Yunnan proposes cross-border special zone with Laos

According to Yunnan Ribao 云南日报, Yunnan Province has proposed to Laos’ Luang Namtha Province to set up a Mohan-Boten cross-border special economic zone (SEZ) based on the “two countries, one zone; separate administrations, joint planning” 两国一区、分别管理、统筹协调 model. According to the proposal, this would require an agreement between the two national governments.

Earlier this year, the prefect of Sipsongpanna, Dao Linyin 刀林荫, announced that a Chinese-Lao cross-border nature reserve established in 2009 would be expanded to 1.5 million mu (100 thousand ha), in part to promote tourism. A previous report by Xinhua claimed that the initiative encompassed 550 thousand ha in Sipsongpanna Prefecture and Laos’ Phongsaly Province, and that talks were underway with Burma’s Shan State Special Region 4 to create a similar zone.

Currently, the Golden Boten City Special Economic Zone in Laos is the private concession of a Chinese company, which recently acquired it from its earlier, Hong Kong-registered concessonaire. While the latter had sometimes conflicted relations with the Yunnan officialdom — and was eventually forced by the Chinese government to roll up its gambling business — the new owner is said to be a high official from Sipsongpanna Prefecture in Yunnan, and may be better positioned to broker between the two governments. Although Golden Boten City has often been described by Western observers as essentially an extension of China, I argue in a recent article that its private investors used the paraphernalia of the Chinese state to enhance their own developmental clout. But if the new plan is implemented, the special zone will become more closely intertwined with Chinese bureaucracy, and questions about sovereignty may have to be asked anew.

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“Instant city” plans in Georgia are said to follow Chinese model

Ellen Barry writes in The New York Times that plans to build an “instant city” in Georgia (the country), hatched by President Mikheil Saakashvili four months ago, seem to be inspired by China’s experience. Saakashvili wants the new city, Lazika, to be the country’s second largest in ten years.

Deputy Minister of Justice Giorgi Vashadze said he found the idea of a “charter city” on the Internet and envisioned the new city as one of these, built by foreign investors and with “distinct regulatory and judicial systems” in which all who come to the city to invest or work enjoy the same rights. It is not clear whether Vashadze envisages such a regime for the new city.

The term “charter city” is currently being championed in poor countries by the libertarian US economist Paul Romer, who defines them as “city-scale special administrative zones.” This is very similar to the declared plans in the new Chinese concessions in northern Laos, and broadly to the special zones advocated by China in Africa. Most recently, the Albanian prime minister proposed a Chinese-invested free zone. According to the NYT article, Georgia is hoping to attract both Western and Chinese investors to Lazika.

Albanian premier proposes Chinese free trade zone

During Chinese Communist Party Politburo member Liu Qi’s visit to Tirana on 18 March, Albanian Prime Minister Sali Berisha

expressed readiness “to support the creation of a free zone for Chinese investments, which can use this favourable position [in Albania] for further penetration in the European markets,”

SETimes.com reports. The article also mentions that both Albania and Serbia are introducing the teaching of Chinese in primary and secondary schools.

This is the first time that the special-zone model of Chinese investment, which China has officially promoted in Africa with UNDP’s endorsement and which has also spread to Indochina, has been mentioned in the European context.

World Bank and UNDP endorse Chinese special economic zones as model for African poverty alleviation

The International Poverty Reduction Centre of China (IPRCC) and the UN Development Programme (UNDP) co-organised a seminar called “China’s SEZs and Poverty Reduction” in  Shenzhen on 9 January. In his speech at the seminar (link forwarded by Yoon Jung Park to the China-Africa mailing list), Christophe Bahuet, UNDP’s China Country Director, said that “China’s Special Economic Zones … offer many valuable experiences and lessons for other developing countries” and expressed his confidence that “this seminar will lead to a useful exchange on good practices, opportunities and challenges for Special Economic Zones in developing countries.”

