Friday, July 10, 2015

A Different View on Chinese Aid

China’s emergence as a development leader: a historical perspective

China aid (image: Camilla Burkot)The signing of the Asian Infrastructure Investment Bank (AIIB) agreement last week at the Great Hall of the People in Beijing by 50 countries led by Australia (by virtue of its place in the alphabet), is reminiscent of tributes being paid by tributary states to the Middle Kingdom of the ancient world. I would argue that this is the latest step in the re-emergence of the ‘Middle Kingdom’ as a world power, not only economically and militarily, but also in the development space. China’s rapid growth in providing development funding in general through the 2000s, and the AIIB in particular, represents a clear shift away from a unipolar world that emerged in 1989 at the end of the Cold War and the so-called Washington Consensus on foreign aid.
This process of China’s increasing role in international development has a very long history.Heinz Arndt (1987) notes that Sun Yat Sen in 1918 was probably the first national leader to advocate for international development in ‘the modern sense of the term’ (p. 16). A series of Democrat US presidents since the 1940s argued for a global aid program: Roosevelt’s Freedom from Want (1941); Truman’s Point Four program to extend US technical assistance from Europe to the Third World (1949), and Kennedy’s Alliance for Progress (1961).These ideas and programs were then used as part of a Cold War strategy to boost quasi-military alliances and isolate the Soviet Union and China (Picard and Buss 2009Morgenthau 1962).
It was a little over 50 years ago that China joined the donor club in a meaningful way, when Chinese premier Chou Enlai in 1964 enunciated his eight principles of foreign aid, which set the nascent Chinese aid program as a clear contrast to the Western aid agenda of the time. These principles remain largely unchanged, with the key one being ‘respect for sovereignty’ [1] (Shinn and Eisenman 2012).
The 1960s also marked the first Development Decade, which set Western aid on a clearer development footing with the formation of a much broader national group of specialised development agencies: USAID (1961); DfID (1964); and CIDA (1968). France and Germany set up their agencies in 1961, Japan too in 1961, and the Netherlands in 1963 (Lancaster 2006), all with ostensibly a more humanitarian and developmental focus. This was meant to represent a major shift from the Cold War focus of the 1950s (for example see Oakman 2010). The Development Assistance Committee of the OECD was formed in 1961 with part of its mandate:
…to consult on the methods for making national resources available for assisting countries and areas in the process of economic development and for expanding and improving the flow of long-term funds and other development assistance to them (Manning 2004, p. 111).
The DAC, however, was very much a Western Club and over time pushed what were seen by many in the Third World as Western values. At various times the DAC promoted good governance agendas, free trade, neo-liberal policies, and in the late 1990s even a rights based development agenda. The 2005 Paris Principles on Aid Effectiveness were a slight nod in the direction of Chou Enlai’s eight principles of the 1960s, but generally they have not gained a lot of traction. Attempts to bring China into the DAC fold in 2012 at Busan and 2014 at Paris have come to nothing, and with the AIIB and more assertive non‑DAC donors it may well be that the DAC is becoming marginalised as an aid and development policy player.
Throughout this period the Third World countries, and to varying degrees China in that grouping, have been arguing for different dispensations by which national priorities and sovereignty should have precedence. The non-aligned movement (NAM) was one manifestation of this and while China has been on the Security Council but could not be a full member, it became an active ‘observer’ in 1991 at the end of the Cold War.
However, China’s role in the NAM has had a long history with China being an important player at the movement’s founding conference at Bandung in 1955, when Chou Enlai led the delegation and highlighted with Egypt’s President Nasser the possibilities of Afro-Asia linkages (Larkin 1973). This left the door ajar for China’s subsequent long term relationship with Africa, and later it was the Asian economic crisis of 1998 that enabled China to take an economic leadership role in Asia (Emmers and Ravenhill 2011).
The role of China in development cooperation has come full circle from a 1960s vision to a 2010s reality of being a major player. The challenge now is how to embrace (and challenge) China’s role without trying to make it something that it is not, nor wants to be, and that is another ‘Western’ donor (Lin and Wang 2014).
Patrick Kilby is the author of the forthcoming ANU Press book ‘NGOs and Political Change: a History of the Australian Council for International Development’.
[1] The eight principles of foreign aid were enunciated by Chou Enlai during a visit to Ghana in 1964 (Shinn and Eisenman 2012, p. 424 footnote): i) equality and mutual benefit; ii) respect of sovereignty; iii) aid as low interest or interest free loans with extended repayment as needed; iv) anti dependency and pro self-reliant; v) low investment, quick result projects to increase income and accumulate capital; vi) best quality equipment and material of its own manufacture (and will replace if necessary); vii) train personnel in recipient country; viii) experts will have the same standard of living as local experts.

