for Africa's economic development. In that sense, the emergence of China as a major financier of hydro schemes is a trend of great strategic importance for the African power sector. 22 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Rail As stated earlier (see box 1), China began its foray into Africa in large part through the construction of the Tanzania-Zambia railway in the 1970s. In 2001, China pledged continued financial support for the railway; however, it was not possible to confirm whether this led to any definitive agreements. In recent years, China has made a major comeback in the African rail sec- tor, with financing commitments on the order of US$4 billion for this sector. They include rehabilitation of more than 1,350 kilometers of existing rail- way lines and the construction of more than 1,600 kilometers of new rail- road. To put this in perspective, the entire African railroad network amounts to around 50,000 kilometers. The largest deals have been in Nigeria, Gabon, and Mauritania. In Nigeria, the Chinese have committed to financing construction of the Abuja Rail Mass Transit System, and to rehabilitation of 1,315 kilometers of the Lagos-Kano line under the first phase of Nigeria railway moderniza- tion program. The total cost of the Lagos-Kano rail project is estimated to be US$8.3 billion, of which the Chinese were to cover US$2.5 billion through a line of credit part of which would be also be allocated to support power projects. However, these rail projects agreed under an earlier administration are under review by the Nigerian authorities and their final status is there- fore unclear. China Ex-Im Bank is also preparing to finance the 560 km Belinga-Santa Clara railway in Gabon, which, together with Poubara hydropower dam and deepwater port at Santa Clara, is part of the already mentioned Belinga Iron Ore project. The China Ex-Im Bank's loan for the project is to be repaid via sales of iron ore to China. The most recent railway project was the commitment to finance a 430 km railroad linking Nouakchott to phosphate-rich Bofal in Mauritania, which was agreed upon in 2007. The project is financed by a US$620 million China Ex-Im Bank loan and will be implemented by Chinese Transtech Engineering Corporation. Roads The Chinese have been active in building roads across Africa. The database has recorded more than 18 projects involving Chinese commitments for con- struction and rehabilitation of more than 1,400 kilometers of road. However, the aggregate value of finance for confirmed projects at around US$550 mil- lion is substantially below that reported for the other sectors. The road proj- ects that Chinese firms have undertaken have been relatively small compared to average project sizes in other sectors, and many of them are financed by The Emergence of Chinese Infrastructure Finance 23 grants from the Ministry of Commerce. Indeed, the database recorded only two road projects financed by Chinese sources that were larger than US$100 million in size, both of which were in Angola and part of the Ex-Im Bank line of credit provided in 2004. Road building has been an especially important activity in Ethiopia and Botswana. By far the most active Chinese road con- struction firm was the China Road and Bridge Corporation (CRBC). Information and Communication Technology The ICT sector attracted a cumulative total of almost US$3 billion of finance in 2001­07. China's involvement in the ICT sector in Africa mainly takes the form of equipment sales. In some cases, this involves normal commercial con- tacts between Chinese manufacturers and public and private operators in Africa. However, in some cases, it entails intergovernmental financing tied to purchases of Chinese equipment by state-owned telecom incumbents. While international attention has tended to focus on Africa's new private operators such as Vodacom, MTN, and Celtel, Chinese firms are emerging as key play- ers in the supply of technology and equipment for networks, typically to na- tional telecom incumbents. By far the largest ICT project has been in Ethiopia (US$1.5 billion), which involved the rollout of national communication backbones and associated rollout of mobile coverage in rural areas. The four-year project, which was ini- tially agreed upon in 2006, was to be undertaken by ZTE, Huawei, and China International Telecommunication Construction Corporation (CITCC). It is expected that, if completed, the project will more than double the country's optical fiber deployment, more than triple mobile network expansion capac- ity, double rural telecom coverage, and quadruple the length of the fixed tele- phone network. In 2007, ZTE commenced construction of the first two phases of the project. The three most active Chinese telecom equipment supply firms were state- owned ZTE, privately held Huawei, and the mixed, private-public, 50-50 French-Chinese joint venture Alcatel Shanghai Bell. In most of the cases recorded by the database, the state-owned Chinese banks directly provided the funds for the equipment to the host government. In some cases, ZTE was able to finance its deals through a standing line of credit with China Ex-Im Bank of US$500 million, issued in 2004. Similarly, Huawei was granted US$600 million export seller's credit from China Ex-Im bank, as well as US$10 billion in credit financing from the China Development Bank, both in 2004. It is important to stress that these lines of credit were given to the con- tractor firms for their worldwide operations. A salient example of China's ICT projects is the National Communication Backbone Infrastructural Project in Ghana, agreed to in June of 2006, 24 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa whereby the China Ex-Im Bank is financing US$31 million of a US$70 mil- lion project initiated by the Ministry of Communications through a conces- sional loan. The project is aimed at rehabilitating and expanding fixed-line communications technology in the country. Water and Sanitation Water and sanitation account for a relatively small share of China's total fi- nancial commitments to African infrastructure development. Participation in confirmed projects was about US$120 million, and another estimated US$200 million went into Angola's water sector as part of the China Ex-Im Bank credit line of 2004. Most of these projects were smaller scale in nature and more focused on meeting immediate social needs. China's water supply proj- ects include a number of smaller dams that are not related to hydropower but directly to water supply, in Cape Verde and Mozambique. Country-by-Country View The projects database records cases of Chinese infrastructure finance for which the amount of commitments was available and confirmed in 27 countries across sub-Saharan Africa. Nevertheless, despite this broad reach in practice, there is a heavy geographic concentration of finance. Four countries--Nigeria, Angola, Ethiopia, and Sudan--together account for about 70 percent of Chi- nese financing commitments, and Nigeria alone for nearly 30 percent (figure 7). Three other countries--Guinea, Ghana, and Mauritania--have received sizable volumes, on the order of US$0.8­1.0 billion each. A more extensive profile of the Chinese portfolio of infrastructure proj- ects in each of the four largest recipient countries is provided below. In addi- tion, the country tables in annex 4 provide details of the individual projects recorded in each country. Nigeria China's engagement in Nigeria amounts to total financing commitments of US$5.4 billion. The initiation of activities dates back to 2002 with the agree- ment on the first phase of the National Rural Telephony Project (NRPT), when China's two telecom giants ZTE and Huawei began actively pursuing equipment supply and network rollout projects for both fixed and wireless services in the country. Nigeria's first loan from the China Ex-Im Bank came in 2005 to support construction of power stations at Papalanto (335 MW), Omotosho (335 MW), and Geregu (138 MW) in Ogun, Ondo, and Kogi states. The construc- tion of Papalanto plant, financing commitments to which we were able to confirm via Chinese sources, was undertaken by Shandong Electric Power Construction Corporation (SEPCO) of China while the China Ex-Im Bank The Emergence of Chinese Infrastructure Finance 25 Figure 7: Confirmed Chinese infrastructure finance commitments in sub-Saharan Africa by country, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). agreed to finance US$300 million of the estimated US$400 million construc- tion costs. The deal was oil-backed such that in return CNPC (or PetroChina, which is CNPC's listed arm) secured a deal to purchase 30,000 barrels of crude oil a day from the Nigerian National Petroleum Corporation (NNPC) for one year, renewable. In 2006, there was a substantial scale-up in China Ex-Im Bank financing, with almost US$5 billion of projects agreed on. These included contributions of US$2.5 billion to a major Lagos-Kano railway upgrading project; contri- bution of US$1 billion to Abuja Rail Mass Transit project, which involves the construction of a high-speed rail link between Lagos and Abuja, as well as a light railway system connecting Murtala Mohammed International Air- port and Nmandi Azikwe International Airport with the Lagos and Abuja city centers respectively; and a contribution of US$1 billion to the 2,600 MW Mambilla Hydropower project. Following the change of administration in Nigeria, the major rail and power projects are under review by the authori- ties, and it is not yet clear whether they will go forward. Angola China's involvement in infrastructure finance in Angola began in 2002-- following the conclusion of the civil war--with a series of relatively small projects involving the rehabilitation of power transmission infrastructure and the installation of a new fiber-optic link. 26 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa In 2004, China substantially scaled up its involvement in Angola with the agreement of a China Ex-Im Bank line of credit to allow the government to repair infrastructure damaged in the country's 27-year civil war that for- mally ended in 2002. The overall size of the line of credit was US$2 billion; however, only half of it went toward infrastructure (electricity, roads, water, telecom, and public works), with the other half dedicated to health, educa- tion, and fisheries. This line of credit was disbursed in two equal installments over the 2004­06 period. The mentioned 2004 US$2 billion loan was backed by an agreement to supply China with 10,000 barrels of Angolan crude per day. Indeed, this type of natural resource-backed financing deal (of which this was the first major example) has come to be known as "Angola mode." The Centre for Chinese Studies at Stellenbosch University indicates that the interest on the loan has been lowered to 0.25 percent from an initial level of more than 1 percent, and that the loan has a 3-year grace period and 15-year repayment term (Corkin, 2006). Tied to the Chinese loan was the agreement that the public tenders for the construction and civil engineering contracts would be awarded primarily (70 percent) to Chinese state-owned enterprises approved by the Chinese govern- ment. In response, the China Ex-Im Bank compiled a list of 35 Chinese com- panies approved by both the bank and the Chinese authorities to tender in Angola. In 2007, China Ex-Im Bank issued another US$2 billion loan reportedly devoted entirely to infrastructure needs. Ethiopia China's engagement in Ethiopia amounts to US$1.6 billion. Activities began in 2002 with an agreement for construction of the 300 MW Tekeze Dam in the state of Tigray with a total cost of US$224 million, of which China Ex- Im Bank committed US$50 million. Construction is expected to be completed in 2008. In 2003, Ethiopia saw a number of relatively small-scale projects concen- trated in the roads sector, with particular emphasis on improving the city ring road for Addis Ababa. There have also been a couple of significant recent projects for extension of power transmission lines. However, the main thrust of Chinese financing in the country has focused on the ICT sector, which has absorbed more than 95 percent of the total en- velope. Financing was agreed to in 2006­07 for the US$1.5 billion Ethiopia Millennium Project to create a fiber-optic transmission backbone across the country and roll out the expansion of the Global System for Mobile commu- nications (GSM) network, with estimated 8,500,000 new connections. Unlike The Emergence of Chinese Infrastructure Finance 27 the earlier projects, most of which have been financed through loans, these were financed under export sellers' credit arrangements with the Chinese telecommunications operator ZTE for the supply of equipment to the Ethiopian national telecommunications incumbent. Sudan Since 2001, China has provided US$1.3 billion to the finance of infrastruc- ture projects in Sudan. The early infrastructure projects were all related to the power sector, beginning with construction of the El Gaili Combined Cycle Power Plant in 2001 (followed by expansion in 2007), and the Qarre I thermal station in 2002 (financing for which however was not confirmed by Chinese sources). China later agreed to finance three substantial ther- mal generation projects for coal-fired and gas-fired stations in Port Sudan, Al-Fulah, and Rabak. Thus, a total of more than 1,400 MW of new ther- mal generating capacity are being added with Chinese support. By far the highest-profile power sector project is the ongoing construction of the 1,250 MW Merowe Dam that began in early 2004. This massive US$1.2 billion hydropower project was the largest international project that China had ever participated in at the time the contracts were signed (although it has now been superseded by the Mambilla hydropower project in Nigeria, which will be more than twice the size). Financers of the project included the China Ex-Im Bank (US$400 million), the Saudi Fund (US$150 million), BADEA (US$100 million), the Kuwait Fund for Arab Economic Develop- ment (US$100 million), and the Abu Dhabi Fund (US$100 million). The Chi- nese company Sinohydro was involved in the construction of the plant, while, Harbin Power Equipment Company Limited and Jilin Province Transmission and Substation Project Company took over construction of the 1,776 kilome- ters of transmission lines within the same project. The government in Khar- toum announced that part of the benefits of this dam would be a major increase in the country's electrification rate following much needed invest- ments in distribution. The project has entailed the resettlement of 55,000 to 70,000 residents away from the fertile agricultural areas surrounding the River Nile. 28 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa 5. ECONOMIC COMPLEMENTARITIES BETWEEN CHINA AND SUB-SAHARAN AFRICA The growing economic ties between China and Africa, including China's emerging role as a major financier of infrastructure in the region, can be un- derstood in terms of the evident economic complementarities that exist be- tween the two parties (table 4). On the one hand, Africa counts among its development challenges a major infrastructure deficit, with large investment needs and an associated financing gap. China has developed one of the world's largest and most competitive construction industries, with particular expertise in the civil works critical for infrastructure development. On the Table 4: Economic complementarities between China and sub-Saharan Africa Infrastructure Resources Africa Africa has a major infrastructure Africa is a major exporter of deficit. natural resources, with infra- structure bottlenecks preventing full realization of its potential China China has a large, globally China's manufacturing-based competitive construction economy creates high demand for industry. natural resource inputs, beyond those domestically available. Source: Authors. 29 Table 5: Indicators of infrastructure development in sub-Saharan Africa and other developing regions East Europe Latin Middle Asia and America East Sub-Saharan South and Central and and North Indicator Africa Asia Pacific Asia Caribbean Africa Transport Paved road density 49 149 59 335 418 482 Total road density 152 306 237 576 740 599 ICT Mainline teledensity 33 39 90 261 197 100 Mobile teledensity 101 86 208 489 350 224 Internet density 3 2 7 16 14 10 Power Generation capacity 70 154 231 970 464 496 Electricity access 18 44 57 -- 79 88 Water and sanitation Improved water 63 72 75 87 90 85 Improved sanitation 35 48 60 78 77 77 Source: Yepes et al. (2007). Note: Data correspond to the most recent year available for the quinquennium 2000­05. Road densities meas- ured in kilometers per thousand square kilometers; teledensities measured in subscribers per thousand popu- lation; generation capacity measured in megawatts per million population; access to electricity and to improved water and sanitation measured in percentage of households. -- = not available. other hand, China's fast-growing manufacturing economy is generating major demands for oil and mineral inputs that have rapidly outstripped the coun- try's own domestic resources. Even before China's entry into the market, Africa was a major natural resource exporter, with substantial unrealized po- tential that is attributable (at least in part) to infrastructure bottlenecks that constrain the development of those resources. The Infrastructure Side Sub-Saharan Africa currently lags behind other developing regions on most standard indicators of infrastructure development (table 5). This finding holds across a wide range of indicators including road density, paved road density, electricity generation capacity per capita, and household access to electricity, water, and sanitation. By far the largest gaps arise in the power sector, with 30 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa generation capacity and household access in Africa at around half the levels ob- served in South Asia, and about a third of the levels observed in East Asia and Pacific. The story is somewhat different for the information and communica- tion technology (ICT) sector, where Africa significantly outperforms South Asia in both mobile and Internet density and comes relatively close in terms of fixed-line density, although the deficit relative to other regions remains large. Furthermore, Africa's limited infrastructure services tend to be much more costly than those available in other regions. Road freight tariffs in Africa are two to four times as high per kilometer as those in the United States, and travel times along key export corridors are two to three times as high as those found in Asia. The average effective cost of electricity to manufacturing en- terprises in Africa is close to US$0.20 per kilowatt-hour, or around four times as high as industrial rates elsewhere in the world. This reflects both high-cost utility power (costing around US$0.10 per kilowatt-hour), and heavy reliance on emergency back-up generation during frequent power outages (costing around US$0.40 per kilowatt-hour). Telecommunications costs have been falling substantially in recent years, but are still high relative to other devel- oping regions. Mobile and Internet telephone charges in Africa are about four times as high as those found in South Asia, and international call prices are more than twice as high. Inadequate infrastructure stocks are contributing to Africa's poor perform- ance in terms of economic growth. A recent study by Esfahani and Ramirez (2003) estimates that if Africa had shared East Asia's growth rate in terms of telephones per capita (10 percent versus 5 percent) and electricity generation (6 percent versus 2 percent), its economic growth rate would have been 0.9 percent higher than it was. These results are confirmed although with a very different methodology by Calderon and Serven (2004) for a large sample that includes 20 African countries. Using the methodology developed by Calderon and Serven, Estache (2005) finds that, on average, if Africa had enjoyed Korea's quantity and quality of infrastructure, it would have grown by 1.04 percent per capita more. Many similar estimates are available in the literature, all of which confirm the strong growth payoff from investing in infrastructure. Deficient infrastructure inflates indirect production costs reducing the com- petitiveness of exports. In spite of low labor costs, sub-Saharan firms have very low participation in export markets. One of the reasons for this lies in high indirect costs. In the case of strong export performers, indirect costs tend to absorb no more than 10­12 percent of total production costs. By contrast, in sub-Saharan Africa, indirect costs can be as high as 20­30 percent of total production costs. Analysis shows that more than half of these indirect costs are infrastructure related, with 31 percent relating to transport and 19 per- cent relating to power alone. Economic Complementarities between China and Sub-Saharan Africa 31 Surveys indicate that deficient infrastructure is one of the key obstacles to doing business, and a key impediment to foreign direct investment (FDI). Emerging evidence from Enterprise Surveys indicates that a high percentage of businesses in sub-Saharan Africa identify deficient infrastructure as one of the major obstacles to the operation and growth of their enterprises. The spe- cific figures are 48 percent for electricity, and 24 percent for transportation; this can be compared with 30 percent that considered corruption to be a major obstacle to doing business. In Nigeria, for example, as many as 76 per- cent of firms listed electricity as one of the top three constraints to their op- erations. Recent studies also show that countries with larger infrastructure stocks tend to be more successful at attracting FDI. A particular problem is the unreliability of power supply, which has major economic consequences for firms. Reliability of infrastructure services in sub- Table 6: Impact of unreliable infrastructure services on the productive sector East Europe Latin Middle Sub- Asia and America East and Saharan South and Central and North Africa Asia Pacific Asia Caribbean Africa Electricity Delay in obtaining electricity 34.8 49.0 21.5 20.1 34.2 55.4 connection (days) Average duration of power 6.8 2.4 5.8 6.2 8.0 3.9 outages (hours) Value lost due to power 5.9 7.4 2.8 3.0 4.1 4.4 outages (% of sales) Firms owning or sharing a 38.5 52.6 22.0 20.5 19.9 38.7 generator (% of total) Telecom Delay in obtaining a mainline 45.6 50.1 18.4 15.2 35.6 28.0 telephone connection (days) Water Delay in obtaining a water 40.4 28.8 21.9 21.1 34.6 56.2 connections (days) Average duration of insuffi- 14.8 5.0 12.7 8.7 13.4 13.4 cient water supply (hours) Source: The World Bank Group Enterprise Surveys from the period 2002/07 (http://www.enterprise surveys.org) Note: Data for sub-SaharanAfrica are based on evidence from 31 countries and those for other developing re- gions from 69 countries. 