By Sir Ronald Sanders, From Caribbean360

Caribbean countries should be active in securing investment and concessionary loan financing from China but not to continue the construction of vanity projects that do not earn revenues says Sir Ronald Sanders.

BRIDGETOWN, Barbados, Saturday August 10, 2013 – In China recently one of the country’s leading academics told me that a former Chinese Ambassador to the Caribbean said that the region has “a two-party system” – one party during the day and another party at night.

What the academic was quoting the former Chinese Ambassador as saying is that Caribbean workers prefer to “party” than to work.  This is a principal reason that Chinese companies advance for importing labour from China for construction projects in the Caribbean.  Another is that they are pressured by Caribbean governments to deliver projects quickly and they cannot do so without importing Chinese workers to whom they do not apply the labour laws and practices of Caribbean countries.

The former Chinese Ambassador’s remark demonstrated a lack of appreciation of the historical, political and cultural development of Caribbean labour laws and industrial procedures.  It showed little appreciation for the history of slavery and indentured labour in the region; the exploitation of workers; and the rise of the trade union movement to establish and protect workers’ interests and their conditions of work. 

Yet, if the current practices continue in which Caribbean workers are, for the most part, spectators at projects employing Chinese labour, there will eventually be resentment and a backlash, particularly if the projects are financed by loans to Caribbean governments that taxpayers have to repay.  Such a backlash will harm relations between China and Caribbean countries at a time when these relations should be improved and deepened at the economic level.

It has to be recognised, however, that Caribbean workers will also have to improve their performance if they are to compete in a global market where costs and output are crucial factors in production.

Chinese companies that secure contracts for construction and other projects should also be mindful of the importance of joint ventures with Caribbean companies especially as Caribbean firms cannot raise capital on the advantageous terms given to Chinese competitors by the China Development Bank and the China Import-Export Bank.  If Caribbean businesses continue to be sidelined by Chinese firms in bids for projects in their own countries because of the comparative high costs of borrowing and also because they are required to adhere to Caribbean labour laws, they too will build up resentment.

Based on their experiences elsewhere – more particularly in Africa – Chinese companies are beginning to recognise the vital importance of understanding the culture and laws of the countries in which they operate.   They know that even if governments blink at their own laws in order to secure Chinese financing, this is a rope that has an end and the end could have unhelpful consequences.  But, there needs to be a constructive dialogue now between the government of China and the governments of the Caribbean to set down the terms of engagement including joint ventures, public sector-private sector partnerships, respect for labour laws and the requirement to employ local labour on projects financed by Caribbean governments’ borrowing.

Chinese officials state quite clearly that the government of China would not be averse to such a discussion with Caribbean governments.   It is, therefore, a discussion that should happen soon.

For their part, Chinese officials are clear about what China wants for its business people.  In a recent China-Latin America and Caribbean Forum in which I participated in Beijing, China’s representatives proposed that governments should give China’s business people “a stable and better investment environment, in particular more facilities in such areas as  national treatment, tax, visa and residence”.

While it is appropriate that China should seek such conditions for its business people, reciprocal arrangements from Caribbean countries – even if they were agreed – would hardly be beneficial to the small states of the region.   In this connection, Caribbean governments should be thinking through their own requirements from China including aid for trade, and Chinese companies putting up capital for much needed infrastructural projects on the basis that they would build and operate such projects until their investment is recovered at which time they would hand them over to the governments, or sell them to the Caribbean private sector.

Caribbean countries should be fully engaged with China.  The urgency of doing so stares the region in the face compellingly.   China is the world’s second largest economy, but more importantly it has US$3.4 trillion in foreign reserves.  China needs to invest that money so that it gets a regular and sustained return.

The portion of these reserves that are tied up in US and European bonds is not earning a great return.  Thus, China is investing overseas in owning real assets – like ports, utilities, natural resources, technology and financial companies.

The British Guardian Newspaper reported in May this year that, “since 2005, China has provided loan commitments of more than $86 billion to Latin American countries. That is more than the World Bank or the Inter-American Development Bank has provided to the region during the same period”.  The Chinese investment and loans have contributed significantly to the growth of Latin American economies over the last eight years. For its part, China expects that the money it has invested in Latin American countries will give it returns not only in political influence on issues that are important to China in the international community, but also in financial benefits.

Caribbean countries should be active in securing investment and concessionary loan financing from China but not to continue the construction of vanity projects that do not earn revenues and that will quickly deteriorate unless they are maintained by draining national budgets.

Caribbean “cap in hand” diplomacy has elicited some response from China in the past, but it is not maintainable.   The relationship has to be put on a mutually beneficial footing.  In this connection, the Caribbean might focus on offering China and Chinese businesses the opportunity to invest in sustainable projects from which they will earn a return.  Such projects could include energy generation from renewable sources; roads and bridges that can be financed from tolls; region-wide maritime transportation including fast ferries; the construction of modern sea ports; tourist resorts (not necessarily for the Chinese market); agriculture and fisheries projects.

Urgent work is required by Caribbean countries to take full advantage of the considerable resources that China has to invest in what the Chinese call “win-win” situations.

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