Saturday, February 10, 2007

EIB Criticizes China's Uncondiitonal Lending in Africa

Sources: EIB 'Losing Out to Chinese Banks’-; EIB to Talk on China's Africa Lending Spree -; EIB President Says China's Investment in Africa Good Thing - People's Daily Online

Philippe Maystadt, president of the European Investment Bank (EIB), admitted that the EIB is losing projects in Africa to Chinese banks, but sharply criticized the Chinese banks’ lending policies. Chinese investment in Africa has been increasing, and Chinese President Hu Jintao recently pledged to double aid to Africa and provide $5 million in loan and credits to African nations in an effort to secure access to oil and other commodities.

The World Bank reported that Chinese investment has positively impacted African economies, but Maystadt is critical of the Chinese loans, which provide unconditional financing. This contravenes the approach of the EIB and other Western lenders, who condition financing on political, fiscal, ethical, and environmental reforms.

Maystadt blames the lower Chinese lending standards for taking business from the EIB and warns that abandoning conditionality would reduce the incentive to reform and encourage African nations to take on unsustainable levels of debt. Maystadt admitted that Chinese lending is necessary to meet Africa’s financial needs, but called for talks with the Chinese to better coordinate efforts to promote good governance and environmental protection through conditionality.


Given the need for lending in Africa, should African nations be given as many lending options as possible, without respect to conditionality? If China agrees to talks with the EIB, what types of conditionality might the the parties agree to support in light of their different understandings of human and environmental rights?

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