Tue | Nov 20, 2018

Editorial | A transparent embrace of Beijing’s cash

Published:Tuesday | November 6, 2018 | 12:00 AM

At Jamaica's stage and state of development, it definitely has to be in the business of attracting foreign capital, including loans from multilateral and bilateral partners, to help in the expansion of the country's infrastructure. Over the last decade, much of that cash has come from China.

Chinese firms have built and operated highways, bought sugar factories and acquired an alumina refinery, spending in the process in excess of US$1.3 billion, or more than J$165 billion. They plan to spend more on future and existing projects.

In addition to the foreign direct investment (FDI), of Jamaica's national debt of around J$2 trillion, around 3.9 per cent, according to Finance Minister Nigel Clarke, is owed to the Chinese government, mostly to Beijing's Export-Import Bank. That, at the current exchange rate, translates to around J$78 billion, or just over US$550 million.

In many respects, with regard to cheap bilateral capital, China is the only game in town. Beijing and its cash aren't easily sniffed at.

But it is not remarkable, in the circumstance, that there are concerns about a perceived overdependence on China's money, and, as is the case in many regions of the world, Beijing's motives for being so relatively free with its cash. Neocolonial entrapment, with debt, or being made pawns in a geopolitical chess game, aimed at supporting China's emergence as an economic and military superpower, are ideas frequently raised in countries in Africa, Asia and Latin America, where Beijing has spread its largesse. Jamaica is no different.

It is against this backdrop that Prime Minister Andrew Holness' rebuttal last week of the notion of being a Chinese pawn is important, yet deserving of a place in a broader and deeper enunciation of Jamaica's foreign policy and greater transparency in the country's economic deals.

Speaking at the opening of an infant school with high-tech equipment located in one of Kingston's gritty communities, Mr Holness explained that protecting Jamaica's sovereignty is critical to the country's bilateral partnerships, including with China. "The Government of Jamaica has been very strategic, and the sovereignty of Jamaica is always foremost in my mind," said Mr Holness. "So, when we engage, that is a non-negotiable part of the partnership."

Indeed, sovereignty isn't, a priori, compromised by which country or bank lends money to invest in national infrastructure. Moreover, it is impossible for China to lift up the North-South Highway and place it in the outskirts of Hangzhou, or some other city, if relations between Beijing and Kingston turn sour. Nor would we expect the owners of the Frome Sugar Factory to unscrew and ship home the light bulks from the mill, as the French are claimed to have done after the Algerian Revolution.

Two things are, however, critical when a country like Jamaica strikes deals with a country like China. Projects can't be merely about prestige, or as shiny objects to place on show. Second, when we borrow, it should be for income-generating investment, whether directly or for development that enhances people's lives and with a positive effect on economic growth.

Further, that debt must be appropriately priced, which falls into Mr Holness' declared paradigm of "borrowing smartly" and always seeking "to get the best rates". It is the failure to cover these bases, specifically, pursuing a project that was patently uneconomic, that underpinned the failure of Sri Lanka's Hambantota seaport and its subsequent takeover by the Chinese.

Dr Clarke reported that 99 per cent of Jamaica's Chinese loans are fixed at two per cent, with a small fraction of the debt at three per cent. By any measure, that is cheap money. That is good, but that is not all Jamaicans should know about the country's debt to China or any other partner.

There should be full transparency in all debt and other contracts, so that the public can determine whether there are hidden or potentially detrimental obligations, or the possibility for the siphoning of cash to unintended beneficiaries.