This endorsement comes after one by Justin Lin, the World Bank’s senior vice president and chief economist, in the prestigious annual UNU-WIDER lecture to the United Nations University in May last year. Lin, who previously was a professor at Peking University, a member of the National People’s Congress and holder of other offices in China, includid setting up special economic zones among his six recommendations for “developing countries” that he called a “road map” to economic growth. (In the same speech, he likened China to a “leading dragon,” rather than a mere “leading goose” as in the expression “flying geese,” that will be the source of structural transformation in these countries.)

In the past, the United Nations Industrial Development Programme (UNIDO) has endorsed special economic zones in Laos and Cambodia and in Nepal (the latter was specifically related to a Chinese project and later retracted by higher-ups in the organisation). But UNDP has tended to be more “pro-poor” and less sanguine about the growth model these zones represent.

Chinese minister of commerce reaffirms focus on agriculture in Africa

Chen Deming 陈德铭, the minister of agriculture, told 21st Century Economic Herald 21世纪经济导报 that he spends his vacation in Africa every year. In line with earlier government statements, but adding some new elements, he said China will prioritize investment in agriculture, manufacturing, finance, trade and environmental protection in Africa. He also said it will accelerate the construction of “economic cooperation zones” and concentrate financing in large-scale infrastructure projects. Agriculture will be the focus of aid, through the establishment of demonstration centres, in particular in the four cotton-producing countries in Northwest Africa where the centres will build up manufacturing chains from cotton to garment. Chen explicitly recommended African governments to learn from China’s example in establishing special economic zones.

The article notes that this is in line with World Bank President Robert Zoellick’s plea that China shift some of its low-value-added manufacturing to Africa.

Chen further offered China’s help in drawing up master plans for regional integration in Africa, including the linking of electricity and transport grids.(Several Chinese commentaries recently have suggested that China focus on exporting infrastructure built to its own specifications, as this will strengthen its economic and political position in the future.)

More private Chinese investment in African manufacturing

Local media in Wenzhou — reputed as China’s capital of private entrepreneurship — report of growing interest in private  investment in African mining as the government has clamped down on small-scale mines in China. The article quotes a lawyer, however, as saying that only 1% of these investments actually succeed. (According to another article, though, 90% of  mines in Katanga Province of Congo-Kinshasa are small Chinese-owned mines with proprietors who sailed in on the tailwinds of state mining companies, each with only some tens of local workers.)

A third article from Wenzhou reports on the expansion of investment in manufacturing in a series of both state-supported and private special manufacturing  zones in Africa, a practice Wenzhounese businessmen are also engaging in in Central America. This practice has grown out of trading: Wang Jianping, for example, started importing shoes to Nigeria in 2001, set up a shoe factory there in 2005 (claimed to be the largest such factory in West Africa, with 600 local workers), and is now setting up a ceramics factory in the industrial zone he established. Nigeria has two more such Wenzhounese zones. Another businessman set up a factory in Egypt, commenting that wages there, at about 1,000 yuan a month, are much lower than in China, and there are export opportunities to the Arab Gulf and Europe.

The article says that the Wenzhou city government assists the expansion of businesses to Africa by organising special trainings and promotions of various African industrial zones. By 2010, city data show an investment of $50 million in Africa.

Lake Victoria East Africa Free Trade Zone vanishes

The Lake Victoria East Africa Free Trade Zone, also known as the Ssesamirembe Eco-City, has for a while looked like one of the largest Chinese concessions in Africa and one with the most intriguing portfolio of agricultural, industrial, residential, touristic, you-name-it development on 518 hectares and plans to attract 500,000 Chinese settlers. We even offered a PhD scholarship to do research on it. Although no news of its development ever transpired, the concession seemed real enough, with photos of its signing by senior Ugandan officials in Peking. It was also linked to that Phantom of Africa, Liu Jianjun.

