Trade versus aid? : solidarity or realpolitik : Chinese and western investments and development in Zambia

Chinese and Western investments and development in Zambia

Bob J. W. ter Horst

St. No. 10122966

Master Thesis Contemporary Asian Studies

Faculty of Anthropology Graduate School of Social Sciences

December 2014 – July 2015 Word count: 23916

Supervisor: Dr. Laurens Bakker

Abstract

This thesis analyses Zambian development on the basis of Chinese and Western ‘trade’ and ‘aid’. Since the late 1980s Western neo-liberal policies and developmental theories prevailed over other development theories, resulting in the ‘trade, not aid’ developmental idea gaining momentum. Trade was thought to be more effective in developing Africa than aid, as indicators of development such as extreme poverty increased in the past 60 years of aid in Africa. When the early 2000s the Chinese reengagement with Africa took of, this resulted in a strong increase Sino-African trade. In order to harness the full developmental potential of these trade flows and counter the deteriorating effect this could have on governance, the ‘aid for trade’ idea gained momentum. The idea of ‘aid for trade’ is that it improves developing countries’ trade capacity by developing their governance infrastructure. The concept of aid was thus recycled and regained popularity. Additionally, existing aid projects were transformed in a more business-like manner wherein aid projects had to become financially sustainable and focus more on knowledge sharing. Aid and trade are in this research separated in Western traditional trade and aid within the Washington consensus framework and Chinese trade and ‘aid with Chinese characteristics’ within the Beijing consensus framework in order to research their impact on the development of Zambia’s agricultural sector.

Fieldwork that took place in Zambia indicates that the difference between trade and aid is to a large extent artificial. Just as China does not perceive these concepts as distinctly different, this appears to be the case for Western aid and trade as well. On the basis of a comparison between agricultural trade and aid projects in Zambia; the West and China; and the Beijing and Washington consensus this thesis concludes that drivers of these concepts are mainly economic and political interests and barely altruism. China and the West have different definitions of the concepts of aid and trade but whether this influx of money is of Western or Chinese origin, both have similar goals and thus appear to be two sides of the same token. Even though aid (and trade) are generally not motivated by altruism, this does not exclude Zambia from benefitting from them.

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Chapter 2 Chinese and Western engagement in Africa and Zambia – a context …………... 9

2.1 The story of China in Africa ………... 9

2.2 Current political and economic situation in Zambia ………... 11

2.3 China in Zambia ……….. 13

2.4 The West in Zambia ……… 14

2.5 Current situation of the Zambian agricultural sector ………. 15

2.6 Donors and aid in Zambia’s agricultural sector ……….. 16

2.7 Chapter conclusions ……… 17

Chapter 3 Theoretical Framework / Debates in literature ……… 18

3.1 Trade, not aid – dependency and conditionalities ………. 18

3.2 The Washington Consensus – neoliberalism? ……….. 20

3.3 The Beijing Consensus ………. 21

3.4 Aid for trade ……..……….. 22

3.5 Contemporary aid and the dependency theory ……… ……… 24

3.6 Development through aid and agriculture? ……….… 25

3.7 Foreign aid, institutions and Governance ………...… 25

3.8 Limitations of the research…….………... 26

3.9 Chapter conclusions ……… 26

Chapter 4 Chinese Engagement in Zambia ……… 28

4.1 Tantalizing opportunity or terrifying threat? ………. 28

4.1.1 Chinese Friendship Farms ………... 29

4.1.2 The Zambia China Cooperation Zone ………... 31

4.2 Chinese development? ……….. 32

4.3 Aid with ‘Chinese characteristics’? ……… 34

4.4 Chapter conclusions ………. 36

Chapter 5 Western Engagement in Zambia ……… 37

5.1 Making the most of Aid? Challenges for Zambia’s agricultural sector ………. 37

5.1.1 The Conservation Farming Unit ……….. 38

5.1.2 The USAID C.A.S.H. project ……….. 39

5.2 Altruistic means to development or political and commercial strategy? ……… 40

5.3 The impact of aid in Zambia ………... 41

5.4 Chapter conclusions ……… 43

Chapter 6 Analysis ……… 44

6.1 Comparison Western did and Chinese Trade ………. 44

6.2 The Washington Consensus versus the Beijing Consensus ……….. 45

6.3 Two sides of the same token? Drivers for engagement ……….. 46

6.4 Trade versus in Zambia ……… 47

6.5 Concluding remarks: different sides of the same token……… 48

List of abbreviations

AAA Accra Agenda for Action

AFRICOM United States Africa Command

AfT Aid for Trade

ASIP Agricultural Sector Investment Program

ASNAPP Agribusiness in Sustainable Natural Plant Products

BjC Beijing Consensus

BRICS Brazil Russia India China South Africa

CASH Commercial Agribusiness for Sustainable Horticulture

CF Conservation Farming

CFU Conservation Farming Unit

CSFAC China State Farms and Agribusiness Corporation

CNMC China Non-Ferrous Metal Mining Group Company

DAC Development Assistance Committee

ETCZ Economic Trade and Cooperation Zone

EU European Union

EXIM Export-Import Bank of China

FAO Food and Agricultural Organization of the United Nations

FDI Foreign Direct Investments

FOCAC Forum on China-Africa Cooperation

GDP Gross Domestic Product

IBRD International Bank of Reconstruction and Development

IMF International Monetary Fund

MMD Movement for Multiparty Democracy

NAP National Agricultural Policy

NFCA Non-Ferrous Metals Cooperation

NGO Non-Governmental Organization

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PR China People’s Republic of China

SAP Structural Adjustment Programs

SEZ Special Economic Zone

SME Small and Medium Enterprise

SOE State Owned Enterprise

TAZARA Tanzania-Zambia Railway

UK United Kingdom

UN United Nations

UNIP United Independence Party

UNZA University of Zambia

US United States

USAID United States Agency for International Development

USD United States Dollar

WaC Washington Consensus

WTO World Trade Organization

ZCCM Zambia Consolidated Copper Mines

ZCCZ Zambia China Cooperation Zone

ZDA Zambian Development Agency

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Chapter 1. Introduction

Illustration 1. Economist, 2000; 2011

Africa is on the rise. Even though Africa has long been perceived as a continent by-passed and marginalized by the process of globalization. Since the late 1980s, the relations of African nations with the rest of the world are changing (Carmody, 2013). Currently, there is a massively increased interest and influx of investment in the continent from major world powers. The role of the emerging Asian powers is growing rapidly, particularly China’s role (Carmody, 2011, p. 3). The Economist covers above illustrate this; they exemplify the growing interest and the 180 degrees turn in 11 years this signifies. Chinese investments are an important reason for this. Chinese investments have a great potential to change Africa, according to authors such as Moyo (2009, 2010) Brautigam (2010) and Carmody (2009) in a positive way, according to others, such as French (2010, 2014) in a negative manner. Where the increased interest in Africa on one hand results in increasing investments, arguments against the traditional patters of aid giving to Africa arise on the other. Authors such as Moyo, Brautigam and Carmody assert that trade-based economic relationships encourage investments, production and technological exchange, which provide the effectiveness and sustainability that are lacking in traditional aid projects (Moyo, 2009). The ‘trade, not aid’ approach they advocate is in line with contemporary China-Africa economic relations (Moyo, 2009, p. 98).

