Is Kenya a beneficiary or victim of Chinese Belt and Road Initiative?
Bravely, President Uhuru Kenyatta, supported by his friend Raila Odinga and some civil servants, set forth to Beijing early this week.
What will happen there is as puzzling as the title of the gathering, of over 40 states and a larger number of corporations under – the Belt and Road Initiative
China is ostensibly helping states all over the world to improve the living standards of its people.
India and numerous Western states rejected the generous offer of China’s Life President, Xi Jinping, to take advantage of unique offers to improve the lot of their citizens (as Chinese citizens were experiencing, short of the small matter of their rights and freedoms).
However, while our leaders, ever optimistic, are confident of huge largesse from Xi Jinping (after all he has frequently and openly promised our “leaders” of his generosity), most Kenyans, I am told, are hoping that our leaders would return empty handed.
But why? Because though at one stage many Kenyans thought that we were the beneficiaries of Xi’s kindness, not long ago a number of journalists, business people, and scholars have found out the harm that Kenya has suffered and is suffering from the mode of the dispensation of Xi Jinjin’s generosity and largesse. why?
The more I read studies by those who have seen contracts under of the Belt and Road, the more I am persuaded that the intention of Xi Jinjin and his team contradicts their publicly stated benevolent motives.
The most obvious instance was the crude way that the Chinese took over for 99 years for its own use, a harbour built by it for Sri Lanka for which that country (I assume temporarily) it could not fully pay. Now China has taken over assets in about 8 counties, including Zambia.
WHAT ARE WE RISKING?
Up until now, Kenyans are worried that Mombasa Port which, it has been suggested, would make a good military base for China, was at risk of seizure by China if we could not pay our debts. But more recent leaks show that any Kenyan asset can be seized.
Kenyan President Uhuru Kenyatta and Chinese President Xi Jinping attend
the meeting at the Great Hall of People in Beijing, China on April 25,
Image: Kenzaburo Fukuhara/Pool via REUTERS
The leaked document refers to the two huge loans from China for the Mombasa to Nairobi Standard Gauge Railway were to be paid from SGR revenue, but that has been far below the original estimates (despite the government’s efforts to forcing importers to use the SGR).
Clause 5.5 of the “Preferential Buyer Credit Loan Agreement on the Mombasa-Nairobi SGR” says: “Neither the borrower (Kenya) nor any of its assets is entitled to any right of immunity on the grounds of sovereignty or otherwise from arbitration, suit, execution or any other legal process with respect to its obligations under this Agreement, as the case may be in any jurisdiction.”
None of the news reports I have seen provides a list of foreign assets that might be vulnerable, except to suggest that all of them are.
According to legal experts, in case of default, China can take over many critical resources – anything from airports and natural resources to embassies abroad – just as if individuals cannot pay debts their assets may be seized to satisfy a court judgment.
It is no bad thing for countries to have to respect the contracts they make, and this is the modern legal trend.
But the great irony is that, a few years ago, Hong Kong’s highest court, under great pressure from Beijing, accepted the Chinese view that sovereign immunity of states was complete.
The same immunity that China denies to Kenya in these contracts.
OTHER UNFAIR CLAUSES IN KENYA-CHINA CONTRACT
Other clauses of the leaked contract include that Kenya must keep the contract secret.
And “Without the prior written consent of the lender [China], the borrower shall not disclose any information hereunder or in connection with this agreement to any third party unless required by applicable law.”
This seems to allow Kenyan law to force disclosure but seems to prevent the government from voluntarily disclosing it.
Kenya’s government has repeatedly promised to publicly release the contract but has always stalled, presumably because doing so would violate the contract with China and would also expose massive corruption and incompetence among Kenyan government officials.
The agreement is governed by Chinese law. One Kenyan lawyer said, “The agreement is being made in Kenya, the railway is built in Kenya and the assets they are talking about are in Kenya, so why is it being governed by the laws of China?”
Any disputes can be resolved only by the China International Economic and Trade Arbitration Commission.
According to the agreement, “The arbitration award shall be final and binding on both parties. The arbitration shall take place in Beijing.”
There would be greater confidence if neutral law applied. For example, in 2017 Kenya signed a pipeline security commercial contract with Israel, and disputes will be submitted to an arbitrator in London.
Kenya pays the China Road and Bridge Corporation (CRBC) $10 million per month to run the railway. Such clauses are apparently common in CBR contracts.
It has not helped that CRBC has been accused of treating Kenyans badly, and of “neo-colonialism, racism, and blatant discrimination.”
And on study comments that “Kenya’s Auditor General, Edward Ouko, has repeatedly violated Kenya’s laws by not releasing regular reports on payments to CRBC.”
China loans a huge amount of money to a country like Kenya, but it is very much like Western aid agreements that countries often complain about — a country gives “aid” but much of it has to be spent on experts and services from the donor country.
Much of the money Kenya borrows must be used to pay Chinese workers and buy goods, technology, and services from China, and it does not benefit Kenyan factories and workers.
Another commentary says, “China is charging considerably more for the project than would be standard in other countries. This is a sign of corruption.”
Kenyans are well aware of that phenomenon – we all know that contract prices are inflated to accommodate the bribes paid to Kenyan officials to award the contract. By China too?
These reports also say that Kenya must pay off the loan from the agreed sources. If true – and those sources like the SGR proceeds – cannot meet the debt, this would seem to be structured to ensure Kenya defaults.
More Kenyans, a survey shows, believe that China constitutes the biggest threat to the country’s economic and political development – bigger than the US. A recent survey by Ipsos showed that 26 per cent Kenyans rank China highest and only 12 per cent giving the US.
The things that worried Kenyans were cheap goods, undermining the local industry, and job losses as a result, and fear of corruption. Increasingly, Kenyan are becoming worried about the size of the debt that the government is incurring.
A study of the Institute of Economic Affairs (in Kenya) this week has exposed the financial affairs of the state.
Briefly, it says that it would take the government two years by a large group of workers “ to repay the Sh5.39 trillion Kenya much of which has been accumulated since President Kenyatta took power in 2013”.
In a buoyant economy, this would be less of a worry, but reality seems to be very different. Recent reports suggest the economy has slowed recently, demand has dropped, and exports fell.
Meanwhile, the Treasury plans to issue a third Eurobond – to raise $2.5 billion to pay debts.
Soon our distinguished team (including the Attorney General) will return home -full of triumph?
In keeping with the Constitution, the President and his team should exercise their powers and responsibilities for the well-being and benefit of the people of Kenya.
And what has happened to the general principle of the consultation of state institutions with the people before executive decisions are made.
Uhuru owes us a detailed and prompt explanation of the transactions conducted in China.
Yash Ghai grateful to Jill Ghai for her assistance in the writing of this article.
Thia Article was first published by the Star Newspaper on 28th April, 2019