32 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Saharan Africa is comparatively worse than elsewhere in the developing world, particularly in the case of power and water supply. Firms in sub-Saha- ran Africa face significant delays in obtaining connections to electricity, water, or telephony services, and suffer electricity outages for as long as 7 hours and inufficient water supply for 15 hours on average. Power cuts lead to economic losses on the order of 6 percent of sales, prompting around 39 percent of all firms to invest in their own high-cost independent generating facilities (table 6). As a result, the typical weighted average cost of power faced by manufac- turing firms (considering both own generation and grid purchases) amounts to around US$0.17 per kilowatt-hour. Closing Africa's infrastructure deficit will require substantial levels of sus- tained finance for infrastructure in the region. Infrastructure investment needs for sub-Saharan Africa have been estimated as at least 5 percent of the re- gion's GDP, plus a further 4 percent of regional GDP to cover operation and maintenance. In absolute terms, this amounts to US$22 billion per year of in- vestment needs, and a further US$17 billion for maintenance (table 7). The largest investment needs are in the transport sector (US$9.5 billion or 43 per- cent of the total), followed by electricity (US$5.2 billion or 23 percent of the total), and water and sanitation (US$4.3 billion or 20 percent of the total). These estimates of investment needs are based on research by World Bank staff, which also provided the underlying basis for similar estimates presented in the 2005 Report of the Commission for Africa. The corresponding absolute annual investment requirement of US$22 bil- lion implies a virtual doubling of current investment levels. In addition, a fur- ther US$17 billion would be needed for operation and maintenance of infrastructure, amounting to an overall expenditure requirement of US$40 billion per year.7 Comparing estimated needs of US$22 billion with estimated historical levels in infrastructure of around US$10­12 billion suggests a fi- nancing gap of at least US$10 billion. Whereas Africa shows a particularly strong unmet demand for infrastruc- ture and for infrastructure finance, China has accumulated very substantial financial reserves and has become a leading global supplier of construction services, with particular expertise in the civil works critical for infrastruc- ture development (Chen et al. 2007). Since 1999, China's construction sec- tor has seen annual growth of 20 percent, making China the largest construction market in the global economy (Stellenbosch University 2006). By the end of 2004, the value of China's overseas engineering projects totaled US$156.3 billion, with a sizable share of this value stemming from infra- structure projects. This has been the outcome of China's "Going Global" 7 Estache (2005). Economic Complementarities between China and Sub-Saharan Africa 33 Table 7: Estimated annual infrastructure investment and maintenance needs to meet Millennium Development Goals in sub-Saharan Africa, 2005­15 (US$ millions) Electricity Telecom Transport WSS Total Investment 5,200 3,000 9,500 4,300 22,000 Operation and maintenance 3,100 2,200 8,300 3,500 17,000 Total 8,200 5,200 17,800 7,800 39,000 Source: Estache (2005). Note: WSS = Water supply and sanitation. strategy initiated in the 1990s with the aim of increasing the international ex- perience of Chinese firms. One way of gauging the international competitiveness of the Chinese con- struction industry is to look at the performance of Chinese firms under open tenders. Multilateral agencies, such as the African Development Bank and the World Bank, require unrestricted international competitive bidding to take place on all significant contracts that they finance. The procurement data from these agencies is publicly available and can be used to calculate the share of contract value going to Chinese firms bidding for projects in different segments of the market. This in turn provides an objective indication of the competitive- ness of Chinese construction firms. In the case of the World Bank, it was possible to establish that since 1999 Chinese contractors have been winning a significant share (10­20 percent) of African infrastructure contracts awarded by the International Development Association. The accumulated contract value won by Chinese contractors was US$738 million over the period 2001­06. While substantial, this figure is much lower than the value of Chinese commitments to infrastructure finance over the same period, which are estimated at more than US$12 billion. Looking at more recent data from both the World Bank and the African Development Bank, it is evident that the success of Chinese firms has been largely confined to the area of civil works. The presence of Chinese firms is almost nonexistent in the area of consulting services, and minimal in the area of equipment supply where they capture a mere 3 percent of the market. However, in the area of civil works Chinese firms accounted for 31 percent of total contract value over the period of 2005­06.8 8The limited procurement data available from bilateral agencies suggest that the share of con- tracts going to Chinese firms is substantially lower than for multilaterals. In the case of Ger- many's KfW, for example, Chinese contractors account for only 5 percent of civil works contract values for infrastructure in sub-Saharan Africa over the last five years. Similarly, France's AFD reports less than US$10 million of Chinese contracts over the last three years. 34 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Figure 8: Percentage value of multilateral civil works contracts in sub-Saharan Africa captured by foreign contractors according to their country of origin, 2005­06 Source: African Development Bank and World Bank procurement data (2005­06). With the exception of France, which has been winning around 12 percent of World Bank civil works contracts, no other country has won more than a 5 percent share (figure 8). This figure illustrates the competitiveness of Chi- nese contractors in this market. The World Bank procurement data also pro- vide (partial) information on the nationality of the second most highly ranked bidder for each contract. This shows that in as many as 20 percent of the number of contracts won by Chinese firms, the second most highly ranked bidder is also a Chinese firm. Chinese firms have tended to capture the larger civil works contracts. The average size of a civil works contract awarded to a Chinese contractor was US$6 million in the case of the African Development Fund window of the African Development Bank and US$11 million in the case of the International Development Association arm of the World Bank, compared to more typical contract values of US$3­4 million. Within the civil works field, Chinese contractors have been particularly successful winning contracts in the transport (mainly roads) and water sec- tors--where they captured respectively 38 percent and 32 percent of tenders awarded--compared to only 7 percent in power and none at all in ICT. In terms of sectoral distribution of the civil works contracts won by Chinese, 97 percent of their value went to transport and water sectors (figure 9a). It is striking that the sectoral composition of Chinese-funded projects is completely different: water and roads account for only a small share of this activity, whereas hydro-power, rail, and ICT are much more substantial. One expla- nation for this is that OECD donors have not devoted significant resources to either hydropower or rail development in recent years. Economic Complementarities between China and Sub-Saharan Africa 35 Figure 9: Sectoral and geographic distribution of Chinese-implemented multilateral civil works contracts in sub-Saharan Africa Sources: African Development Bank and World Bank Procurement Data (2005­06). Overall, about 81% of the value of contracts won by Chinese firms under multilateral projects was accounted for by just four countries: Ethiopia, Tan- zania, Democratic Republic of Congo, and Mozambique (figure 9b). Once again, this is quite different from the geographic spread under Chinese-funded projects, where more than 70% of the contract value is accounted for by Nigeria, Angola, Ethiopia, and Sudan. This indicates that Chinese contractors have significant presence and experience in a number of countries that have not yet featured prominently in Chinese financing deals. In summary, the overall picture that emerges is one of a highly successful Chinese contracting sector developing a pre-eminent position in internation- ally competitive civil works contracts for transport and water projects ten- dered by multilateral agencies in sub-Saharan Africa. The emergence of Chinese contractors long predates the expansion of Chinese finance for African infrastructure, and may have served as a training ground for the Chi- nese construction sector in Africa. Nevertheless, the value of multilateral con- tracts secured by Chinese firms over this period remains much lower that more recent deals based on Chinese finance. What is particularly striking is the contrasting nature of the Chinese contract portfolio based on multilateral finance, versus that based on Chinese finance. Activity funded by multilater- 36 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa als is focused on roads and water projects in Eastern and Southern Africa. Activity funded by China is focused on hydropower and railways in coun- tries such as Angola, Nigeria, and Sudan. The Natural Resource Side Sub-Saharan Africa's natural resource exports to China have grown expo- nentially from just over US$3 billion in 2001 to US$22 billion in 2006. Pe- troleum accounts for 80 percent of total exports by value over 2001­06 period. The next most important commodities are iron ore and timber (each of which represents 5 percent of total exports), followed by manganese, cobalt, copper, and chromium (each of which represents around 0.5­1 percent of total exports over the same period). Nevertheless, the bulk of Africa's oil exports continue to go to OECD countries. Over the 2001­06 period, 40 percent of Africa's oil production was exported to the United States, a further 17 percent to Europe, and a fur- ther 14 percent to China (figure 10a). China has greater weight as a minerals trading partner, accounting for around 60 percent of Africa's exports of cobalt, 40 percent of exports of iron, and 25­30 percent of exports of chromium, copper, and manganese. China also accounts for 30 percent of the region's timber exports (figure 10b). With the exception of iron, the Chinese share in sub-Saharan Africa exports was increasing at a faster rate for miner- als and timber than for oil, over 2001­06 period (figure 10c). As sub-Saharan Africa's natural resource exports to China have grown, China's relative dependence on sub-Saharan Africa as a supplier of natural re- sources has also increased (though at a much slower pace). This trend is best illustrated by statistics from the petroleum sector. China currently imports around half of its oil requirements. Africa's share of China's total oil imports has been rising steadily from less than 23 percent in 2001 to 29 percent in 2006 (figure 11a). As a result, sub-Saharan Africa is second only to the Mid- dle East and North Africa in terms of its importance as a supplier of oil im- ports to China (figure 12a). Within sub-Saharan Africa, Angola is by far the largest supplier, accounting for 50 percent of sub-Saharan Africa's oil exports to China over 2001­06 period (figure 12b). The next most important play- ers are Sudan (18 percent), Republic of Congo (13 percent), and Equatorial Guinea (11 percent). From the perspective of the sub-Saharan African oil pro- ducers, China is also a very important client whose imports account for 53 percent of the oil exports of Sudan, and 30 percent of the oil exports of An- gola, over 2001­06 period. It is interesting that Nigeria does not feature prominently in Sino-African petroleum trade, although this may change given the volume of recent petroleum deals reported below. Economic Complementarities between China and Sub-Saharan Africa 37 Figure 10: Trends in sub-Saharan African share of exports of selected natural re- sources going to China and other major trading partners, 2001­06 Source: COMTRADE database by the UNSD, data obtained using WITS software. Note: SSA = sub-Saharan Africa. In the case of minerals, China is almost exclusively reliant on sub-Saharan Africa for its cobalt imports, and significantly reliant for manganese (the lat- ter primarily from Gabon, South Africa, and Ghana). Sub-Saharan Africa is also an important supplier of timber (mainly from Gabon, Republic of Congo, and Cameroon) and chromium (mainly from South Africa, Madagascar, and Sudan), accounting for around one-seventh of China's global imports each. However, with respect to China's imports of iron and copper, sub-Saharan Africa is still a relatively small (but growing) contributor (figure 11b). Comparing Sino-African trading patterns in key natural resources between 2001 and 2006 indicates some shifts in the countries that are supplying China 38 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Figure 11: Sub-Saharan African share of China's imports of selected natural resources, 2001­06 Source: COMTRADE database by the UNSD, data obtained using WITS software. with specific products (table 8). In the case of petroleum, the relative position of Sudan as an exporter to China has declined. In the case of copper, there has been a major shift away from South Africa and Zambia toward Tanzania and Republic of Congo as the major suppliers. Iron ore imports are also beginning to diversify away from South Africa toward Mozambique and Mauritania. The Democratic Republic of Congo has also increased its share of trade in cobalt ore, while the Republic of Congo has made significant gains in the sup- ply of timber and petroleum. The pattern of African exports to China has changed substantially over the last few years (figure 13). In 2001, Sudan, Angola, and Equatorial Guinea were the three leading exporters of natural resources to China, with about US$0.5­1 billion of exports each, while South Africa, Gabon, and Republic of Congo were substantially further behind with US$170­300 million each. By 2006, Angola's exports to China had grown to more than US$10 billion. The Republic of Congo has also experienced exponential growth in exports to China, and together with Equatorial Guinea, Sudan, and South Africa is now in the second tier of countries with exports in the range US$1.5­2.5 bil- lion. In addition, countries such as Mauritania, Democratic Republic of Congo, and Chad are also becoming established as Chinese suppliers. China's oil companies have just recently begun to bid for oil blocks in sub- Saharan Africa, outbidding other international oil companies in a number of Economic Complementarities between China and Sub-Saharan Africa 39 Figure 12: China's oil imports by source, for all regions and for sub-Saharan Africa, 2001­06 Source: COMTRADE database by the UNSD, data obtained using WITS software. Note: EAP = East Asia and Pacific; ECA = Europe and Central Asia; LAC = Latin America and the Caribbean; MNA = Middle East and North Africa; SA = South Asia; SSA = sub-Saharan Africa. recent cases. As a result, they have secured oil exploration and drilling rights in Angola, Chad, Republic of Congo, Côte d'Ivoire, Equatorial Guinea, Ethiopia, Gabon, Kenya, Mali, Mauritania, Niger, Nigeria, São Tomé and Príncipe, and Sudan. The main players are the major state-owned oil firms: China National Petroleum Corporation (CNPC), Sinopec, and China Na- tional Offshore Oil Corporation (CNOOC). In addition to exploration and production, Chinese firms are making major investments in pipeline devel- opment, refineries, and terminal capacity, particularly in Nigeria and Sudan. In countries such as the Democratic Republic of Congo, Guinea, Gabon, Zambia, and Zimbabwe, Chinese companies have secured projects for min- erals including copper, iron ore, and bauxite. A wide range of companies have been active in minerals development, including both state-owned enterprises9 and private business interests.10 A typical arrangement is for the Chinese 9 Such as China National Overseas Engineering Corporation (COVEC), China Non-Ferrous Metals Mining and Construction Group (NFC), China National Machinery and Equipment Im- port and Export Corporation (CEMEC), and China Northern Industries Corporation (NOR- INCO). 10Such as Collum Coal Mining, Wambao Resources, Yunnan Copper Group, Xuzhou Huayan, Ningbo Huaneng Kuangyu, and Feza Mining. 40 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 8: Shifting patterns of Sino-African trade in selected natural resources (share in total export value of product from Africa to China) Top three African exporters to China in 2001 Top three African exporters to China in 2006 Petroleum Sudan Angola Eq. Guinea Angola Congo, Rep. of Eq. Guinea (37%) (28%) (17%) (57%) (13%) (13%) Copper ore S. Africa Zambia __ S. Africa Tanzania Congo, Rep. of (96%) (4%) (26%) (22%) (13%) Economic Iron ore S. Africa __ __ S. Africa Mozambique Mauritania (100%) (98%) (2%) (1%) Complementarities Cobalt ore S. Africa Congo, Dem. Congo, Rep. of Congo, Dem. Congo, Rep. of S. Africa (40%) Rep. of (33%) (22%) Rep. of (73%) (18%) (8%) Manganese ore Ghana Gabon S. Africa Gabon S. Africa Ghana (52%) (41%) (3%) (50%) (35%) (14%) between Timber Gabon Eq. Guinea Liberia Gabon Congo, Rep. of Cameroon (56%) (21%) (8%) (44%) (16%) (15%) China Chromium ore S. Africa Madagascar __ S. Africa Madagascar Sudan and (73%) (27%) (91%) (5%) (4%) Sub-Sahar Source: COMTRADE database by the UNSD, data obtained using WITS software. an Africa 41 Figure 13: Natural resource exports to China by selected sub-Saharan African countries, 2001 and 2006 Source: COMTRADE database by the UNSD, data obtained using WITS software. investor (whether private or state owned) to form a joint venture with the local African state-owned mining enterprise, as has taken place for example in Democratic Republic of Congo, Gabon, and Zambia.11 To understand this trend better, a parallel projects database was prepared based on the Factiva data tool using international press sources, to identify natural resource projects in Africa where China had secured some kind of equity stake. The database records around 100 natural resource projects with Chinese involvement. As with the infrastructure projects reported above, proj- ect information was taken from international press reports and subsequently validated from official Chinese Web sites using the same methodology already described. The data presented below include only projects that could be val- idated from Chinese sources. Unfortunately, the value of the associated in- vestment commitments is not given for all of the reported projects. Although we were able to confirm existence of 80 natural resources projects, the in- vestment commitments were available and confirmed in only 27 cases. There- 11The respective African counterparts being MKM in Democratic Republic of Congo, Industrial and Commercial Mines Company of Gabon (CICMG), and Zambia Consolidated Copper Mine (ZCCM). 