The ‘trade, not aid’ approach contributed to the change in perspective illustrated on the Economist Magazine covers as well. The magazine stated that African lives have greatly improved over the past decade and that the next ten years will be even better. (Economist, 2000; 2011). This change in perspectives for Africa is related to the rise of China and the influx of Chinese investments on the continent (Brautigam, 2009, p. 3). The former President of Mozambique, Jaoquim Chissano, argued similarly and pointed at the need for traditional aid to change in his opening speech on a conference on foreign aid organized by Oxford University. Chissano (2007) called for a change in the aid system. He criticized the ‘‘never-ending litany of reform with sometimes destabilizing consequences’’ and stated that donors had ‘systematically dismissed’ African needs for infrastructure, and generally ignored the African need for development of the local private

sector. Chissano (2007) argued: ‘’We should devise innovative ways to leverage aid to private sector resources in order to nurture and support the emergence of robust entrepreneurial classes that have a strong stake in the national economies’’ (Carmody, 2012).

Despite nearly sixty year of aid, developed countries do not have a way to ensure that their assistance will actually promote development; economic-, social-, sustainable-, people-centered- or however development is defined or called (Brautigam, 2009, p. 11). Moyo states that Africa has received over 1 trillion US dollar in development aid, but that this aid did not improve the lives of Africans. Contrarily, she argues that the recipients of aid are not better of as a result of it, but worse (Moyo, 2009, p. 16). Moyo argues that aid locks Africa up in a ‘cycle of dysfunction’ as it promotes corruption, bureaucracy and inflation and stimulates dependency on foreign donors. As a result, poverty levels have continued to escalate and growth rates have declined. Provocatively, Moyo (2009) draws a sharp contrast between countries that have rejected the aid route and prospered due to trade, such as Singapore and Malaysia, and African countries such as Zambia that have become aid-dependent and seen poverty increase. Moyo (2009) argues that aid is fostering corruption, a military culture, promoting inflation, reducing the incentives to save and invest and results in dependency. Overreliance on aid has trapped African developing nations in a circle of aid dependency, corruption, market distortion, and further poverty, leaving countries with nothing, except an increased need for more aid. Moyo (2009) advocates that the solution or the alternative to aid is borrowing money in international markets, more international and specifically Chinese trade, more microfinance, more remittances and domestic savings therefore hinting at the so-called ‘Washington Consensus, a strongly market-based neoliberal approach (Gore, 2000, p. 793). The neoliberal Washington Consensus did however receive a lot of critique. As liberalizations proved to fail to result in export growth but resulted in poor governance instead, the ‘aid for trade’ approach is often posed as a more suitable solution to Africa’s development.

The basis of this approach is that ‘aid’ is vital for these countries to grasp the opportunities provided with trade. As aid provided to developing countries is assumed to strengthen governance it is argued that this helps harnessing trade and transform it into development. With this argument, the trade and aid debate is basically turned around into a premise wherein aid is perceived to be a trade stimulant.

Zambia and the Zambian history are illustrative of African economic and social development. From being an English colony to gaining its independence, from receiving great amounts of (ideological) aid from Western donors and China in the 1970s and 1980s to receiving modern day aid and investments, on the basis of its resource richness, Zambia exemplifies Sub-Saharan African development. This research will look into Zambia and assess if these claims correct and applicable to Zambia. The Zambian agricultural sector appears to be a good case to test and compare the ‘trade, not aid’ with the ‘aid for trade’ approaches to development. The Zambian government is trying to develop the country by diversifying the Zambian economy and thus wants to invest in and attract aid for the agricultural sector. This could have major impact on Zambia as the agricultural sector has the potential to become the backbone of the Zambian economy and even Africa’s new ‘bread basket’. As Zambia has attracted the interest Chinese investors and as Western aid projects are present in the sector as well in similar geographical areas, Zambia seems to be a good case to compare and research what the influence of trade and investments on development is, versus the influence of aid on development.

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In doing so, this research aims at contributing to the debate on what development strategy is most appropriate for Zambia.

1.2 Research question

Specifically, this dichotomy will be researched on the basis of Zambian agriculture. This thesis researches the changing concepts of trade and aid and the relation between these concepts and development on the basis of the Zambian agricultural sector in order to answer the following research question: ‘’What are the differences in impact of Chinese investments and Western aid projects in the Zambian agricultural sector and how does this relate to development?

This question focuses on the changing nature of trade and aid and the relation of these concepts to Zambian development. As there exist a lot of misconceptions and differences regarding both concepts, it explores both concepts in the Zambian context. Trade and aid are hailed by various actors to either be crucial or harmful in a certain order for the development of Zambia. This research aims at making a relevant contribution to the ‘trade, not aid’ versus ‘aid for trade’ debate on the basis of the Zambian case. By proxy, this thesis extents this comparison by comparing Western and Chinese aid, investments and thus development in a broader sense on the basis of the so-called Washington and Beijing consensus.

1.3 Thesis Outline

In order to provide an answer to the research question this thesis consists of six chapters. The second chapter provides a background on the Chinese and Western engagement in Africa and Zambia by overviewing of the current situation on foreign aid and investments. It touches upon the relevant factors relevant for this research. It provides a factual oversight of these factors in order to give to following chapters a firm base. The third chapter embeds this in the theories of dependency, neoliberalism, modernization and globalization in order to address the fourth and fifth chapter. In these chapters the Chinese and Western engagement in Zambia and their respective methods of engagement will be discussed. The Chinese engagement represents to a larger extent the ‘trade, not aid’ idea and elaborates on the ‘aid with Chinese characteristics’ concept, which holds the middle ground between trade and aid. The Western engagement in the fifth chapter elaborates on the Conservation Farming Unit and the USAID ‘CASH’ project and therefore represents the ‘aid for trade’ concept. The sixth chapter analyses by making the comparison between the fourth and the fifth chapter and incorporates the theories presented in the third chapter. More broadly speaking, it compares the ostensible contrast between the Western Washington consensus (hereafter WaC) and Chinese Beijing consensus (hereafter BjC) and the Western and Chinese engagement in Africa in general. This comparison is made explicit in the sixth chapter but is in fact an overarching theme and therefore discussed throughout the thesis. Under this comparison, multiple comparisons are made. In this respect, ‘trade’ and ‘aid’ and the resulting ‘trade, not aid’ and ‘aid for trade’ approach are discussed and compared on the basis of the Zambian case. The seventh chapter concludes by reiterating previously stated arguments, return to the research question and prospect on Zambia’s future related to trade and aid.

1.4 Methodology

The Organization for Economic Cooperation and Development (OECD) acknowledges the fact that trade can be a powerful engine for economic growth and poverty reduction, but nuances it by stating that harnessing its power is difficult for many developing countries (OECD, 2010). This is particularly true for the least developed countries (LDCs), such as Zambia, as they often lack the capacity – in terms of information, policies, procedures, institution and/or infrastructure – to compete effectively in global markets and take full advantage of the opportunities that are offered through international trade (OECD, 2007).

