“China’s engagement in the region does not necessarily have to be negative, it could be a big positive for growth… There must be a better more equitable vision for a mutually beneficial operating model, for the management of the relationship with China.“Perry Douglas
Perry Douglas, Guest Contributor
In the recent article titled: China’s Opaque Caribbean Trail: Dreams, Deal, and Debt by Caribbean Investigative Journal Network (CIJN.), this piece is filled with many examples of the Chinese debt-trap strategy. For Caribbean countries, one of the most visible, expansive, and expensive forms of Beijing’s engagement with the region is its financing of large-scale infrastructure projects. The CIJN investigation unveiled a trail of official secrecy, questionable procurement processes, and the looming threat of potentially insurmountable debt. The Chinese playbook is the same everywhere—huge hotel projects, highways, agriculture projects, even building a Prime Ministers fancy new house. According to CIJN, “China’s Caribbean portfolio is extensive. It includes highways and bridges, housing, energy, mining, air and seaports, tourism projects, hospitals, and even official residences, forming a part of that country’s strategic thrust into Latin American and the Caribbean.”
The investigating team uncovered, that in most cases, the precise terms of agreements are not routinely publicized, the procurement processes and concessions are a mystery. The Chinese often end up with all the labour contracts, and their labour practices lack adherence to any type of building code and other health and safety standards.
A 2012 independent forensic audit of the Jamaica Development Infrastructure Programme (JDIP) and the Palisadoes Shoreline Protection, and Rehabilitation Works Project concluded there was “non-adherence to allocations approved by Parliament and the Ministry of Finance. There was also the arbitrary issuance of Variation Orders and selection of sub-contractors along with the unprogrammed and arbitrary allocation of funds for institutional strengthening,” according to the audit document.
According to clause 13.3 of the contract ($630 million North-South Highway project signed with China Harbour Engineering Corporation (CHEC) on June 21, 2012):
“The Government shall unconditionally and irrevocably waive any right of immunity (to the fullest extent permitted by applicable law) which it or any of its assets now has or may acquire in the future in any jurisdiction.”
To add insult to injury, the highway deal, in a case study conducted by the Caribbean Development Bank (CDB,) found there was “no way costs could be recouped through toll payments.” Hence, China now said that since the investment couldn’t be recouped through toll payments, land adjacent to the highway should be given as compensation. Jamaica of course had already agreed to those terms in the clause. China of course enforced it and the Chinese company promptly brought in 1000+ workers from China to begin work on a commercial project—free land, no Jamaican worker participation, no contracts for Jamaican firms, no economic benefit to Jamaica.
“New roads, new businesses, new hotels, and booming Chinese immigration has led to many companies being staffed with more Chinese workers than local Bahamians.” Forbes
In practical terms, this meant that the Jamaican state allowed China, in a case of a breach of contract by the Government of Jamaica, or actions that the Chinese have determined results in non-performance, would be actionable on Jamaica’s sovereignty. When contextualized, the clause essentially allows for the GOJ to forfeit any current or future owned assets to China, for debt recovery by seizure. A blatant neocolonialism play and encroachment on sovereignty.
In Trinidad and Tobago, the sudden termination of the Government’s $71.7 million project between China Gezhouba Group International Engineering Company and the Housing Development Corporation (HDC) in 2019 has drawn attention to a lack of transparency in the awarding of the contract, and what has been described as overly generous concessions to this Chinese company.
In Suriname, there are increasingly alarming rising fears that mounting debt to China, spanning decades, can have the impact of stalling future development and exposing the country to liabilities way above its ability to pay.
Economics has never been a morality play; so, it’s not China’s responsibility to look after the interest of our people, it is the responsibility of leaders, in consultation with the people, to lead and look after the interest of their nations. We must be committed to real change, otherwise, nothing will ever change! The highly skilled Chinese negotiators need to be matched with our powerful team of negotiators, weaponized with the tools and resources of Artificial Intelligence and Machine Learning algorithms, and systems that can process and provide actionable solutions at a simple keystroke.
China’s engagement in the region does not necessarily have to be negative, it could be a big positive for growth. Notwithstanding, it will all depend on how we play our cards—understand the historical colonialism playbook of others and develop counter offenses…be proactive, not reactive, and control the narrative. There must be a better more equitable vision for a mutually beneficial operating model, for the management of the relationship with China.
This operating ecosystem must be formattable, backed up by strong executable mechanisms, progressive regulatory environments, compliance, and governance, abiding by sturdy democratic principles…the rule of law, freedom of information, and enhanced transparency, in the context of an anti-corruption agenda.
Assets belonging to the people becoming collateralized property in business deals is beyond the pale, way beyond the bounds of any acceptable actions and behaviour by any government, and it is fundamentally illegal. Sovereignty represents a state’s most precious right and freedom under international law.
“The borrower hereby irrevocably waives any immunity on the grounds of sovereignty or otherwise for itself or its property in connection with any arbitration proceeding…or with the enforcement of any arbitral award pursuant thereto.” Project in Guyana signed on January 9, 2017; in Article 8.1:
“This is Guyana dangerously agreeing to cede sovereignty. It plays into the Chinese strategy of using economic weaponry in the pursuit of influence and domination,” says attorney and chartered accountant Christopher Ram. In short, these governments have signed away their nation’s sovereignty, dignity, and basic self-respect, to China. China could simply walk in and take control of Guyana’s assets through its pre-set “debt trap.”