42 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa fore the figures given below are a likely lower bound on the total value. A de- tailed tabulation of Chinese-funded natural resource projects by country can be found in annex 5. The database documents a rapidly rising trend in Chinese commitments to African natural resource development, with deals in excess of US$9 billion reported in 2006, compared with a value of around US$194 million in the year 2005. No investment commitments could be confirmed in earlier years. The 2007 deals for which financing information was available amounted to US$1.3 billion. Most of the total commitments were directed at natural re- source development and hence could be considered FDI. Some of it was paid directly to governments largely in the form of one-time royalties or "signature bonuses" required to secure oil exploration and production licenses. These figures are high in relation to historical levels of Chinese FDI reported for Africa, with the most recent figures indicating annual flows of US$400 mil- lion for 2004­05, although recent research highlights significant limitation in capturing oil sector FDI in official statistics (Aukut and Goldstein 2007). Given that the projects database reports commitments, while FDI relates to actual disbursements, a significant lag could be expected. Nevertheless, based on these reports a substantial increase in Chinese FDI to Africa can be pre- dicted for the coming years. Some 71 percent of at least US$10.6 billion Chinese commitments to the natural resources sector relate to petroleum, with the balance going to minerals--mainly copper and chromium, but also cobalt, iron, bauxite, man- ganese, coal, nickel, titanium, and uranium (table 9). Although at least 26 countries have received some investment in natural resource development, Nigeria and Angola stand out as by far the largest recipients of natural resource investment, predominantly in petroleum. Despite the inability to con- firm putative US$1.3 billion of commitments to exploration and transporta- tion of Sudanese oil, the quantity of the recorded natural resources projects in Sudan points to its strategic importance for China. Box 2 below provides further details of the nature of Chinese involvement in the oil sectors of each of these three oil-rich countries. China has also been taking an interest in countries that are just beginning to identify and exploit new hydrocarbon re- sources. For example, in 2006, CNOOC purchased 50 percent interest in oil block covering seven sedimentary basins in Chad, from Canadian producer EnCana. Subsequently, CNOOC made its first commercial discovery of oil in Chad in mid 2007. In addition, Chinese petroleum companies have exploration activities underway in a number of countries not yet considered to be oil producers, such as Central African Republic, Ethiopia, Liberia, Madagascar, and Somalia. Economic Complementarities between China and Sub-Saharan Africa 43 Nevertheless, this vigorous growth of natural resource trade between China and Africa, takes place from a very low base. The fact remains that China's oil companies are relative latecomers to petroleum exploration and production in Africa. Thus, the US$7.5 billion of Chinese oil sector investments recorded above are less than a tenth of the US$168 billion that other international oil companies have already invested in the region (Downs 2007). South Africa is currently in the first place as a recipient of natural resource finance due to major investments related to solid minerals, mainly chromium, cobalt, iron, gold and nickel. However, China has also shown a growing in- terest in the mining belt of central-southern Africa, comprising Zambia, Tan- zania, and Mozambique. This area is well endowed with copper, iron, gold, manganese, and other base metals. Of these three countries, Zambia has the most advanced level of Chinese engagement. In Zambia, China has secured direct equity interests in copper, coal, and manganese. The purchase of an 85 percent stake of Chambishi copper mine for about US$20 million in 1998 was one of China's earliest overseas mining investments. After its reopening in 2003, the mine has seen continuous inflow of more than US$200 million of new investment, including construction of the smelter plants. The mine's production capacity is expected to reach 150,000 tons of copper per year in 2008. In coal, Chinese Collum Mine at the old Nkandabbwe Mine in Sina- zongwe district started production in 2003 and recorded an output of 20,000 tons in 2004. In 2005, a private Chinese firm purchased a manganese mine with proven deposit of 4 million tons in Zambia's old industrial town of Kabwe. The processing of manganese started in 2007. In 2006, around 27 percent of Zambia's exports of copper were destined for China, compared to 100 percent of manganese.12 Comparing table 9 on the pattern of current Chinese natural resource in- vestments with table 8 indicating the current pattern of Chinese natural re- source imports from Africa provides some pointers as to the future direction of trade flows. Whereas table 8 above indicated that Nigeria is not currently a major supplier of oil to China, the new Chinese commitments to petroleum sector development in Nigeria reported in this section suggest that Nigeria's volume of oil exports to China is set to increase. The same could be said of Gabon, which today does not feature as an exporter of iron ore to China, but which is receiving a substantial investment in the mining sector, particularly into the Belinga iron ore reserve, capable of producing 15 million tons per year. In many cases, the exact value of the investment could not be ascer- 12COMTRADE database by the United Nations Statistics Division (UNSD), data obtained using WITS software. 44 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 9: Chinese investment commitments in natural resource sector in sub-Saharan Africa, 2001­07 (US$ millions) Other Oil Chromium Copper Iron Bauxite Coal Manganese Multiple minerals Total Angola 2,400 0 0 0 0 0 0 0 0 2,400 Central African Republic -- 0 0 0 0 0 0 0 0 -- Chad >203 0 0 0 0 0 0 0 0 >203 Congo, Dem. Rep. of -- 0 -- 0 0 0 0 >370a -- >370 Economic Congo, Rep. of -- 0 0 0 0 0 0 0 0 -- Côte d'Ivoire -- 0 0 0 0 0 -- 0 0 -- Complementarities Equatorial Guinea -- 0 0 0 0 0 0 0 0 -- Eritrea 0 0 -- 0 0 0 0 60b -- >60 Gabon -- 0 0 -- 0 0 2 0 -- >2 Guinea 0 0 0 0 63 0 0 0 -- >63 Kenya -- 0 0 0 0 0 0 0 24 >24 between Liberia -- 0 0 0 0 0 0 0 0 -- Madagascar 103 0 0 0 0 0 0 0 0 103 China Mali -- 0 0 0 0 0 0 0 0 -- Mauritania >9 0 0 0 0 0 0 0 0 >9 and Mozambique -- 0 0 0 0 0 0 0 -- -- Sub-Sahar Multiple countries 0 0 0 0 0 0 0 783c 0 783 Namibia 0 0 -- 0 0 0 0 0 -- -- an Niger -- 0 0 0 0 0 0 0 -- -- Africa Nigeria >4,762 0 0 0 0 0 0 300d 19 >5,081 (continued) 45 46 Building Table 9: continued Other Bridges: Oil Chromium Copper Iron Bauxite Coal Manganese Multiple minerals Total São Tomé and Prîncipe -- 0 0 0 0 0 0 0 0 -- China' Somalia -- 0 0 0 0 0 0 0 0 -- South Africa 0 537 0 -- 0 0 0 510e -- >1,047 sGrowing Sudan -- 0 0 -- 0 0 0 0 4 >4 Tanzania 0 0 0 0 0 -- 0 0 0 -- Role Zambia 0 0 220 0 0 -- -- 0 25 >245 as Zimbabwe 0 200 -- 0 0 -- 0 0 0 >200 Infr Total >7,476 >737 >220 -- 63 -- >2 >2,023 >71 >10,591 astructure Source: World Bank­PPIAF Chinese Projects Database (2008). Note: "--" = project was reported but that the value of the commitment was not given. Financier a. Copper and cobalt b. Copper and gold c. Purchase of shareholding in Anglo-American group with operations in platinum, diamonds, coal, base metals, and ferrous metals in Botswana, Namibia, South Africa, and for Tanzania Sub-Sahar d. Oil and solid minerals e. Iron and chromium, cobalt and nickel. an Africa Figure 14: Country shares of Chinese natural resource investment and finance com- mitments into power and transport in sub-Saharan Africa, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). tained. Thus, for example, Chinese oil sector investment of unknown magni- tude has been reported in countries as diverse as Côte d'Ivoire, Ethiopia, Gabon, Equatorial Guinea, Kenya, Liberia, and Mali. Overall, there is some correspondence between countries with large Chi- nese natural resource investments and those with large Chinese infrastructure financing into power and transport (figure 14). One explanation for this lies in the fact that infrastructure is often the bottleneck that prevents African countries from realizing their full potential as natural resource exporters. As a result, FDI in the natural resource sector is sometimes packaged with offi- cial finance for infrastructure needed to facilitate development and export. This may include power for processing, and rail and port facilities for outward transportation. Some concrete examples recorded by the database are pro- vided in table 10 below. However, these deals only account for US$1.6 billion, or for 10 percent of US$16 billion total Chinese infrastructure finance reported in this study. While a large share of Chinese infrastructure finance goes to major natural re- source exporters, and a certain amount of that goes on projects that facilitate natural resource development, the bulk of Chinese infrastructure finance is targeted toward projects that meet the country's broader development needs. Economic Complementarities between China and Sub-Saharan Africa 47 48 Building Table 10: Chinese-financed infrastructure projects linked to Chinese natural resource development projects Chinese Bridges: financing Year of Status at Link to natural resource commitments China' Country commitment end of 2007 development Project description (US$ millions) sGrowing Botswana 2006 Proposed To provide means of trans- Construction of the Trans-Kgalagadi Not available portation of coal to China railway that would link Botswana from landlocked Botswana with Namibia Role via Namibian ports as Gabon 2006 Agreement Provides means of transpor- Belinga iron ore project. Includes Not available Infr tation for the iron ore output construction of Poubara hydro- astructure from the Belinga Mine power dam, Belinga-Santa Clara railway, and the deep-water port at Santa Clara, with total projects cost Financier of US$3 billion. Guinea 2006 Under recon- Power needed to process Construction of Souapiti Dam 1,000 for sideration bauxite associated with hydropower 750 MW project Sub-Sahar China's mining interests Mauritania 2007 Agreement Facilitates phosphate mining Construction of 430 km railway 620 an from the reserves near the from Nouakchott to Bofal Africa town of Bofal, close to Senegal's border Total 1,620 Source: World Bank­PPIAF Chinese Projects Database (2008). BOX 2 Chinese involvement in petroleum sector development in Nigeria, Angola, and Sudan Nigeria:A rapidly growing engagement Since 2004, Chinese petroleum companies have acquired various interests in Nigerian oil production. This began when Sinopec won an initial oil explo- ration contract for blocks 64 and 66 of the Chad Basin. In 2006, both China National Oil Corporation (CNOOC) and China National Petroleum Corpora- tion (CNPC) won substantial interests in Nigerian oil exploration. CNOOC purchased 45 percent of block ML130 in the Niger Delta, with reserve estimates of 600 million barrels covering about 500 square miles of Akpo Oilfield and other discoveries. The total deal offered by CNOCC was worth US$2.7 billion. Just several months later, CNPC completed the acquisition of a 51 percent stake in the Kaduna refinery for a total consideration of US$2 billion. The re- finery was designed to refine 110,000 barrels of oil a day, yet due to lack of maintenance, its actual refinery capacity was only 70 percent of that capacity. Together with this deal, CNPC received the license for four oil blocks--OPL 471, 721, 732, and 298. As a result of these deals, Chinese state-owned oil companies committed to invest around US$5 billion in the country's petro- leum industry. Angola:A joint venture between state-owned enterprises The China Petroleum and Chemical Corporation (SINOPEC) and Angola Na- tional Oil Corporation (Sonangol) signed a contract for the establishment of a joint venture, Sonangol Sinopec International (SSI), to exploit crude oil in An- gola's three offshore oil fields in 2006. Sinopec held a 75 percent share, while Sonangol of Angola had the remaining 25 percent. SINOPEC, China's biggest oil refinement corporation, was to contribute about US$2.4 billion, including government signature bonuses of US$2.2 billion and US$200 million invest- ment in social projects. SSI won a 27.5 percent stake in block 17, a 40 per- cent stake in block 18, and a 20 percent working interest in block 15. With block 15 holding approximately 1.5 billion barrels of oil reserves, block 17 holding 1 billion barrels, and block 18 holding 700 million barrels, it was esti- mated that the three blocks would bring Sinopec around 100,000 barrels of oil output per day. (continued) Economic Complementarities between China and Sub-Saharan Africa 49 BOX 2 continued SSI also announced plans to develop a US$3 billion refinery in Lobito with maximum capacity of 240,000 barrels per day, under the project known as Sonaref. However, the negotiations around Sonaref collapsed and the project was canceled in 2007. Angola's current oil refinery capacity is around 39,000 barrels per day. Sudan: First major African oil experience During 2001­07, the database recorded six confirmed oil-related projects in Sudan. However, none of the total recorded commitments for Sudan amount- ing to some US$645 million was confirmed by Chinese sources. The database also has information on another six unconfirmed oil projects, amounting to additional US$789 million of possible finance commitments. Project sponsorship in Sudan has taken the form of complex multinational consortia with other emerging financiers. In most cases, the leading minority stake goes to CNPC, which has formed a joint venture with the Sudanese government to bid for blocks. Other members of the consortium typically in- clude Petronas of Malaysia, and the Al Thani Corporation of the United Arab Emirates, with Sinopec of China sometimes participating with a small stake. Moreover, in 2005, Indian and Chinese companies collaborated on an African oil project for the first time through the Greater Nile Petroleum Operating Company (GNPOC)--a joint venture of CNPC (40 percent) and ONGC Vin- desh (25 percent)--which won the rights to the Heglig and Unity fields (blocks 1, 2, and 4 ). Source: Authors. Oil exploration deals in Sudan have not entailed the payment of major royalty payments to the government, but rather the entire investment com- mitments in the industry to date have gone directly into exploration and con- struction of supporting pipeline and refinery infrastructure. Furthermore, China has provided additional finance to support development of oil-related infrastructure, including pipelines, pumping facilities, and export terminals all related to exploitation of the Melut Basin oil field. Similarly, pipelines and oil terminals are being constructed to facilitate the export of oil from 50 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Blocks 3, 6, and 7. There have also been significant investments in expand- ing the capacity of the Khartoum oil refinery. Exploration and production ac- tivities are so far taking place in blocks 1, 2, 3, 4, 7, and 15. Economic Complementarities between China and Sub-Saharan Africa 51 6. THE FINANCING PERSPECTIVE Loans from the China Export-Import (Ex-Im) Bank account for the vast ma- jority--92 percent--of the recorded Chinese infrastructure finance commit- ments in sub-Saharan Africa in 2001­07 (figure 15a). Another category is "Chinese government unspecified" financing, which accounts for 3 percent of the total, and may indicate funding directly from the executive branch of gov- ernment, likely to be the Ministry of Commerce. More recently, a number of projects have been funded by the China Africa Development Fund established by the China Development Bank (CDB). This follows public announcements of CDB's intention to rapidly expand its overseas portfolio.13 CDB is China's major domestic development bank and the world's largest development bank as measured by assets. Fifty percent of the recorded commitments are loans, and a further 44 percent take the form of export credits (figure 15b). Given the pre-eminence of the China Ex-Im Bank, this section analyzes the bank's practices in greater detail, and brings together the limited information available on loan financing terms. It also considers the financial impact of Chinese loans on the overall indebtedness of the African countries involved. The Role of China Ex-Im Bank As a state policy bank founded in 1994, China Ex-Im's official mission is to carry out state industrial policies, foreign economic and trade policies, and diplomatic policies. While state banks such as CDB specialize in domestic development, the Ex-Im Bank was set up to focus on overseas projects. The 13Reported in the Financial Times of London (December 6, 2006). 52 Figure 15: Chinese infrastructure finance commitments in sub-Saharan Africa by source and type, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). Ex-Im Bank offers several products, the most important of which are export buyers' and sellers' credits, international guarantees, on-loaned funds ex- tended by foreign governments and financial institutions, as well as conces- sional and nonconcessional loans for overseas construction and investment projects. The Ex-Im Bank is the only Chinese institution that is empowered to provide concessional lending to overseas projects. Concessional loans require a sovereign guarantee, and where the govern- ment's creditworthiness may be an issue, the loans are sometimes backed by natural resources. In the case of export buyers' credits, sovereign guarantees are also needed in most cases; however, local banks with a good record of creditworthiness or local branches of internationally recognized banks may also be able to provide acceptable guarantees under some circumstances. As a state policy bank handling bilateral aid, details on much of the lend- ing activities of the Ex-Im Bank are not made public. While the annual reports of the bank do disclose the total amounts of export buyers' and sellers' cred- its per year, it is not broken down by specific agreements. The section on con- cessional lending activities does not reveal the level of disbursements. However, according to the report, "During the `Tenth Five-Year Plan' period (2001­05), the Bank signed 78 concessional loan projects for foreign The Financing Perspective 53 countries, with the approved loans increasing by 35 percent on an annual basis; the outstanding loans by 28 percent; and the accumulated disburse- ments by 22 percent. The prioritization for concessional loans typically goes to sectors closely related to the economic development of the recipient coun- tries, such as electric power, transportation and telecommunication." The available information provided by the China Ex-Im Bank makes clear that the scale of its operations is increasing (figure 16). According to Moss and Rose (2006), the China Ex-Im Bank may now be one of the largest export credit agencies in the world, with primary commercial operations in 2005 greater than Organisation for Economic Co-operation and Development (OECD) Ex-Im Banks such as those in the United States, Japan, and the United Kingdom. Because China is not an OECD member, it has no obliga- tion to follow OECD reporting requirements. Since China does not have a separate bilateral donor institution, the China Ex-Im Bank has largely as- sumed this role, further differentiating it from OECD Ex-Im Banks. By providing preferred lines of credit to Chinese state-owned enterprises and foreign governments wishing to purchase Chinese-made goods, the China Ex-Im Bank supports the overseas expansion of Chinese firms in line with the country's "Go Global" strategy, to increase the productivity and competitive- ness of these enterprises. Figure 16: Commitments by China Ex-Im Bank, 2001­06 Source: China Ex-Im Bank (2007). 