In order to contribute to the ‘trade, not aid’ versus ‘trade for aid’ debate, I have found it useful to focus on Chinese investments on the trade side of the debate. The aid side in this paper consists of Western aid. I have chosen a case study approach. According to Yin (2003, p. 13-14) a case study is an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident. Thomas (2011, p. 512) adds to this that the case that is the subject of the inquiry will be an instance of a class of phenomena that provides an analytical frame – an object – within which the study is conducted and within which the study is conducted and which the case illuminates and explicates.

Whilst there is quite a lot of information on Chinese investments in Africa and on Sino-African trade, most of this information is of a general character. There is little information on Chinese investments in Zambia specifically, let alone the Zambian agricultural sector. The closed nature of Chinese operations in Africa makes it more difficult to obtain more specific information as Chinese farms; farmers and Chinese in Africa are often shrouded in haziness.

The methodology thus consists of a discourse analysis combined with 20 semi-structured interviews with different stakeholder conducted during fieldwork in Zambia. According to Abrams and Harpham (2005) a discourse analysis ‘’concerns itself with the use of language in a running discourse and involving the interaction of a speaker (or writer) and auditor (or reader) in a specific situational context, and within a framework of social and cultural conventions’’. A discourse analysis thus analyzes the way written and spoken languages are used in texts and contexts. This makes it a useful tool of analysis in this particular research as it captures perceptions. The discourse analysis in this research focused on the discourses available on the internet, in newspapers and in archives in Zambia and in the Netherlands. The discourse analysis consists of text analysis, literature studies and an analysis of spoken discourses. The data from secondary sources will be used to confirm and substantiate data and information gathered in the interviews with respondents. The interviews took place during fieldwork in Zambia from January till March 2015. Interviewed stakeholders ranged from Chinese farmers to University of Zambia professors to people working at the Ministry of Lands and Agriculture. As it was quite difficult to get interviews, I selected a large amount of possibly interesting stakeholders related to trade, aid and agriculture, which I tried to contact repeatedly. Initially, this was not very successful as it only resulted in a few relevant interviews. However, via these interviews I got in contact with other relevant stakeholders that were quite willing to give interviews because someone I had already interviewed introduced me. The interviews were different in shape and form. Some were quite formal whilst others were relatively informal. As all of the informants wished to by anonymous, there is no list of these

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informant in the appendix. Throughout the analysis references to the information obtained in interviews will be made with relevant information but without compromising their anonymity.

1.5 Fieldwork challenges

Challenges during the period of fieldwork were mainly of a practical nature. It was difficult to make appointments with informants due to poor functioning of the information infrastructure. Internet reception on computers was very poor but usually worked. Informants did however barely reply to emails or did not have an email address. Another challenge was that Zambians generally have multiple mobile phones with multiple sim cards and thus multiple mobile numbers because it is cheaper or even free of charge to make phone calls to phones with the same telecom provider. This made it difficult to get in touch with people by mobile phone. Several (confirmed) appointments had to be postponed, as the informants did not show up and were not to be reached. Furthermore, if appointments turned into interviews, informants were not always talkative about the topic. Especially informants related to investments were not talkative. Even after I gave the assurance that the interviews would be fully anonymous, I sensed that people were holding back. Asides from this, organizations like the Zambian Development Agency were difficult to reach due to bureaucratic difficulties. In the case of the ZDA I had to send over 6 formal letters to finally be granted an interview with an Investments Officer. Generally, I would conclude that especially during fieldwork persistence turned out to pay off. It was not easy to get to interview people, but the interviews definitely gave interesting insights and a sense of what is going on with trade, aid and agriculture in Zambia.

1.6 Research Setting

Research by Hairong and Sautman (2010, p. 308) indicates that there are six Chinese state-owned farms and about thirty private Chinese farms operating in Zambia. These investments range from large state-sponsored investment projects (3000ha+) and agricultural cooperation projects on the one hand, and individual entrepreneurs (starting from 2ha upwards) and private companies (40ha-1000ha+) on the other hand (Chaterlard, 2014). While predominantly Western and South African investors in Zambia produce agricultural goods on a large-scale for export, Chinese farms, including state-owned farms produce staple foods for local markets according to informants. Their production includes cereals, fruits, vegetables, meat, eggs and mushrooms. They generally rely on various sales outlets from personal networks and local food markets to larger private clients such as restaurants, agri-businesses and commercial chains throughout the country (Chaterlard, 2014).

These Chinese investments will be compared with a the USAID CASH project and Conservation Farming project in Zambia, as these are the largest projects related aid and to agriculture located near Lusaka and in the Eastern Province area. The CASH project is a four-year, US$4.8 million project that aims to supplement small-scale farmers’ income by maintaining current and garnering additional Zambian horticulture market share (USAID, 2014). Conservation Farming practiced by the Conservation Farming Unit (CFU) aims at teaching methods and techniques to local, small-scale farmers the CFU tries to improve production without depleting the soil.

Chapter 2. Chinese and Western engagement in Africa and Zambia – a context

This chapter provides an overview of China in Africa and links this to an overview of the current political and economic situation Zambia finds itself in. The chapter subsequently narrows down on the Chinese story in Zambia and makes the comparison with Western engagement in Zambia. Furthermore, it provides an overview of the Zambian agricultural sector and the foreign actors in this sector.

Illustration 2. Map of Zambia and Zambia’s location in Africa 2.1 China in Africa

In the 1950s and 1960s the Chinese Chairman Mao intended to launch an international Chinese ‘footprint’ that consisted largely out of ideological support to likeminded revolutionaries. This support consisted of sending capital and construction teams to the new African governments if they swore not to recognize Taiwan as a state. The 1970s and 1980s were marked by a more sober Chinese engagement in Africa. The Chinese engagement focused on bilateral support between governments to build state-owned factories and economic infrastructure with loans that were to be repaid with the production forthcoming from this infrastructure. These projects were generally managed by teams of Chinese and since its foundation in 1994 financed by the Chinese Export-Import (EXIM) Bank (Carmody, 2012). From the 1990s onwards the Chinese engagement stood in the light of China’s ‘going global’ policy in which the Chinese government promotes the going out of mature industries out of China, to other parts of the world. This development overlaps with China’s rapid economic growth and expanding middle class, which has fueled an unprecedented demand for (natural) resources. Since the Chinese economy opened up, with the economic reforms implemented by Deng Xiaoping in 1978, the Chinese economy grew approximately 10 percent a year on average (Carmody, 2013, p. 27-33). This has resulted in a Chinese focus on securing long-term resource supplies to sustain its rapid industrialization, locking down sources of oil, ores and other resources across the globe. As part of this effort, China has turned to the African continent and its abundant resources. In this

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respect, China faces growing criticism over its controversial business practices as well as critique on its failure to promote good governance and human rights.

