Author Topic: China & Ethiopia's Addis Ababa-Djibouti Railway  (Read 2756 times)


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China & Ethiopia's Addis Ababa-Djibouti Railway
« on: July 04, 2018, 05:10:17 PM »
Why Chinese Infrastructure Loans in Africa Represent a Brand-New Type of Neocolonialism
How will African countries repay massive debts to China?

By Xiaochen Su
June 09, 2017
Amid much fanfare, the Nairobi-Mombasa railway line opened in Kenya on May 31, 18 months ahead of the schedule. It represents the second major railway undertaken by China on the African continent recently, after the launch of Addis Ababa-Djibouti Railway in January.  Chinese media outlets have spoken glowingly about these African infrastructural investments, often in the context of the One Belt, One Road Initiative that seeks to attain economic development through greater transport connectivity. African leaders seem to concur, as many are taking out massive concessional loans from China to fulfill ambitious projects, such as the East African Railway Master Plan, in the coming decades.

But there is strong doubt as to whether African countries have the financial capabilities to put such ambitious plans in action. In the case of the Addis Ababa-Djibouti Railway, for instance, its total building cost of roughly $4 billion is almost a quarter of Ethiopia’s 2016 government budget of $12.57 billion. Even at concessional rates, servicing and repaying the debt will be a significant burden for the government in the coming years and decades. It is unfathomable how that the government will be able to undertake other infrastructural projects even if the economy, and the government budget, grow at a steady clip, as it has done in recent years.

It begs the question, then, of how African governments will possibly repay the Chinese for all this infrastructure construction. Given the ballooning amount of debt from more and more loans taken on to finance infrastructural developments in the future, African states are likely to require more than just portions of their limited budgets to complete repayment. More likely than not, many states will have to resort to payments in kind.

The concept of “in-kind payments” smacks of colonialism in some ways. The historical precedent of European colonists comes to mind.  Europeans built infrastructure in Africa at the turn of the century, purportedly also for local economic development, but in essence the projects were used for natural resource extraction. The predecessor of both the Nairobi-Mombasa and Addis Ababa-Djibouti railways can be categorized as such. Both connect inland regions with mineral deposits with major ports on the Indian Ocean.

And there is no doubt that some of the same natural resources sought out by European colonists a century or more ago are also desired by the Chinese. While building infrastructure, the Chinese have also invested massively in local mines and processing facilities. At least part of the cargo to be shipped by the new railways and roads constructed with Chinese financing is expected to be natural resources to feed the Chinese industrial machine.

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If almost monopolistic control of Southeast Asian economies by the ethnic Chinese serves as any reference, dominance of the local economic infrastructure through control of banks, real estate, trade networks, and retail space is pivotal for ensuring wealth remains concentrated within Chinese families despite waves after waves of anti-Chinese regulations, protests, and violence. China’s leveraging of sovereign debt stemming from infrastructural investments may greatly accelerate this process and deepen the economic control to one less politically toxic than the Southeast Asian case.

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