Very recently, July 2020, a Kenyan Appellate Court halted a construction deal, by pronouncing the $3.2 billion contract between Kenya and China for the construction of the Standard Gauge Railways (SGR,) as illegal. The recent judgment effectively lifted the lid on the “dragon’s debt-trap diplomacy.” China had been pressuring Kenya to pay the huge debt, while in the middle of battling a pandemic.
Since 2013, Kenya has saddled itself with more than $5 billion in loans from China for construction on the project. However, in just its first year of operation, the project reported losses of about $98 million US, making servicing the debt impossible. And of course, the terms of the deal made it such, that if Kenya couldn’t repay, it could end up giving China control over some of its most important assets. In this case, it would have been Mombasa Port, Kenya’s largest and most valuable port in east Africa, the gateway into Kenya and landlocked neighboring nations Burundi, Congo, Rwanda, South Sudan, and Uganda. “Therefore, losing control over the port would mean erosion of Kenya’s sovereignty.” The implications are freighting, thousands of port workers would be forced to work under its Chinese lenders—colonialism would have crept back. Fortunately, Kenya’s court system saved the day, bringing a wakeup call to all those involved in similar entanglements with China. We hope Caribbean leadership took the call!
COVID-19 has provided us with a pause, an inflection point, to shift our thinking and strategy focus towards a better future, we can’t get stuck in the past, behind amateurish politicians, with nothing but stale ideas that have never worked out for the people. If we stand still, we perish; we must move in the same direction the world is moving in or be left behind!
In short, greater investment focus on digital commerce needs to be applied, become the priority. It is counterintuitive to build backward and in line with China’s geopolitical and economic objectives when the rest of the world is moving in another direction.
Domestic success depends on global commerce, but for over 400 years we’ve been on the wrong side of that curve. Digital transformation underpins a prosperity reality and must be the government’s top policy development priority. Resources need to be mobilized with the stated objective being to leapfrog the regional economy into the more prosperous global economy, our ambitions have to be focused, and big! We can’t just sit there, letting others decide our future for us.
We must invest to diversify the entire region to protect our society from future global shocks, as witnessed by the pandemic, which has essentially wiped out the tourism economy. We need diversification and foresight.
If we had a vibrant commerce based agricultural and fisheries industry, for example, with robust global digital sales and marketing capabilities, we would be able to achieve food security and effectively export meaningfully for-profit simultaneously. Pandemic or no pandemic!
A diversified economy is a resilient economy.
A fundamental change in approach and the underlying variables is relative to how development should logically be carried out—a fundamental change in basic thinking, concepts, and practices, highly relevant to the digital era in which we live in, is paramount! Grenada needs a new Investment Policy Statement, a new operating paradigm, one that is progressive, inclusive, with empathy towards sustainable socio-economic development. Politicians should no longer be put in charge of investment decisions, instead, a professional data and applied intelligence-driven performance approach must be taken up immediately! Scientific ecosystems coupled with highly qualified investment committees, responsible to the people, is the push! Driven by intelligent scientific data-based decisioning and predictable modeling, powered by Artificial Intelligence, followed up with fearless implementation and actions, transparent and measurable—is the push! This new paradigm includes an advanced level of due diligence, governance, and transparency, all of which must be brought to the investment decisioning forefront, in examining the probability of desired outcomes in future ‘worlds’ scenarios.
Throughout history, technology-driven economic investment and infrastructure development have driven civilizations to prosperity, always! History shows, through evidence and analysis, that those nations that have deliberately focused on facilitating technology-led growth, went on to forge empires. Today, the world is at another transitioning inflection point, and good decisions taken here can change the directional curvature of prosperity for the entire Caribbean. History shows, like other periods of great technological transition opportunities before it, mishandling it at this critical juncture, will set the entire region back behind the prosperity curve, for generations to come!
The genesis of our future prosperity begins with how we first choose to think! Instinctive and emotional thinking must be put aside for a more slow, deliberative, and logical process—with an entrepreneurial mindset being at the forefront. Increased efficiencies and productivity will increase a nation’s profits and intergenerational wealth curve trajectory, upwards. Growing the standard of living through the development of a highly-skilled, tech-savvy middle-class, throughout the region. This is our best and most optimal opportunity; lets push! Socioeconomic also history tells us that we must resist the intuitive nature of our human condition, towards decision-making processes and choices. Think and focus logically instead, find the data-driven solutions, and put emotions and ego aside. Playing the long game is critical to future success. Decisions based on intelligence gathering and actions are central to good outcomes. Such focused thinking is paramount and can be the genesis of a true Caribbean Renaissance.
Perry C. Douglas is an Entrepreneur and Innovator…for Inclusive Caribbean Economies. Read more of his work at his blog The Inclusive Agenda: http://theinclusiveagenda.blogspot.com.
The views and opinions expressed herein are solely those of the guest author and are not necessarily representative of those of the Caribbean Trade Law & Development Blog.