Wednesday 25 Nov 2020 | 01:30 | SYDNEY
Wednesday 25 Nov 2020 | 01:30 | SYDNEY

China dazzles Congo — next stop, PNG


Fergus Hanson


13 February 2008 10:40

This fascinating article from Asia Times reports on China’s latest foray into Africa: a $US12 billion ‘resource-backed finance’ deal in the DRC. In a characteristic move to secure resource access, China has agreed to build $US9 billion worth of infrastructure to be paid for from its mining of Congo’s copper and cobalt deposits: a considerable sum for a government whose budget was $US1.3 billion in 2007.

While the deal might seem of only passing interest, it has relevance closer to home. China’s insatiable appetite for resources has seen it recently make some bold moves in next door PNG.

In 2006, China announced a $US651 million investment to mine the Ramu copper and cobalt deposit in PNG, and rumours suggest it plans to sew up a number of other deals there. The Congo scheme is a reminder of the massive scale that China can operate on and its ability to deliver goods that Western governments and firms are unwilling or unable to provide or fund in trouble-ridden states.

Like similar Chinese infrastructure-for-resources deals, the Congo scheme has some alluring elements. Funding for infrastructure projects will come from China’s Eximbank and be paid directly to Chinese state-owned companies employing mainly Chinese labourers, giving a large bang for each buck and reducing the potential for graft. And in a war ravaged country shunned by investors, a way has been found to build the infrastructure the new government has set as a priority (water, electricity, education, health and transport).

Of course there are strings attached, and China has naturally hedged its position: profits will first be used to repay the mining investment. There are also few ways to guarantee the quality of the infrastructure China builds or its useability, and with Chinese state owned companies doing the bulk of the work and employing mainly imported Chinese labour, the flow on effects to the local economy will be diminished.  

With a swag of state-owned enterprises it can direct at will, employing dirt cheap labourers prepared to work in conditions the locals complain about, the Chinese are a steam-train force when it comes to securing resources in the developing world. We can expect a lot more to come in the resource-rich countries of Melanesia, especially PNG.