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CALCULATING ECONOMIC DEVELOPMENT AND CHINESE CONTRACTS OF THE DEMOCRATIC REPUBLIC OF CONGO. by Ibanda Kabaka Paulin, Economist.
1. Economics calculation and Congolese Development.
There has always been a failure among Congolese leaders. It is the lack of economic calculations in decisions about economic development and social development.
They often favor legal considerations without regard for economic rationality. Do not believe that an agreement in good and due form necessarily guarantee your interests. This is the case of unconscionable contract concluded in 2007 between China and Congo. Beware of people who come in sheep but are really wolves that in itself says the Bible.
Let's economic calculation could have been done before the conclusion of the contract. In this contract against infrastructure materials, China has demanded to be paid in kind for 10 million tonnes of copper. Microeconomics teaches that the budget for the purchase of a product is equal to the price of the property multiplied by the amount of the property. Thus: R P is multiplied by Q.
The average price of a tonne of copper was $ 6500 when signing the contract. This means that the budget that China was reserved for the acquisition of that amount is $ 6500 by 10 million tons, or 65 billion dollars. In carrying out public works in the Congo for 10 billion, China realized a gain budget of $ 55 billion. That's crazy economy. This scam has never been made in world history.
Moreover, the maximum allowable annual extraction of copper was 500.000t the granting of 10 million tonnes to China can only be done in 20 years. Hence a presidential mandate commits the resources of other 3 presidential terms to come. With what money these Presidents will they work? Hence the lack of realism and madness of this contract in terms of length and encryption (development) budget.
Therefore the Congo should be re: to renegotiate the contract or terminating it. By renegotiating, there are two alternatives: 1) China revises its claims to decline, more or less 13 million (infrastructure funding plus extraction), equivalent to 2 million tons of copper. 2) China is delivering 10 million and will build for $ 50 billion in infrastructure and 15 billion earmarked for costs of extraction, or a program built on 20 years.
That is the only way to guarantee the interests Congolese risk of litigation Sino-Congolese.
It should be noted that the International Monetary Fund and World Bank Group just require the Congolese government to review these contracts in kind (materials against infrastructure) with China because they pose a serious risk to Lend to the Congo when the country is in a program of debt reduction with 2 international financial organizations listed through the HIPC (Highly Indebted Poor Countries).
2. Contract DRC-China: a market of fools?
In succession of general elections in the Democratic Republic of Congo in 2006, new political institutions have been established, led by elected leaders. At the top of the State, Mr Joseph Kabila, who was chosen as Head of State.
As the DRC is a country that has chosen the presidential system, it is the President who is Head of Government. Is its economic and social policy to be applied by the Government. In this context, Mr Kabila has set a goal of reducing poverty in terms of its current mandate in engaging meaningfully in the five (5) the following sectors: infrastructure, employment, education, health and the electrification of the country. It is now known as the five sites Kabila.
To finance the realization of those projects to rebuild the country, it is clear that the Congo could not himself raise the necessary funds, both internally, and therefore had access to external financing multilateral (Bank Group World, IMF, African Development Bank, UNDP and bilateral ,...) (country donors of funds). For your information, foreshadowed in Budget 2008, the DRC expects 60% of budget revenues outside input. It provided that nothing concrete could be done in this country without foreign aid.
For this reason, Kabila's strategists are determined to seek a massive external financing. As the DRC could not qualify for concessional funding from Western donors and multilateral lenders because the countries that acceded to the HIPC initiative, was always under the program and had not yet seen its foreign debt ease or erase. To provide further funds would be the massive Lend, which would be a vicious circle. As a result, the Congolese Government has negotiated an agreement behind closed doors for funding under the philosophy of project support, not budget support. Indeed, China has agreed to fund the implementation of some of these sites however, it will make itself. For an amount of 10 billion dollars, China will build roads, a railway-Kinshasa Ilebo, schools, hospitals and electricity to several towns and cities.
To return its funds, China has imposed on the Congolese Government to be paid in kind or against 10 million tonnes of copper. The DRC must deliver to China the quantity of Pharaonic copper.
Indeed, if I take the hypothesis of maximum production of copper in the DRC, Gecamines, the company that extracts copper in the DRC, produced 500 000 tons when she was walking normally. This means that to deliver 10 million tonnes that we need in China, it takes 20 years of event production with maximum production.
As the presidential term is 5 years, this amounts to saying that a single term of the mortgage Kabila three terms that will succeed him.
That makes me fear tensions between the future Congolese leaders in 5 and 10 years, and China. What is the Congolese President will accept a lack of budgetary room for maneuver because China has signed a contract unconscionable to his predecessor?
That presages a future Sino-Congolese litigation. |
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