China’s African Foothold – Djibouti & Beyond

FILE-CHINA-DJIBOUT-DEFENCE

By J Paul Zachariah*

In February 2018, the small African country of Djibouti terminated a deal with Dubai Ports World, one of the world’s largest port and container terminal operators,that was struck in 2006 to operate the Doraleh Container Terminal (DCT) at the Port of Doraleh. Though the Government of UAE accused Djibouti of ‘illegal seizure’ of the terminal, western military officials had no doubts that the real player in this ‘appropriation’ was China. At a US Congressional hearing in March this year, soon after the Doraleh incident, Commander of the U.S Africa Command, General Thomas Waldhauser warned that a “Chinese takeover of Doraleh could have significant consequences if there were restrictions on the US’ ability to use the facility.” What does it mean for India, as China establishes a strong foothold in Africa?

The strategic importance of Djibouti

With a population of less than a million of which three fourths live in the capital city; with arable land being only less than one per cent of the landmass; with no major natural resources to exploit; with a GDP of a little over US$ 2 billion, Djibouti is a place of extreme interest to world powers only because of its strategic location at the ‘Horn of Africa’ bordering the Red Sea and the Gulf of Aden entering from the Indian Ocean. The ports of Djibouti are located near the Strait of Bab al-Mandeb, which is the route for oil tankers and container ships from the Indian subcontinent, the Gulf States, and eastern Africa to Europe. Djibouti with an area of 23,200 square kilometres (a little larger than the Indian state of Meghalaya), already has the military bases of the USA, France, Japan, and China which formally opened its base in August 2017. Saudi Arabia also has plans to build a military base in Djibouti.

Chinese victory in the Port of Doraleh take over

After the nationalization of the DCT, the Government of Djibouti announced that the terminal would be controlled by the Doraleh Container Terminal Management Company which is said to be a fullygovernmentowned enterprise under the Djibouti Ports and Free Zones Authority. In March this year, the DCT Management Company signed a deal with the Singapore based Pacific International Lines to increase the amount of cargo handled at DCT. One of Asia’s largest shipping companies, Pacific International Lines (PIL) founded by Chang Yun Chung, has an MOU with China Merchant Port Holdings (CMPort) to develop new markets in Southeast Asia, South Asiaand Africa. CMPort which owns a 23.5 per cent stake, is the largest shareholder of the Port de Djibouti SA which is the parent holding company of all the ports and container terminals in Djibouti. CMPort, though listed in Hong Kong, is itself a subsidiary of China Merchants Group which is a state-owned enterprise under the direct supervision of the State-owned Assets Supervision and Administration Commission of the State Council of the Chinese Government. In 2016, CMPort, China Merchants Investment Development Company Limited and the Djibouti Ports & Free Zones Authority signedan agreement for the investment and development of the Djibouti International Free Trade Zone. The Chinese military base is located adjacent to the Doraleh Multi-Purpose Port which was opened in March 2017 with investments from CMPort and where the Doraleh Container Terminal was originally located. The government of Djibouti has also allocated a wharf at this port for the exclusive use of the Chinese navy.

China’s Strategic ‘Investments’ in Africa

The influence of Chinese ‘investments’ in Africa can be best gauged by the fact that of the 54 countries in Africa, only two -Swaziland and Burkina Faso, have maintained diplomatic relations with Taiwan, withstanding pressure from Beijing. AidData (a research unit at the College of William & Mary, UK) notes that Chinese official development assistance to African nations, were linked with the recipient country’s voting patterns in favour of China in UN bodies and the acceptance of the One-China policy with regards to recognition of Taiwan.

A report by Deloitte (Africa Construction Trends, 2017) points out that though the respective governments may own the majority of big construction projects in Africa, the bulk is either funded or built by Chinese companies. In January 2017, a 750 kilometer railway line linking Addis Ababa, the capital of Ethiopia, and the city of Djibouti was inaugurated. Of the US$3.5 billion spent on this project, 70 per cent was from loans from China Exim Bank. In May 2017, the 472 kilometer Mombasa-Nairobi railway line was opened in Kenya. Of the US$4 billion spent on this project, 90 per cent was from loans from China Exim Bank. The newly opened Addis Ababa-Djibouti railway line also suits the interests of a Chinese shoe factory, Huajian Shoe Co, located in the Chinese built industrial park along the rail line. Ethiopians work 13 hours a day to make shoes which would be exported from the ports of Djibouti to the US, mainly to international brands like Tommy Hilfiger, Guess and Lucky.

According to a report by China-Africa Research Initiative (CARI) of the Johns Hopkins School of Advanced International Studies, Washington DC, it is seen that transportation constitutes the largest sector financed by Chinese loans at US$24.2 billion, followed by energy (mainly power) at US$17.6 billion, mining/oil at US$9 billion, and communication projects at US$6.5 billion.

The Chinese aid and loans are not restricted to any one region in Africa, they have granted secured loans and aid to resourcerich nations like Angola, Sudan, Zambia, Côte d’Ivoire etc., and to resource deficient nations like Ethiopia and Djibouti where the focus is to develop infrastructure and free trade zones. According to CARI, of the 54 African nations, 45 have received Chinese funding.

