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May 23, 2013

History of Economic Growth in India

April 24, 2013 by

Manmohan Singh, the prime minister of India during the World Economic Forum’s India Economic Summit 2009 held in New Delhi. Photo by Eric Miller

Last month, Morgan Stanly and HSBC lowered India’s economic growth forecast for fiscal years 2013 and 2014 from 5.2 to 5 percent and from 6.2 to 6 percent respectively. These numbers do not sound encouraging, but compared to a GDP growth of 4.5 percent for October-December quarter of FY2013, this news provides some encouragement for India’s economy. According to Finance Minister Chidambaram Palaniappan, India’s economy would grow 6.2-6.7 percent during FY 2014. If accurate, it would be a good economic recovery.

Although it is nowhere near the double digit GDP growth India was enjoying a few years ago, the recent news of an economic turnaround is a cause for celebration, especially when U.S. and European economies are still struggling to get back to pre-recession levels.

India’s economic journey from an impoverished country to an emerging global economy is an inspiring example for many developing nations. In order to understand India’s economic voyage, it is essential to shed some light on India’s political and economic history. After 200 years of British rule, India became an independent sovereign nation in 1947. This newly born nation faced a number of issues including a shattered economy, a minimal rate of literacy and horrific poverty. It was a mission impossible for Indian leaders, but Sardar Patel, Nehru and others transformed India into a secular and democratic nation.

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Challenges for China-Africa Relations

April 18, 2013 by

President Jacob Zuma addresses the China-Africa roundtable meeting hosted by China’s President Xi Jinping in Durban, South Africa. Image via GovernmentZA

Adapted from Amb. David H. Shinn’s Speech to the Cosmopolitan Club in Manhattan.

Before making any predictions it is important to begin with a few basic assumptions about China that will also impact its relations with Africa. I believe China’s leadership will remain stable and in full control of the country through at least the Xi Jinping era. China’s focus will remain on ensuring domestic political stability and economic development. But structural challenges such as its aging demography, continued migration to cities, higher population growth rate as a result of loosening restrictions on the one child policy, higher labor costs, dangerous levels of income inequality, lack of a universal social security system, worsening environmental conditions, more severe weather events due to climate change, increasing domestic pressure for input on decision-making by ordinary Chinese, and growing global competition from other emerging nations will take their toll on China’s society and system of governance.

Nevertheless, China’s GDP growth rate will continue to out-perform the world average, but at a less impressive rate than during that past three decades. China will also maintain a high savings rate and contribute disproportionately to global economic growth. While it will try to change elements of the existing international order, it will operate within this system rather than try to replace it.

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China’s Xi Jinping Seeks to Strengthen Relations with Russia and Africa

March 22, 2013 by

China’s president, Xi Jinping, pictured with He Guoqiang and Jia Qinglin in Beijing in November 2012. How Hwee Young/EPA

The first official state visits by the new president of China, Xi Jinping, have just been announced; Xi Jinping will embark on a four-country tour of Russia, Tanzania, South Africa and the Democratic Republic of Congo (DRC). In terms of grand strategy, the Chinese visit to Russia and South Africa, as well as BRICS countries is about balancing against the West and pushing for a multi-polar world order. The visits will prioritize China’s interests as a mixture of cementing geopolitical alliances and closing major strategic resource deals.

While one can expect the usual announcements of eternal friendship in Tanzania and South Africa, the real test for Xi Jinping will be whether he can close an oil deal with Russia and resolve the resources-infrastructure trade-off agreement with the Democratic Republic of Congo. From an African perspective, it appears that the new Chinese leadership is redoubling efforts on its comprehensive charm offensive in Africa.

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Will Rafael Correa Inherit the Leadership of Latin American Socialism?

March 2, 2013 by

Will Ecuador’s Rafael Correa be able to fill the leadership vacuum that will emerge in a post-Castro/post-Chavez era?

With Hugo Chavez apparently near death, the question of who will inherit his legacy as the vanguard of 21st century socialism in Latin America is foremost in the minds of many. With Chavez soon out of the picture, and the Castro brothers in Cuba not far behind him, Ecuador’s Rafael Correa - who has an established record of promoting socialism, has effectively challenged conventional wisdom in the region, and who is likely to remain a force to be reckoned with — seems a natural choice to fill that role.

