Friday, March 4, 2011

Libya exposes risks of China’s ventures

Tens of thousands of Chinese workers are scrambling to escape the chaos in Libya, highlighting the risks by Chinese businesses in unstable African countries in search of oil, gas and other resources.

Beijing is taking unprecedented steps to aid with the evacuation, sending charter flights and ferries along with military transport planes and dispatching a navy frigate to provide security for its nationals in Libya, where increasingly violent clashes are threatening to transform a 15-day rebellion into a civil war.

About 32 000 Chinese – most working on construction projects or providing oil field services – were whisked out of Libya as of yesterday, with another 3 000 waiting to be airlifted out of the desert in the country’s deep south, China’s Foreign Ministry said.

The fighting between rebel forces and loyalists of Libyan leader Muammar Gaddafi is not expected to have an impact on China’s burgeoning economic links with Africa, but analysts say it serves as a reminder of the need for contingency plans when working in unstable or politically repressive countries where conditions can turn desperate.

Chasing opportunities where others fear to tread, Chinese businesses have long accepted such dangers and the swift response in Libya is a sign of the new protections it is offering its citizens abroad.

While no Chinese have been reported killed or injured in Libya, Chinese businesses and construction sites have been looted and workers forced from their dormitories. Chinese companies, meanwhile, stand to lose financially from deals abruptly halted, including an unfinished public housing project being built by state-owned contractor China State Construction Engineering worth 17.6 billion yuan (R18.6bn).

“There is this argument that China can no longer continue to afford to pull back every time and that it should more actively safeguard the interests of its people and its companies,” said Jonathan Holslag, a research fellow at the Institute for Contemporary China Studies at the University of Brussels.

Another state-run company, China Railway Construction, said it was concerned over the fate of three projects worth a total of more than $4.2bn (R29.2bn), especially losses to equipment and building materials. Other Chinese engineering, telecoms and energy companies also face losses, although it is unclear what the total figure will come to, according to the China Business News newspaper.

Wang Suolao, a Peking University Middle East expert, said Chinese companies had taken on contracts in Libya worth a total of $18bn. He said it was too early to tell what the losses would be.

Chinese businesses drawn to the continent in search of oil, gas, copper and other resources are expected to have invested $50bn in Africa by 2015, according to a forecast from Standard Bank. Meanwhile, China’s trade with Africa passed $100bn last year, boosted by cuts in tariffs on African exports, and was expected to more than double to $300bn by 2015, Standard Bank said.

The Chinese presence has been largely welcomed by local leaders eager for investment, but Chinese firms have gained a reputation for exploiting corruption and inefficiencies in African states to win contracts for their cut-rate equipment and services.

According to a cable from the US Embassy in Kenya released by WikiLeaks, Chinese telecoms equipment maker Huawei was awarded a contract with Kenya’s state-run telecoms firm without undergoing the required bidding process and despite complaints about poor after-sales service.

The investment has also at times fuelled resentment over poor treatment of African workers and the tendency of Chinese firms to import labour from China. Increasingly, Chinese private businesses are also playing major roles in retail, food production and manufacturing in Africa, often at the cost of local players.

“I think that Beijing is only beginning to fully realise the implications of complications of its exposure abroad” to instability in countries overseas, said Christopher Alden, a lecturer at the London School of Economics who studied China-Africa relations.