Doing business with China

Claude Robinson

Sunday, July 15, 2012    

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UNDERSTANDABLY, the legal battle between Transport, Works and Housing Minister Dr Omar Davies and Contractor General Greg Christie has attracted considerable public scrutiny because of its implications for good governance and development.

The Government is seeking a judicial review as to whether Mr Christie has the authority to require the three-member Independent Oversight Panel (IOP) appointed by the minister to report to the contractor general about their monitoring of three mega projects. For the Administration, a lot is riding on timely completion of the projects because of their implication for investment, job creation and long-term development.

When he announced the panel, the minister said it would "strengthen the existing monitoring framework" of three infrastructure projects. The Administration would "not accept impotence as an option" and would not allow the Office of the Contractor General (OCG) to be a stumbling block in the way of progress. Mr Christie sees the IOP as an attempt to "deliberately circumvent" the authority of the OCG.

The projects are the north-south link of Highway 2000, which spans Spanish Town to Ocho Rios; the Gordon Cay Container Transshipment hub, and the Fort Augusta Container terminal — the latter two being critical to position Kingston as a centre of global shipping after expansion of the Panama Canal is completed in 2015.

Completion of the north-south link of Highway 2000 is being undertaken By China Harbour Engineering Company under conditions which the minister insists fall under the category of "investment" and not a contract that would fall under the oversight purview of the OCG.

The minister reaffirmed his stance last Wednesday at a forum, 'Doing Business with China', put on by the Jamaica-China Friendship Association in Kingston.

"Unlike the present legs of Highway 2000 in which the Government of Jamaica has significant debt obligation, there will be no such obligation for this north-to-south link of Highway 2000," Davies told an overflow gathering of business people, apparently anxious to figure out how to take advantage of opportunities presented by China's status as a global economic powerhouse.

"I want people both inside this room and wherever else they may be to appreciate this distinction. This is not a contract being awarded to China Harbour. This is China Harbour, an investor and (they) must be treated like any investor." There was no doubt as to 'whoever else' the minister wanted to hear his words.

The outcome of the Supreme Court deliberations is important because issues of governance and accountability are at stake. Equally, the case for investment in sensible development projects is unarguable. But, as I commented previously on the issue, development and accountability are not mutually exclusive. We will see how this plays out in the Courts, the place for resolution of such issues.

Dealing with the newest superpower

Meanwhile, the forum provided practical information for Jamaicans wishing to do business with China. The advice ranged from building relationships to sourcing goods and services at the best price and quality to identifying Jamaican goods that can find a toe-hold in China.

Madame Lui Lei of the Chinese Embassy in Kingston stressed the importance of building personal relationships with Chinese counterparts. Relationships count far more than transaction.

Pay attention to rank in dealing with Chinese business people. Gifts are expected and welcome, but take care to give the senior person something that is clearly a notch above what's given to other members of the delegation. Gifts must be neatly wrapped; "avoid plain black or white wrapping paper, these symbolise mourning". And, of course, what happens at the dining table can be a deal-maker or a deal-breaker.

Beyond day-to-day commerce, though, I believe there is need for greater clarity and understanding of the relationship between Jamaica and China, which has emerged in a very short period as the second largest economy (after the USA).

In the years since our Independence, the balance of global power has shifted from its US-European Centre. China has the largest capital surplus in the world. The largest foreign holder of US debt is China, which owns more about US$1.2 trillion in bills, notes and bonds, according to a New York Times report citing the US Treasury as its source.

Hence, as Dr Davies said at the forum, "the economic fortunes of all countries, not just Jamaica, depend on your ability to anticipate" what happens with China and position yourself to take advantage of it. "No country can plan for the future without understanding what's happening in China," he said.

Minister of industry, investment and commerce Anthony Hylton reminded the audience of the background to current Jamaica-China relations which began more than 40 years ago when then Prime Minister Michael Manley outlined his Administration's One China policy at a time when Taiwan and the People's Republic of China were competing for international recognition.

As someone who worked in the Office of the Prime Minister at the time I recall some of the discussions about the risks in taking a position on the other side of the United States. Also, it was against a background of Prime Minister Sir Alexander Bustamante's summation of Jamaica's foreign policy in the 1960s in the pithy expression, "We are with the West".

Now, both sides of the aisle in Gordon House share a common China policy of attracting Chinese money and know-how to our economic development.

This is evidenced by projects such as JDIP, the Palisados Shoreline Project, the Montego Bay Convention Centre, COMPLANT acquisition of three sugar factories, and construction of the UWI Medical Sciences building. And Dr Davies promised more announcements when he hosts the head of the major Chinese firm, China Communication and Construction Company (CCCC), next week. CCCC is the parent of China Harbour.

And, in a speech to the UN Economic Commission for Latin America and the Caribbean last month, the Chinese Premier Wen Jiabao announced the creation of a co-operation fund for the region with an initial input of US$5 billion to promote, inter alia, the development of the manufacturing sector, as well as a credit line of US$10 billion to boost infrastructure co-operation through the Bank of China.

Premier Wen Jiabao noted that the only way to correct the current imbalance in trade is for our region to increase future exports of products with greater added value. According to Wen, China expects the volume of trade with the region to be worth more than $400 billion in the next five years.

Question, as posed by the editors of this newspaper in an editorial last week, is whether regional policy makers and business people will catch the fast boat to China.

"The Chinese boat to boosting the region's flagging economic growth is the enormous potential for trade, direct foreign investment and tourism, which remains underdeveloped or undeveloped. The Government and private sector of Caricom should be doing more to export to China, encourage Chinese foreign investment and promote tourism emanating from China."

Truth is that over the first 50 years of Independence, Jamaica has attracted an enormous amount of foreign direct investment and development support for creating infrastructure.

But these have not been transformed into sustainable economic growth. Will this time be different? Will there be linkages between the foreign investment and the local economy? How can we transfer the learning from international best practice into our everyday production process?

Will we really see China as more than a generous benefactor? Will we understand that China's interest in us — however driven by fraternal relations and development — is also part of their global strategic interest? What is our interest and how do we best protect it?





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