There is a lot of debate in literature about China’s objectives in Africa. Van Dijk (2009, p. 11-12) inclusively argues that there are eight objectives behind the Chinese presence in Africa. These are to assure the supply of resources for China in order to:

- Create a market for Chinese products and services - Obtain land for agricultural purposes

- Channel migrations of Chinese people to Africa - Gain diplomatic support from African countries

- Present an alternative to the Western development model - Provide an alternative to Western development cooperation - Emphasize China’s status as a superpower

Whilst the bulk of African exports to China consist of oil, Africa also exports ores, commodities and food and agricultural products to China. At the same time, China exports a range of machinery, transportation equipment, communications equipment and electronics to African countries. So much that in 2009 China surpassed the US as Africa’s largest trading partner. According to the Chinese Ministry of Commerce, Sino-Africa trade reached over 125 billion USD in 2010. China uses a double approach in cementing its economic relations with Africa. Brautigam (2010) argues that China offers resource-backed development loans to resource rich nations like Angola and Nigeria and develops special trade and economic cooperation zones in several other nations, such as in Zambia. Cooperation zones allow China to assure all the objectives mentioned by Van Dijk (2010) except the obtaining of land for agricultural purposes.

Despite prospering trade relations, some African nations are pushing back on China’s investments in several cases. Scrutiny over Chinese business practices ranges from accusations of poor compliance with safety and environmental standards to unfair business practices and non-compliance with local laws. A lot of emphasis is specifically placed on alleged Chinese misconducts regarding labor practices. Taylor (2012) argues in this regard that the Chinese government can hardly control this as it has less control over companies than it had in previous years and that it results in undermining of the Chinese propagated ‘win-win’ situation.

Since the Chinese reengagement in the late 1990s with Africa, China maintains a policy of non-interference in the domestic affairs of African countries (Sparks, 2011). The Chinese government famously states that it operates its foreign policy with ‘no political strings attached’. This policy is successful in Africa and finds traction among African political elites as a result of the contrast with the conditionality-based and neo-liberal mode of geo-governance Western policies are situated in with which it now competes and hybridizes (Carmody, 2013, p. 27). The policy is criticized as it enabled China to sell weapons to rogue states like Zimbabwe and Chad and engage in so-called ‘pariah partnerships’ with dictators. Where the non-interference policy is one problem in the eyes of Western observers, some analysts argue that China’s efforts in Africa are actually aimed at building goodwill for later investment opportunities, stockpiling international

support for contentious political issues and are part of a Chinese ‘grand strategy’ – a highly coordinated plan of action, based on the calculated relationship of means to large ends (Edel, 2014). Whilst Ian Taylor (2009) argues contrarily that the Chinese engagement in Africa contains ‘no grand, coordinated strategy’, Deborah Brautigam (2009, p. 78) states that Beijing has created a ‘well-thought out and long-term strategy’ for Africa. Evidence supports Brautigam’s claim: in 2006 China released China’s African Strategy, which emphasized that the basis of the Chinese engagement in Africa is centered around ‘trade, investment, economic cooperation and the deepening of political relations’ (Mohan and Power, 2008, p. 32). Dowden (2009) illustrates this view by arguing: ‘’China is playing a long game for oil and other raw materials in Africa in and securing allies who will vote for it in the United Nations’’. Furthermore, in addition to international observers, many Africans themselves are frustrated over China’s role on the continent. Chinese companies are accused of underbidding local firms and of ‘importing labor from China’ or if African workers are hired, the Chinese are, as mentioned, criticized for failing to comply with labor regulations.

The Chinese conduct in Africa raises questions regarding the future of the Sino-African relationship. On the one hand this relationship is promising as it does provide Africa with a large influx of FDI whilst on the other hand there are serious social, economic and ethical problems that need to be addressed.

2.2 Current political and economic situation in Zambia

Zambia became independent from Great Britain in 1964 with independence movement leader Kenneth Kaunda as the first president. In the 1960s and 1970s Kaunda and his party, the United National Independence Party (UNIP), were blessed with high copper prices on the world market. Copper was, and still is an important resource in Zambia’s economy as illustration 3 indicates. High copper prices led the UNIP to promise Zambians rapid development, with money earned in the mining sector (Lungu, 2008, p. 404). In order to ensure this the UNIP nationalized and consolidated Zambia’s copper mines in 1974 to form the Zambia Consolidated Copper Mines (ZCCM) creating in fact a ‘statist formal economy’ (Carmody, 2009, p. 1198). The ZCCM became a vertically integrated firm run by state bureaucrats. In line with Kaunda’s humanist philosophy, the ZCCM extended the welfare provisions provided by the pre-ZCCM mines through the operation of a ‘cradle to grave’ policy (Li, 2010, p. 6-8). The creation of a statist formal economy coupled with Zambia’s copper for development meant that the UNIP, and therefore Zambia, was dependent on the global copper prices (Negi, 2011, p. 29).

Following the oil crisis in 1974 global copper prices plummeted. In order to maintain the ZCCM’s extensive welfare program the Kaunda government was forced to borrow money on the international market (Gadzala, 2010, p. 43). After the second oil crisis in 1979 the ‘‘interests rate shot up and Zambia was thrown in a severe debt crisis’’ (Fraser and Lungu, 2007, p. 8). As a result, between 1974 and 1994 Zambia’s per capita income declined by 50 per cent, the GDP fell to less than 300 USD and more than 80 per cent of Zambians fell in extreme poverty (Lungu, 2008, p. 405). Consequently, as there was no way to pay off their debt, the Zambian government was forced by the IMF and the World Bank to liberalize the economy, which led to civil unrest (Lungu, 2008, p. 405). These unrests manifested into a coalition of ‘‘trade union, students, academics, the business community and the parliamentary back benchers’’ which formed the Movement for

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Multiparty Democracy (MMD) (Negi, 2011). Frederick Chiluba, a trade unionist, emerged as MMD leader and would later become the Zambian president as a result of the 1991 elections. The MMD was driven by a desire to end the one-party rule and promised to attract FDI in especially the mining sector. In order to do so the economy was liberalized and some SOEs were privatized (Lungu, 2008, p. 12). With the help of the international community and donors the MMD implemented a ‘sweeping program of shock therapy reform’, in effect ‘applying’ the so-called WaC (Fraser, 2007, p. 615). These liberalizations are widely considered to have been ruinous for Zambia. As a result the manufacturing industry collapsed, the economy contracted, unemployment soared and a severe pensions crisis arose (Fraser and Larmer, 2007, p. 616). Fraser and Lungu (2007) state that the social impact resulting from the privatizations turned out to be even more adverse: social programs (such as HIV/AIDS projects), hospitals, schools and housing all deteriorated. This point is confirmed by Zambians in interviews and in conversations on street level. As interviews took place during the current elections, Chiluba’s MMD and the results of his presidency were often topics of conversation. Then president Chiluba referred to this at the opening ceremony of the Forum on China-Africa Cooperation (FOCAC) meeting in 2000 by stating: ‘’The developing world continues to subsidize consumption of the developed world, through an iniquitous trade system. The existing structure is designed to consign us to perpetual poverty and underdevelopment… It is unrealistic to expect support, relief or respite from those who benefit from the status quo’’ (Kopinski and Polus 2011, p. 184).