Now our new student, Josh Maiyo, is ready to start his research. But in the meantime, references to the Chinese project, and to the free trade zone, have disappeared from Ugandan media. According to a May report on Ugandan radio, local residents were planning to reoccupy the area after development plans failed to materialize. Intriguingly, the report makes no reference to the Chinese role in the plans except that “residents have lost hope for Ssesamirembe after they discovered that China wanted to grab their land and use it to settle some of her people there under the guise of establishing a free trade zone.”

But Liu Jianjun himself refuses to go away. In August, the magazine 中国商界 (Chinese Business Circles) published a long, adulatory portrait of him, entitled “Liu Jianjun’s African legend” and enumerating his photos with Chinese leaders, his honorary African titles and his visionary ideas with even more fervour than the earlier reports. The only reference to the extensive questioning, also in Chinese media, of Liu’s credibility is a mention of a court case in which Liu supposedly won a libel suit against a newspaper. Point taken.

I can’t resist quoting some of the more extravagant Liuisms. All he wants to do, Liu says, is “to take China’s excess of peasants, standard technologies, machinery, products, and money to Africa, which has an excess of land, assembly labour, raw materials, market demand and natural resources.” Liu at his neoclassical best: straight out of Ravenstein’s Laws of Migration, A.D. 1889. Except that he adds that “the Chinese race’s stress on righteousness and neglect of profit” (中华民族重义轻利) guarantees the benevolent nature of the enterprise.

Liu also relates a meeting with Hu Deping, a deputy director of the Chinese Communist Party’s Únited Front Department six years ago, in the course of which Hu told him that “only by expanding the influence of Chinese culture in Africa can Africans’ [presumably negative] attitudes be fundamentally changed, because the industrious, honest, charitable, and enthusiastic character of the Chinese race is a great spiritual wealth.” It is this injunction, Liu claims, that prompted him to draw up the “Rules of Establishing Baoding Villages” 保定村组织颁发, the “Baoding Villagers’ Compact” 保定村民公约, and the “Charter of Temporary [Communist] Party Branches in Baoding Villages” 保定村零食党支部条例 and to commission a composer to write a Baoding Village Song, all of which used to be available on the Baoding Villages website, since closed down.

Liu is further claimed to have established a martial arts school in Kampala; to have brought youth from 42 African countries for training to Baoding, to have arranged for youth from Rakai to study Chinese and for young Tanzanians to study at a vocational school in Weifang, Shandong Province. Perhaps the most outlandish of all is his launching of the brand “Chieftain” (酋长), which covers products from motorcycles to wine and whose logo is adorned with Liu’s own head. (One of Liu’s favourite boasts is that he has been given the honorary title of chief in an African country.) An unnamed “former senior leader at the foreign ministry” is said to have encouraged Liu to expand the range of Chieftain products to one hundred, because “only when cultures come together is there sustainable partnership.”

Liu is obviously quite undeterred by criticism, ridicule, and official embarrassment. He just won’t tone himself down. What makes him happiest, he says, is “seeing Chinese people have 99-year concessions on thousands, tens of thousands of mu … ; seeing queues of dozens of metres in front of Chinese hospitals; seeing young people speak fluent Chinese … ; seeing Wuhan Steel’s brigades put up the frame of the 80-thousand-square-metre Chinese wholesale market; seeing Tanzanian gems, manganese ore, and agate packed into containers leaving for Tianjin; seeing Chinese planters, construction workers, the sounds of merriment and laughter at entertainment centres.”

That, at least, is a clear vision of development.

So once again, is it worth taking Liu seriously? It is hard to do so, and yet it is also hard to believe that he would dare to repeatedly make such outrageous boasts and take the name of senior officials in vain if there were nothing behind him.

