Be wary of China deals

By ROBERT A. NEMALA
IN his speech at the Lowy In­stitute and to the Australian
media late last year, Prime Minister Peter O’Neill said the “cheque book” diplomacy with China would not affect existing traditional relationship with Australia.
The statement must have been received with some reservation by Australia and other long-time donors more so as they believe that Chinese aid comes with short-term objectives and Indo-Pacific geo-political implications.
Chinese development aid has been difficult to quantify as the loan details are not open to public scrutiny.
Nevertheless, their objectives are focused on resources and take little account of local needs and concerns.
Experience in Africa indicates that China violates Organisation for Economic Co-operation and Development (OECD) guidelines on aid, the Millennium Challenge Corporation designed to promote good governance and transparency, accountability and basic human rights.
Foreign aid to African countries, especially those considered as developing countries, has not reduced poverty and conflicts.
One of the main debate issues for the ineffectiveness of development aid has been on the lack of disharmony between the donor and the recipient (go­vernment and non-governmental organisations, traditional and emerging new donors).
The correlation between deve­lopment and foreign aid in PNG requires empirical evidence, which I am not well-placed to discuss.
Certainly, however, PNG has gone through all kinds of aid dilemmas.
By its own measure, PNG is at liberty to seek a bilateral relationship with China that is supportive of development.
PNG should learn and partner with Association of Southeast Asian Nations (Asean) economies who had engineered their large inflow of foreign direct investments (FDI) to fast track their economic growth.
According to recent statistics, China now ranks third in the world, closely after UK and USA, with capital inflows of about US$60.6 billion.
China is far and away the lar­gest recipient of FDI among developing countries.
No wonder, its foreign economic model is all-pervading in the African, Latin American and the Asean countries.
This is something Pacific Island states should ponder when trying to put in place agreements.
They need a consensus with a suitable economy to create a platform to drive the Pacific economy.
The consensus must have a mix of traditional values with global prosperity values, and must emanate from the Pacific realities, resources and practice.
It should stipulate clearly our development philosophy.
Other regional organisations such as the Pacific Island Forum should lubricate and collate an integrated economy to construct the Pacific Consensus.
Five world economic consensuses should be explored:
l    The Mumbai Consensus based on democratic developmental state and people-centred emphasis, especially on consumption;
l    The Beijing Consensus based on state capitalism with mercantilist emphasis;
l    The African Consensus based on transacting traditional values with the global prosperity values;
l    The Washington Consensus based on laissez-faire (unrestrictive) capitalism with emphasis on economic discipline; and
l    The Sao Paulo Consensus based on middle class economy with emphasis on improving poverty.
While the Washington Consensus is said to be the standard prescription for a crises-wrecked economy, does it really suit us? 
Michael Schuman of the US-based Time magazine asked: “India vs China: Which is the best role model for the developing world?”
This is a serious question the Pacific Island states must ponder on.
PNG should play a lead role in this notion to identify what existing economic consensus is suitable to emulate and partner with.
Botswana (tagged as Africa’s Singapore) is an ideal country to follow as it has one the world’s lowest per capita income figure of US$70 to a middle-income level category of US$16,300 since 1989.
The African Consensus is looking to Botswana as the role model. 
PNG identifies well with most African countries because most of the populace is traditional, in the informal sector and the country’s wealth has not improved the people’s lives at large.
Irrespective, some critics say that the “dragon” is well placed in our backyard.
The influence of China in the Pacific is overtly seen in politics, extraction, construction, merchan­dise, counterfeits, technology, etc.
Chinese aid, it would seem, has bought a whole lot of influence.
According to US Secretary of State Hillary Clinton, China has brought about “new colonialism”.
Not deterred, China has an unrestrained FDI in PNG and other Pacific states.
The political, economic, social, technological environment of the Pacific states is very conducive for Chinese influence.
Whether China is malicious with no moral, as described by some US officials, PNG’s position on FDI needs to be redefined to instil fiscal discipline and sound management of the economy and yet, tolerant.
China thirsts to dominate all industry sectors, especially in resource extraction, construction and manufacturing.
In PNG’s case, most of the FDI inflow is concentrated on resource extraction.
Sensibly, FDI in non-extraction sectors, such as service, should also be encouraged to diversify the national economy to fulfil Vision 2050.
PNG can be an emerging eco­nomy, but much depends on the type of diplomatic relationship it creates and fiscal discipline.
If all goes well, the island states will need a Pacific Stock Exchange Association with member exchanges in every one.
This can be a mechanism to provide capital as opportunities are abounding currently.
With the US, Australia and China all imposing themselves as genuine economic development partners in the Pacific, one can only ask which is a competitor or a partner, a positive influen­cer or a detractor.
We also need to understand other intended implications such as pluralism, capitalism, hyper-power or hegemony; military projection and geopolitical in­fluence.
Whoever the power is, PNG should seek transparent deals that are not kept secret in the highest echelon of the government, but made public.
PNG, with increasing stakes on FDI inflows, should review and redefine its national security constituents.
Although non-military, there are some issues of great national security when dealing with intellectual property rights, foreign relations and FDI.
As the world’s principle platform of counterfeit goods and trade, China has failed to enforce intellectual property rights and combat counterfeits.
Its stand on any international queries on counterfeit is normally met with an offensive stand and leaves no room for constructive dialogue.
In our cities and towns, we see first-hand the hallmark of counterfeits everywhere – it is now a global phenomenon.
The proliferation rules for multilateral investments by bo­dies such as the World Trade Organisation (WTO) will affect the national government’s scope to use restriction and economic performance requirement.
Although agreements are there, trade differences have arisen from lack of vigilant mo­nitoring of trade agreements, commitment to enforce penalties on trade infringement and reward mechanism for successful trade developments.
If China is seeking excessive power over weak economics, our guard needs to be on high alert.
This is a tough call but a real world scenario that PNG must face.
We need tough measures on consumer safety, economic safety, criminal organisations and proliferation of sensitive technology.
Again, damage done by counterfeit products does not discri­minate anyone.
Counterfeit currency produced by the criminals such as triads (Chinese mafia) is a hostile act against another state and should be embedded as one of the core national security issues.
Vast swathes of Chinese business and economics in all sectors are either state-owned enterprises (SOEs) or state-controlled companies.
The Chinese business actors are so diverse that their small and medium-sized enterprises (SMEs) and SOEs cannot be differentiated easily.
Often neglected by FDI reci­pients, the SMEs are an area that requires specific attention.
The African experience indicates that China has exported many small businesses and technology, cheap materials and labourers.
For instance, most Chinese-funded infrastructural construction projects are done by Chinese firms, using their own technology, materials, labour and standards.
This should ring a bell in some latest developments in Port Moresby and Madang.
Often, the labourers remain behind when assignments are completed by becoming entrepreneurs, selling cheap import goods or taking over indigenous businesses.
Investments made by China in a developing country, benefits itself and not the host country.
Zambian President Michael Sata once said to the Chinese investors: “We welcome your investment, but as we welcome your investment, your investment should benefit Zambians, not the Chinese.”
While the number of major Chinese projects and programmes will dramatically increase in PNG, their implementation and compliance to standards should concern authorities.
PNG must study Chinese fo­reign policy priorities, with an eye on sustainable economic development and improving health, living standards and education. 
Other key areas such as good governance and transparency, human rights and labour practices, occupational health and safety standards, are also significant priorities.

The writer holds a Masters in strategic management and has a great interest in the Indo-Pacific and the Middle East geo-political strategies and influences. For feedback: [email protected]