Wednesday, August 01, 2012

Kath Noble on Chinese projects

Kath Noble has written a piece on Chinese infrastructure projects. While I have no argument with her basic thesis, she repeats, in passing, the common misconception about the World Bank -

"On the plus side, the Chinese don’t try to tell Sri Lanka what to do. This makes a refreshing change from agencies like the World Bank, which refuses to lend unless the Government undertakes major reforms to key policies. Want to build a power plant? Tough luck, because they will only give money to the private sector, and then only if the Government promises to buy the electricity these companies generate at inflated prices for decades to come."

It is correct that the World Bank does indeed require conditions, but for the most part these conditions are intended to ensure that the project does provide some benefit for the country in which it is carried out, as this report points out.To quote:

"From its earliest days through the 1960s, the Bank took a project-by-project approach to development assistance, focusing on capital-intensive infrastructure projects. By the late 1970s, however, it had become clear that the policy and institutional environment in which projects were implemented was a major determinant of the performance of the Bank’s growing project portfolio. Indeed, in many borrowing countries, policy-induced distortions were so severe that projects could not be expected to succeed no matter how well designed they were."
The link between governance and growth is something I have talked about before, all the bank is trying to do is to ensure proper policies are in place so that the project works. These policies will help the populace but are irksome to the politicians.

The real reason that politicians prefer Chinese projects is that they come with no questions asked and kick backs all around, both on the Chinese side as well as the local side. The Chinese officials approving the loans probably make as much money as the politician's getting the loans. Unfortunately the general population has to cough up, when the loan needs to be repaid.

Apart from the policy changes required by the World Bank, there is also the tiresome process of monitoring that the Bank insists on. The Banks approach to monitoring is, to quote:

1. Clearly articulated statement of objectives, reflected in the design documents and lending agreements

2. Results framework with output and outcome indicators capable of measuring the results chain leading to achievement of the objectives, specified during project design

3. Regular supervision and supervision reports

4. Self-evaluation by the managing units: Implementation Completion and Results Reports (ICR) completed within six months of project closing

5. Independent validation of the ICRs by the Independent Evaluation Group (ICR Reviews) and independent field evaluations of about one in five projects: Project Performance Assessment Reports (PPARs) 
6. Project evaluations also feed into higher level evaluations, including country-level and sector-level evaluations, as well as meta-synthesis evaluations.
All of which mean that it is (a) a lot more difficult to come up with a useless white elephant idea, which no one knows about and then (b) to proceed to steal the money which is part and parcel of the whole idea.

Politicians are thus ever ready to trumpet the benefits of Chinese projects while condemning the World Bank and other lenders. Not that everything that the World Bank has done is a success or that they are right every time, but at least with these projects there is some accountability somewhere. With Chinese projects there is none.

Who decided to build Norochcholai coal plant, minus a pier or some other economical means of getting coal to the station? Not the World Bank, which funded some village hydro projects, apparently with some small success. Nor did they fund the Hambantota habour (minus container terminal) or the Mattala Airport (runway larger than Changi airport, Singapore).

For anyone interested in development, the world has had a good sixty years of experience to learn from since the first new independent states emerged after the second world war. In the 1950's and 1960's there were questions as to what would succeed. By the late 1980's it was clear what needed to be done.

Why is Sri Lanka, in the 21st century, making the same mistakes that many a nation on the African continent made in the 1950's ?

For further reading on this I would recommend Martin Meredith's The State of Africa, there are so many striking parallels, both economic and political with the Sri Lanka of today, it's almost frightening.    


sittingnut said...

your rabid irrational anti chineses racism continues. so is your preference for western run sri lanka as opposed to sri lankans run sri lanka (you think we are incompetent to run our own country).

as always you are wrong and exclude facts to make your point.
what happened when we obeyed world bank and west ?
economy stagnated (while south east asia overtook us) ,
we alienated both china and india ,
and in spite of our leaders' obedience to west, west funded the tamil tigers and forced us to appease the murderers and we had to live in terror, etc etc )

now that we are running our own thing and dare to disobey the west what happens?
we defeat the tiger murderers.
economic growth reach new heights consistently(and better than other countries),
we can do our best to balance teh india , china, west, and others to get the best deal of us, etc etc

you prefer the first(stagnation, terror and obedience)and think growth, peace, and balance, are disasters.

but then you parroted west said we cannot defeat the tigers. and many other failed predictions .
you will do so as long as you live in fantasy. get real!

Jack Point said...

I think SE Asia overtook us in the 1970's when we were experimenting with socialism?

Growth numbers - better than before, but now slowing. Also our old debate about the accuracy of the numbers-I think they are overstated by a bit.

" sri lankans run sri lanka (you think we are incompetent to run our own country)." On this you are right.

Anonymous said...

sittingnut you seeming to subscribe to JVP rhetoric. we need investment from all countries not only the west or the east.

the economy stagnated not because of funds that we recieved from the world bank but because of itensified terrorist activities that delt a major blow to the tourist sector.

therefore, dont think the chinese are our saviors; the interest cost alone from their loans would cripple us if MR's hair brained projects dont kick off.

I think the man for The SL economy is Ranil. although i despise the man for his despotic demeanor, he has a knack of getting investments into the country. he is far better suited for our country than MR whose economic policy is akin to the sinhalese coming to singapore on shopping sprees - the proverbial saappu savari.

Mahinda Believes that if he gets himself a cool port and a posh transmission tower, investments will pore in from all four corners- what nonsense.

Jack Point said...

Thanks for the comment, War Elephant and welcome to the blog.