During last month’s presidential election, in which he won 57% of the vote, Rafael Correa secured a mandate to advance his “Citizen’s Revolution”. But the head winds associated with fluctuating oil prices, a worsening foreign investment climate, rising violent crime, isolation from international financial institutions, and a growing domestic opposition will undoubtedly have an impact on his ability to be as successful as he has been in the past. If Correa plays his cards wisely, and has a bit of luck, he may still be able to pull it off.

Although Rafael Correa’s record in office is mixed, his popularity is attributable to greater political stability, poverty reduction and greater economic equality. No Ecuadorian president in the past century has remained in power as long as Correa, nor has had the ability to actually implement a long-term agenda. Although nearly one in three Ecuadorians currently live below the poverty line, this is five percent lower than in 2007. And the share of income earned by the wealthiest ten percent declined from 43% to 38% from 2007 to 2009.

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China, Africa and FDI

March 2, 2013 by

Standard Bank South Africa. keso/Flickr

A number of us have struggled for years trying to determine the amount of China’s foreign direct investment (FDI) in Africa. China’s Ministry of Commerce regularly publishes a total cumulative figure for FDI in Africa. In 2012, Minister of Commerce, Chen Deming, stated that as of the end of 2011 China’s cumulative FDI in Africa “exceeded $14.7 billion, up 60 percent from 2009.” But the Ministry of Commerce (MOFCOM) also commented in 2012 that China’s investment in Africa of “various kinds” exceeds $40 billion, among which $14.7 billion is direct investment. A number of Chinese academics use a variety of other numbers, a few exceeding $40 billion.

Some of the problem surrounds the issue of FDI definition. The OECD Benchmark Definition is the global standard. China specifically excludes investment in financial institutions. As a result, China’s $5.5 billion investment in Standard Bank of South Africa, for example, is presumably not included in its FDI total, but presumably is included in the “various kinds” of investment. But the exclusion of investment in financial institutions does not come close to explaining the different totals.

I recently ran across a couple of detailed studies that shed some light on this dilemma. Both of them are somewhat dated, but still useful even if they do not end the confusion.

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China and Africa: The Next Decade

February 6, 2013 by

Chinese and Chadian workers at an oil site in southern Chad, part of China’s growing economic presence in Africa. Ruth Fremson/The New York Times via The New York Times

Some Assumptions

China’s leadership will remain stable and in full control of the country. Its focus will remain on ensuring domestic political stability and economic development. But structural challenges such as its aging demography, continued migration to cities, higher population growth rate as a result of loosening of restrictions on the one child policy, higher labor costs, dangerous levels of income inequality, worsening environmental conditions, more severe weather events due to global warming, increasing domestic pressure to allow input on decision-making by ordinary Chinese, and growing global competition from other emerging nations will take their toll on China’s society and system of governance.

China’s economy will continue to out-perform the global average, but at a less impressive rate than during that past three decades. Nevertheless, China will contribute disproportionately to global economic growth. While it will try to change elements of the existing international order, it will continue to operate within this system rather than devote physical and human resources in an effort to replace it.

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Education Reform in Indonesia Likely to Backfire

January 11, 2013 by

Students in Central Jakarta. Photo by Charles Wiriawan

The decision by the Indonesian government to radically alter its current primary school curriculum by replacing science with classes focused on religion and courses that strengthen nationalism will have a generational impact that may prove to make the country less economically competitive and less attractive to foreign direct investment in the years ahead. The drastic changes in primary school curriculums in Indonesia’s public school system, slated for implementation this summer, could lead to greater persecution of the nation’s Catholic, Buddhist, and Protestant religious minority groups.

With religious violence on the rise and the declining effectiveness of the educational system in Indonesia, reform efforts to address these issues are a logical pursuit. However, the decision to remove science and social sciences classes will likely backfire and create a lost generation, which will lead to economic decline, social instability, and religious radicalization.

