Oil-backed loan will finance recovery projects

Walk down any street in the Angolan capital, Luanda, and the signs of a US $2 billion cash injection from China are evident. From workmen in hard hats bustling around construction sites to suited businessmen in hotel lobbies, the growing presence of the Asian tiger is impossible to miss. The oil-backed credit line, agreed with Eximbank of China in March 2004, is being released on a project-by-project basis to rebuild Angola's war-devastated infrastructure. "This is the year when China's activity in Angola will really speed up," finance ministry spokesman Bastos de Almeida told IRIN. "We can already see several Chinese companies operating here, building [premises for] the finance ministry, the justice ministry and rehabilitating the railways in Luanda, [and the southern coastal provinces of] Benguela and Namibe - 2005 is the year when China's presence will really be felt," he said. Rebuilding the infrastructure is a top priority. "This credit line is going to be great for Angola - there's no doubt about it," said one senior state official. "It is providing funding for our development, and that is something that Angola needs right now. The Chinese are going to rehabilitate our infrastructure, and they are going to do it in a fast and efficient manner." Economists agree that the lack of functioning infrastructure - power grids and water networks, roads, bridges and railways - is the single biggest barrier to economic recovery in a country desperate to diversify away from oil. But even before the lion's share of the money is paid out, there are questions about the sustainability of the Chinese projects. "This is a very old-fashioned way of promoting development," said an aid worker who did not wish to be named. "They [foreign enterprises] come in, build dams, roads and bridges, but no one ensures that there's the capacity to maintain them. There is a real risk of creating white elephants - mega-projects gathering dust in the desert," the source commented. Others fear that the approved projects are focused on boosting the government's popularity ahead of general elections, due in 2006, rather than on the grass-roots development Angola so badly needs. The massive cash boost will not have a noticeable impact on employment. Well over half the working-age population are jobless but, under the agreement, Chinese companies have access to 70 percent of the contracts, leaving just 30 percent for local firms - an arrangement that has already caused consternation. "Angolan businessmen are very worried about this because they don't get the business, and the construction sector is one in which Angolans hope they can find work," said independent economist Jose Cerqueira. MORE CASH, LESS TRANSPARENCY Perhaps the biggest concern among foreign officials in Luanda is the perceived opaqueness of Angola's recent deals. The bilateral Chinese agreement comes hard on the heels of a $2.25 billion Standard Chartered bank loan, which means there is less pressure on the government to answer difficult questions posed by the international community. "My reaction when I hear of this big Chinese loan is that it distorts the whole process and gives a lot more flexibility for Angola not to comply with the conditions for other deals, such as an agreement with International Monetary Fund (IMF)," said Douglas Steinberg, country director for the humanitarian NGO, CARE. "It allows the government to escape ... transparency." Donors want Angola to open its books to scrutiny and meet the standards required by global institutions, which would clear the way to cheaper credit on more favourable terms, and boost development more effectively because such loans demand greater openness, resulting in better management of state resources. Despite being rich in oil, most of Angola's 13 million people are woefully poor, and critics continue to level accusations of corruption at the country's wealthy elite. The China deal has already been dogged by claims of mismanagement. Earlier this week the transparency watchdog, Global Witness, sent a letter to the World Bank and the IMF lamenting the fact that the terms of the deal had not been made public. "The long-standing concerns about the lack of fiscal transparency and accountability also extend to the reconstruction process," the NGO pointed out. "There has to date been no public scrutiny of either specific reconstruction projects, nor of the procurement process managed by the National Reconstruction Office, including projects selected under the terms of the $2 billion credit line extended to Angola by China." With relations between Angola and the IMF plunging to a new low, and no sign of any agreement soon, state sources said the country must have funding now, to answer its immediate needs. "A lot of institutions don't like Angola doing these deals because they have strings attached, but that is normal in any part of the world," said one official. "But look at how many times the World Bank has delayed its funding - we cannot sit back and wait." Many believe that the deal is mutually beneficial, with oil-hungry China looking to Africa and elsewhere to satisfy its growing demand for energy. The agreement provides China with crude in return for credit, and also opens the door to possible future exploration prospects. China already imports around 30 percent of Angola's oil, just behind the United States, which buys 40 percent of production. With talk of establishing a Chinatown in Luanda, and weekly flights linking Beijing to the Angolan capital, bilateral ties are expected to become increasingly important.