The “Angola model” reaches Europe, finally

OK, not quite the “Angola model,” as Hungary has no oil and few minerals. But, after a few tentative infrastructural investments in the poorer parts of Eastern Europe and a recent fiasco in Poland (see News, 14 June 2011), the package approach, in which a slate of agreements on investment and credit are signed at once and which is familiar from Africa, has arrived in the European Union. On 25 June, during Premier Wen Jiabao’s visit to Budapest, Chinese and Hungarian government and corporate officials signed 12 agreements, covering among others

• investment in railways, a citric acid and a lightbulb factory, and a European  regional support centre for telecom giant Huawei;
• a “Central European Hungarian-Chinese Trade Logistics and Development Cooperation Zone;”
• a China Development Bank credit line of 1 bn euro to cover these;
• a Bank of China credit line of  1.1 bn euro to BorsodChem, a chemical company already majority-owned by a Chinese state enterprise;
• purchase of Hungarian debt by China (which has already bought Greek and Spanish debt);
• the establishment of cultural centres in each other’s countries (this is intriguing since China has no cultural centres overseas, apart from Confucius Institutes, which Hungary already has);
• the setting up of a bilateral trade council (this too is interesting, since to my knowledge China only has multilateral trade bodies, such as with certain African or Pacific countries);
• and scholarships for 150 Hungarian students to study in China.

This seems to be, as Chinese officials like to say, all-round success for Orbán Viktor, Hungary’s prime minister, who while holding the EU’s rotating presidency likes to talk about how the wind is blowing from the East and berates the IMF. The fact that anti-Communism is central for the legitimizing ideology of Orbán’s party is only ironic at first sight. In fact, both ruling parties use an increasingly hegemonic discourse of national harmony used to justify denying  autonomy to courts and media; feed a discourse of history in which ideological conflicts are erased and great national heroes are presented in a seamless succession; replace legal arguments with moral ones in justifying criminal prosecution or violations of civil rights; rhetorically exclude dissenters from the nation and automatically associate them with foreign interests; and institutionalise nationalist symbols and rituals. Orbán justified the adoption of a new constitution by saying that the old one was not “consistent with the Hungarian spirit.” The legitimacy of both governments rests upon depicting their predecessors and enemies — Communist or anti-Communist — as puppets of alien interests. As the critic Szilágyi Ákos points out, both government boast of their bravery in withstanding the pressures of international capital and international human rights organisations or media.

Indeed, there are reports of Tibetan demonstrators being assaulted by police during Wen’s visit, and other Tibetans who live in Hungary being summoned to the immigration authority without explanation. (If this is true, it could only have happened in direct cooperation with Chinese authorities, since the Hungarian government does not have information on the ethnicity of immigrants.) According to the spokesman of an opposition party, the government also banned a demonstration by Falungong members. (Both Tibetan and Falungong protest is assumed by the Chinese government to be fuelled by interests inimical to China – a view that is akin to that of Gypsy protests in Hungary.) Wresting banners away from demonstrators and using pretexts to make sure potential demonstrators are safely away from the risky sites are methods used by Chinese police, and someone has had to teach the Hungarians these methods. They will come in handy when dealing with their own dissidents.

The fact that Orbán’s party, back in 2006, campaigned against Chinese immigration — despite the fact that there are only 10 to 15 thousand Chinese in Hungary, 80% of Hungarians in surveys consistently express their opposition to their presence — does not matter either, since the Chinese government does not care very much about the fate of its private citizens abroad. On the other hand, the choice of Hungary for the first full-scale Chinese investment package in Europe, in addition to Orbán’s politics and Hungary’s dire finances, probably does have to do with the country’s role as the region’s earliest hub of post-1989 entrepreneurial migration. The new contracts will no doubt energise Hungary’s languishing Chinese businesspeople, who will try to get pieces of the pie.

To quote again from Szilágyi’s vision of a new European “barracks capitalism,” possibly beginning in Hungary: “Democracy and the rule of law will be “tightened” to the extent to which freedom of expression and assembly (…) labour rights (and) civil society hinders the withdrawal of resources, accompanied with banners bearing national slogans, from social welfare systems,” resulting in a “state that commands both labour and capital, and in which both restriction of consumption and restriction of freedom becomes morally condoned, indeed a new national, nay European, ethic.”