Whilst privatizations hit Zambia hard, they did bring in necessary investments in the entire economy and saved mines from closing. Where the government used to borrow money to pay wages, privatizations led to a significant increase in production and profitability. The MMD viewed FDI as necessary in order to develop Zambia. Even after Chiluba was pushed away from office, this view persisted. This liberal ‘open door’ policy has ‘‘enthusiastically sought to court Chinese SOEs’’ (Rousseau 2012, p. 17). The sought after Chinese FDI started with a Chinese SOE acquiring and reopening mines in the Zambian Copperbelt in 1998. Ever since, the Chinese engagement in Zambia has been under scrutiny and faced opposition from multiple national and foreign parties, for earlier mentioned reasons. Zambia’s former president Mwanawasa commented on this by stating: “Those who oppose Chinese investment ... all they need to do is to equal the help we are getting from China. We only turned to the East when you people in the West let us down‟ (Davies et al. 2008, p.46). Following disastrous decades in terms of development, Zambia’s MMD – and its breakaway party, the Patriotic Front, the current ruling party in Zambia – looked to China to ensure development and economic growth. As a result Zambia increasingly ‘focuses on the east’ which refers primarily to China (Mwanawina, 2014).

Foreign Direct Inflow By Sector (US $ Millions)

SECTOR 2009 2010 2011 2012 2013

Mining 367,20 1.141,30 955,60 933,70 289,70

Manufacturing 285,70 373,90 178,40 469,60 177,60

Bank And Non Bank Financial Institutions 83,50 11,20 70,90 193,60 96,00

Whosale and Retail 65,00 2,20 76,60 38,30 -

Transport And Communications 10,70 179,30 41,60 19,70 30,20

Tourism 40,90 4,30 13,80 - -

Agriculture 14,10 13,20 31,70 28,30 33,40

Real Estate 0,40 4,50 42,80 4,90 17,20

Construction 44,20 17,40 39,20 54,60 2,30

Electricity, Gas and steam - - - 6,50 6,80

Others 0,60 17,80 59,70 19,20 2,90

Illustration 3. ZDA 2015 2.3 China in Zambia

Fraser (2010, p. 3) argues that the Chinese engagement in Africa is illustrative for the Chinese engagement in Zambia by stating that it holds ‘’implications for how we think about the causes of and solutions to current global economic stabilities, about hopes for resistance to neo-liberalism and about potential new drivers of global development such as China and India’’.

As Zambia ‘focuses on the east’ this engagement is under scrutiny. Haglund (2008, p. 556) states that there are ‘multiple challenges faced by Chinese political and economic interest’. Alden (2007, 72) refers to these challenges, and the situation of Chinese engagement in Zambia as ‘China’s perfect storm’. Fraser and Larmer (2007, p. 616) argue that the Chinese engagement in Zambia centers mainly on its rich endowments of copper and China’s demand for copper and that a result, China has built a strong ‘all weather’ relationship with the Zambian governments by creating a mutually beneficial relationship aimed at gaining access to Zambia’s mining sector and aimed at channeling Chinese FDI to the Zambian economy.

The nature of China’s Africa Strategy holds the potential to aid economic development for the countries it engages with, including Zambia. Despite the multitude of drivers of the Chinese engagement in Zambia, Kopinsky and Polus (2011, p. 185) argue that China’s main driver for engagement in Zambia is economic interest. Economic growth in China drives the demand for copper so high that China will demand more than 50 per cent of the worlds demand for the metal (Carmody, 2012). As a result, the primary focus of China in Zambia relates to mining with 89 per cent of all Chinese FDI pledges relating to the industry. Even though China is most active in the mining industry, Chinese FDI spans to agriculture, construction, manufacturing and health as well. China emphasizes on investments through infrastructure development. Due to China’s interest in the mining sector the Chinese EXIM bank provided a 600 million USD resource-backed loan to develop Zambia’s infrastructure in 2003 (Carmody, 2009). Critics argue however that these infrastructure projects in the end are mainly beneficial in to the Chinese as they open-up hard to reach areas were resources are extracted and are done by Chinese firms and Chinese workers.

China also provides assistance to Zambia in the form of projects aimed a skill transfers for example with trainings to Zambian nationals in multiple fields. Amongst them are the Agricultural Technology

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Demonstration Centers on which paragraph 4.1.1 elaborates. Furthermore, the Chinese government provides hundreds of Zambian nationals annually with scholarships.

Indicative of Zambia’s importance to China is the fact that Zambia houses China’s first Special Economic Zone (SEZ) in Africa. The SEZ in Zambia, the Zambia China Cooperation Zone (ZCCZ) was proposed at the 2007 FOCAC meeting and is aimed at attracting Chinese FDI to Zambia and stimulating value-adding industries1 _{(Alves, 2011).}

2.4 The West in Zambia

Conventional wisdom holds that there has been a momentum shift away from the traditional trade and investment partners in the West towards the East, particularly China and to a lesser extent to India and Malaysia. This is true, considering the fact that China became Africa’s biggest trading partner in 2009 and overtook traditional partners such as the US, the UK and France. A multitude of academic literature and news articles emphasize this phenomenon. However, these figures should be placed in perspective. The countries that make up the European Union (EU) were Africa’s biggest trade partner in 2010, with 44.3 per cent of all trade for example, whilst Sino-African trade by then counted for 13.9 per cent.

The situation in Zambia is consistent with this perspective. Whilst Chinese investments increase in a rapid pace and are expected to increase in an even more rapid pace in the future, traditional Western donors still dominate the charts when it comes to the inflow of FDI in the Zambian economy. Canada contributed most FDI in Zambia in 2012 as illustration 4 illustrates.

FDI influx Zambia by country (US $ millions)

COUNTRY 2009 COUNTRY 2010 COUNTRY 2011 COUNTRY 2012 COUNTRY 2013

India 296,20 Canada 443.40 Canada 465,70 Canada 724,30 Virgin Islands 60,10 Canada 203,00 Australia 389.40 P.R. China 332.60 South Africa 426,00 Nigeria 16,50 Ireland 180,00 Virgin Islands 271.80 UK 240,30 Netherlands 262,20 India 12,70

Netherlands 77,80 UK 250,60 Australia 119,40 UK 227,20 UK 391,20

P.R. China 75,80 Netherlands 78,80 Virgin Islands 106,60 Swiss 166,90 P.R. China 11,90

South Africa 73,40 Bermuda 71,70 Netherlands 81,80 P.R. China 141,90

France 27,50 P.R. China 32,40 Mauritius 0,40 Nigeria 94,60

USA 16,90 Libya 239,70 Singapore 62,00

Panama 17,00 France 32,90 France 20,20

UAE 10,90 UAE 18,00 Other 124,60 Togo 15,50 Other 37,8

Illustration 4. Zambian Development Agency 2015

Despite a strong Chinese growth, Yun Sun (2014) argues that Beijing remains a smaller player in Africa than the US. Sun (2014) argues that US FDI totals nearly two or three times more than Chinese stock investment and France and Malaysia rank higher than China in terms of investment on the continent as well. Witney Schneidman in turn notes that for US businesses, competition with Chinese companies is by no means a zero sum game (Sun & Olin-Ammentorp, 2014). The US still holds its ground despite limited