Tuesday, July 7, 2015

Wage Increases: Good But Not Enough

National economic policies,  based on the assumed paramount importance of growth (and not on sustainable growth and the fair distribution of its benefits) have resulted  in the increase of economic inequality in most countries.  The rich have become richer and the poor  poorer. In this article, long time advocate for the poor Fr Kevin Barr writes about \wages and Government policies in Fiji-- Croz

By Fr. Kevin Barr
03 July 2015h

Much publicity was given to the recent wage increases for our workers.  But let us be very honest about the National Minimum Wage and the other small wage increases published in the last few days.

Over a year ago Dr Mahendra Reddy (after extensive research) proposed that the National Minimum Wage should begin at the rate of $2.32 an hour and be regularly increased each year. Mr Hazelman (representing the Fiji Commerce and Employers Federation) announced publicly that the Federation had intervened with government to have the National Minimum Wage reduced to $2.00 an hour.  Our new Government is now restoring the National Minimum Wage to its originally proposed rate of $2.32.  In truth, if the employers had not intervened, the National Minimum Wage for July this year should now be at least $2.55 or more.  But even that would not be sufficient. As many have stated the National Minimum Wage of $2.32 is a joke and totally inadequate in view of the current cost of living.

Yet, of course, the National Minimum Wage will benefit to some extent those 10% of workers (such as domestic workers, gardeners etc) who are not covered by the Unions (about 30%) or the Wage Regulation Orders (about 60%).

In principle the National Minimum Wage should be measured according to the Basic Needs Poverty Line (or the current cost of living) which is probably at least around $4.20.  The Bureau of Statistics can tell us the exact figure.

Again the increases given to those workers in the ten industries covered by the Wage Regulation Orders are minimal.  Representing the increases by giving percentages is an old trick and very deceptive.  It sounds impressive to read that the wage of a particular industry has increased by 4 %.  But, if the previous wage was $2.50 an hour it means that in real terms the newly increased wage will only be $2.60 an hour – a miserable increase of only ten cents an hour.

I am open to correction but I am told that there has been no significant increase in the Wage Regulation Orders for at least two years.

We are told that: “The increases in the Wages Regulation Orders is based on a formula Agreed to by the Employment Relations Advisory Board and takes into account the Consumer Price Index and other figures on how each industry is faring to calculate the increases”. Yet Fiji should be following not its own formula but the criteria for Wage fixing established in accord with the ILO Convention to which Fiji is a signatory.  Its principal criteria is the current cost of living in the country (which is represented by the Basic Needs Poverty Line) but it also takes into account other issues as well. If you begin with a low unjust wage and increase it only by the current Consumer Price Index you will still have a low unjust wage.

Unfortunately in recent years “productivity” has been highlighted by some influential people as the major criteria for wages.  But how can you expect workers to be more productive unless their basic needs in terms of housing, nutritious food, education and health care are being met for themselves and their families?

As the 1997 UNDP  Fiji Poverty Report  stated clearly, low wages is one of the major reasons for the high degree of poverty and hardship in Fiji.  We should be ashamed of ourselves for allowing this situation to continue.  We are constantly being informed about the great increases in economic growth in the country but the benefits of this economic growth are not shared.  The old “trickle down” theory is now recognised as a myth and the so-called “social responsibility” of many of our employers (not all) revolves around sponsoring sporting events, fashion parades or tourism extravaganzas – not a just living wage for their workers.

Our successive Governments have agreed to implement the policies of the World Bank and the International Monetary Fund which we are told will increase economic growth.  Yet at the Economic Forum held in Davos earlier this year it was agreed that the policies of these International Financial Institutions (IFIs) had produced a frightening increase in poverty and inequality all around the world.    When will we wake up?  Yet we have actually invited the World Bank to analyse the results of our most recent Housing Income and Expenditure Survey.  How really credible and reliable will their results be?

Government has never acknowledged that the 20% devaluation of our currency in 2011 meant that food costs increased by 36% and building costs by 29% (according to the Bureau of Statistics).  Then this was followed by an increase in VAT by 2.5% which, because it is a regressive tax, affects the poorer sector of our nation more than the rest.  All this occurred while wages did not increase significantly.  Of course in all this we followed the recommendations of the IFIs.  It is about time we “stand up to the big boys” as our honourable AG once suggested in another context.