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China’s Investments in Africa

November 5, 2012 by

Chinese and Chadian oil workers worked side by side at the exploration site in southern Chad. Ruth Fremson/The New York Times

There is agreement among those who follow China-Africa relations that state-owned and private Chinese companies have become major investors in Africa over the past 10 years.  Even Chinese individuals are investing small amounts in enterprises ranging from restaurants to acupuncture clinics.  It is possible that in the past several years, China was the single largest bilateral source of annual foreign direct investment (FDI) in Africa’s 54 countries.

There is, however, considerable confusion as to what constitutes Chinese investment in Africa.  Many analyses, especially journalistic accounts, conflate investment with multi-billion dollar loans from China to African governments that often use the loans to build infrastructure by Chinese construction companies.  These loans tend to go to resource rich countries such as Angola, Democratic Republic of the Congo and Ghana and are usually repaid by shipping natural resources to China.  These loans are not FDI; they are commercial deals, albeit often with a concessionary loan component.  It is important to keep them separate from investment.

So how much have Chinese companies and individuals invested in Africa?  I have concluded that no one, including no one in China, knows the answer to this question.  For that matter, it is not even clear how China defines FDI.  China’s Minister of Commerce, Chen Deming, stated in mid-2012 that as of the end of 2011 China’s cumulative FDI in Africa “exceeded $14.7 billion, up 60 percent from 2009.” 

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Convergence of US and Chinese interests on African Security? The Case of the Two Sudans

November 2, 2012 by

Liberian children hold Chinese flags before the arrival of China’s President Hu Jintao in Monrovia in 2007. Christopher Herwig/Reuters via Reuters

There has been intense interest in and outright alarm expressed by western civil society and governments on the rapidly increasing Chinese presence in almost all spheres in African life. Many articles paint a picture of a saintly west and a demonic China in Africa, charging the Chinese on the hearsay evidence of abuse of African workers and poor Chinese workmanship of roads and infrastructure projects. The Chinese focus on resources and infrastructure and its pragmatic and self-interest motivated policy of non-interference in domestic affairs is paraded as the smoking gun of Chinese responsibility for a range of African ills from unemployment here in Cape Town where I write, to the Darfur genocide.

The intense interest by the west in China-Africa relations - arguably a natural development of the globalization process - betrays a deep seated unease on the part of the west as Chinese companies, government and Chinese models of development are shown to be more adaptable, better liked and more suitable in Africa compared to the western counterparts.

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Reheating the Beans: The Gillard White Paper on Asia

October 29, 2012 by

Australia’s Prime Minister Julia Gillard. Paul Miller/AAP

It has a familiar ring to it. Australia, that White Tribe of Asia, is now sounding desperate, hoping for recognition in a region it has struggled to comprehend since the days of British colonisation. If human beings are seeking to find the common thread of expression, that elemental language amongst Babel’s sea of tongues, then we can say that the White Paper on the Asian Century seeks to do so – in part.

This is, however, only the start. There are, altogether, 25 speculative objectives. Four “Asian” languages have been selected as priorities: Chinese, Indonesian, Hindi and Japanese. The report deems it fundamental that every child be given the chance to learn an Asian language throughout their education in a school system that “will be in the top five in the world”. Globally, Australia will be ranked in the top five countries for ease of doing business and our innovation system will be in the world’s top 10. Astrology is a superb thing in some ways, but dangerous in politics.

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China’s Dangerous Game: Resource Investment and the Future of Africa

October 9, 2012 by

Chinese and Chadian workers at an oil site in southern Chad, part of China’s growing economic presence in Africa. Ruth Fremson/The New York Times via The New York Times

It was an important day for Angola, June 20th, 2006. Amid the diplomatic pomp and handshakes of an official visit Chinese Premier Wen Jiabao opened the Luanda General Hospital and had his picture taken peering into a microscope surrounded by officials in suits and medics in white smocks.  The capital’s General Hospital, a sprawling eighty-thousand square meter complex, was constructed with Chinese funds and meant to symbolize the growing partnership between Beijing and Angola, a symbol replicated across the African continent in countless roads, bridges, and other infrastructure projects funded by Chinese investments.