54 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa In the case of concessional loans, there is a requirement that a Chinese en- terprise be selected as the contractor or exporter. Moreover, no less than 50 percent of the equipment, materials, services, or technology needed to imple- ment the project should be secured from China. Concessional loans are founded on two legal agreements. The first is an In- tergovernmental Framework Agreement signed by both governments indicat- ing the purpose, amount, maturity, and interest rate of the facility. The second is a loan agreement signed by the China Ex-Im Bank and the borrower within that framework. Relatively little is known about the terms of the China Ex- Im Bank's concessional loans. However, the range of interest rates offered by the bank across all its products is 2­7 percent, in addition to some direct grants. Interest rates for specific deals are determined on the basis of a matrix that takes both the economic situation and the commercial viability of the project into account. The China Ex-Im Bank was originally created with a mandate to cover costs, without necessarily making a profit; as a result in the past it has done little more than to break even. In recent years there is a growing interest in more commercially oriented lending. Initially, the China Ex-Im Bank only provided loans to state-owned enterprises. However, more recently it has broadened its range of clients to include private Chinese enterprises, and for- eign enterprises active in China. The China Ex-Im Bank is making increasing use of a deal structure-- known as "Angola mode" or "resources for infrastructure"--whereby re- payment of the loan for infrastructure development is made in terms of natural resources (for example, oil). This approach is by no means novel or unique, but follows a long history of natural resource-based transactions in the oil industry (Johnston 1994). Indeed, its use in Angola by Western cor- porations in the earlier years of this century has also been widely documented (HRW 2001). The Angola mode is increasingly being used by the China Ex-Im Bank for countries that cannot provide adequate financial guarantees to back their loan commitments. Under this arrangement, the money is never directly transferred to the government (as illustrated in figure 17). Instead, a framework agree- ment is signed with the government covering a certain program of infrastruc- ture investments. These are contracted to a Chinese construction firm. At the same time, a Chinese petroleum company is awarded rights to begin produc- tion. The government of the beneficiary country instructs the Chinese contrac- tor to undertake infrastructure works, supported by a credit from China Ex-Im Bank. Repayment is in the form of oil produced directly by the Chinese petroleum company. The organization of the deal is relatively complex owing The Financing Perspective 55 Figure 17: Structure of "Angola mode" arrangement Source: Authors. to the need to coordinate with the two Chinese firms involved, each of which must carry out its own due diligence. The arrangement allows countries with abundant resources but limited creditworthiness to package the exploitation of natural resources with the development of infrastructure assets. The financial terms of Angola mode are particularly difficult to pinpoint, given that they depend to a significant extent on the implicit price agreed upon for the commodity traded, and its relation to current and future mar- ket prices, so that any discount provided with respect to the future price of oil effectively contributes to a hardening of lending terms (or vice versa). Using the Angola mode method of finance, China is able to gain physical se- curity over oil resources, normally at a slightly discounted price. Although the detailed terms of these Chinese oil-backed loans are not known, accord- ing to oil industry specialists at the World Bank the wider experience with deals of this kind suggests that they do not typically entail fixing the price of oil over the term of the loan. In fact, as oil prices rise and fall over the pe- riod, the term of the loan is usually adjusted accordingly; for example, a shortening of the repayment period as the price of oil rises. In this sense, credit deals tied to repayment in oil are not really a hedge against the future price of oil, but rather provide a way of securing a steady supply into the medium term. A growing number of such resource-backed financing schemes were iden- tified in the infrastructure projects database created for this paper. Table 11 documents eight deals totaling more than US$3 billion. The first reported example of the arrangement was a relatively small deal in the Republic of 56 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 11: Chinese-financed infrastructure projects backed by natural resources, 2001­07 Natural Total resource to Chinese Year of Status at the be received financing Country commitment end of 2007 in payment Project description (US$ millions) Congo, Rep. of 2001 Under construction Oil Congo River Dam. Backed by crude oil guarantees. 280 Sudan 2001 Completed Oil Construction of the El-Gaili (Al Jaily) Power Plant, first two 128 phases with Sudan's oil serving as collateral for the loans. Angola 2004 Completed Oil Oil-backed loan to repair damaged infrastructure bombed 1,020 in the country's civil war (power, transport, ICT, and water portion). China to receive 10,000 barrels of oil per day. Nigeria 2005 Under Oil Construction of gas turbine power plant at Papalanto. 298 construction PetroChina secured by a deal to purchase 30,000 barrels of crude oil a day from the Nigerian National Petroleum Corporation for a period of one year, renewable. Guinea 2006 Under recon- Bauxite Souapiti Dam project. Reportedly linked to mining (bauxite) 1,000 sideration revenues. Gabon 2006 Agreement Iron Bélinga iron ore reserve. Loan is to be repaid via sales of iron Not ore to China. available The Zimbabwe 2006 Agreement, Chromium Construction of new coal mines and three thermal power Not Financing possibly not stations in Dande, in the Zambezi valley on the Zambian border. available materialized In exchange, Zimbabwe was to provide China with chromium. Ghana 2007 Under Cocoa Bui Dam hydropower project. Part of the loan will 562 Perspective construction be repaid in cocoa exports to China. Total 3,287 Source: World Bank­PPIAF Chinese Projects Database (2008). 57 Congo in 2001. However, since the landmark oil-backed deal with Angola in 2004, the mechanism has become more popular, and the resources used to back deals have diversified to include bauxite, chromium, iron ore, and even cocoa. The common state ownership of most of the major oil and infrastruc- ture corporations makes it easier to coordinate this kind of bundled multi- sectoral deal. Financing Terms As noted above, there is no public information available as to the financial terms offered by the China Ex-Im Bank on its concessional financing deals. It was, however, possible to identify some of the projects that were financed by grants from the Ministry of Commerce, because these are published on an official Web site for the benefit of prospective contractors (table 12). Although the exact financial value of each project was not always available, in general these appear to have been small projects, of little more than US$10 million on average. Many of them take place in smaller countries, such as Burundi, Cape Verde, Comoros, and Rwanda. Moreover, the projects themselves relate either to rehabilitation of power plants or construction of prestige transport infra- structure projects (airports, bridges, bypasses). All members of the World Bank who borrow from the International De- velopment Association or the International Bank for Reconstruction and De- velopment are required to report the value and financial terms of their external debt (including public, publicly guaranteed, and private nonguaran- teed debt) to the World Bank's Debtor Reporting System (DRS), so that their overall creditworthiness can be assessed. From the DRS it is difficult to trace specific projects, because only very general descriptions of loan purpose are typically included. Nevertheless, it is possible to obtain an overall indication of the average financial terms on Chinese loans to specific countries. These may or may not correspond to the specific infrastructure projects recorded in the project database developed for this report. However, given that infrastruc- ture is a central focus of Chinese lending to sub-Saharan Africa, the overlap is likely to be quite large. Unfortunately, only very partial DRS data for 2006 (the year with the highest volumes of Chinese finance to date) were available at the time of this writing. The International Development Association applies a grant element calcu- lation to permit standardized comparison of financial terms across deals and to establish whether or not the financial terms can be deemed concessional. For any particular set of financial terms (including interest rate, grace period, and repayment period) the calculator determines the equivalent percentage grant component that would have to be applied to a standard loan at market 58 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 12: Chinese grant-financed infrastructure projects in sub-Saharan Africa, 2004­07 Chinese Year of finance Country commitment Sector Project description (US$ m) Cape Verde 2004 Power Reconstruction of Palião Dam -- Comoros 2004 Transport Renovation of Prince Said Ibraim 7 International Airport Guinea 2004 Power Rehabilitation of Ginkang & 2 Tinkisso hydropower plants Nigeria 2004 Water Construction of 598 water -- schemes for 19 states Rwanda 2004 Transport Construction of a 2.6 km road -- as part of Kigali ring road Burundi 2005 Power Rehabilitation of Gikonge & -- Ruvyironza hydroplants Ethiopia 2006 Transport Construction of Gotera 13 intersection bridge in Addis Kenya 2006 Transport Rehabilitation of link road to 28 Kenyatta International Airport Chad 2007 Transport Rehabilitation of six roads in -- N'Djamena Gabon 2007 Transport Rehabilitation of 17 roads in -- Gabon (10 km total) Kenya 2007 Transport Construction of roads in Nairobi 23 Lesotho 2007 ICT Establishment of television -- systems in five cities Mali 2007 Transport Construction of the "Third" -- bridge in Bamako Niger 2007 Transport Construction of bridge over 30 River Niger in Niamey Tanzania 2007 Water Rehabilitation/extension of -- water system in Chalinze Togo 2007 Power Construction of generating -- unit for Tomegbe Source: China, Ministry of Commerce 2007. The Financing Perspective 59 terms to achieve the same financial profile as that offered by the loan in ques- tion. It is important to recall that in the specific case of the Angola mode deals cited in table 11 above, these financial terms do not give the full picture because they fail to quantify the impact of any discount offered on the future price of natural resources. According to the OECD-DAC (Development Assistance Committee) defi- nition, official credits with an implicit grant element of at least 25 percent can be regarded as official development assistance (ODA).14 Based on this definition, Chinese lending on average would contain a grant element of about 36 percent. However, given today's low interest rate environment, the major disadvantage of the ODA-DAC methodology, which uses a fixed 10 percent discount rate, is that it overestimates the concessionality of a loan. For com- parative purposes, the results obtained using the OECD-DAC definition are reported in all the tables and figures below. However, the discussion centers on the OECD-ECA definition, defined below, which is now more widely used for the purposes of calculating debt sustainability. The OECD-ECA (Export Credit Agreement) defines a loan as concessional when it has a grant element of 35 percent or more using regularly updated currency-specific commercial interest reference rates. This definition has been adopted both by the International Monetary Fund (IMF) and the World Bank. As a point of reference, using this definition, IDA credits incorporate a grant element of about 70 percent, and are based on zero interest (but a 0.75 per- cent service charge), a 10- year grace period and a 40-year repayment term.15 Table 13 presents the average terms on all Chinese lending to various African countries in recent years, including both infrastructure and other types of loans. On average, the Chinese loans offer an interest rate of 3.1 percent, a grace period of 4 years, and a maturity of 13 years. Overall, this represents a grant element of around 18 percent based on the OECD-ECA definition of concessionality. Nevertheless, the variation around all of these parameters is considerable across countries; thus interest rates range from 1 to 6 percent, grace periods from 2 to 10 years, maturities between 5 and 25 years, and overall grant elements between 0 and 55 percent, so that a subset of the loans to lie above the concessionality threshold. At the same time, the terms for individual countries that received multiple loans over a number of different years are generally very consistent (figure 18a). The relationship between financial terms and gross national income (GNI) per capita is very weak (figure 18b). While some of the most conces- sional terms (around 55 percent) go to the poorest countries such as Ethiopia 14Credits are also required to be concessional in nature to be regarded as ODA. 15IDA homepage. 60 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 13: Average terms of all Chinese official loans to various sub-Saharan African countries, 2002­06 Grant Grant Chinese Interest Grace Financing element element finance rate period term (OECD-DAC) (OECD-ECA) Year Country (US$ m) (%) (yrs) (yrs) (%) (%) 2002 Cape Verde 1.2 3.0 10.1 14.1 48 25 Gabon 7.6 1.0 2.0 8.5 34 22 Gambia, The 25.5 4.0 8.4 24.4 45 27 Mauritius 12.1 4.0 4.8 12.3 32 13 Nigeria 377.0 4.8 3.9 10.9 26 6 Sudan 57.7 4.3 3.5 11.1 28 10 Zimbabwe 27.0 6.4 1.3 5.8 10 0 2003 Botswana 29.7 3.2 5.1 14.9 41 20 Sudan 33.8 5.1 1.2 6.1 13 3 Swaziland 10.0 3.3 3.1 19.6 42 25 Zimbabwe 69.0 6.1 0.4 5.3 10 0 2004 Angola 2,000.0 1.2 3.5 15.5 50 37 Benin 2.4 1.0 10.1 20.1 68 53 Ethiopia 13.0 1.0 11.2 20.2 69 55 Sudan 74.7 3.7 2.7 8.8 25 11 2005 Mauritania 136.0 3.0 3.4 18.9 43 27 Seychelles 1.0 2.0 4.2 9.7 38 22 Sudan 9.0 4.0 2.8 6.8 21 8 Zimbabwe 6.6 6.4 0.7 4.7 8 0 2006 Botswana 28.7 3.0 5.4 15.3 41 26 Ghana 30.0 2.0 5.0 20.0 53 39 Nigeria 200.0 3.0 2.2 8.7 27 13 Sudan 3.5 4.0 1.6 4.6 15 5 Zimbabwe 200.0 6.1 0.4 1.9 4 0 Source: World Bank's Debtor Reporting System, 2006. Note: In calculating the OECD-ECA grant element we use the average financing terms for each country or group to calculate the grant element, which may lead to some under- or overestimation. In addition, the fol- lowing assumptions are made: (a) the commitment is fully disbursed; (b) the number of repayments per annum is twice; (c) repayment is on an equal principal repayment basis; (d) interest rates are fixed; (e) the discount rate is the relevant and latest available Commercial Interest Reference Rate (CIRR) for the U.S. dollar plus the relevant margin as set out under the OECD-ECA definition and consistent with the IMF Poverty Reduction and Growth Facility (PRGF) Performance Criteria; and (f) where the information on maturity is not available, 10-year maturity is assumed. In calculating the OECD-DAC grant element the same assumptions (a) through (d) are made, while on point (e) the discount rate is assumed to take the fixed value of 10 percent used in OECD-DAC calculations.The calculation of grant element does not take into account, if any, fees, commitment charges, pro- curement conditions and so on as such information is unavailable. The Financing Perspective 61 Figure 18: Average grant element of Chinese lending to selected sub-Saharan African countries, 2002­06 Sources: World Bank's, Debtor Reporting System, 2006 and World Development Indicators. and Benin, other countries in a similar income bracket receive less favorable terms. Moreover, middle-income countries such as Botswana, Cape Verde and Gabon still receive comparatively large grant elements of 20­25 percent. Loans to Zimbabwe were on substantially harder terms than those for any other country. Using the same DRS source, table 14 compares Chinese financing terms for sub-Saharan Africa and other developing countries with those offered by other creditors. The evidence shows that on average African countries receive more favorable borrowing terms than other developing nations. Based on the OECD-ECA definition of concessionality, the overall average grant element for a sub-Saharan Africa from all creditors is 33 percent versus 14 percent for other developing countries. This difference is almost entirely driven by much more favorable terms from official creditors, which lend to sub-Saharan Africa at a grant element of 54 percent versus 34 percent for developing coun- tries as a whole. Rates offered by Chinese creditors to sub-Saharan Africa amount to a grant element of around 18 percent based on this definition. Country Indebtedness The growing volume of Chinese debt finance being made available to African countries comes in the wake of increased grant provision and major debt relief efforts. As a result of bilateral (Paris Club) and multilateral (Heavily Indebted Poor Countries [HIPC] and Multilateral Debt Relief Initiative 62 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Table 14: Financing terms offered by China and other creditors to sub-Saharan Africa and all developing countries, 2002­06 Grant Grant Interest Grace Financing element element rates period term (OECD-DAC) (OECD-ECA) Type of creditor (%) (yrs) (yrs) (%) (%) All developing countries All creditors 4.8 7.4 15.2 30 14 Official creditors only 2.8 5.9 22.2 49 34 Private creditors 6.0 8.3 10.9 19 0 Sub-Saharan Africa All creditors 2.9 5.9 22.3 45 33 Official creditors only 1.7 7.7 32.9 66 54 Private creditors 4.7 3.4 7.2 17 5 Chinese creditors only 3.1 3.6 13.2 36 18 Source: World Bank, Debtor Reporting System (2006). Notes: For methodology underlying grant element calculation, see previous table. [MDRI] initiatives, the sub-Saharan African countries covered in this study were forgiven a total of US$89 billion of bilateral and multilateral debt up to 2007, much of it concessional in nature. China itself has also provided a sig- nificant amount of debt relief to African countries totaling at least US$780 million since the year 2000. The major beneficiaries have been Zambia, Ethiopia, Angola, Tanzania, Republic of Congo, Uganda, Ghana and Guinea. The reduced indebtedness of African countries that benefited from this debt relief has created significant fiscal space allowing these countries to bor- row again to finance much needed investments. Debt relief was granted on the understanding that future indebtedness would be carefully monitored to en- sure its macroeconomic sustainability. To provide a very approximate sense of the materiality of potential African indebtedness to China under the recent agreements documented above, table 15 provides a country-by-country comparison of the face value of recent OECD debt relief against new financial commitments to China.16 The ratio of 16Given widespread default, the market value of the debt that was forgiven would have been substantially below the face value reported here. The Financing Perspective 63 Table 15: Comparison of debt relief with Chinese loan commitments, 2000­07 (US$ millions except where otherwise specified) Chinese finance Paris Chinese over Club Total infra- Western (since HIPC MDRI debt structure debt 2000) (IDA) (IDA) relief finance relief (%) Country (A) (B) (C ) (A+B+C) (D) (D)/(A+B+C) Angola 0 0 0 0 3,200 n.a. Burundi 90 1,465 0 1,555 8 1 Cameroon 1,990 4,917 1,266 8,173 24 0 Central African 0 0 0 0 67 n.a. Republic Comoros 0 0 0 0 8 n.a. Congo, 4,640 10,389 0 15,029 10 0 Democratic Republic of Congo, Republic of 1,680 2,881 0 4,561 503 11 Côte d'Ivoire 0 0 0 0 30 n.a. Ethiopia 1,433 3,275 3,208 7,916 1,585 20 Ghana 941 3,500 3,801 8,242 980 12 Guinea 70 800 0 870 1,002 115 Kenya 0 0 0 0 51 n.a. Mali 149 895 1,914 2,958 1 0 Mauritania 210 1,100 855 2,165 844 39 Mozambique 2,270 4,300 1,990 8,560 0 0 Niger 244 1,190 1,026 2,460 68 3 Nigeria 10,022 0 0 10,022 5,398 54 Rwanda 82 709 347 1,138 0 0 Senegal 149 164 1,854 2,167 100 5 Sierra Leone 468 994 644 2,106 34 2 Sudan 0 0 0 0 1,330 n.a. Tanzania 1,613 1,157 2,804 5,574 21 0 Togo 1,423 0 0 1,423 0 2 Zambia 1,403 885 1,875 4,163 0 0 Zimbabwe 0 0 0 0 500 n.a. Total 28,877 38,621 21,584 89,082 15,764 20 Sources: Paris Club, International Development Association (2007),World Bank­PPIAF Chinese Projects Data- base (2008). n.a. = not applicable. 