September 22, 2009

China’s aid program raises questions

Chinese aid using its foreign exchange reserves may be winning Beijing clout in developing countries but a probe of that program has raised some questions.

The New York Times Tuesday quoted experts who say that most of China's foreign aid program requires loan recipients to buy goods or services from companies, many state-controlled, picked by Chinese officials without competitive bidding. The experts said essential details such as project costs and loan and repayment terms are mostly kept secret.

The report cited the case of Namibia which in 2007 got a large low-interest loan from China which was then used to purchase some $55 million worth of Chinese-made anti-smuggling cargo scanners.

Namibia later charged the state-controlled company selected by China to provide the scanners had allegedly facilitated the deal with millions of dollars in illegal kickbacks, the report said, adding China has no specific law against bribing foreign officials.

The Times said China is using its vast foreign exchange resources to firm up diplomatic ties and win access to natural resources in countries in deals for its own companies.

China is using this financing to buy the loyalty of the political elite, Harry Roque, a University of the Philippines law professor, told the Times.