Dar es Salaam. While a recent warning to Tanzania by the World Bank over the cozying up to China has sparked a backlash from some quarters, it has also re-ignited debate on the sustainability of the country’s Look East policy.
Industry stakeholders and local economists have expressed mixed views on the warning contained in the World Bank’s latest economic update on Tanzania.
In the report titled, The Road Less Travelled: Unleashing Public-Private Partnerships in Tanzania, the Bank observes that in recent years, the Chinese economy has been slowing down, partly reflecting a rebalancing towards a consumption-driven, services-oriented growth model.
The Bretton Woods institution expressed concerns that the Chinese economy was suffering a major hit at a time Tanzania seems to be overly depending on it for its ambitious industrialisation drive.
It noted: “The value of China’s development finance to Tanzania has also grown substantially in recently years, including $1.2 billion in 2013/14-2014/15 for the construction of the gas pipeline from Mtwara to Dar es Salaam. Moreover, the officially reported stock of Chinese FDI in Tanzania has increased significantly, standing at an estimated value of $60 million in 2013.”
Protecting Western interests
However, the Confederation of Tanzania Industries (CTI) has dismissed the report as a veiled attempt by the World Bank to protect Western interests in the country by decampaigning China.
“Many countries the world over have realised that they cannot move ahead with the West as the sole development partner. They know that they can also attain their goals by cooperating with China, which has proved to be friendly,” says the CTI Advocacy and Policy Director, Mr Hussein Kamote.
He was quick to dismiss the warning as a bid by the World Bank to “safeguard US interests”. The CTI official says the US is worried about increasing China influence in Africa and other developing nations.
He notes that China has over the years overshadowed the influence of Europe and Western countries in Africa.
“Many developing nations have opted to cooperate with China because it doesn’t attach many strings to its donations or grants,” he says.
The value of China’s development finance to Tanzania has also grown substantially in recently years, including $1.2 billion in 2013/14-2014/15 for the construction of the gas pipeline from Mtwara to Dar es Salaam.
The World Bank report shows the reported stock of Chinese Foreign Direct Investment (FDI) in Tanzania has increased significantly, standing at an estimated value of $60 million in 2013, while the increased economic ties have resulted in increased economic growth. However, it has also closes Tanzania’s vulnerability to downturns in China’s business cycles.
In addition, if the Chinese economy stalls, it may put a further strain on the availability of development finance far Tanzania. The magnitude of the ripple effect in the future depends on how successful and smooth China’s economic rebalancing will be.
To redress the risk, the World Bank said Tanzania needs to increase investments in infrastructure and human capital to further unlock its growth potential while enabling the private sector to create more jobs.
The report highlighted the need to explore public private partnerships (PPPs) since this is still “under-utilised way of financing development, consistent with the Sustainable Development Goals (SDGs).
But Prof Humphrey Mosha from the University of Dar es Salaam (UDSM)’s Business School says the World Bank was up to some “mischief”.
He argues that the World Bank has been advising Tanzania for more than 30 years on how to improve its economy, but with little to show for the advice.
“We are tired of the World Bank. It is time now we worked with China because the US and other Western countries have taken advantage of us for far too long,” he says.
Prof Mosha notes that though China also have vested interests, its deals have proved to be so far ‘friendly’. As a result, many African countries have decided to turn to China because it is offering no strings attached to its assistances and investment drive.
On the contrary, he adds, the government should continue to improve its relations with China, but also use local experts to advise on what deals would benefit the country the most.
However, Prof Honest Ngowi of the Economy Department at Mzumbe University’s Dar es Salaam campus, is of the view that the statement by World Bank should be scrutinised before it is being dismissed.
He says what developed nations need to do is widen their cooperation with the outside world. “While the World Bank is wary of growing China influence in Tanzania and Africa, the fact is that the country has been vital in changing many countries in industrialisation, agriculture and infrastructure sectors,” says Prof Ngowi.
He warns against the tendency to put “all our eggs in one basket” saying Tanzania needs to seriously consider the World Bank’s views as much as possible.
Nevertheless, Prof Ngowi also holds the belief that there more to the World Bank’s advice than meets the eye. He doesn’t believe that the Bretton Woods institution would issue similar advice in case it was the US in China’s shoes at the moment.
His sentiment is echoed by the co-founder and chairman of the CEO Roundtable of Tanzani, Mr Ali Mufuruki, who says though the advice should be carefully considered, there is also need for Tanzania and other African countries to ask themselves why the World Bank did not issue such advice when the US and Western-backed financial institutions with huge interests in the continent faced the economic downturn.
“But it is also true that developing nations, including Tanzania should avoid dependence on one nation. And in our borrowing we should do so for projects which will help revive our economy,” he elaborates.
According to The Diplomat, China is struggling to move away from dependence on exports as it restructures the country’s economy. Instead, China’s grand plan is to move up the value chain – which involves not only upgrading China’s capabilities to make high-tech products, but also building up lower-end industrialisation capacities in other countries. Doing so will also help Chinese companies in their attempts to “go global” as they set up factories in other countries. That’s an often overlooked part of China’s “Belt and Road” strategy, which emphasises industrialization in addition to infrastructure.
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