64 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Chinese financing commitments (according to Chinese plus international sources) to the total value of Western debt relief is computed to provide a rough indication of the extent to which the space afforded by debt relief is being used up by contracting new debts to China. The table confirms that some of the largest beneficiaries of Chinese finance (such as Angola, Sudan, and Zimbabwe) have not been beneficiaries of recent debt relief initiatives. These three countries together received more than one- third of all China's financing commitments. There are only a handful of coun- tries where the value of recent loans contracted to China represents a high share of the value of recent OECD debt relief. Guinea is the only country to have contracted Chinese debt in excess of the value of OECD debt relief. Mauritania has contracted loans equivalent to 40 percent of its OECD debt relief, and Nigeria, loans equivalent to 55 percent. The Financing Perspective 65 7. THE CHANGING LANDSCAPE OF INFRASTRUCTURE FINANCE The preceding sections analyzed the phenomenon of Chinese finance for African infrastructure projects in Africa in some detail and from a variety of perspectives. To reach a better understanding of the significance and implica- tions of this trend, it is equally important to take a wider-angle view, and place the Chinese contribution in the broader perspective of infrastructure fi- nance in Africa. To do this, it is necessary to compare China both to tradi- tional sources of infrastructure finance, such as official development assistance (ODA) and private participation in infrastructure (PPI), as well as to other non-OECD financiers such as India and the Arab donors. It is important to clarify that all the figures reported in this section are in terms of financing commitments rather than actual disbursements; this is equally true for Chi- nese finance, traditional ODA, and PPI. Other Non-OECD Financiers China is not the only non-OECD player taking a substantial interest in African infrastructure finance. Arab donors have been providing concessional financing for infrastructure projects for some time, and India (primarily through its own Export-Import Bank) has begun to play a significant role in the last couple of years. Finance from Arab donors is channeled through a number of special funds or development agencies. Of these the most significant ones in terms of the support they provide to African infrastructure projects are the Islamic Devel- opment Bank (27 percent), the Arab Bank for Economic Development in Africa (16 percent), the Kuwait Fund for Arab Economic Development 66 (16 percent), the OPEC Fund (12 percent), and the Saudi Fund (10 percent). Most of the projects are cofinanced with at least one other Arab donor, the most notable example being the 1,250 MW Merowe Dam in Sudan. Four Arab donors, as well as China Ex-Im Bank, jointly committed US$850 mil- lion of financing for the construction of the US$1.2 billion dam. Concessional financing is typically provided with interest rates of 1­2 percent and a 20- to 30-year repayment period. The activities of all these institutions are publicly reported; hence it is straightforward to build up a picture of their project portfolio in Africa. Total commitments by this group of Arab donors were an estimated US$3.6 billion in 2001­07, but there was no discernible year-on-year trend with commitment levels averaging just over US$500 million per year. Project size is relatively small, with an average value of US$22 million. Activities are broadly spread across 36 countries in sub-Saharan Africa, but with evidence of greater con- centration in countries with relatively large Muslim populations. Around half of the resources are associated with transportation (mainly roads) projects, a further 30 percent with power, and 15 percent with water and sanitation. India is also beginning to emerge as a significant new player in African in- frastructure finance. A detailed survey of international press reports, similar to that conducted for China, reveals 20 Indian-official or state-owned enter- prise (SOE)-funded infrastructure projects worth US$2.6 billion over the period 2003­07, averaging US$0.5 billion per year. Once again no clear trend is apparent, with flows being highly volatile. Similar to the case of China, India's activities in infrastructure finance are closely linked to interests in nat- ural resource development, where a further US$7.3 billion of investments were identified over the same period. As with China, the India Ex-Im Bank is the primary conduit for infrastructure finance, with terms varying according to the nature of the project. For example, in the case of a 2006 Kosti Power Plant in Sudan, India Ex-Im Bank provided a 4 percent interest rate over a nine-year term with four years of grace. As with China, Indian financing has been heavily concentrated in oil-exporting countries, most notably Nigeria and to a lesser extent Sudan. The bulk of India's financing activity is concentrated in a single Nigerian deal struck in November 2005. At that time, ONGC Mittal (a 50­48 joint venture between state-owned Oil and Natural Gas Corporation [ONGC] and the private Mittal Steel) made a commitment of US$6 billion in Nigeria to build a 9-million-ton-per-year oil refinery, 2,000 MW power plant, and 1,000- kilometer cross-nation railway. It has not been made public how much the re- finery and infrastructure will cost, respectively, but it was estimated that (roughly) US$3 billion will go to each. The Changing Landscape of Infrastructure Finance 67 In Sudan, India has financed some US$600 million of energy infrastructure, including a 741 km oil product pipeline linking the Khartoum refinery to Port Sudan, and four 125 MW Kosti combined cycle power plants and associated transmission system. In parallel, India purchased a 25 percent stake in the Greater Nile Petroleum Operating Company (GNPOC) from the Canadian firm Talisman Energy, including exploration rights for blocks 1, 2, and 4, which are currently producing 280,000 barrels per day. In addition, India has acquired 25 percent stakes in blocks 5A and 5B of the Thar Jath field. India also became active in Angola's rail sector, committing to a US$40 million project to rehabilitate the Namibe-Matala (Huila) railroad in August of 2004. The project was funded by the India Ex-Im Bank on a concessional basis, with repayment to be made over 50 years. Other than Angola, the Indian consortium Rites and Ircon International (RII) secured a concession contract in December 2004 for the restoration and management of the Beira rail system in central Mozambique. RII promised to invest US$55 million in the system, while the World Bank provided a loan of US$110 million. India's largest rail deal, however, was part of the US$6 billion oil and infrastructure package agreement reached in Nigeria in November 2005, involving the con- struction of an east-west, 1,000 railway. Aggregating across these three emerging financiers gives an overall indica- tion of the importance of these new players (figure 19). Through 2003, the combined activities of the emerging financiers amounted to no more than US$0.6­1.4 billion, with the Arab funds being the most important category. Volumes jumped to US$2 billion in 2004 with the emergence of China, topped US$4 billion in 2005 due to major investments by India, peaked at around US$8 billion in 2006 as a result of the Chinese "Year of Africa," and tailed back to around US$5 billion in 2007. Comparison of OECD and Non-OECD Finance To put the activities of non-OECD financiers in perspective, it is relevant to compare them to ODA from the OECD countries as well as other conven- tional sources of infrastructure finance such as PPI (which is essentially a sub- category of FDI). The comparison indicates substantial growth from PPI and non-OECD commitments in recent years. In 2006, the totals provided by PPI and non-OECD financiers were broadly similar, amounting to just over US$8 billion each, followed by ODA total commitments of more than US$5 billion. Both non-OECD and PPI commitments tailed back in 2007, while OECD to- tals continued to increase (figure 20). Another important question is the extent to which the emergence of new sources of finance has helped to bridge the infrastructure financing gap in 68 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Figure 19: Non-OECD infrastructure finance in sub-Saharan Africa, 2001­07 Source: World Bank­PPIAF Chinese Projects Database (2008). Note: Figures for China include only projects that could be confirmed from Chinese sources.Only financing from official or SOE sources is reported. Figure 20: External infrastructure finance in sub-Saharan Africa, 2001­06 Source: World Bank­PPIAF Chinese Projects Database;World Bank­PPIAF PPI database (ppi.worldbank.org); Infrastructure Consortium for Africa Annual Report, 2008. Note: Reported PPI data include investments into new and existing projects with financial closure years 2001­07 only. The Changing Landscape of Infrastructure Finance 69 Figure 21: External infrastructure finance by sector in sub-Saharan Africa, 2001­06 Source: World Bank­PPIAF Chinese Projects Database;World Bank­PPIAF PPI database (ppi.worldbank.org); OECD database (http://stats.oecd.org/). Note: WSS = Water supply and sanitation. Africa. Disaggregating by sector, a very different picture emerges in each case (figure 21). In information and communication technology (ICT), the contri- bution of non-OECD financiers is also relatively small, but comes on top of already abundant resources from the private sector. The contribution of the non-OECD financiers is particularly important in the power sector, where it constitutes a substantial addition to existing flows. In transport, the contri- bution is relatively more modest, but still significant. In water, the contribu- tion of non-OECD financiers is small in relation to needs. With the exception of ICT, a significant funding gap remains even after taking the contributions of the non-OECD financiers into account. The foregoing analysis already points to certain sectoral patterns of special- ization across the different financiers. Whereas ODA is relatively evenly spread across transport, power, and water, PPI is heavily skewed toward ICT and non-OECD finance is heavily skewed toward the power and transport sectors (figure 22a). The result of this specialization is that the sources of fi- nance vary substantially for each sector (figure 22b). Thus, ICT is almost en- tirely funded by PPI. Half of the resources for the power sector come from the non-OECD financiers (focused primarily on generation and hydropower), with ODA making the next most substantial contribution (that also encom- passes transmission and distribution). About 40 percent of resources for the 70 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Figure 22: Sectoral specialization of external sources of infrastructure finance in sub-Saharan Africa, 2001­06 Source: World Bank­PPIAF Chinese Projects Database;World Bank­PPIAF PPI database (ppi.worldbank.org); OECD database (http://stats.oecd.org/). transport sector comes from ODA (focused on roads), with emerging finan- ciers (focused on rail) also making a significant contribution. Finally, the water and sanitation sector is almost exclusively financed by ODA. To some extent, and without any particular orchestration, the interests of the different financiers appear to be largely complementary. Thus, ODA fo- cuses on social concerns and finance of public goods, PPI seeks the most com- mercially lucrative opportunities in ICT, and emerging financiers are motivated by the desire to create productive infrastructures. A similar pattern of specialization emerges with respect to geography, with different countries benefiting disproportionately from different sources of fi- nance. Figure 23 presents the amount of external infrastructure financing flows for the 17 countries that capture more than 2 percent of their GDP in such assistance. Looking across these countries, it is evident that they rely predominantly on different sources of external finance for infrastructure. The countries that rely predominantly on non-OECD financiers are Guinea, Mauritania, Zimbabwe, Ethiopia, the Central African Republic, and The Gambia. These countries also tend to be among the largest recipients of The Changing Landscape of Infrastructure Finance 71 Figure 23: Geographic specialization of external sources of infrastructure finance in sub-Saharan Africa Sources:Three-year average of financing data reported byWorld Bank­PPIAF Chinese Projects Database,World Bank PPI Database, and OECD International Development Statistics; divided by GDP taken from World Bank World Development Indicators (2008). external finance. In the case of Guinea, Mauritania, and Zimbabwe, non- OECD finance amounts to more than 10 percent of GDP. The countries most heavily reliant on PPI are Burkina Faso, Liberia, Mozambique, Uganda, and Kenya. The countries most heavily reliant on ODA are Benin, Burundi, and Cape Verde. 72 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa 8. CONCLUSION This study documents the emergence of China as a major new financier of in- frastructure in sub-Saharan Africa. Chinese financing commitments rose from around US$0.5 billion per year in the early 2000s to at least US$7 billion in 2006, which was China's official "Year of Africa." Such indirect evidence as exists on the financing terms of these loans suggests that they are more favor- able than the private capital markets, though not as soft as ODA. Thus, Chi- nese loans were found to have an average grant element of 18 percent compared with 54 percent for official creditors. China is not the only non-OECD financier to be playing a major role in Africa. India is also scaling up finance for infrastructure projects in the re- gion, with commitments averaging $0.5 billion a year over the years 2003­07. Chinese and Indian finance share many common characteristics, including their channeling through the respective countries' Ex-Im banks and their focus on countries that are becoming major petroleum trading partners, such as Nigeria and Sudan. In addition to China and India, the Arab donors are also playing a significant role in African infrastructure finance, with their resources being channeled primarily in the form of soft loans through development funds focusing on roads and other social infrastructure projects. China's approach to its intergovernmental financial cooperation forms part of a broader phenomenon of south-south economic cooperation between de- veloping nations. The principles underlying this support are therefore ones of mutual benefit, reciprocity, and complementarity. Unlike traditional ODA, financing is not channeled through a development agency, but rather through the Ex-Im Bank with its explicit mission to promote trade. Given the export promotion rationale, the tying of financial support to the participation of 73 contractors from the financing country is a typical feature. A similar approach is currently being taken by the India Ex-Im Bank, and has in the past been used by export credit agencies of other countries. Even compared to other developing regions, sub-Saharan Africa faces a se- rious infrastructure deficit that is currently undermining growth and compet- itiveness. The estimated infrastructure financing needs are on the order of US$22 billion per year, with an associated funding gap of over US$10 billion per year. Against this context, the growth of Chinese (and other emerging) fi- nance presents itself as an encouraging trend for the region, and can poten- tially make a material contribution to closing the deficit. In the power sector, for example, the 10 hydropower plants currently agreed upon or under con- struction amount to at least 6,000 MW of capacity and when completed would represent a 30 percent increase over and above existing hydrocapac- ity in the region. To put these findings in perspective, the combined contribution of China and the other emerging financiers at more than US$8 billion for 2006 is broadly comparable to private participation in infrastructure (PPI) and ex- ceeds the combined official development assistance of the OECD countries that topped US$5 billion in the same year. The analysis shows a significant de- gree of complementarity in the sectoral and geographic focus of traditional and emerging finance. Non-OECD donors tend to focus on productive infra- structures, mainly power (in particular hydroelectric schemes) and railways, and direct their resources primarily to major petroleum trading partners. Tra- ditional donors tend to focus on public goods such as roads, water, sanitation, and electrification and spread their support more evenly, reaching non-re- source-exporting countries to a greater extent. The advent of China and other non-OECD players as major financiers presents itself as a hopeful trend for Africa, given the magnitude of its infra- structure deficit. The aid provided by these emerging financiers is unprece- dented in scale and in its focus on large-scale infrastructure projects. With new actors and new modalities, there is a learning process ahead for borrow- ers and financiers alike. The key challenge for African governments will be how to make the best strategic use of all external sources of infrastructure funding, including those of emerging financiers. 74 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa BIBLIOGRAPHY Akyut, Dilek, and Andrea Goldstein. Forthcoming. "Foreign Direct Investment in the Oil Sector." Mimeo, OECD Development Centre, Paris. ------. 2006. "Developing Country Multinationals: South-South Investment Comes of Age." Working Paper No. 257, OECD Development Centre, Paris. Alden, C., and A. Rothman. 2006. 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METHODOLOGY FOR SEARCHING FACTIVA DATABASE Factiva is a news database that covers 10,000 different media from 159 coun- tries. Using the Factiva search engine it is possible to do very precise targeted searches for news coverage of specific topics. This annex documents the search terms that were used to generate the database of Chinese infrastructure and natural resource projects in Africa. Factiva uses simple, logical statements as search parameters. For example, to find articles containing two specific words used in the same article, such as "China" and "Africa," the operator "and" is used. To find articles using ei- ther of two words, such as "China" or "Africa," the operator "or" is used. The * parameter controls for different endings of words. For example, Chin* would pick up the use of "China" or "Chinese" or "China's" in an article. The parameter w/7, for example, finds two words within 7 words of each other, for example, China w/7 Africa, would find articles with the word "China" within 7 words of "Africa." The construction of the project database began with a broad, general search that was then followed up by specific searches for each country in Africa. The same approach was adapted to obtain information on infrastruc- ture and natural resource projects, as well as debt relief, for both China and India. 79 Broad, General Search A number of combinations of search terms was used to do the first-order searches. The initial searches took the following forms: ((china or Chinese) w/10 Africa*) and (invest* or loan or grant or fi- nance or Ex-Im or ex-im or export-import or aid) and (infrastructure or energy or electricity or water or wastewater or sewage or road* or rail* or *port or telecom* or mobile) ((china or Chinese) w/10 Africa*) and (chin* w/5 Ex-Im or ex-im or export-import) These types of searches generated a very large number of results. To analyze the results, it was necessary to control for either dates or specific countries using "Select Sources: Factiva Intelligent Indexing" located below the search field. The search terms are bolded in the text of the articles that are identified by the Factiva database. All the articles were initially scanned to identify which were the most informative on project details. Once a specific project was identified, a follow-up search was conducted using the name of the project or project sponsors to get additional informa- tion. For example, if the search revealed an article containing information on the Merowe dam, and reported financing by the China Ex-Im Bank, the fol- low-up search would be as follows: (China or Chinese) and Merowe and Sudan and (Ex-Im or ex-im or ex- port-import) Specific Country Searches Thereafter, the search process was narrowed to specific countries. Two differ- ent approaches were used to do this. The first approach, which proved to yield quite efficient results, was the following: ((China or Chinese) w/10 (Angola or Benin or Botswana or Burkina or Burundi)) and (infrastructure or energy or electricity or water or waste- water or sewage or road* or rail* or *port or telecom* or mobile) and (invest* or loan or grant or finance or Ex-Im or ex-im or export-import or aid) 80 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa Alternatively, Factiva also allows the user to specifically control for coun- try by clicking "region" under "Select Sources: Factiva Intelligent Indexing" then selecting "Developing Economies" selecting a specific country and then just running a basic search such as the following. (China or Chinese) and (infrastructure or energy or electricity or water or wastewater or sewage or road* or rail* or *port or telecom* or mo- bile) and (invest* or loan or grant or finance or Ex-Im or ex-im or ex- port-import or aid) To find information on China's debt relief activities, the following terms were used: ((china or Chinese) w/10 (Rwanda or São Tomé or Senegal or Seychelles or Sierra Leone or Somalia or Sudan or Swaziland or Tanzania or Togo or Uganda or Zambia or Zimbabwe)) and ((debt*) w/7 (relief or forgive or cancel* or reduc* or waive or writ* off)) To find information about natural resource development projects sup- ported by China or India, the following terms were used: ((China or Chinese) w/10 (insert countries here)) and (CNOCC or Sinopec or CNPC or PetroChina or mineral*) ((India* w/10 (insert countries here)) and (ONGC or OVL or GAIL or Oil India or Indian Oil or mineral*) Similar searches were also conducted inserting names of specific minerals such as copper, bauxite, ore, manganese, coal, and so forth. Methodology for Searching Factiva Database 81 ANNEX 2. METHODOLOGY FOR CREATING PROJECT DATABASE To systematically record the information that was found in the newspaper ar- ticles generated by the Factiva database, a database structure was predesigned. The articles generated by Factiva were then read with a view to filling the specific data fields described below, which were entered into the database to create consistent project records. Only 2001­07 projects were targeted. Infrastructure Projects The database records Chinese-financed projects in sub-Saharan Africa that involve the infrastructure sectors (power, transport, ICT, water, and sanita- tion). It also allows the collection of similar information for projects financed by Indian and Arab financiers. The key pieces of information collected are described below: · Agreement date. Recorded when an official announcement in the press is made concerning a government or Arab donor-funded commitment or when a Chinese or Indian company formally agrees to undertake a proj- ect. In the case where the exact date is uncertain, the earliest recorded date of when the project financing was announced is used. It must be clear that a formal commitment has been made (for example, formal documents were signed) to qualify as a project. · Status. The main categories are: agreed, under construction, and com- pleted, or under reconsideration. 