The Weekend Leader – As China runs out of steam, India must relaunch the Asia-Africa Growth Corridor to get closer to Africa
India plans to revive the Asia-Africa Growth Corridor (AAGC), the mega infrastructure project launched in 2017 to connect Asia and Africa. The outlines and finer details of the project, which was essentially a collaboration between India and Japan, could be significantly altered. Other actors could also be mobilized to relaunch the project.
The almost stillborn AAGC was seen as an attempt to provide an alternative to the China-propelled Belt and Road Initiative (BRI).
“At a time when the world is looking for an alternative to Chinese projects, the AAGC is keeping its promises but with the Covid 19 pandemic and its economic impact, many projects are in the spotlight,” an insider told India Narrative . However, he added that a new financing mechanism that is viable and transparent must be developed.
Other countries as well as multilateral agencies, including those focused on Asia, such as the Asian Development Bank, must be associated to bring the project to life.
At present, China, which aggressively carries out BIS execution, is the continent’s largest lender. However, as of 2019, China’s loan commitments to Africa declined.
“We must think about how we can revise the AGCA to make it more attractive and beneficial. It must be a for-profit project rather than a vision of human development”, underlined the French Institute. of international relations (IFRI).
According to a study by Carnegie Endowment for International Peace, Chinese financiers committed $ 153 billion to African public sector borrowers between 2000 and 2019. “After rapid growth in the 2000s, annual loan commitments to Africa peaked in 2013, when the BIS was launched. In 2019, however, new Chinese loan commitments were only $ 7 billion for the mainland, down 30% from $ 9.9 billion in 2018, “he said. .
That aside, China’s “resource-backed loan model for financing infrastructure projects” in which the borrowing country commits to earning future revenues from its natural resource exports to repay loans. guaranteed by Chinese creditors, raised doubts.
Africa’s debt problem
“China’s trade relations in Africa raise eyebrows,” notes a report published by Nairobi News.
“It is true that many African countries have shown their concerns about the Chinese lending model, but the problem is that other sources of funds are often not available to them and this creates a condition where they have to borrow more from the China “, Pradeep S Mehta, General Secretary of CUTS International told India Narrative.
Last month, Kristalina Georgieva, managing director of the International Monetary Fund, noted that debt levels, which were already high before the pandemic, have risen sharply. Public debt in sub-Saharan Africa jumped more than 6 percentage points to 58% of GDP in 2020, the highest level in almost two decades, she said.
A sectoral breakdown of Chinese loans highlights that more than 65% of its loans go to infrastructure sectors such as energy, mining, construction, transportation, among others, according to the Carnegie study, adding that comparison, traditional lenders, mainly from Europe and North America as well as Japan in the Development Assistance Committee of the OECD focus more on social sectors such as health, population, education and humanitarian aid.
Not just that. The lending model of other lenders includes the right mix of grants and loans.
“It is time for India and other countries to look to Africa for development in partnership,” an Indian-born entrepreneur living in Kenya told India Narrative.
The Group of Seven (G7) countries that held their meeting in June highlighted an arc between Africa and the Indo-Pacific as the space where they want to extend their democratic footprint amid the rise in power of China as a world power.
The G7 also announced that it would increase its support for the Indo-Pacific and Africa. “We are committed to working with partners around the world, including in the Indo-Pacific and Africa, to actively promote these shared values for the benefit of all,” the statement said.
Meanwhile, US President Joe Biden’s proposal to develop a mega infrastructure plan under the Build Back Better World (B3W) initiative, which a Financial Times report says is based on the transparency, sustainability and consultation with local communities – be a gesture to counter the BRI.
“It remains to be seen what the finer details of the proposed project will be,” said Mehta.-IANS