1_{Paragraph 4.1.2 elaborates on the ZCCZ}

2_{This changed again since 2009 as illustration 3 indicates.}

transparent and fair business policies and an uneven playing field in some African markets. Additionally, experts argue that the US soft power in Africa is still far greater that China’s Sun & Olin-Ammentorp, 2014. Whilst Chinese FDI, and the Chinese engagement in Zambian agriculture as well, may be on the rise, the role of the West is still large, arguably the largest. The Zambian agricultural sector illustrates this. The role of Chinese investments in Zambian agriculture appears to be exaggerated in literature. There is no evidence of so-called ‘land grabs’ in Zambia done by Chinese corporations for example. So far I have been able to confirm the existence of nine Chinese owned farms operating in Zambia, together cultivating an area approximately 10.000 hectares, which is consistent with Chinese statements and comparable with two medium sized commercial farms in Zambia. Chatelard and Chu (2015) confirm this by stating that a focus on large-scale Chinese investments in Zambian agriculture has fueled popular misperceptions of Chinese ‘land grabs’ and has overshadowed an unexplored phenomenon, the rise of media-scale private Chinese farmers and rural entrepreneurs in Zambia. This is consistent with my own findings, namely that there are quite a lot small-scale farmers (selling approximately 2000 chickens a week) but no large scale ‘land grabs’. China’s role is therefore not insignificant, but popular believe of a great Chinese takeover may not be justified. Even though China took over the US as Africa’s biggest trading partner, the West is not ‘pulling out’ as illustration 4 signifies. Complementary to this, the idea that the West and China are competing for Africa’s resources is not justified as well, as the illustration exemplifies as well. Investments from the BRICS countries for example doubled since 2007 and even though India’s footprint is still small, it grows at 400 per cent a year according to Carmody in his 2013 study (Murdoch, 2014).

2.5 Current situation of the Zambian agricultural sector

The Zambian agricultural sector holds a lot of potential. Zambia consists of more than 750.000 square kilometers. 58 per cent of this land is classified as having a medium to high potential for farming whilst only 14 per cent is currently utilized (ZDA, 2014). As Zambia is traditionally dependent on copper, it is struggling to diversify into other commercial activities such as farming. The agricultural sector has long been neglected by the government’s reliance on high copper prices, urban bias and single-minded emphasis on maize for food self-sufficiency. Infrastructure, agricultural services and agricultural research and development are underdeveloped, particularly in rural areas.

Zambia’s agricultural sector displays a dual structure where approximately 750 large commercial farms, concentrated along the TAZARA railroad and the railroads from Lusaka to Ndola and Livingstone, which coexist with approximately 750.000 families engaged in small-scale sustenance farming and 25.000 families engaged in small commercial farming (ASNIPP informant). In order to leverage Zambia’s agricultural potential multifaceted support strategies are required and partially undertaken. Targeting diversification in agricultural production, as has been done in the past, proved not be sufficient without improving market information and the promotion of linkages between farmers and other value chain participants.

Despite some diversification in agricultural production, crop diversification still has a long way to go in Zambia. The government promoted maize production since the 1970s and currently supports the production of cassava, cowpeas and sorghum as well. Profit margins on these crops remain however

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mediocre. Diversification into cash crops face problems in the access to markets, a lack of infrastructure and the lack of human capital. Whilst the privatizations in the 2000s have led to a rise in the production of these crops and of crops such as sugarcane, tobacco, groundnuts and rice, the production of maize is still dominant in terms of value (ASNIPP informant)

Livestock currently accounts for 35 per cent of the total agricultural production and future growth is projected. The industry hinges on quality and decease control. If these points were improved, the productivity, food security and income would rise. Zambeef, Zambia’s largest commercial farm dominates this sector. Zambeef started off as a butchery in the early 1990s and is now listed on the Lusaka Stock Exchange with a capital of over 80 million USD. The dairy industry, concentrated around Zambeef with ZamMilk, Parmalat and Danish Diaries, has the potential to facilitate to the entire Southern Africa region but instead fails to meet domestic demand (Zambeef, 2015). The processing industry markets only 30 per cent of the diary consumed in Zambia. The fact that the dairy industry has an enormous potential but is unable to meet local demand, combined with the fact that it only markets 30 per cent of the dairy consumed is illustrative for the Zambian agricultural sector. Efforts are currently made to link these smallholder producers, responsible for the other 70 per cent of dairy marketed, to value chains. A second large problem is the lack of market information and knowledge as the development of market and access to them is crucial for agriculture. The FAO states is this regard: ‘’it is very difficult to push for change on the technological or input side if there is not a proper market. Linkages to agro-processing and other value-adding activities might create demand for farmers’ (FAO, 2006).

If the potential in diversification, value chain linkages and market information were fully exploited Zambia could rapidly increase its agricultural production, meet the domestic demand and cater to regional and global markets. The FAO states that a ‘’the anti-agriculture bias in people’s minds needs to change so that the sector is actually considered to be an income-generating opportunity’’ (FAO, 2006).

Where the anti-agriculture bias might makes the agricultural sector less appealing to Zambians; there is an increasing amount of interest in the sector from foreigners. Private investors range from Asian sovereign wealth funds to expropriated Zimbabwean farmers to farmers from the US. Asides from private investors, foreign governments have shown interest in the sector as well, for example from China when Beijing requested 2 million hectares for the cultivation of biofuel crop jatropa (Von Braun, 2009). Moreover, mixed trade and aid involvements from the Chinese government as well as aid the Scandinavian countries. The fruits from these interests and willingness to invest should be harvested sooner rather than later. 2.6 Donors and aid in Zambia’s agricultural sector

Agriculture has long been the favorite sector for donors in the developing world as it is considered to be a catalyst for development. Zambia is no exception. Especially the Scandinavian countries, the World Bank and the UN system allocated a lot of aid to this sector. Evaluations of these aid flows are however not very positive, especially in terms of (economic) sustainability. Unsupportive policy environments, unpredictable local counterpart financing and poor quality of local institutions combines with projects heavily reliant on external (donor) funding and foreign personnel are the main reasons of these projects not being sustainable.

The proliferation of projects and the need to tackle many related constraints in a more coherent manner led the Zambian government and donors to set up the Agricultural Sector Investment Program (ASIP) in 1996. Even though the ASIP did some good things for the sector in aligning government policies with the new priorities of the agricultural sector led by the market and the private sector, the ASIP is widely considered to be unsuccessful. Richard Fuller, Zambia’s representative at the Food and Agriculture Organization (FAO) asserts that the ASIP ‘’was a total failure’’. He argues that mismanagement of funds, and the inability to address small-scale farmers’ needs as factors contributing to ASIP’s poor performance. Fuller explains that due to the donor community’s experience with ASIP, direct funds to the Ministry of Agriculture are being withdrawn (Mukherjee, 2002, p. 26). The disappointment with the ASIP and the non-existence of clear policy on agriculture led to the scaling down of some donor funded agricultural projects, or even the pull back of donors. However, donors kept supporting communities or community-based organizations directly to include small-scale farmers in planning in implementing programs (Mukherjee, 2002, p. 26). These projects represent a new generation of projects emerged toward the end of the ASIP program in the early 2000s that strongly focused on business-minded approaches reoriented at smallholders aimed at facilitating access to markets. The USAID funded ‘CASH’ project discussed in the fifth chapter is one of such projects. The development of these new generation aid projects, labeled as ‘contemporary aid’ will be the counterpart of ‘trade’ in the ‘trade, not aid’ and ‘aid for trade’ debates and dichotomy on which this paper elaborates. 2.7 Chapter conclusions