82 · Sector (for example, transport); subsector, for example, road, railway, airport). Sometimes, commitments of funds will be for "general infrastruc- ture purposes" or involve commitments for more than one sector. In those cases where it is unclear how a given commitment will be divided up among specific infrastructure sectors and subsectors, the sector is recorded as "General." The database does not count commitments given for un- specified purposes or for "projects to be determined at a later date," be- cause it is unclear in those cases that the resources will be directed toward traditional infrastructure. · Chinese financier. Most of the projects were funded by the China Ex-Im Bank, the Indian Ex-Im Bank, Arab donors, or state-owned enterprises. Sometimes, it is unclear which specific institution is committing resources as reports in the press refer simply to, for example, "the Chinese govern- ment" as the source of the funds. Such cases are recorded as "Chinese gov- ernment--Unspecified" in the database. · Type of financing. The database records a commitment as a loan, conces- sional loan, grant, or equity financed. The type of financing is recorded as it is most commonly referred to in public media. That is, there is no objec- tive interest rate below which the database records loans as "concessional." Oftentimes, the terms of financing are confidential; in those cases the proj- ect is simply recorded as a "loan." For the Arab donors, it seemed clear that most of the project financing should be deemed "concessional" be- cause interest rates were generally 1­2 percent, over 20­30 years. If de- tailed financing terms are available, they are recorded as well. · Amount of financing. Only that portion of the total project cost that is at- tributable to Chinese funding sources is recorded, not the total value of the contract. For example, if a hydroelectric dam cost US$700 million, and the China Ex-Im Bank financed US$500 of that while the government of the country in question financed the remainder, only the US$500 is recorded as the Chinese commitment, while the US$700 million would be recorded as the total project cost. Likewise, in the case of a sponsor- financed project, only the amount(s) attributable to the sponsor(s) are recorded. In a project in which a sponsor has a share of the equity, and only the total value of the project is known, the equity stake is multiplied by the total project value to get the sponsor commitment. · Contractor. Sometimes the specific names of these firms are not made pub- lic, yet it is clear that the project agreement requires, for example, Chinese- owned entities to be contracted for the work. Such cases are recorded as "Chinese contractors--Unspecified." For the projects financed by Arab Methodology for Creating Project Database 83 donors, there was little information available on the winners of the con- struction contracts. · Whether or not there was a natural resource or political consideration in- volved in the project--either directly or indirectly. Most Chinese govern- ment-funded projects in sub-Saharan Africa are ultimately aimed at securing a flow of sub-Saharan Africa's natural resources for export to China. Oftentimes, commitments of funds to infrastructure projects either precede or follow an agreement for a Chinese firm to exploit oil, mineral, or other natural resources in the project country. Other times, Chinese loans for projects will be backed by guarantees of natural resource exports. The database attempts to record this trend by linking projects to natural resource deals when such links are readily apparent or deemed appropri- ate. Other times, it is determined that projects are for purely commercial reasons and recorded as such. Again, however, there is no rigorous method- ology used in this classification. · Other project details. A brief "project description" is included in every entry that attempts to capture the capacity (size) of the project, location, duration, and other details deemed interesting. Natural Resource Project Database The natural resource database records projects with Chinese, Indian, or Arab involvement in sub-Saharan Africa's natural resource sector (that is, oil and minerals) and subsector (oil exploration, oil refining, chrome, copper, and so forth) and captures the same project information as the infrastructure database. It is important to note that commitments to the natural resource projects are considered FDI. 84 Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa ANNEX 3. SUMMARY OF CHINESE-FUNDED INFRASTRUCTURE PROJECTS BY SECTOR 85 86 Building Table A3.1: Overview of Chinese financing commitments in confirmed power projects in sub-Saharan Africa, 2001­07 Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) China' HYDRO GENERATION sGrowing Benin 2004 Construction Adjarala Dam on the Mono Ex-Im Bank, Unknown 96 MW 162 Unconfirmed River, Benin's share China Role Burundi 2005 Construction Rehabilitation of Gikonge Government, Xing Jiang Bei 2.5 MW -- -- as and Ruvyironza hydraulic China Xin Construction Infr power plants Engineering (group) astructure Co., Ltd Congo, 2001 Construction Construction of Congo Ex-Im Bank, China National 120 MW 280 280 Financier Rep. of River Dam at Imboulou China Machinery & Equipment Import & Export Corp. for (CMEC); Sinohydro Sub-Sahar Ethiopia 2002 Construction Construction of the Ex-Im Bank, China National Water 300 MW 224 50 Tekeze Dam, in the state China Resources and Hydro- an Africa of Tigray in Ethiopia power Engineering Corp. (CWHEC) Gabon 2006 Agreement Poubara hydropower Ex-Im Bank, Sinohydro -- -- -- dam (part of US$ 3 billion China Belinga iron ore project) Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) Ghana 2007 Construction Bui Dam Complex Ex-Im Bank, Sinohydro 400 MW 622 562 China Guinea 2004 Completed Rehabilitation of Ginkang Government, Hunan Construction -- 2 2 hydropower plant and China Engineering Group Tinkisso Hydropower plant Corp. Summary Guinea 2006 Under recon- Souapiti Dam project on Ex-Im Bank, Sinohydro 750 MW 1,000 1,000 sideration the Konkouri River China of Chinese-Funded Mozam- 2006 Under recon- Mphanda Nkuwa Dam, To be Camargo Correa 1,300 MW 2,300 -- bique sideration and transmission line to defined Maputo Nigeria 2006 Under recon- Construction of Mambilla Ex-Im Bank, China Gezhouba 2,600 MW 1,460 1,000 Infr sideration hydroelectric power plant China Group Corporation astructure in Taraba State (CGGC); China Geo-Engineering Projects Corporation (CGC) Sudan 2003 Construction Construction of the Ex-Im Bank, Sinohydro 1,250 MW 1,200 400 by Sector Merowe hydroelectric dam China (continued) 87 88 Building Table A3.1: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) China' Togo 2004 Construction Adjarala Dam on the Ex-Im Bank, Sinohydro 96 MW 162 Unconfirmed sGrowing Mono River, Togo's share China Uganda 2006 Unknown Construction of the Unconfirmed Unknown 530 MW 900 Unconfirmed Role Ayago-Nile Dam as Zambia 2005 Agreement Kafue Gorge lower power Ex-Im Bank, Sinohydro 750 MW 600 -- Infr station project China astructure Zambia 2007 Construction Expansion of Kariba Ex-Im Bank, Sinohydro 360 MW 280 Unconfirmed North Bank hydraulic China Financier power plant on Zambezi river for Sub-Sahar Hydro generation total 3,294 THERMAL GENERATION an Africa Ghana 2007 Agreement Construction of gas-stream CADF; Shenzhen Energy 200 MW 143 137 combined-cycle power Shenzhen Investment Co., Ltd; generation plant at Krone, China Africa Develop- near Tema ment Fund (CADF) Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) Nigeria 2005 Construction Construction of Papalanto Ex-Im Bank, Sepco 335 MW 360 298 power gas turbine power China plant, in Ogun Nigeria 2005 Construction Construction of Okitipupa Ex-Im Bank, CMEC 335 MW 361 -- (Omotosho) gas turbine China Summary power plant, in Ondo Nigeria 2005 Construction Construction of Geregu Ex-Im Bank, Siemens 138 MW 390 -- of gas turbine power plant China Chinese-Funded Senegal 2006 Agreement Construction of a power Government, China 250 MW -- -- plant equipped with two China Metallurgical turbines Group Infr Sudan 2001 Completed Construction of the El-Gaili Ex-Im Bank, Harbin Power 200 MW 150 128 astructure combined-cycle power China Equipment Company plant, Phase 1 Limited (HPEC) Projects Sudan 2005 Agreement 500 MW coal-fired power Ex-Im Bank, Shandong Electric 820 MW -- 512 plant in Port Sudan; China Power Constr. Corp. by Sector 320 MW gas-fired power (SEPCO) plant in Rabak (continued) 89 90 Building Table A3.1: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) China' Sudan 2007 Completed Construction of the Ex-Im Bank, HPEC 100 MW -- -- sGrowing El-Gaili (Al Jaily) power China plant, Phase 2 Role Sudan 2007 Construction Construction of 300 MW Ex-Im Bank, Shandong Electric 300 MW 518 -- gas-fired power plant China Power Constr. Corp. as Infr in Al-Fulah (SEPCO) astructure Togo 2007 Completed Equip the township of Government, Unknown -- -- -- Tomegbe with a high- China Financier capacity generating unit Zimbabwe 2004 Agreement Construction of two CATIC China National -- 500 500 for electricity generation units Aero-Technology Sub-Sahar at Hwange Power Station Import & Export Co. (CATIC) an Africa Zimbabwe 2006 Under recon- Construction of coal Government, CMEC 600 MW 1,300 -- sideration mines and three thermal China power stations in Dande Thermal generation total 1,574 Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) DISTRIBUTION, TRANSMISSION, AND GENERAL Angola 2002 Completed Rehabilitation and Ex-Im Bank, China Machine- -- 15 15 extension of the power China Building International system in Luanda, Corporation (CMIC) Phase 1 Summary Angola 2004 Completed Rehabilitation and Unconfirmed China National -- 15 Unconfirmed extension of the Lubango Electronics Import of power transmission and Export Corp. Chinese-Funded project (CEIEC) Angola 2004 Completed Power portion of the Ex-Im Bank, Multiple -- -- 200 first phase of 2004 China Infr US$ 2 billion loan from astructure Ex-Im Bank of China Angola 2005 Completed Rehabilitation and Ex-Im Bank, -- 46 46 Projects extension of the power China system in Luanda, by Phase 2 Sector (continued) 91 92 Building Table A3.1: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$m) (US$m) China' Angola 2006 Completed Capanda-Ndalatando Ex-Im Bank, China Railway -- -- -- sGrowing and Cambambe-Luanda China Construction transmission lines Corporation (CRCC) Role Ghana 2006 Construction The electrification of Ex-Im Bank, China International -- 90 81 rural areas in Ghana China Water & Electric Corp. as Infr (CWE) astructure Senegal 2007 Construction Construction of power Ex-Im Bank, CMEC 30 km 70 49 transmission line and China Financier 4 transformer substations Sudan 2003 Construction Power transmission and Ex-Im Bank, HPEC; Jilin Province 1,776 km -- -- for transformation line for China Transmission and Sub-Sahar the Merowe hydroelectric Substation Company dam an Africa Sudan 2006 Construction National Electricity Ex-Im Bank, CMEC 340 km 81 81 Corporation (NEC) China transition line Distribution, transmission and general total 472 POWER TOTAL 5,340 Source: World Bank­PPIAF Chinese Projects Database (2008). Table A3.2: Overview of Chinese financing commitments in confirmed transport projects in sub-Saharan Africa, 2001­07 Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) AIRPORT Comoros 2004 Completed Rehabilitation of Prince Ex-Im Bank, China Airport Construc- -- -- 8 Said Ibrahim International China tion Group Corporation Airport in Moroni of Civil Aviation Admini- stration of China (CAAC) Summary Congo, 2007 Construction Construction of terminals, Ex-Im Bank, China Jiangsu Inter- -- 56 56 Rep. of tower, and power control China national Economic- of Chinese-Funded center at Ollombo Airport Technical Cooperation Corporation Congo, 2007 Construction Rehabilitate Brazaville Ex-Im Bank, Weihai International -- 160 160 Rep. of Airport project China Economic & Technical Infr (Maya-Maya Cooperative Co., Ltd. astructure International Airport) (WIETC) Mauritania 2005 Construction Construction of a new Government, Unknown -- 280 224 Projects international airport at China Nouakchott by Sector Airport total 448 (continued) 93 94 Building Table A3.2: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' BRIDGE sGrowing Ethiopia 2006 Construction Construction of the Gotera Ex-Im Bank, Shanghai Construction -- 13 13 Intersection bridge in China Group Addis Ababa Role Mali 2007 Agreement Grant to construct the Ministry of Unknown -- -- -- as Infr third bridge for Mali in Commerce, astructure Bamako China Niger 2007 Construction Construction of the bridge Ministry of No.14 China Railway 2.15 40 40 Financier over River Niger in Niamey Commerce, Group Co., Ltd. China for Sudan 2004 Construction Construction of the bridge China Jilin Province Interna- 0.44 20 10 Sub-Sahar between Khartoum and the National tional Economy & Trade Sudanese-Egyptian border Petroleum Development Corporation Corporation (JIETDC) an Africa (CNPC) Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Sudan 2006 Construction Construction of Ruffa China Poly China Poly Group 0.394 23 -- bridge Group Corporation; China Corporation Railway 18th Bureau Group Co. Ltd. Bridge total 62 Summary RAILWAY of Angola 2003 Completed Rehabilitation of Luanda Government, CMEC 43 90 90 Chinese-Funded railway, Phase 1 China Botswana 2006 Proposed Construct the Trans- Ex-Im Bank, Unknown -- -- -- Kgalagadi railway that China would link Botswana Infr with Namibia astructure Gabon 2006 Agreement Belinga-Santa Clara Ex-Im Bank, China Railway Engineering -- -- -- railway (part of US$3 billion China Group Co. Ltd. (CREGC) Projects Belinga iron ore project) (continued) by Sector 95 96 Building Table A3.2: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Mauritania 2007 Agreement Build 430 km railway from Ex-Im Bank, Transtech Engineering 430 620 620 sGrowing Nouakchott to Bofal China Corporation Namibia 2005 Completed Railway equipment Ex-Im Bank, China Railway Material -- 200 31 purchase China Group Role Nigeria 2006 Under recon- Modernization of the Ex-Im Bank, China Civil Engineering 1,315 8,300 2,500 as Infr sideration Nigeria railway, Phase 1: China Construction Corporation astructure Lagos-Kano railway (CCECC) Nigeria 2006 Under recon- Abuja Rail Mass Transit Ex-Im Bank, China Guangdong -- 2,000 1,000 Financier sideration Project China Xinguang International Group for Sudan 2004 Completed Interest-free loan for Unconfirmed China National Petroleum -- -- Unconfirmed Sub-Sahar railway development Corporation (CNPC) Sudan 2007 Agreement Construction of railway Unconfirmed CREGC 762 1,154 -- an from Khartoum to Port Africa Sudan Railway total 4,241 Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) ROAD Angola 2004 Construction The no. 1 and 2 ring roads Ex-Im Bank, CMEC 51.25 170 170 of Angola City China Angola 2005 Construction Rehabilitation of the Ex-Im Bank, China Road and Bridge 371 211 211 Kifangondo-Caxito-Uige- China Corporation (CRBC) Summary Negage road Botswana 2003 Completed Letlhakeng-Kang road, Ex-Im Bank, CSCEC 561 29 23 of Phase 1 China Chinese-Funded Botswana 2006 Construction Letlhakeng-Kang road, Ex-Im Bank, CSCEC 85 40 19 Phase 2 China Botswana 2006 Construction Dutlwe-Morwamosu Road Ex-Im Bank, CSCEC -- -- 17 China Infr astructure Chad 2007 Construction Rehabilitate 6 roads in Ministry of Guangdong Provincial 9.7 -- -- N'Djamena Commerce, Construction Engineering China Group Co. Projects Congo, 2007 Construction Road linking Brazaville and Ex-Im Bank, CSCEC 178 -- -- by Rep. of Pointe-Noire China Sector (continued) 97 98 Building Table A3.2: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Equatorial 2001 Completed Niefang-Nkue Road Government, CRBC 33.2 11 11 sGrowing Guinea China Equatorial 2003 Completed Bata-Niefang section road Government, China Wuyi Co., Ltd. 30 -- 6 Guinea rehabilitation China Role Ethiopia 2003 Completed Gottera-Wolo Sefer Road Government, CRBC 2.6 5 3 as Infr China astructure Ethiopia 2004 Completed Addis Ababa city ring road, Government, CRBC 33.4 77 13 Phase 2 China Financier Ethiopia 2006 Agreement Road and two bridges Government, CRBC 5.8 17 6 construction in Addis China for Ababa Sub-Sahar Gabon 2007 Construction Grant to rehabilitate 17 Ministry of China Geo-Engineering 9.96 -- -- roads in Gabon Commerce, Corporation (CGC) an China Africa Ghana 2003 Completed Accra-Kumasi trunk road Ex-Im Bank, CREGC 17.4 23 23 rehabilitation China Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Kenya 2006 Construction Rehabilitation of the roads Government, CRBC 26 -- 28 in Nairobi from Kenyatta China International Airport to UN Environment Programme Kenya 2007 Construction Grant to construct roads Ministry of Shengli Engineering 22.5 23 23 in Nairobi Commerce, Construction (Group) Summary China Corporation Ltd. Mada- 2003 Completed Rehabilitation of roads in Ex-Im Bank, Anhui Foreign Economic -- -- -- of Chinese-Funded gascar the north of the capital China & Trade Development Co. Rwanda 2003 Completed Construction of a 2.6 km Ex-Im Bank, CRBC -- -- -- road in Kigali City China Road total 553 Infr astructure TRANSPORT TOTAL 5,304 Source: World Bank­PPIAF Chinese Projects Database (2008). Projects by Sector 99 100 Building Table A3.3: Overview of Chinese financing commitments in confirmed ICT projects in sub-Saharan Africa, 2001­07 Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Angola 2002 Completed Angola Telecom Network Ex-Im Bank, Alcatel Shanghai Bell -- 60 -- sGrowing Expansion Project in the China (ASB) Province of Namibe, Huile, Cunene, and Lunda Norte, Role Phase 1 as Angola 2004 Completed Telecom portion of the Ex-Im Bank, Unknown -- -- 200 Infr astructure second phase of 2004 China US$2 billion loan from Ex-Im Bank of China Financier Angola 2005 Completed An agreement between Ex-Im Bank, Zhong Xing -- 69 38 ZTE and Mundo Startel to China Telecommunication for install a new fixed-line Equipment Company Sub-Sahar network in 8 states Limited (ZTE) across Angola an Benin 2004 Completed Provision of complete Unknown ZTE 156 -- -- Africa GSM national network in Benin--including General Packet Radio Services (GPRS) capability on its existing GSM network Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Burundi 2004 Completed Burundi GSM mobile Ex-Im Bank, Huawei Technologies 60 9 8 telecommunication project China Co., Ltd. Central 2005 Completed Supply and installation for Ex-Im Bank, ZTE 300 79 67 African mobile and fixed networks China Republic covering the whole country Summary Congo, 2001 Completed China-Congo Telecom Ex-Im Bank, ZTE -- 20 10 Dem. Rep. of (CCT) network project China of Chinese-Funded Côte 2006 Agreement Build the network covering Ex-Im Bank, ZTE -- 30 30 d'Ivoire Abidjan and its adjacent China areas, Phase 1 Eritrea 2005 Construction 200,000 fixed-line telecom Ex-Im Bank, ZTE 200 21 -- Infr network rehabilitation China astructure project Ethiopia 2003 Completed Expansion of Ethiopia's Unknown ZTE 250 29 -- Projects existing mobile network capacity in Addis Ababa by and regions Sector (continued) 101 102 Building Table A3.3: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Ethiopia 2006 Agreement Expand and upgrade Ex-Im Bank, ZTE 8,500 -- 822 sGrowing Ethiopia's telecom networka China Ethiopia 2007 Construction First phase of fiber trans- Ex-Im Bank, ZTE -- 200 200 mission backbone, China Role expansion of mobile phone as service for the Ethiopian Infr astructure millennium, and expansion of wireless telephone servicea Financier Ethiopia 2007 Construction GSM project phase IIa Ex-Im Bank, ZTE -- 478 478 China for Sub-Sahar Gambia, 2005 Completed CDMA network for Gamtel Unknown Huawei -- -- -- The Ghana 2003 Completed Ghana Telecom equipment Ex-Im Bank, ASB -- 200 79 an Africa supply, Phase 1 China Ghana 2005 Agreement Ghana Telecom equipment Government, ASB -- 80 67 supply, Phase 2 China; Sinosure Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Ghana 2005 Completed Build a CDMA2000 1X Unknown ZTE 500 -- -- network for Kasapa Telecom Ghana 2006 Construction National Fibre Backbone Ex-Im Bank, Huawei -- 70 31 Project China Ghana 2007 Construction Communication system Ex-Im Bank, ZTE -- -- Unconfirmed Summary for security agencies project China Lesotho 2007 Agreement Rehabilitate the Telecom Ex-Im Bank, ZTE -- -- 30 of Agricultural Network China Chinese-Funded Lesotho 2007 Construction Grant to establish television Ministry of Unknown -- -- 3 systems in several cities Commerce, China Mali 2005 Agreement Rehabilitate CDMA2000 ZTE ZTE -- 2 1 Infr astructure 1X WLL network in Bamako Mauritius 2006 Construction Milcom purchase by Unknown China Mobile 250 -- -- Projects China Mobile by (continued) Sector 103 104 Building Table A3.3: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Niger 2001 Completed Niger Telecommunications Unknown ZTE -- 8 Unconfirmed sGrowing Company (SONITEL) with GSM mobile system covering the city of Niamey Role Niger 2001 Completed Tender for 51 percent ZTE ZTE -- -- 24 as ownership of SONITEL, Infr astructure Niger's state telecoms company, and its mobile arm, Sahel Com Financier Nigeria 2002 Construction National Rural Telephony Ex-Im Bank, Huawei; 150 200 200 Project (NRPT), Phase 1 China ZTE; ASB for Sub-Sahar Nigeria 2006 Completed Nigeria First Communication Ex-Im Bank, China Great Wall -- -- 200 Sattelite NigComSat-1 China Industry Corporation Senegal 2007 Construction Build the e-government Ex-Im Bank, Huawei; CMEC -- 51 51 an Africa network China Sierra 2005 Completed Provision of CDMA fixed- Ex-Im Bank, Huawei 100 17 17 Leone wireless network to China government-owned Sierratel Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Sierra 2006 Construction Upgrade the rural telecom Ex-Im Bank, Huawei -- -- 18 Leone network China Sudan 2005 Agreement Sudan Telecom purchasing Ex-Im Bank, ZTE -- -- 200 equipment from ZTE China Togo 2005 Completed Expansion and upgrade Ex-Im Bank, ASB 100 17 Unconfirmed Summary the GSM network of China Togo Cellulaire of Zambia 2006 Construction Deploy fiber-optic lines Unknown ZTE -- 11 -- Chinese-Funded over ZESCO power transmission network Zimbabwe 2004 Construction Two contracts for telecom Ex-Im Bank, Huawei -- 332 Unconfirmed equipment supply with China Infr Zimbabwe`s state-owned, astructure fixed-line operator TelOne and mobile operator Projects NetOne ICT TOTAL 2,774 by Sector Source: World Bank­PPIAF Chinese Projects Database (2008). a. Part of US$1.5 billion Ethiopia Millennium Project. 