Premier Wen stayed only 24 hours but the hospital remained; a physical reminder of Sino-African trust and cooperation. Four years later the hospital was in imminent danger of collapse. Deep cracks ran through its walls, bricks crumbled under the structure’s weight. Personnel and 150 patients were evacuated with some forced to live in tents on the hospital grounds. Beijing dispatched an investigatory team and their findings concluded that faulty Angolan surveys resulted in flawed Chinese designs, a diagnosis that has come to symbolize the greater Sino-African relationship: great ambitions built on uncertain ground.

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Enter the Dragon: Will China’s Deal of the Century Save Congo?

July 16, 2012 by

Twenty-four trillion dollars. It is a number that beggars the imagination, almost 40% of the global economy, and it is buried in one of the world’s poorest and most violent countries: The Democratic Republic of Congo. Failed state, rape capital of the world, humanitarian catastrophe…Congo personifies all these but beneath the surface its dark earth holds $24 trillion of copper, cobalt, coltan, the bones and blood of information age manufacturing. For this reason, if for no other, the world cannot ignore Congo. It can’t afford to.

Called Congo’s “deal of the century”, in 2007 China recognized the beleaguered nation’s importance to the global economy with an unprecedented $9 billion resources-for-infrastructure agreement which holds the potential to unlock Congo’s vast mineral wealth and improve the material lives of its seventy-one million people with new roads, rails, hospitals, and universities.

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China, Africa and Implications for the United States

July 14, 2012 by

China is planning to build Chad’s first oil refinery, lay new roads, provide irrigation and erect a mobile telephone network. Chinese oil workers at the exploration site. Ruth Fremson/The New York Times via The New York Times

China and the United States have surprisingly similar interests in Africa. Both rely increasingly on the continent for oil while China also imports large quantities of minerals. Both seek political support from Africa’s 54 countries, which constitute more than a quarter of the membership of the United Nations. Both see Africa as an increasingly attractive export market, although today the African countries collectively account for a tiny percentage of each country’s global trade.

China also wants to expand the “one China” principle throughout Africa; four African countries recognize Taiwan. This is not an American interest. For its part, the United States wants to minimize the impact in Africa of terrorism, narcotics trafficking, international crime, piracy and money laundering so they do not harm US interests in Africa or the homeland. While these are increasingly becoming Chinese interests, they have not yet reached the level of US interest. The United States also seeks to continue naval access to African ports and maintain the ability to overfly and land military aircraft. This is not yet an important interest for China.

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Iran: Why this time is Different

May 3, 2012 by

The latest P5+1 talks in Istanbul rejuvenated the diplomatic track between Iran and the West, paving the way for a new chapter in Iranian nuclear negotiations. Yet if the recently concluded talks were a test of intentions, the upcoming negotiations in Baghdad are going to be a real test of wills. Both sides will have to overcome huge obstacles if they want to establish a “sustained process of serious dialogue” to resolve the Iranian nuclear impasse.

The only way the Baghdad nuclear talks can work is if both sides confine their demands to a mutually acceptable deal. This means that the Iranians need to concretely demonstrate their openness to greater transparency — subjecting not only their (increasing) stockpile of highly enriched uranium to real-time, verifiable, and comprehensive inspection by the International Atomic Energy Agency (IAEA), but also opening up their more controversial facilities in Fordo and Parchin.

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Assessing China’s Role and Influence in Africa

March 29, 2012 by

China’s interest in Africa has grown rapidly in recent years. In Chad, China bought the rights to several oil exploration zones from a Canadian company and has gone from bit player to center stage in Chad’s affairs. Ruth Fremson/The New York Times via The New York Times

Remarks by David H. Shinn to the House Subcommittee on Africa, Global Health, and Human Rights. 

I thank Chairman Ileana Ros-Lehtinen of the House Committee on Foreign Affairs, Subcommittee Chairman Christopher Smith and Ranking Member Karen Bass for inviting me to participate in this hearing. For the past six years, two of us have been researching a book on China-Africa relations that is being published by the University of Pennsylvania Press and will be available this June. My comments today reflect some of that research. Unless otherwise noted, the statistics and analysis in this testimony refer to all fifty-four countries in Africa. China tends not to make a distinction between Sub-Saharan Africa and North Africa as the U.S. government often does.

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