Even though the Chinese engagement to Africa started in the 1950s and 1960s China is a relative newcomer in Africa. The Chinese engagement in Africa as we now know it took of in the mid 1990s. Conventional wisdom holds that ever since there is a momentum shift away from traditional trade partners towards Chinese trade. Illustration 3 indicates that whilst China’s role is growing, the role of the traditional partners is still considerably larger that China’s. The Zambian agricultural sector is still relatively small in terms of foreign investments, as illustration 2 indicates. Agriculture is however important for Zambia’s development in the longer run and poverty elevation in the shorter run. Due to the potential the agricultural sector has, and the impact this has on the country, donors and the government are eager to further develop the sector. Where previous projects resulted in little tangible, sustainable results for Zambia and proved to be unsuccessful, current project directed in a more businesslike fashion and labeled as ‘contemporary aid’ are expected to fit in better with ‘aid for trade’ and modern day developmental ideas and concepts.

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Chapter 3. Theoretical Framework – Development in Zambia?

The objective of this chapter is to provide an overview of relevant theories relating to development, trade and aid and the debates going on within this field and position this research within these debates. It will do so on the basis of mainly the theories of dependency, neoliberalism, modernization and the globalization theory as these theories grasp the reality and provide theoretical explanations to interpret develop efforts carried out in Zambia.

3.1 Trade, not aid – dependency and conditionality

In 2009 Dambisa Moyo published her book Dead Aid with the subtitle ‘Why aid is not working and how there is another way for Africa’. She argues that traditional aid from Western donors is hurting the development of Africa and that recipients of the aid would have been better off without it. Moyo states that it is a myth that aid money from Western donors reduces poverty and increases economic growth. Poverty levels escalate whilst growth rates decline and countries become dependent on aid resulting in a further increase of poverty and a decrease of economic growth in the longer run. Consequently, overreliance on aid trapped developing nations in a circle of dependency, corruption, market distortion and further poverty, leaving these countries with nothing but the need for more aid (Moyo, 2009).

Dead aid does not promote a new idea. It follows in the footsteps of Teresa Hayter’s book called Aid as Imperialism (1971) which emphasizes the idea of aid as a political weapon used by donor countries for their own interests. US presidents such as Richard Nixon substantiated this idea by stating: ‘‘Let us remember that the main purpose of aid is not to help other nations but to help ourselves’’. Hayter went even further by revealing the ideological bias of institutions such as the International Monetary Fund and the World Bank in the light of the cold war. Such institutions in the Cold War were promoted as being ‘above politics’ but in fact were not.

One problem with aid from a developing nations’ perspective is the resulting dependency on the donor country. This dependency combined with the use of conditionalities to impose the donors’ own political and economic ideologies on the recipient countries is under scrutiny. One of the main characteristics of traditional bilateral development aid is this conditionality (Rich, 2004, p. 322). Conditionality is a mutual arrangement by which a recipient government takes, or promises to take certain policy actions in exchange for donor funds (Killick, 1998, p. 6). The prominence of conditionality as an explicit issue has been emphasized in the literature but has also changed over the years (Foster, 1995, p. 201). Conditionality is divided in two overlapping categories, economic and political conditionality.

Economic conditionality is the tying the provided aid to conditions. Conditions that products and services have to be acquired from the donor countries (Mushi, 1995, p. 227). The WaC and the prescribed neo-liberal policies it consists of are essentially also economic conditions attached to aid. Donor countries provide loans to developing countries if they are willing to implement Structural Adjustment Policies (SAPs). Balance of payment support (thus providing funds) was given in if neo-liberal policies were to be implemented (Mushi, 1995, p.227). To a certain extent, there is also a political dimension to these economic conditions as one of the goals was to reduce the role of the state in the economy (Stokke, 1995, p. 163).

Political conditionality is the second category of conditions tied to aid. Political conditionality enters the domestic political agenda’s of African nations. It aims to reform politics, improve democracy, human rights and administrative accountability (Mushi, 1995, p. 227). Scholars argue that the end of the Cold War led Western donors to try and spread the ‘victorious’ liberal market democracy in the rest of the world. There method of choice were political conditions attached to aid (Crawford, 1995, p. 32).

With these conditions attached to aid donors have been able to undermine democracy in many recipient African nations, preventing governments from introducing development policies appropriate to their national situations (Hilary, 2009, p. 81). As a result, many African governments have been devoted to satisfying the interests of the donor states and the donor community without reference to the needs of their peoples and nations. In response to this and the scrutiny the IMF, the World Bank and donor countries in general came under, the IMF and the World Bank declared at the start of the millennium that they would put efforts in place to relief the debts of recipient nations. They also committed themselves to respecting national ownership of development policies by stating that they would reduce the number of structural conditions on loans and aid. These commitments have still to be honored.

The aid conditionalities imposed by the World Bank, the IMF and therefore also by Western donors are held responsible for the two so-called ‘lost decades’ of the 1980s and the 1990s in which per capita income levels fell dramatically in most of countries across Africa (Carmody, 2012). Aid-dependent countries were required to implement the so-called WaC. This required market reforms such as trade liberalizations and the privatizations of state-owned companies and utilities, despite the acknowledged damage these policies would likely cause to their economies and, especially, to the vulnerable sectors in their populations. Moyo partially aligns herself with this reasoning as she reflects in her suggestion how Africa should liberate itself from its dependency on foreign aid. Moyo argues that only the free market can offer Africa a real path to development and suggests that all African leaders should adopt the neoliberal economics similar to those proposed by the World Bank and the IMF in the 1980s and 1990s (Hilary, 2009, p. 82).

In summary, the ‘Trade, not Aid’ theory argues that there are many problems in using aid as a vehicle for development. This is mainly because handouts have never been an effective way to achieve economic transformation. The main reasons for this are, firstly that aid is not really aid. As Nixon’s quote indicated: most aid programs are poorly structured and constrained by conditionalities. This undermines the independence of recipient countries and the management of their economic affairs. Secondly, aid erodes accountability. Providing aid through the governments of poor countries erodes the accountability of governments. Their main source of income is aid, not tax revenue. Governments therefore have to become more accountable to donors than to their own citizens. Thirdly, aid leads to a chronic dependency on donors. As Dambisa Moyo (2009) rightly illustrated, recipient countries become dependent on aid from donors. They fail to prioritize the generation of domestic resources. Trade on the other hand is presented as a driver for economic growth that has been proven in history and as one of the fundamental tenets of economic theory. Trade in this respect is related to investments in Africa. When reviewing Zambia, the case of the Jhonken farm is often mentioned as a successful example the ‘trade, not aid’ theory. Brautigam for example concludes:

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‘Li’s (the deceased owners wife, now owner and operator of the farm) private investment generates profit as well as employment opportunities for locals’ (Brautigam, 2009, p. 254).