105 106 Building Table A3.4: Overview of Chinese financing commitments in confirmed water projects in sub-Saharan Africa, 2001­07 Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Angola 2004 Completed Water portion of the first Ex-Im Bank, Multiple -- -- 200 sGrowing phase of 2004 US$2 billion China loan from Ex-Im Bank of China Role Cameroon 2007 Construction Build a water treatment Ex-Im Bank, China Geo-Engineering -- -- 24 as plant and water distribution China Corporation (CGC) Infr astructure pipeline in Douala Cape 2004 Completed Construction of the Poilco Government, Guangdong Yuanda 1,700,000 -- -- Verde dam, largest dam project China Water Conservancy; square Financier in the country Hydro Power Group meters Co., Ltd. for Sub-Sahar Congo, 2005 Completed Sibiti water supply project Government, -- 6 5.79 Rep. of WIETC China Congo, 2005 Completed Mosaka water supply project Government, WIETC -- 2 1.65 an Africa Rep. of China Congo, 2007 Construction Rehabilitation of the old Ex-Im Bank, CMEC 177,000 -- -- Rep. of water treatment plant China tons per day Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Mauritius 2007 Construction Build a water treatment Ex-Im Bank, Beijing Construction 29,000 -- 63.75 plant and the water China Engineering Group connections distribution network Mozam- 2006 Agreement Construction of the Ex-Im Bank, Unknown -- 300 -- bique Moamba-Major dam in China the Maputo province for Summary drinking water supply Niger 2002 Completed Niger Water Sector project Government, China Railway 600 9 4 of Chinese-Funded to reinforce the water China Construction cubic production system of Corporation (CRCC) meters Zinder Nigeria 2005 Completed Construction of water Government, Beijing G and M -- 5 -- Infr schemes and water points China Construction astructure for 19 states and the Company Ltd. Federal Capital Territory Projects Sudan 2005 Construction Water supplying systems of Ex-Im Bank, China National -- 100 -- Gedarif and Al-Fashir China Construction & Agricultural by Machinery Imp./Exp. Sector Corporation (CAMC) (continued) 107 108 Building Table A3.4: continued Project Chinese Bridges: Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) China' Sudan 2006 Construction Wad Medani Water Ex-Im Bank, CAMC 100,000 29 -- sGrowing Treatment Plant China tons per day Tanzania 2001 Completed Chalinze (Shalinze) Water Government, Unknown -- 100 21 Supply Project, Phase 1 China Role Tanzania 2003 Completed Dodoma Water Supply Government, China Civil Engineering -- 77 -- as Infr Project China Construction Company astructure (CCECC) Tanzania 2007 Construction Grant to rehabilitate and Ministry of Unknown -- -- -- Financier extend the water supply Commerce, system in Chalinze China for WATER TOTAL 320 Sub-Sahar Source: World Bank­PPIAF Chinese Projects Database (2008). an Africa Table A3.5: Overview of Chinese financing commitments in confirmed multisector projects in sub-Saharan Africa, 2001­07 Project Chinese Chinese Added cost commitments Country Year Status Project financier Contractors capacity (US$ m) (US$ m) Nigeria 2006 Construction Lekki Free Trade Zone in CCECC- CCECC-Beyond -- 300 200 Lagos, Phase 1 (power Beyond International Investment plants, road network, International & Development Co., manufacturing facilities) Investment & Lekki Global Development Investment Co. Summary Co. Angola 2004 Completed Remaining public works Ex-Im Bank, Unknown -- -- 30 of portion of the first phase China Chinese-Funded of 2004 US$2 billion loan from Ex-Im Bank of China Angola 2007 Agreement Unallocated US$2 billion Ex-Im Bank, Unknown -- -- 2,000 Infr China Ex-Im Bank loan of China astructure 2007 (for infrastructure) MULTISECTOR TOTAL 2,230 Projects Source: World Bank­PPIAF Chinese Projects Database (2008). by Sector 109 ANNEX 4 SUMMARY OF CHINESE-FUNDED INFRASTRUCTURE PROJECTS FOR SELECTED COUNTRIES 110 Table A4.1: Chinese financing commitments in infrastructure projects in Nigeria, 2001­07 Project Chinese Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) 2002 Construction National Rural Telephony ICT Ex-Im Bank, Huawei; ZTE; 150,226 200 200 Project (NRPT), Phase 1 China Alcatel Shanghai conn. Bell (ASB) Summary 2005 Construction Construction of Papalanto Electricity Ex-Im Bank, Shandong Electric 670 MW 360 298 power gas turbine plant China Power Constr. of Chinese-Funded in Oguna Corp. (SEPCO) 2006 Construction Lekki Free Trade Zone in Multiple CCECC- CCECC-Beyond __ 300 200 Lagos, Phase 1; the funds Beyond International will be used on power plants, International Investment & Infr road networks, and Investment & Development astructure manufacturing facilities Development 2006 Distressed Modernization of the Nigeria Transport Ex-Im Bank, China Civil 1,315 km 8,300 2,500 Projects railway, Phase 1: Lagos-Kano China Engineering railway Construction for Company (CCECC) Selected 2006 Completed Nigeria First Communication ICT Ex-Im Bank, China Great Wall __ __ 200 Sattelite NigComSat-1 China Industry Corporation Countries 111 112 Building Project Chinese Bridges: Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) China' 2006 Construction Abuja Rail Mass Transit Project Transport Ex-Im Bank, China Guangdong __ 2,000 1,000 China Xinguang sGrowing International Group 2006 Distressed Construction of Mambilla Electricity Ex-Im Bank, China Gezhouba 2,600 MW 1,460 1,000 Role hydroelectric power plant in China Group Corporation as Taraba state (CGGC); China Infr Geo-Engineering astructure Corporation (CGC) NIGERIA TOTAL 5,398 Financier Source: World Bank­PPIAF Chinese Projects Database (2008). a. Chinese financing commitments for the other two plants Omotosho and Geregu are not confirmed (see table A3.1). for Sub-Sahar an Africa Table A4.2: Chinese financing commitments in infrastructure projects in Angola, 2001­07 Project Chinese Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) 2002 Completed Rehabilitation and extension Electricity Ex-Im Bank, China Machine- __ 15 15 of the electrical system in China Building Interna- Summary Luanda, Phase 1 tional Corporation (CMIC) of Chinese-Funded 2003 Completed Rehabilitation of Luanda Transport Government, China National 43 km 90 90 railway, Phase 1 China Machinery & Equipment Import & Export Corpora- Infr tion (CMEC) astructure 2004 Construction The no. 1 and 2 ring roads Transport Ex-Im Bank, CMEC 51.25 km 170 170 of the Angola Citya China Projects 2004 Completed Power portion of the first Electricity Ex-Im Bank, Multiple __ __ 200 phase of 2004 US$2 billion China for loan from Ex-Im Bank of Chinaa Selected (continued) Countries 113 114 Building Table A4.2: continued Project Chinese Bridges: Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) China' 2004 Completed Water portion of the first Water Ex-Im Bank, Multiple __ __ 200 sGrowing phase of 2004 US$2 billion China loan from Ex-Im Bank of Chinaa 2004 Completed Remaining public works Multiple Ex-Im Bank, Multiple __ __ 301 Role portion of the first phase of China as 2004 US$2 billion loan from Infr astructure Ex-Im Bank of China 2004 Completed Telecom portion of the second ICT Ex-Im Bank, Multiple __ __ 200 phase of 2004 US$2 billion China Financier loan from Ex-Im Bank of Chinaa 2005 Construction Rehabilitation of the Transport Ex-Im Bank, China Road and 371 km 211 211 for Sub-Sahar Kifangondo-Caxito-Uige- China Bridge Corpora- Negage roada tion (CRBC) 2005 Completed An agreement between ZTE ICT Ex-Im Bank, Zhong Xing __ 69 38 an Africa and Mundo Startel to install China Telecommunication a new fixed-line network in Equipment Company 8 states across Angola Limited (ZTE) Project Chinese Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) 2005 Completed Rehabilitation and extension Electricity Ex-Im Bank, CMIC __ 46 46 of the electrical system in China Luanda, Phase 2 Summary 2007 Agreement Unallocated US$2 billion Multiple Ex-Im Bank, Multiple __ __ 2,000 China Ex-Im Bank Loan China of of 2007 Chinese-Funded ANGOLA TOTAL 3,200 Source: World Bank­PPIAF Chinese Projects Database (2008). a. Part of 2004 China Ex-Im Bank credit line. Infr astructure Projects for Selected Countries 115 116 Building Table A4.3: Chinese financing commitments in infrastructure projects in Ethiopia, 2001­07 Project Chinese Bridges: Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) China' 2002 Construction Construction of the Tekeze Electricity Ex-Im Bank, China National 300 MW 224 50 sGrowing Dam, in the state of Tigray China Water Resources in Ethiopia and Hydropower Engineering Cor- Role poration (CWHEC) as 2003 Completed Gottera-Wolo Sefer Road Transport Government, China Road and 2.6 km 4.52 2.94 Infr astructure China Bridge Corpora- tion (CRBC) 2004 Completed Addis Ababa city ring road, Transport Government, CRBC 33.4 km 77 12.89 Financier Phase 2 China 2006 Agreement Road and two bridges Transport Government, CRBC 5.8 km 16.8 6.33 for Sub-Sahar construction in Addis Ababa China 2006 Agreement Expand and upgrade Ethiopia's ICT Ex-Im Bank, Zhong Xing Tele- 8,500,000 __ 822 telecom networka China communication conn.b an Africa Equipment Com- pany Limited (ZTE) Project Chinese Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) 2006 Construction Construction of the Gotera Transport Ex-Im Bank, Shanghai __ 12.71 12.71 intersection bridge in China Construction Addis Ababa Group Summary 2007 Construction First phase of fiber trans- ICT Ex-Im Bank, ZTE __ 200 200 mission backbone, expansion China of of mobile phone service for Chinese-Funded the Ethiopian millennium and expansion of wireless telephone servicea Infr 2007 Construction GSM project phase IIa ICT Ex-Im Bank, ZTE __ 478 478 astructure China ETHIOPIA TOTAL 1,585 Projects Source: World Bank­PPIAF Chinese Projects Database (2008). a. Part of US$ 1,5 billion Ethiopia Millennium Project for b. Refers to the total new connections under Ethiopia Millennium Project. Selected Countries 117 118 Building Table A4.4: Chinese financing commitments in infrastructure projects in Sudan, 2001­07 Project Chinese Bridges: Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) China' 2001 Completed Construction of the El-Gaili Electricity Ex-Im Bank, Harbin Power 200 MW 150 128 sGrowing combined-cycle power China Equipment Plant, Phase 1 Company Limited 2003 Construction Construction of the Electricity Ex-Im Bank, China Hydraulic 1,250 MW 1,200 400 Role Merowe hydroelectric dam China and Hydroelectric as (1,250 MW)a Construction Group Infr astructure Corporation (Sinohydro Corporation) 2004 Construction Construction of the bridge Transport China Jilin Province 0.44 km 20 10 Financier between Khartoum and the National International Sudanese-Egyptian border Petroleum Economy & for Corporation Trade Development Sub-Sahar (CNPC) Corporation (JIETDC) an 2005 Agreement 500 MW coal-fired power Electricity Ex-Im Bank, Shandong 1,120 MW __ 512 Africa plant in Port Sudan; China Electric Power 320 MW gas-fired power Construction plant in Rabak; 300 MW Corporation gas-fired Al Fula plantb Project Chinese Chinese Added cost commitments Year Status Project Sector financier Contractors capacity (US$ m) (US$ m) 2005 Agreement Sudan Telecom purchasing Telecom Ex-Im Bank, ZTE __ __ 200 equipment from ZTE China 2006 Construction National Electricity Electricity Ex-Im Bank, China National 340 km 81 81 Summary Corporation of Sudan China Machinery & (NEC) Equipment Import of & Export Corporation Chinese-Funded (CMEC) SUDAN TOTAL 1,330.5 Source: World Bank­PPIAF Chinese Projects Database (2008). Infr a. The projects is cofinanced by Abu Dhabi Fund; Arab Bank for Economic Development in Africa (BADEA); Kuwait Fund for Arab Economic Development (KFAED); and the Saudi astructure Fund for Development. b. Construction of Al Fula plant commenced in 2007. Projects for Selected Countries 119 ANNEX 5 SUMMARY OF CHINESE- FUNDED NATURAL RESOURCE PROJECTS 120 Table A5.1: Chinese financing interests in confirmed natural resource projects Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) Angola 2003 In 2003, Sinopec acquired Oil Exploration China Petroleum and -- -- block 3 in Angola Chemical Corporation (SINOPEC) Angola 2006 Sonaref: development of the Oil Refinery Sonangol Sinopec 3,000 canceled refinery in Lobito by SSI, International (SSI) canceled Summary Angola 2006 Explore crude oil in Angola's Oil Exploration SINOPEC 2,400 2,400 three offshore oil fields of (blocks 15, 17, 18 ) Chinese-Funded Central 2007 Concession for oil block B Oil Exploration China Poly Group -- -- African in northeast near borders Corporation; IAS Republic with Chad and Sudan International Holding Co. Natur Chad 2003 Purchase of a 50 percent Oil Exploration China National Petroleum 45 -- al stake in oil block H from Corporation (CNPC); Resource Cliveden Petroleum of the China International Trust United Kingdom by CITIC and Investment Corporation Projects and CNPC (CITIC) (continued) 121 122 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Chad 2006 Purchase of 50 percent Oil Exploration CNPC 203 203 sGrowing stake in oil block from Canadian EnCana (Permit H) Role Chad 2007 Build first oil refinery in Oil Refinery CNPC -- as Chad to the north of Infr astructure N'Djamena Congo, 2003 New copper alloy and Minerals Copper Wambao Resources -- -- Dem. Rep. of cobalt plant in Katanga Financier Congo, 2004 Rent 3 copper mines Minerals Copper, Xinglong Bicycle Co. Ltd. -- -- Dem. Rep. of and collect cobalt cobalt for Sub-Sahar Congo, 2005 Development of Musonoi Minerals Copper, China National Overseas -- 100 Dem. Rep. of copper and cobalt mine cobalt Engineering Corporation (COVEC) an Africa Congo, 2005 Establish a joint venture, Minerals Copper Shanghai Industrial -- -- Dem. Rep. of Huaxin Mines Co. Ltd. Investment (Holdings) Co. Ltd. Congo, 2006 Develop the Kalumbwe- Minerals Copper, China Railway Engineering 270 270 Dem. Rep. of Myunga copper-cobalt mine cobalt Group Co. Ltd. (CREGC); Ex-Im Bank, China Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) Congo, 2007 Purchase of the prospecting Minerals Cobalt Dalian Xinyang High-Tech 2 Unconfirmed Dem. Rep. of and mining rights to a Development (DLX) cobalt mine in Lubumbashi Congo, 2005 Two oil field concessions: Oil Exploration SINOPEC -- -- Rep. of Marine XII and Haute Mer B. Côte d'Ivoire 2005 Manganese ore project Minerals Manganese China National Geological -- -- Summary and Mining Corporation Equatorial 2006 Exploration of oil block S Oil Exploration China National Offshore Oil -- -- of Guinea Corporation (CNOOC) Chinese-Funded Eritrea 2006 Exploration rights for Minerals Copper China National Geological -- -- copper mine and Mining Corporation Eritrea 2006 Jointly develop a Minerals Gold China National Geological -- -- Natur gold mine and Mining Corporation al Eritrea 2007 Explore gold and copper Minerals Copper, Beijing Southeast Resources Resource in Kenatib and Defere gold Company Limited -- -- (continued) Projects 123 124 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Eritrea 2007 China Ex-Im Bank provided Minerals Copper, Ex-Im Bank, China 60 60 sGrowing a commercial loan of gold US$60 million to the Eritrea government, which Role spent the loan to acquire as 40 percent of the Bisha Infr project from a Canadian astructure company Nevsun Eritrea 2007 Explore and develop Minerals Multiple China National Geological -- -- Financier minerals in Augaro and Mining Corporation (Gash-Barka Region) for Gabon 2004 Technical evaluation of Oil Exploration SINOPEC -- Sub-Sahar three onshore oil fields (one oil and two gas blocks) an Gabon 2005 SINOPEC purchased Block Oil Exploration SINOPEC -- -- Africa G4­188 from Transworld Gabon 2005 Exploration of Mbigou Minerals Manganese Sino Steel -- -- manganese mine Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) Gabon 2005 Exploration work on a Minerals Manganese Xuzhou Huayan; Ningbo -- 2 manganese ore deposit in Huaneng Kuangye the vicinity of Mont Bembele, near the north- western town of Ndjolé (Moyen-Ogooué Province) Gabon 2006 Exploration of block Oil Exploration SINOPEC -- -- Summary G4­217 (1815.3 km2) Gabon 2006 License for Njielei Minerals Manganese Ningbo Huazhou mines -- -- of Manganese mines Chinese-Funded Gabon 2006 Exploration license for Minerals Lead, zinc, Ningbo Huazhou mines -- -- 2000 km2 of deposit silver with lead, zinc, and silver Natur Gabon 2006 Belinga iron ore project; Minerals Iron Financing by China Ex-Im 3,000 -- includes construction of Bank; Mining by Panzhihua al Resource Poubara hydropower Iron & Steel Co. dam, Belinga-Santa Clara Projects railway, and deep-water port at Santa Clara (continued) 125 126 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Guinea 2005 Renewable 3-year Minerals Bauxite Aluminium Corp of China -- 63 sGrowing bauxite exploration license Guinea 2007 Exploration of aluminum Minerals Aluminium China Henan International -- -- in Boke district, Guinea Cooperation Group (CHICO); Role Henan Provincial State-Owned as Assets Operation Company; Infr astructure Henan Zhonglian Mining Co., Ltd.; Yongcheng Coal & Electricity Holding Group Co., Ltd. Financier Kenya 2006 Production-sharing contracts Oil Exploration China National Offshore Oil -- -- for six onshore blocks Corporation (CNOOC) for (1, 9, 10A, L2, L3, and L4) Sub-Sahar Kenya 2006 Purchase the debenture of Minerals Titanium Jinchuan Group Limited (JNMC) -- -- Tiomin Kenya an Africa Kenya 2007 Financing titanium project Minerals Titanium JNMC 155 24 in Kwale district with Tiomin Liberia 2006 Explore petroleum in Liberia Oil Exploration SINOPEC -- -- Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) Madagascar 2007 Exploration of oil block Oil Exploration Sino Union Petroleum & 103 103 3,113 Chemical International Mali 2004 Exploration license for Oil Exploration SINOPEC -- -- four to five blocks in the areas of Timbuktu and Gao Mauritania 2004 Exploration of block 12 Oil Exploration China National Petroleum -- -- and two areas in block 13 Corporation (CNPC) Summary Mauritania 2005 65 percent stake in oil and Oil Exploration CNPC -- 9 gas exploration in block 20 of Chinese-Funded Mozambique 2003 Exploration licenses for Minerals Gold Jiangsu Geology & Mineral -- -- Manica Resources Bureau Mozambique 2004 Subcontract to build 9 Oil Other CNPC 220 -- oil product storage tanks Natur Multiple 2006 The state-owned bank Minerals Multiple China Vision Resources with -- 783 al countries funded a purchase of financing from China Resource 1.1 percent of Anglo by Development Bank (CDB) China Vision Resources Ltd, Projects the investment vehicle of Chinese billionaire Larry Yung 127 (continued) 128 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Namibia 2005 Permits for four prospecting Minerals Copper, Namibia (China) Mining -- -- sGrowing licenses for deposits of lead, zinc, Resources Investment and copper, lead, zinc, silver, silver, gold, Development Co. Ltd. gold, uranium, and stone uranium, Role stone as Niger 2003 License for the exploration Oil Exploration CNPC -- Infr astructure of block BILMA Niger 2006 Drill exploration wells in Oil Exploration CNPC 44 Unconfirmed Tenere oil block Financier Niger 2006 Explore Teguidda and Minerals Uranium China Nuclear International -- -- Madaouela uranium Uranium Corporation for Sub-Sahar mineral deposits (Sino U); ZXJOY Invest Niger 2007 Develop Azelik uranium Minerals Uranium Sino U 335 -- mineral deposit in an Africa Agadez region Nigeria 2004 Oil exploration contract Oil Exploration SINOPEC 2,270 Unconfirmed for blocks 64 and 66 in the Chad Basin Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) Nigeria 2006 45 percent of interest in Oil Exploration CNOOC 2268 2,692 an offshore oil exploitation license OML130, which comprises Akpo Oilfield and 3 other discoveries Nigeria 2006 35 percent working interest Oil Exploration CNOOC -- 60 in the Nigeria OPL 229 Summary Nigeria 2006 Acquisition of a 51 percent Oil Refinery CNPC -- 2,000 stake in the Kaduna of refinery and rehabilitation Chinese-Funded Nigeria 2006 License for 4 oil blocks Oil Exploration CNPC 16 Unconfirmed OPL 471, 721, 732, and 298 Nigeria 2006 Provide seismic exploration Oil Exploration SINOPEC -- 10 Natur service al Nigeria 2006 Negotiating with Nigeria Oil Exploration CNOOC -- -- Resource on the priority rights to purchase offshore blocks Projects Nigeria 2006 Asphalite mine Minerals Asphalite SINOPEC -- 19 (continued) 129 130 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Nigeria 2007 CNOOC was granted Oil Exploration CNOOC -- -- sGrowing four oil districts Nigeria 2007 Three development Multiple Hydro- Reofield Industries Ltd 300 -- projects for sugar, power, Role hydropower, and solid minerals, as minerals in Zamfara state and sugar Infr astructure Nigeria 