Sunday, September 23, 2007

China’s $5 bn investment in Congo

Financial Times - Alarm over China’s Congo deal
BBC News - China opens coffers for minerals

China and the Democratic Republic of Congo have signed a preliminary agreement to help rehabilitate Congo’s weak infrastructure. Following years of “war, dictatorship and turmoil,” Congo’s infrastructure is in desperate need of repair. This bilateral agreement will invest $5 bn in Congo for infrastructure projects and loans in exchange for Chinese mining rights to many of Congo’s mineral resources (the country is rich in copper, cobalt, diamonds, gold, iron, and uranium). It will make Congo one of the top recipients of Chinese investment in Africa as well as stimulate China’s domestic economy.

The loans have been allocated for several large infrastructure projects in Congo. There is an emphasis on transport infrastructure projects and $3bn of the loans will be spent on transportation. Plans include a 2,125 mile highway between Kisangani and Kasumbalesa, as well as a 2,000 mile railway “to link the country’s southern mining heartland to the main Atlantic port of Matadi in the west.” Additionally, the loans will be used to construct “30 hospitals, more than 100 health centres and two universities.” Finally, some of the loans will be used to rehabilitate the country’s mining industry.

For Discussion:
The timing of the agreement has shaken mining companies, the IMF, and other donors, who worry about Congo’s previous debt commitments. Will this loan agreement negatively impact the IMF and World Bank’s loans to Congo?

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