3.2 The Washington Consensus – neoliberalism?

The practical levers of the neoliberal policy were the IMF; the World Bank and the WTO – and its momentum was provided by a more general sense of excitement about what today is referred to as globalization (Ramon, 2004). Neoliberalism is often associated with pro-market and anti-intervention ideas but is in fact more specific than this. Neoliberalism harnesses policies to support the interest of large businesses, transnational corporations and finance. According to Reid-Henry (2012) ‘’it seeks not so much a free market, therefore, as a market free for powerful interests’’.

In terms of development theory, neoliberalism holds the idea that intensified globalization is in itself development, arguing that neoliberalism and globalization are two inseparable sides of the same virtuous token. The English economist John Williamson referred to a set of neoliberal economic policy prescriptions as the WaC. This set of policy prescriptions constituted a ‘standard’ reform package for underdeveloped and crisis wracked countries by Washington D.C. based institutions such as the IMF, the World Bank and the US Treasury Department. The prescriptions are all of a neoliberal nature, constituting areas such as macroeconomic stabilization, the economic opening up of countries with respect to both trade and investments and the expansion of market forces within the domestic economy. Williamson stated that these ‘rules’ for developing countries to follow to absorb aid efficiently are as illustration 5 illustrates.

Washington Consensus

1. Fiscal policy discipline

2. Redirection of public spending from subsidies (‘especially indiscriminate subsidies’) towards broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure

3. Tax reform – broadening the tax base and adopting moderate marginal tax rates. 4. Interest rates that are market determined and positive (but moderate) in real terms.

5. Competitive exchange rates

6. Trade liberalization – with particular emphasis on the elimination of quantitative restrictions, any trade protection to be provided by low and relatively uniform tariffs

7. Liberalization of inward foreign direct investment 8. Privatization of state enterprises

9. Deregulation – abolish regulations that impede market entry or restrict competition, except for those justified on safety, environ-mental and consumer protection grounds, and prudent oversight of financial institutions

10 Legal security for property rights

Illustration 5 Williamson (1990) – Washington Consensus

Often heard critique on these rules is that they primarily serve the interest of large, Western corporation, instead of serving developing countries with appropriate targeted policies (Chomsky, 1999). Neoliberals claimed that as free markets were both a means and the desired end of development – the only object of development policy in the light of the WaC is to do what is necessary to make local societies fit with

the new global imperatives. As a result, the neoliberal development policy is radical as well as abstract. Governments were to do no more than facilitating the conditions for the free market society. Barriers for investments and trade had to be pulled down, industry needed privatizations and the profit would become the organizing value of social life. Exactly what Zambia did around the year 2000 by selling and thus privatizing over 250 former SOEs, including the copper mines (Economist, 2002). Academics deemed the WaC therefore the ‘trade, not aid’ approach applied on development (Gallagher, 2011).

3.3 The Beijing Consensus

The WaC became generally accepted as the most effective model by which developing nations could spur growth and thus develop, resulting in a Western led quest for development. The implementations of the WaC were however mixed. As Harris (2008) argues, the consensus led to multiple currency crises, stagnation and recessions during the financial turmoil in the 1990s. The most recent economic crisis the global recession is sill running its course and has further eroded trust in the Western neoliberal economic model.

A contrasting and alternative strategy surfaced from China, the so-called Beijing consensus. Instead of prescribing a rigid set of guidelines for development, the BjC is of a more pragmatic nature. The BjC offers no standard reform package but instead recognizes the need for flexibility and pragmatism in multifarious problems. It is therefore focused on innovations whilst it emphasizes ideals such as equitable development and a ‘Peaceful Rise’ (Ramo, 2004, p. 4-5). The Chinese model is therefore quickly gaining ground on the African continent. The BjC has three overarching ideals of Chinese development which in turn suggest ‘how to organize the place of a developing country in the world’’ (Ramo, 2004, p. 11).

In the first place, innovation is inherent and crucial to the BjC. Governments must actively innovate to address the challenges introduced by the changing economic and social environment (Ramo, 2004, p. 12) Leonard (2006) states this as a commitment to ‘’constant tinkering and constant change, and a recognitions that different strategies are appropriate for different situations’’. Innovation emphasizes the importance China places on pragmatism.

The pursuit of dynamic goals forms the second ideal or pillar in the BjC. In essence this idea ‘’rejects per capita GDP as the be-all and end-all of development priorities’’(Leonard, 2006). This pillar in fact rejects the Western policies, which are known to heavily focus on these figures, as well. It relates to the Chinese pragmatism in the sense that in focuses on measures such as quality-of-life and individual equity, areas on which China has strongly focused (Ramo, 2004, p. 12).

The third pillar of the BjC is the emphasis on self-determinations. This point emphasizes the need for developing countries to actively seek independence from outside pressure as this is imposed by hegemonic powers such as the US (Ramo, 2004, p.12). Gresh (2008) describes this characteristic as ‘’valuing independence and self-determination and refusing to let other (western) powers impose their will’’ emphasizing the idea that ‘countries can plan their own development without having to accept the unfavorable terms of the WaC.

Particularly in Africa, this idea of self-determination being important to development, as China proposes, turns out to be highly appealing. Lyman (2005) relates this self-determination to lesser

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conditionalities attached to Chinese investments and aid as he states: ‘’China’s investments are attractive to Africans … because they come with lesser conditionality related to governance, fiscal probity or other concerns that now drive Western donors’’. The attention focused on conditionalities, poor performance of the WaC and as a reaction on the BjC the ‘aid for trade’ idea started to gain momentum.

3.4 Aid for trade

The WTOs Ministerial meeting in Hong Kong in 2005 marked the beginning of ‘Aid for Trade’ initiative as means to better coordinate development assistance and improves its linkages to enhancing recipient countries’ ability to export and participate in the global trading system. The OECD defines its AfT work as follows: ‘’The OECDs work in trade supports a strong, rule-based multilateral trading system to maintain the momentum for further trade liberalization while contributing to sustainable development. It strengthens trade policy dialogue with developing and emerging economies, increases the understanding of the effects of trade liberalization, and promotes mutually beneficial integration of these economies into the multilateral trading system’’. The WTO started its AfT initiative in 2005 provides another definition: ‘’Aid for trade is about helping developing countries, in particular the least developed, to build the trade capacity and infrastructure they need to benefit from trade opening’’. Furthermore, the WTO notes that ‘’trade has the potential to be an engine for growth that lifts millions of people out of poverty’’ but that ‘’internal barriers – lack of knowledge, excessive red tape, inadequate financing, poor infrastructure’’ hamper that potential. More specifically, the WTO outlines four components for AfT to do so by the following points. Illustration 6 represents the OECD interpretation of the AfT agenda.

(1) Trade policy and regulation – the building of capacity to formulate a trade policy, participate in negotiations and be able to implement agreements;

(2) Economic infrastructure – investments in infrastructure, roads, ports, energy networks, telecommunications and other infrastructure needed to link products to global markets;

(3) Productive capacity building – strengthening economic sectors to increase their competitiveness in global markets;

(4) Adjustment assistance – helping with any transition costs from liberalization.