2007 Exploration of solid Multiple Oil and Zhognho Overseas 300 300 minerals in Zamfara and solid Construction Engineering oil in the northwestern minerals Company Limited Financier Nigerian Sokoto Basin São Tomé 2006 License for block 2 in the Oil Exploration SINOPEC 17.75 Unconfirmed for Sub-Sahar and Príncipe Gulf of Guinea Joint Development Zone (JDZ) South 2006 Chromium development Minerals Chromium Jiuquan Iron & Steel -- 330 an Africa Africa project, which includes company (JISCO) one mine and a concentration factory Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) South 2006 Purchase 50 percent Minerals Chromium Sino Steel -- 200 Africa share in chromium and smelteries from Samancor Chrome South 2007 Exploration of chromium Minerals Chromium Minmetals Development -- 7 Africa in Naboom in South Africa Co., Ltd. South Africa 2007 South African Minerals Iron, JISCO 510 510 Summary ferro-chrome project, chromium Phase 2 of Sudan 2001 Heglig and Unity oil fields Oil Exploration CNPC 144 Unconfirmed Chinese-Funded (blocks 1, 2, and 4) Sudan 2002 Petrodar Operating Oil Exploration CNPC -- -- Company, developing Natur blocks 3 and 7 al Sudan 2003 Expand the capacity of Oil Refinery CNPC 150 Unconfirmed Resource Khartoum refinery Sudan 2003 Exploration of the Tiki-1 Oil Exploration Zhongyuan Petroleum 1 Unconfirmed Projects Test Well in 3/7 Oil Area Exploration Bureau (ZPEB) (continued) 131 132 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Sudan 2003 Construction of a 750 km Oil Distribution CNPC 350 Unconfirmed sGrowing 200,000 b/d pipeline to move oil from block 6 in the southern Kordofan Role field to the Khartoum as refinery and north to Infr Port Sudan astructure Sudan 2005 Exploration of offshore Natural Exploration CNPC 20 -- gas block 15 within the gas Financier Red Sea Basin Sudan 2006 Explore gold in a 6,000 Minerals Gold North China Geological -- 4 for km2 field Exploration Bureau Sub-Sahar Sudan 2007 40 percent stake in Oil Exploration CNPC -- -- block 13, off the coast an of the Red Sea Africa Tanzania 2006 Technical support service Minerals Coal Shanxi Fenwei Energy -- -- to expand the production Consulting Co., Ltd. capacity of a coal mine Project Chinese cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) Zambia 2003 Coal mine at the old Minerals Coal Collum Coal Mining 25 Unconfirmed Nkandabbwe mine in Industries Limited Sinazongwe district Zambia 2004 Develop manganese mine Minerals Manganese Chiman Manufacturing Ltd. 10 Unconfirmed near industrial town Kabwe Zambia 2005 Construction of wet-process Minerals Copper China Nonferrous Metal 20 20 smelting plant and smelter Mining (Group) Co. Ltd. Summary sulfur-to-acid plant at plant (CNMC) Chambishi copper mine of Zambia 2006 Construction of the Minerals Copper CNMC; Yunnan Copper 200 100 Chinese-Funded Chambishi Copper Smelter smelter Industry (Group) Co. Ltd. plant (YNCIG) Zambia 2006 Munali Nickel Project Minerals Nickel Jinchuan Group Limited -- 25 Natur (JNMC) al Zambia 2007 Chambishi West Ore Minerals Copper CNMC 100 100 Resource Body Project (continued) Projects 133 134 Building Table A5.1: continued Project Chinese Bridges: cost commitments Country Year Project Sector Subsector Financiers or sponsors (US$ m) (US$ m) China' Zimbabwe 2007 Acquisition of 92 percent Minerals Chromium Sino Steel; Sino-Africa Fund -- 200 sGrowing in Mauritius-based com- pany ZCE, the owner of the Zimbabwe's largest Role chromium producer as Zimasco, by Sino Steel Infr astructure Zimbabwe 2007 Develop coal in Zimbabwe Minerals Coal Sanxing Coal -- -- Zimbabwe 2007 A joint venture with Minerals Coal China National Aero- -- -- Zimbabwe National Power Technology Import & Export Financier Company to develop and Co. (CATIC); Pingdingshan operate the Sinamatella Coal (Group) Co., Ltd. for Coal Field and coal fields Sub-Sahar in western Zimbabwe NATURAL RESOURCES TOTAL 10,591 an Africa Source: World Bank­PPIAF Chinese Projects Database (2008). INDEX Abuja Rail Mass Transit System, 23, 96t, Alcatel Shanghai Bell, 24 112t Angola, 26­27, 37, 40f, xiv Adjarala Dam, 88t Chinese participation in oil sector, Africa, xi, xiv 49b­50b civil works by foreign contractors, 35f financing commitments, 26f, economic ties with China, 5b­6b, 113t­115t 29­30, 29t ICT projects, 100t exports, 37, 38f, xvi India participation in rail sector, 68 infrastructure deficit, 33 Luanda rail project, 95t infrastructure development indicators, natural resource projects and commit- 30­33 ments, 47f, 121t infrastructure needs, xv power and transport commitments, 47f resource investment commitments, power projects, 91t­92t 45t­46t resource-backed infrastructure projects, sectoral and geographic distribution of 57t civil works contracts, 36f road projects, 97t top three exporters to China, 41t water project financing commitments, trade, 3, 39, 39f, 41t 106t aid programs, 4­6 Angola mode, 27, 55, 56, 56f, xvii airport projects, 93t Angola National Oil Corporation (So- Akpo Oilfield, 49b nangol), 49b Al Fula power plant [[Q: same as below? Angola Telecom Network Expansion which correct?]], 118t Project, 100t Al-Fulah power plant, 90t 135 Arab Bank for Economic Development in Nigeria, 25­26 Africa, 66 rail projects, 23 Arab investment in infrastructure, 66, ZTE financing, 24 69f, 73, xviii FDI, 11, 43 Ayago-Nile Dam, 88t finance beneficiaries and OECD debt relief, 64 Bandung Conference, 5b foreign economic cooperation, 9­10, Beira rail system, 68 10f Belinga Iron Ore project, 21, 23 funding estimated for resource develop- Belinga-Santa Clara railway, 23 ment in Africa, 15 Benin, 86t, 100t grant element of loans, 62f Botswana, 48t, 95t, 97t grant-financed infrastructure projects, Brazaville Airport, 93t 59t bridge projects, 94t­95t history of relationship with Africa, Bui Dam, 21, 87t 5b­6b Burundi, 86t, 101t imports from Africa, xvi infrastructure financing, 11, 16, 52, Cameroon, 106t 53f, 69f, 73, xii Cape Verde, 106t Angola, 26­27 Central African Republic, 101t, 121t by sector, 19, 22f Chad, 40f, 97t, 121t­122t by year and status, 19f Chalinze Water Supply Project, 108t estimated value, 6­7, 17f Chambishi Copper Smelter and West Ore Ethiopia, 27 Body Project, 133t focus, 22 China, 2, 4­6, xi­xii measuring, xii complementarities with Africa, xiv­xv power sector, 86t­92t construction sector, 33, xv Sudan, 28 contracting sector, 20t, 36, 83­84 transport projects, 93t­99t dependence on Africa's resources, 37, Zambia, 44 38f infrastructure projects, 17, 18f development assistance approach, 1­2, and construction firms, 55­56 8, 73, xiii, xvi linked to resource development, economic ties with Africa, 1, 29­30, 48t 29t largest contractors, 19 Export-Import (Ex-Im) Bank, 1­2, 8, loan commitments compared to debt xi­xii, xvi, xvii relief, 65t Angola investment, 27 loan terms, 7, 53­55, 61t, xvii commitments, 53f, 54f compared to other creditors, 62, data disclosures, 9 63t mission of, 52­56 vary by country, 60, 62 Mphanda Nkuwa dam, 21 mineral dependence, 38 136 Index mineral development, 44 complementarities of Africa and China, natural resource commitments increase, 29­30, 29t, 74 43 complementarities, Africa and China, natural resource imports, 39f, 42f xiv­xv natural resource projects, 121t­134t concessional loans, 53­55, 60 natural resource requirements, xv­xvi Congo River Dam, 21, 86t oil exploration, 50 Congo, Democratic Republic of, 36f, oil imports by source, 40f 101t oil sector investment in Africa, 39­40, natural resource commitments, 47f 44, 49b­50b projects, 122t­123t project values, 33­34 Congo, Republic of, 37, 40f, 86t projects verified, 15f airport projects, 93t telecom firms, 24 resource-backed infrastructure projects, trade, 3, 4, 4f, 39, 41t 57t China Africa Development Fund, 53f road projects, 97t China Development Bank (CDB), 52 water project financing commitments, China Machine-Building International 106t Corporation (CMIC), 22 contractors, 19, 20t, 36, 83­84, xv China National Machinery & Equipment copper ore, 41t Import & Export Corp. (CMEC), 22 Côte d'Ivoire, 101t, 123t China National Offshore Oil Corpora- country indebtedness, 62­64 tion (CNOOC), 43, 49b CRBC. See China Road and Bridge Cor- China National Petroleum Corporation poration (CNPC , also PetroChina), 26, 49b China Road and Bridge Corporation Dande, Zimbabwe, 90t (CRBC), 24 data collection, 12, 79­81 China-Africa Business Council (CABC), data sources, 9­11 6b debt relief, 62­64, 65t, xviii China-Congo Telecom (CCT) network Debtor Reporting System (DRS), 12, 58 project, 101t development assistance, Chinese ap- Chinese Journal Web, 12 proach to, 1­2, 8, 73, xiii, xvi Chinese Transtech Engineering Corpora- Dodoma Water Supply Project, 108t tion, 23 chromium ore, 41t East Asia and Pacific (EAP), 30t, 32t, 40f civil works contracts captured by foreign ECA. See Export Credit Agreement contractors, 35f economic complementarities, 29­30, 29t, coal, 44 xiv­xv cobalt ore, 41t economic cooperation, 9­10, 10f Collum Mine, 44 economic growth, hindered by inade- Comoros, 93t quate infrastructure, 31­32 Index 137 El-Gaili Combined Cycle Power Station, Five Points Proposal, 5b 22, 28, 89t, 90t, 118t foreign direct investment (FDI), 4, 4f electricity sector, 22f, 28. See also power foreign economic cooperation, 9, 10f, 11t sector Forum on China-Africa Cooperation costs for enterprises, 31, 32 (FOCAC), 5b, 6b generation capacity, 21 reliability, 32t Gabon, 40f, 44 Enterprise Surveys, 32 Belinga-Santa Clara railway, 95t environmental standards, xiii natural resource projects, 48t, Equatorial Guinea, 37, 40f, 98t, 123t 124t­125t Eritrea, 101t, 123t­124t Poubara dam, 86t Ethiopia, 24, 27­28, xiv resource-backed infrastructure projects, bridge project, 94t 57t civil works' contracts, 36f road project, 98t financing commitments, 26f Gambia, The, 102t ICT, 101t­102t geographic concentration of projects and infrastructure projects, 116t­117t financing, 25 road projects, 98t geographic distribution of civil works' Tekeze Dam, 86t contracts, 36f Europe and Central Asia, 30t geographic specialization, 71, 72f European Union, 38f Geregu power plant, 22, 25, 89t Export Credit Agreement (ECA), 32t, Ghana, 87t, 88t 40f, 60 electrification project, 92t Export-Import (Ex-Im) Banks, 1­2, 73. ICT projects, 24­25 See also China; India financing commitments, 102t­103t resource-backed infrastructure projects, Factiva database, 11­12, 79­81 57t financiers, 83 road project, 98t emerging, 66, 68, xviii Gikonge power plant, 86t non-OECD, 69f, 70, 70f Ginkang hydropower plant, 87t sectoral specialization, 70­71, 71f Global System for Mobile communica- financing terms, 52, 58, 60, 62. See also tions (GSM), 27 loan terms Gottera-Wolo Sefer Road, 116t, 117t average of, 61t grant financing, 59t, 60, 62f, 73 Chinese, 7 Greater Nile Petroleum Operating Com- vs. other creditors, 62, 63t pany (GNPOC), 50 financing types and amounts in project guarantees, 53 database, 83 Guinea, 47f, 87t firms identify infrastructure as business natural resource projects, 48t, 57t, obstacle, 32 126t 138 Index Harbin Power Equipment Company, 22, OECD compared to non-OECD, 68, 28 70­72 Huawei, 24, 25 sectoral specialization, 71f Hwange Power Station, 90t infrastructure inadequacy, 31­32, 47 hydrocarbon resources, 43 infrastructure investment needs, 33, 34t, hydropower projects, 21, 28, 86t­88t, xv xiii infrastructure investment pays off, 31 infrastructure projects, 2, 13, 22, 34, xii, India, 67, 68, 69f, 73, xviii xviii­xix information and communications tech- Angola, 113t­115t nology (ICT) sector, 22f, 25, 31, 36f, by year and status, 19f Xiii contracted out to Chinese construction development indicators, 30t firms, 34, 55­56 Ethiopia, 24, 27 country-by-country, 25­28 financing, 70, 70f data verification, 14 grant-financed projects, 59t database construction, xii projects, 100t­105t Ethiopia, 116t­117t sources of financing, 71f geographic distribution of, xiv information collection with Factiva data- grant-financed, 58, 59t base, 79­81 linked to resource development, 48t information sources, 9­11 multisectoral, 109t infrastructure deficit, 74 natural resource and political consider- infrastructure development indicators, ations, 84 30­33, 30t new and size distribution, 18f infrastructure financing, 11t, 16, 73. See Nigeria, 111t­112t also China; loans resource-backed, 57t and corresponding natural resource in- rise in and classification of, 17­19 vestments, 47 sectoral distribution of, 19, 20t, 21­25, between lower-income countries, 7­8 xiii­xiv by country, 26f Sudan, 118t­119t by sector, 70 value of projects financed by China, 10 by source and type, 53f infrastructure projects database, 11­15, complementarity of focus by sources, 15f xviii­xix constructed with the Factiva database, external by sector, 70f 79­81 gaps, 33 information included in, 82­84 internal, 69f infrastructure services costlier, 31 multisector projects, 109t infrastructure services' reliability, 32­33, non-OECD, 66, 69f, 71, 72f 32t Index 139 interest rates, 55 Madagascar, 36f, 99t, 127t Intergovernmental Framework Agree- Mali, 94t, 103t, 127t ment, 55 Mambilla hydroelectric power plant, 21, International Development Association, 87t, 112t 58 manganese, 41t, 44 Internet costs, 31 Mauritania, 48t, 93t, 96t, 127t iron ore, 41t Mauritius, 103t, 106t Islamic Development Bank, 66 Melut Basin oil field, 50 Merowe Dam, 21, 28, 67, 87t, 118t Jiabao, Wen, 10 Middle East and North Africa (MENA), Jilin Province Transmission and Substa- 30t, 32t, 40f tion Project Company, 28 Millennium Development Goals (MDGs), 34 Kaduna refinery, 49b Millennium Project, Ethiopia, 27 Kafue Lower Gorge project, 21, 88t mineral development, 44 Kariba North Bank hydraulic power minerals, 38, 45t­46t plant, 21, 88t exports, 38f, 41t Kasapa Telecom, 103t imports, 39f Kenya, 99t, 126t projects, 40, 42, xvi Khartoum refinery, 51, 68 Mittal Steel, 67 Kosti Power Plant, 67, 68 Moamba-Major dam, 107t Kuwait Fund for Arab Economic Devel- mobile phone costs, 31 opment, 66­67 Mozambique, 36f, 87t, 106t, 127t Mphanda Nkuwa dam, 21 Lagos-Kano railway, 23, 96t, 111t Munali Nickel Project, 133t Latin America and Caribbean (LAC), 30t, 32t, 40f Namibia, 96t, 128t Lekki Free Trade Zone, 109t, 111t National Communication Backbone In- Lesotho, 103t frastructural Project, Ghana, 24­25 Liberia, 126t National Electricity Corporation of loans, 62, 62f, 73. See also infrastructure Sudan (NEC), 119t financing National Fibre Backbone Project, Ghana, concessional, 53­55, 60 103t resource-backed, xvii National Petroleum Corporation terms, 7, 61t, xvii (NNPC), 26 Lobito refinery, 50b National Rural Telephony Project Luanda power project, 91t, 113t, 115t (NRTP), Nigeria, 25, 104t, 111t Lubango power project, 91t natural resource projects, 42, 121t­134t natural resource projects database, 84 140 Index natural resources, 43, 47 Oil and Gas Natural Gas Corporation Africa's share of China's imports, 39f (ONGC), 67 China's requirements, xv­xvi oil exploration, Sudan, 50 Chinese investment, 45t­46t, 47f oil exports, 38f exports, 37, 38f, 42f oil imports, 39f, 40f financing security, 21 oil sector, 41t, 44 NEC. See National Electricity Corpora- Chinese investment, 39­40, 45t­46t, tion of Sudan 47, 49b­50b, xvi Niger, 94t, 96t, 104t, 106t, 128t Okitipupa power plant, 89t Niger Telecommunications Company Omotosho power station, 22, 25 (SONITEL), 104t ONGC Mittal, 67 Nigeria, 40f, 67, xiv OPEC Fund, 67 China's infrastructure financing, Organisation for Economic Co-operation 25­26, 26f, 111t­112t and Development (OECD), 64, 68, Chinese participation in oil sector, 49b 70­72 Mambilla plant, 87t natural resource commitments, 47f Papalanto power station, 22, 25, 89t, natural resource projects, 128t­130t 111t power and transport commitments, 47f petroleum sector, 41t, 44. See also oil resource-backed infrastructure projects, Poubara hydropower dam, 21, 86t 57t power sector, 20t, 21­22, 36f, xiii thermal power projects, 89t Chinese investment by country, 47f water project financing commitments, development indicators, 30t 106t financing, 70, 70f Nigeria First Communication Satellite, gaps in, xv 111t generation capacity and access lag simi- NNPC. See National Petroleum Corpora- lar regions, 30­31 tion projects, 59t, 86t­92t Nouakchott airport, 93t sources of financing, 71f Nouakchott-Bofal railway, 23 private participation in infrastructure NRTP. See National Rural (PPI), 68, 69f, 70f Telephony Project geographic specialization, 72 sectoral specialization, 70, 71, 71f official development assistance (ODA), 7, 69f, 70f Qarre I thermal station, 28 geographic specialization, 72 grant element of, 60 rail sector, 23, 68, 95t-96t, xiii sectoral specialization, 70, 71, 71f reporting requirements, 58 used to compare financiers, 68 resource-backed infrastructure, 55 official economic assistance, 4­6 projects, 56, 57t, 58 Index 141 resource-backed loans, 26, 27, xvii Merowe Dam, 87t, 92t resources. See natural resources natural resource projects, 43, Rites and Ircon International (RII), 68 131t­132t road freight tariffs, 31 power and transport commitments, 47f road sector, 23­24, 97t­99t, xiv rail development projects, 96t Ruvyironza power plant, 86t resource-backed infrastructure projects, Rwanda, 99t 57t thermal power projects, 89t, 90t Sahel Com, 104t water project financing commitments, sanitation. See water sector 106t­107t São Tomé and Principe, 130t Sudan Telecom, 119t Saudi Fund, 67 sectoral distribution of civil works' con- Tanzania, 36f, 107t, 132t tracts, 36f Tanzania-Zambia Railway (Tazara), 5, sectoral distribution of infrastructure fi- 23 nance, xiii­xiv Tekeze Dam, 27, 86t, 116t sectoral specialization, 70, 71f Telecom Agricultural Network, 103t Senegal, 89t, 92t, 104t telecom sector, 20t, 31, 32t Shandong Electric Construction Corpora- Tenth Five-Year Plan, 53­54 tion (SEPCO), 22, 25­26 Thar Jath field, 68 Siemens, 22 thermal power generation projects, Sierra Leone, 104t­105t 88t­90t Sinamatella Coal Field, 134t thermal power stations, 21­22 Sinohydro, 21, 28 timber, 38f, 39f, 41t SINOPEC, 49b Tinkisso Hydropower plant, 87t social and environmental standards, 8, Togo, 88t, 90t, 105t xiii Tomegbe, 90t Sonangol Sinopec International (SSI), 49b trade, 3, 38­39, 39, 41t SONITEL. See Niger Telecommunica- transport sector, 22f, 35, 36f tions Company Chinese investment by country, 47f Souapiti Dam, 21, 87t contractors active in, 20t South Africa, 47f, 130t­131t development indicators, 30t South Asia, 30t, 32t financing, 70, 70f Sudan, 28, 37, 40f, 50, xiv projects, 59t, 93t­99t bridge project, 94t­95t sources of financing, 71f Chinese participation in oil sector, 50b financing commitments, 26f, Uganda, 88t 118t­119t United States, 38f ICT, 105t 142 Index Wad Medani Water Treatment Plant, Xiaoping, Deng, 5b 108t water project financing commitments, Year of Africa, 6 106t­108t water reliability, 32t Zambia, 36f, 44, 88t water sector, 20t, 22f, 35, xiv ICT financing commitments, 105t and sanitation, 25, 26f natural resource projects, 133t development indicators, 30t Zemin, Jiang, 5b sources of financing, 71f Zimbabwe, 57t, 90t, 105t, 134t financing, 70f ZTE, 24, 25 grant-financed projects, 59t Index 143 ECO-AUDIT Environmental Benefits Statement The World Bank is committed to preserving Saved: endangered forests and natural resources. The · 9 trees Office of the Publisher has chosen to print · 6 million Btu of Building Bridges: China's Growing Role as total energy Infrastructure Financier for Sub-Saharan · 791 lb. of net Africa on recycled paper with 30 percent post- greenhouse gases. consumer fiber in accordance with the recom- · 3,281 gal. of waste mended standards for paper usage set by the water Green Press Initiative, a nonprofit program · 421 lb. of solid supporting publishers in using fiber that is not waste sourced from endangered forests. For more in- formation, visit www.greenpressinitiative.org. In recent years, a number of emerging economies has begun to play a growing role in the finance of infrastructure in Sub- Saharan Africa. Their combined resource flows are now com- parable in scale to traditional Official Development Assistance from Organisation for Economic Co-operation and Develop- ment (OECD) countries or to capital from private investors. These non-OECD financiers include China, India, and the Gulf States, with China the largest player by far. Despite the importance of Chinese infrastructure finance in Africa, relatively little is known about the overall value and destination of financing. The authors of Building Bridges quantify the magnitude of financial flows from China by collating public information from a wide range of Chinese lan- guage sources. From these data, they document the geo- graphic distribution of resources, the types of infrastructure involved, the size and financing terms of the projects, and the methods through which finance is being provided. The growth of China and other non-OECD players as impor- tant financiers represents an encouraging trend for Africa, given the magnitude of its infrastructure deficit. The invest- ments made by these nations are unprecedented both in scale and in their focus on large-scale infrastructure projects. With new actors and new approaches to financing, there is a learn- ing process ahead for borrowers and financiers, both new and old. Building Bridges summarizes the issues involved in this learning curve, including developing the national capacity to negotiate complex and innovative deals, and to enforce appropriate environmental and social standards for project development. ISBN 978-0-8213-7554-9 SKU 17554