Of course Government has done well in reducing education costs, providing scholarships and pensions and free health care and water for families on low incomes and assisting housing for the poor.  These are laudable achievements and are most welcome but they are no substitute for a just living wage. These are things which any caring government should be providing for its people – particularly when two thirds of its population is either in poverty or close to poverty.

Government has bent over backwards to accommodate the demands of employers and investors and has given generous wage increases to politicians and those in the upper levels of the Civil Service. We are told that the country can now afford such increases. Yet workers in full-time employment are left with low, inadequate wages.  While employers and investors are given huge tax deductions and allowed to influence the decisions of some politicians (in the style of “crony capitalism”), worker’s unions are treated with scorn and their leaders insulted and even mistreated.

Of course all this is not entirely new.  As Professor Wadan Narsey  wrote in his detailed report  on the 30 year history of the Wages Councils, Just Wages in Fiji – Keeping Workers out of Poverty (2006:76ff):

            “It was clear that most employer’s representatives resisted all proposals
            for wage increases, and they were quite successful in their attempts. 
            The long term outcome was the severe deterioration in real wage rates
            and  a growth in poverty in the nation. ... Employers would cite the usual
            litany of industrial woes, warn of redundancies and unemployment that
            high wage adjustments would cause and give a lower counter-proposal. 
            They would plead ‘inability to pay’ or ‘this is not the right time’ and get
            their own way.”

He went on to state that “stolen wages” (as he terms the refusal to pay an adequate just wage) have seriously benefited employers but seriously disadvantaged thousands of workers whose quality of life has deteriorated.  He claimed that in the 30 years following Independence more than one billion Fijian dollars has been transferred from worker’s wages to employer’s profits because the business lobby was exceedingly influential in getting its own way.

We know that there are many good employers in the business sector who are deeply concerned for their workers and pay wages above those required.  However there are also many selfish and greedy individuals who want to increase their profits by every cent possible.

It is about time that we stop boasting about our levels of economic growth, the successes of our tourist industry, the new opportunities for our garment industry and the need for greater worker productivity and see that justice is done for our workers.  

Business may be the engine of growth but it is our workers who keep the wheels of the engine turning.  The pitiful wages paid to so many of our workers is a disgrace to the nation.  We can promote business without being anti-worker and anti-Unions.

If we want to bring religion into it (and, of course, all issues of economic social justice involve moral principles) then we could quote James (5:1-6) where it says: 

“Listen to the wages you kept back.  They are calling out.  Realise that the cries of the workers have reached the ears of the Lord God.”

Or, perhaps even more compelling are the words of Isaiah (59:12-17) which says that God is outraged not only by the existence of injustice, but by the failure of anyone to do anything about it.

Let’s hope that we will see some radical changes in the interest of social justice in Fiji today and that our economy will become truly people-centred.

Thursday, July 2, 2015

Singapore and Fiji


The Fijian Minister for Industry, Trade and Tourism, Hon. Faiyaz Siddiq Koya and the Permanent Secretary, Mr. Shaheen Ali met with the Singaporean Ambassador to the Pacific H.E. Verghese Mathews on Monday 29 June, 2015 in Singapore.

The meeting was to discuss growth of economic, trade and investment relations between the two countries. Specific areas of cooperation that were discussed included, cooperatives and small and medium enterprise development, business to business initiatives and investment facilitation.

“Singapore has a well-functioning and globally-renowned Economic Development Board, which plays the same role as the Fijian Investment Fiji. The Fijian Government has undertaken significant steps to improve foreign investment facilitation. Hence, working with the Economic Development Board of Singapore will provide impetus, to our own reforms, to increase the efficacy and efficiency of Investment Fiji to attract even more Foreign Direct Investments and look into ways we could do things differently to grow foreign direct investments,” Minister Koya said.

“Furthermore, Singapore also has a strong cooperatives and small and medium enterprise base, which Fiji can draw examples from as we are in the process of amending the Cooperatives Act, re-organising the Cooperatives Department and establishment of the National Cooperatives Federation.

“Cooperation with Singapore comes at an opportune time with Fijian Government initiating comprehensive reforms and putting in place progressive and attractive policies for both domestic and overseas businesses to take advantage of and flourish.

“The Permanent Secretary for Industry, Trade and Tourism will lead discussions with relevant Singaporean authorities on a proposed Fijian Government-led mission, with key agencies and stakeholders to Singapore later in the year. This mission with formalise the discussions that have been initiated,” Minister Koya said.

The meeting was also attended by the Fijian Ambassador to Indonesia, H.E. Ratu Tui Cavuilati and officials from the Ministry of Industry Trade and Tourism.