China’s Belt and Road Initiative and the String of Pearls

China has persistently worked and improved upon the Belt and Road Initiative (BRI) previously called the ‘One Belt, One Road’ (OBOR) Initiative as a “major foreign policy and economic initiative” according to a research paper by the Rand Corporation. The US$900 billion program aims to “deepen connections between Asia, Europe, and Africa and their surrounding regions.” With the BRI, the Chinese aim to tap the market potential of the regions covered under the ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Silk Road.’ The investment spree of China in railways and ports around the world is considered important for the success of BRI

Apart from the stake in Djibouti’s Doraleh Multi-Purpose Port, CMPort has also made acquisitions in Sri Lanka and Brazil. These new acquisitions add to China’s growing portfolio of international port holdings, which now span the world with terminals in Greece, Myanmar, Israel, Djibouti, Morocco, Spain, Italy, Belgium, Côte d’Ivoire, Egypt and around a dozen other countries. The present bonhomie between China and Maldives could see the revival of China’s interest in building a port in the LaamuAtoll in the southern part of Maldives. If this works out, there is no doubt that the port would form part of China’s ‘String of Pearls’ along with Hambantota (Sri Lanka) and Gwadar (Pakistan) to encircle India in the Indian Ocean.

An Indo-Japanese Alternative to the Chinese Initiative

Envisaged as a “people-centric sustainable growth strategy” the idea of the ‘Asia Africa Growth Corridor (AAGC)’ emerged in the joint declaration by Prime Minister Narendra Modi and Prime Minister Shinzo Abe in November 2016. The AAGC also has the support of the African Development Bank and several African countries like South Africa who are not keen on depending on China for development and foreign investments. The Vision Document of the Asia Africa Growth Corridor says the main objective of the corridor is to enhance growth and connectivity between Asia and Africa with the ‘four pillars’ of Development Cooperation Projects, Quality Infrastructure and Institutional Connectivity, Enhancing Skills, and People-to-People Partnership.

The AAGC, though only in its nascent stages as an innovative idea, has the potential to be a credible ‘alternative’ to China’s debt generating BRI investments. Japan could channel its Overseas Development Assistance Programme to finance and execute ‘economically viable’ projects under AAGC in contrast to China’s pouring in of finance  for projects under BRI, that are not deemed ‘economically viable.’ A core strength of the AAGC could be India’s expertise in ‘human resources development’ and Japan’s expertise in ‘delivering quality infrastructure.’

November,2017 saw the revival of another major multilateral setup called the Quadrilateral Security Dialogue or the ‘Quad’ which is a coalition of the US, Japan, Australia and India to patrol the waters from the Indian Ocean to the Pacific all the way to the disputed South China Sea. Dubbed as the ‘Asian NATO,’ Quad was first mooted in 2007 by Prime Minister Shinzo Abe of Japan but under pressure from the Chinese,  Indiaand Australia pulled out and the idea fizzled out. The Quad is back in the reckoning now, with India and Australia back on board being aware of the geopolitical implications of China’s BRI. With Quad, Asia-Pacific has given way to ‘Indo-Pacific’ and this quadrilateral mechanism could become the ‘security wing’ of the AAGC. However, and not surprisingly, the Chinese are not pleased by the revival of Quad as expressed by their staterun Global Times, which wrote: “Quad contributes only to divide the Asia-Pacific into hostile armed blocs.”

India’s Assertive Diplomacy and a new phase in Indo-African Relations

Rong Ying of the China Institute of International Studies (CIIS), a thinktank affiliated to the Chinese Foreign Ministry, says that over the recent years India’s diplomacy has been vibrant and assertive thanks to what he calls the ‘Modi Doctrine.’ After decades of passive diplomacy emphasized on historical relations, a legacy of the Nehruvian era, India under Prime Minister Narendra Modi has entered a new phase in Indo-African relations.

The success of the third India Africa Forum Summit held in 2015, where all the 54 African countries were represented,was a significant diplomatic success for India under Prime Minister Modi. India could be a major partner of the African Union (AU) particularly in helping the AU to achieve their two key policy documents– Agenda 2063, “a socio-economic framework for the transformation of Africa,” and Africa Integrated Maritime Strategy (AIMS) 2050 which is “to positively change the destiny of African populations through blue growth promotion.”

The strategic positioning of India in the African littoral of the Indian Ocean could be augmented by the access to naval facilities granted to India by Oman and the agreement with Seychelles, if it materializes, to build an airstrip and a naval berth. However, a confrontation with China in the African continent would not be in the interests of India nor the African nations who are no longer passive stakeholders in the development of their societies. There is no denying the fact that India cannot match the deeppocketed ‘financial’ diplomacy of China on its own. And Africa cannot be allowed to drift from the influence of Western hegemony to a Chinese hegemony. This is where real democracies like India and Japan, who are also economic powerhouses, can balance out the influx and influence of Chinese ‘dollars.’

*J Paul Zachariah is Contributor for CPPR. Views expressed by the author is personal and does not reflect that of CPPR

Featured Image: China has established its first overseas military base in Djibouti, located in the Horn of Africa. Jerome Favre / EPA

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