Wednesday, March 18, 2009

Experts raise concerns as Africa goes East

Omondi, George (Business Daily, Nairobi) 2009-03-10 

When Iranian President Mahmoud Ahmadinejad visited Kenya recently, separate talks were held with President Mwai Kibaki and Prime Minister Raila Odinga in what is taking shape as a bold leaning to the East.

The leaders apparently discussed numerous proposals that could tilt the trade balance between the two countries in favour of Kenya.

“We are not shifting policies towards any geographical location. Kenya is always open and willing to trade with other countries based on equal partnerships and mutual respect”, said Finance Minister Uhuru Kenyatta last week. However, observers outside government circles have different opinions.

Many theories are emerging as trade experts and intellectuals delve into the issue of who is courting who in the emerging diplomatic realignment and why Kenya, like many other countries in Africa, appears so eager to dump traditional trade partners for ties in the East.

Barely a week after Ahmadinejad ended his Kenyan tour, a row ensued over the quality of Iranian oil leading some analysts to argue that his country could be looking for a dumping ground for substandard crude oil at a time when international prices have fallen.

Others argue that the Iranian leader’s visit formed part of a wider mission to win over more international friends and support his country’s nuclear programme to which the West is fervently opposed.

At present, the trade balance between Kenya and Iran – with a volume of Sh7 billion – is heavily in favour of Iran, which has perpetuated the argument that Ahmadinejad could not have been in Nairobi to further business interests per se.

At the state banquet held in honour of his guest, President Kibaki appealed to the Iranian delegation to bridge the gap by buying more from Kenya. He also asked that they take advantage of a wide range of “mutually beneficial investment opportunities” in manufacturing, public utilities such as power generation, water supply and telecommunications, and infrastructure development.

“Meanwhile, investing in Kenya will enable Iranian investors to take advantage of Kenya’s strategic location as a gateway to the wider East African Community and COMESA region with a market of close to half a billion people”, he said.

In an effort to woo investors from both countries, the two leaders have signed several agreements ranging from the removal of double taxation, promotion of investments, customs cooperation, and harmonisation of standards.

According to an assistant trade programmes officer at the Institute of Economic Affairs (IEA), Africa’s warming to the East is a way for the region’s leaders to free themselves from the West, which has been pushing for key reforms over the years in economic and political institutions.

“Whether it is a bilateral loan, grant or trade partnership, the West usually ends up micro-managing Africa’s economies. The new shift towards the East is, therefore, a language of protest that often finds validation in the numerous examples of how IMF and World Bank’s policies distorted Africa’s growth priorities”, the officer said.

Odinga has warned that the signing of most of the ‘no-strings-attached’ loans from Asian and Arab countries is often shrouded in mystery and may affect citizens in ways that they do not comprehend at the onset.

For instance, Philip Kiriro of the Eastern Africa Farmers Federation (EAFF) has criticised a Sh3.5 billion financing agreement signed between Kenya and Qatar last year to finance the development of a second port in Lamu.

It later turned out that part of the bilateral agreement was that the country also gives out some 100 000 acres of the pristine Tana Delta to the to the Gulf State to be put under crop production during a time when Kenya itself also faces food deficits as a result of shrinking acreage available for cultivation and over-dependence on rain-fed farming.

According to some analysts, the East presents new untapped opportunities that can change the continent’s fortunes.

Fred Miencha, a trade policy analyst at Kenya Institute for Public-Policy Research and Analysis (Kippra), argues that growing markets in Arab and Asian countries has convinced policy workers that more could be derived from the East if relations are properly nurtured.

“The eastward shift is being driven by the thinking that even without the kind of affirmative tariff interventions such as [the] economic partnership agreement (EPA) or Africa’s Growth and Opportunity Act (AGOA) our exports to that region have been growing at a faster rate compared to West-bound sales”, he said.

Most of these preferential trade agreements that once made the West more expensive for Africa are fast drying up as the World Trade Organisation (WTO) moves to champion non-discriminatory trade practices among countries.

African leaders are above all said to prefer bilateral deals with the East as they do not come with conditionalities that compel them to adhere to strict codes of conduct such as transparency, the fight against corruption, and maintenance of a good human rights record.