US report warns Kenya from Chinese loans

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Washington-based Africa Centre for Strategic Studies analysis has revealed that Chinese infrastructure loans are primarily intended to extend Beijing’s political influence and military reach.

China’s $900 billion One-Belt One-Road (Obor) initiative, which now helps finance 1,700 infrastructure projects in more than 60 countries, “is first and foremost a Chinese geopolitical project designed to advance China’s grand strategy,” the Africa Centre said.

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Kenya should seek to protect its national interests by making its deals with China more transparent, the study urges.

Kenya’s heavy indebtedness to China for the railway project has prompted speculation that the port of Mombasa could fall to Chinese control as a result of contingency stipulations in the lending agreement, the Africa Centre notes.

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What happened in Sri Lanka and Pakistan could also occur in Kenya, the study suggests.

“In 2017, Sri Lanka handed over Hambantota port to Chinese state-owned companies on a 99-year lease after defaulting on an infrastructure loan. Pakistan handed over Gwadar port on a 40-year lease in an arrangement where the Chinese partner also retained 90 per cent of its revenues.”

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But the standard gauge railway is producing economic deficits for Kenya as well as potential benefits, the Pentagon think tank points out.

It points to a World Bank finding that Kenya’s economic competitiveness was waning due to the large volume of Chinese exports to neighbouring Tanzania and Uganda.

This sharp increase in exports of Chinese materials can be seen as an “offloading of Chinese excess capacity in Africa,” said Mr Nantulya’s report.

“In the past decade,” his paper notes, “Tanzania and Uganda’s imports from China increased by as much as 60 per cent, while those from Kenya grew by four and six per cent, respectively, over the same time period.”

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From left- Kenya Association of Manufacturers head of corporate finance Zipporah Maina, Chief Executive Officer Phyllis Wakiaga and TradeMark East Africa Kenya country director Chris Kiptoo during the signing of a partnership at the TradeMark offices in Nairobi on September 24, 2015.

“Kenyan manufacturers have blamed their country’s declining market share of industrial products on Chinese firms, which they also accuse of importing raw materials from China and hiring Chinese labour,” adds Mr Nantulya.

Kenya’s heavy indebtedness to China for the railway project has prompted speculation that the port of Mombasa could fall to Chinese control as a result of contingency stipulations in the lending agreement, the Africa Centre notes.

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