Wenzhou businesspeople apply “overseas development zone model” in Costa Rica

According to an article published in a Wenzhou newspaper — but almost certainly based on materials sent by the investors rather than own reporting — a private company from Wenzhou, Huage, opened the first Wenzhounese “overseas development zone” in Central America. The Huage Costa Rica Chinese Products Industrial and Commercial Park and Exhibition Centre 华格哥斯达黎加中国产品工贸园展示中心 opened in San José, capital of Costa Rica, which until 2007 maintained relations with Taiwan. The first phase of the project is a 10 thousand square meter exhibition hall, while the second phase envisages manufacturing and assembly facilities that will enable Chinese companies to receive Costa Rican certification of origin for their products, thus gaining unfettered access to American markets. The article quotes Costa Rica’s minister of foreign trade and the deputy head of the Zhejiang Province department of commerce as praising the project.

According to the article, Wenzhounese businesses have already established such “overseas development zones” in Russia, Vietnam, and Uzbekistan.

The model of wholesale/retail centres for exhibiting Chinese products and serving as regional hubs of their distribution is  familiar from Eastern Europe and has gained some Chinese government support. What is interesting here is the borrowing of the term “overseas development zone,” familiar from state-to-state projects in Africa and elsewhere, to lend legitimacy to private trade initiatives, albeit possibly with a minor assembly component.

The choice of Costa Rica probably has to do with a relatively large recent Chinese immigrant population, but it is likely also a choice encouraged by the Chinese government as a reward for switching diplomatic relations.

Private contractor gets China-Lao railway contract

 21st Century Economic Herald reports that a private company called Yunnan Xiaoxiang Pan-Asia Investment Co. got a BOT contract for constructing the Lao section of the much-talked-about China-Singapore “Pan-Asia” railway. The company, whose name suggests a connection to Hunan Province, was registered in 2010, and its chairman, Li Zhanqun, is unknown but claims to have spent many years in Southeast Asia. The company’s registered capital is $1 million, and the shareholders are three private individuals. There are currently many Hunanese migrants in Laos, but they tend to be very small businessmen.

The total investment in the Lao part of the railway is estimated at 40 bn yuan. According to Li, some of this will come from the $3 million provided to the Lao government by UNDP, about 15% will come from Chinese government aid, and the rest, about $2 bn, will be raised overseas. This clearly raises questions: first, China has not previously provided direct grants-in-aid of anywhere near this scale. Second, how and why would an unknown person able to and entrusted with raising two billion dollars overseas? It is almost certain that someone who does not want to reveal their identity is behind Li, but it is not clear why. Perhaps because the Chinese subcontractors who will carry out the construction and will certainly benefit from state loans would rather deal with a Chinese contractor? Or perhaps because the real investors are connected to high officials and do not want this revealed?

A Chinese manager at the Golden Triangle Special Economic Zone in Laos suggested that the investors might be gambling barons, like the owner of Malaysia’s Genting resort. He thought that, among the legal industries, only gambling tycoons have the cash to pay $2 bn, and it would be in their interests to get more Chinese gamblers via the railway.

But from my perspective the more interesting aspect of the deal is this: Li says that Xiaoxiang  will operate the railway and get all the income for it (he doesn’t mention the time period), and that in return for the investment it will also receive logging, mining and industrial concessions. He also says that the project will need 40-50 thousand Chinese workers. In other words, he pictures a massive concession along the lines of the China Eastern Railroad, constructed by Russia at the beginning of the 20th century, which remained under Russian control and whose employees enjoyed extraterritorial rights until the Japanese occupation in 1937. These Russians built and ran the city of Harbin, even though technically they had no concession rights, unlike, say, foreign powers in Shanghai.

So if the construction of the Golden Triangle SEZ, with a 99-year lease and Chinese management, recalls Hong Kong, the railway would hark back to another form of extraterritoriality.

The question is how much of this is true, and whether Peking likes it. The construction may well be embarrassing and unwelcome for the national government. Conflicts between Yunnan Province and Peking about how to deal with neighbouring countries are routine, with the former looking more at profit and the latter more at the long-term strategic fallout.