August 30, 2019 / 3:58 AM / 17 days ago

African lender says China not trying to lead region into 'debt trap'

YOKOHAMA, Japan (Reuters) - China is not trying to lead African countries into a debt trap and provides critical investment along with other countries to close a funding gap for crucial infrastructure projects on the continent, the head of the regional lender said on Friday.

Debt sustainability was a key issue at this week’s meeting hosted by Tokyo with African leaders and international lenders on development of the continent, with eyes on China’s aggressive lending that some critics say has saddled poorer African countries with mountains of debt.

African Development Bank President Akinwumi Adesina brushed aside such criticism, and urged Japan and China to not compete but play “complementary roles” in filling a massive funding gap for African infrastructure.

“I don’t think there is a deliberate plan by China to indebt any country at all. I think China is fulfilling a very important role, which is in terms of infrastructure support,” Adesina told Reuters. “Africa is not in a debt crisis.”

Japan nonetheless views its regional rival as a competitor for influence around the world, including in Africa and worries that a flood of Chinese money will weaken its diplomatic standing.

Africa today has a financing gap of $68 billion to $108 billion a year for power, ports, rail, and airports, he added.

At the Tokyo International Conference on African Development (TICAD), Prime Minister Shinzo Abe announced on Wednesday Japan will establish trade insurance to spur private investment in Africa. At the last TICAD meeting in 2016, Japan pledged $30 billion in public and private support for infrastructure development, education and healthcare over three years.

Japan’s investment pales in comparison with China.

Since launching the Forum on China-Africa Cooperation in 2000, Beijing has boosted its Africa-bound aid, and President Xi Jinping announced another $60 billion over the next three years last September.

Japan is focusing on high-quality infrastructure investment in Africa in a bid to set itself apart from China.

“I don’t see a competition at all, I see complementarity. Africa has a tremendous amount of needs. Africa is a friend of China, Africa is a friend of Japan. The China Belt and Road Initiative is highly appreciated,” he said, adding that a lot will be used to fund transport corridors, rail and port projects.

Chinese officials say the Beijing summit is aimed at strengthening Africa’s role in its Belt and Road initiative to link China by sea and land with Southeast and Central Asia, the Middle East and Africa.

Some critics say China is keen on resource extraction in poorer countries to feed its economy, that the projects it funds have poor environmental safeguards, and that too many of the workers are flown in from China rather then using local labor.

“The interest and engagement of China in Africa is welcome. Will I say there were no mistakes made in the beginning, no I wouldn’t say so,” Adesina said. “There are issues of sensitivity to local communities, there are issues of making sure you don’t displace people in the labor market, but these are a learning curve for China.”

The International Monetary Fund says Cameroon, Ghana and other faces a high risk of debt distress, as does Djibouti, already home to the People’s Liberation Army’s first overseas base.

Additional reporting by Kwiyeon Ha; Editing by Kim Coghill

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