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Speaker 1: Hello, everybody, Welcome to the third of Bloomberg's podcasts to

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Speaker 1: Accompany are Built a Road Initiative television series. I'm David

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Speaker 1: Tweed and with me in the studio is rosalind Chin

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Speaker 1: who produced the episode in Africa, in particular in Kenya.

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Speaker 1: You sort of use Kenya as your example for East Africa?

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Speaker 1: Is that right? Why did you choose Kenya? Correct? Well,

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Speaker 1: Kenya has a shiny example of the Bolton Road initiative.

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Speaker 1: China has invested China has invested money um in building

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Speaker 1: the single gage at the standard gage railway. So this

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Speaker 1: railway goes from Mombasa, which is why we started our

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Speaker 1: journey there to Nairobi, and it's meant to open up

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Speaker 1: the passage of goods and people because there's a cargo

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Speaker 1: line and there's a passenger line going between the two. Now,

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Speaker 1: there has been a rail line there before, but that

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Speaker 1: was built many many decades ago, um and it's not

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Speaker 1: not not in a very good shape. There is also

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Speaker 1: a road that gets between the two cities as well.

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Speaker 1: But how far are we talking the rail itself? Is

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Speaker 1: that under just under five kilometers? And what sort of cost,

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Speaker 1: how much money is involved? It cost to three point

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Speaker 1: eight billion to build that particular line um and most

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Speaker 1: of it was financed by a loan from Eggs and Bank,

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Speaker 1: the Chinese Chinese Export Import Bank rather was funded by

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Speaker 1: a loan. And what does it do? I mean, you

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Speaker 1: know it connects obviously the capital Nairobi with mombast of

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Speaker 1: the port Narrobi being inland, so I mean you can

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Speaker 1: see obviously those benefits. Is Nairobi an industrial base or

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Speaker 1: an export you know, an export base? What's what's how

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Speaker 1: does it? How does it benefit? Well, there is a

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Speaker 1: fair bit of manufacturing around Nairobi. In Kenya, for example,

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Speaker 1: there are the biggest cities which are Nairobi and Bassa.

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Speaker 1: There isn't a lot of manufacturing necessarily outside of that.

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Speaker 1: You know. What they're hoping but with this line is

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Speaker 1: to make the tub the passage of goods faster than

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Speaker 1: between the port between Nirobi going in and out, a

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Speaker 1: lot of stuff is actually coming in from the port um.

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Speaker 1: But also eventually to increase those lines going beyond Nairobi

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Speaker 1: further up towards the border of Uganda, and that would

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Speaker 1: also open up manufacturing possibilities elsewhere in towns which are

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Speaker 1: further away. For example Nabasha, which is outside of um

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Speaker 1: It's on online between Nairobi and the border of Uganda.

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Speaker 1: Um you could set up manufacturing plants. There would be

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Speaker 1: a lot easier, of course than to get your goods

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Speaker 1: in and out. So that should hopefully open up both

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Speaker 1: manufacturing and trade in Kenya, and so it is the

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Speaker 1: idea to expand this line into Uganda and bordering countries. Well.

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Speaker 1: There has been a grand plan for many years now

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Speaker 1: among African nations, especially at East African nations, to build

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Speaker 1: rail network that will all join up and again with

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Speaker 1: the same idea that they're going to have better connectivity,

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Speaker 1: which means better trade both people and cargo being able

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Speaker 1: to move around and therefore really help these economies to grow.

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Speaker 1: But due to many reasons including for example, governments changing,

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Speaker 1: changing their minds, not getting along with each other, politics,

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Speaker 1: and also money, so lack of funding in some places,

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Speaker 1: this hasn't really happened and they are trying again still

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Speaker 1: to try and make some of these lines be built

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Speaker 1: and therefore get this connectivity that they've wanted for such

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Speaker 1: a long time. One of the business businessmen who has

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Speaker 1: interviewed spoke a bit about execution or the difficulty of

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Speaker 1: executing and and bottlenecks. Now what was the point that

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Speaker 1: he was making and how does the br initiative how

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Speaker 1: would it overcome those issues? So there were in one

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Speaker 1: part they were talking about the teething problems they've been

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Speaker 1: having with this particular line. So previously, businesses have put

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Speaker 1: their goods on to a train which is very slow,

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Speaker 1: or onto trucks going between one Baston and Nairobi and

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Speaker 1: that would take maybe eight, ten twelve hours to get

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Speaker 1: there because the roads themselves aren't that good either. Now

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Speaker 1: what they've done is the government has essentially pushed businesses,

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Speaker 1: forced them to use the new rail line, the SDR.

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Speaker 1: It's offered them subsidies to do so, because what's happening

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Speaker 1: is you still need trucks at either end to get

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Speaker 1: the goods off the train and two ways be and

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Speaker 1: so these are some issues which eventually should be ironed out,

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Speaker 1: so you need the infrastructure around them exactly. But I

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Speaker 1: think these are seen as fairly short term issues because

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Speaker 1: eventually they will be sorted out. But of course it's

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Speaker 1: hurting businesses right now. Now. You mentioned Excellent Bank, which

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Speaker 1: was which is the bank that is funding most of

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Speaker 1: this project. It seems to me listening to once again

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Speaker 1: to some of the people speaking on the on the episode,

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Speaker 1: that there's an argument that's sort of a debate about

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Speaker 1: whether these projects are going to be economically viable, with

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Speaker 1: one guy was saying that he really can't see how

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Speaker 1: it's ever going to be economically viable, and then you

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Speaker 1: spoke to another businessman I think, who was saying, well,

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Speaker 1: you know, once these projects are in place, they're going

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Speaker 1: to actually spare economic development and that will in turn

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Speaker 1: pay for itself. Can you just tell us a little

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Speaker 1: bit more about what you're hearing or what you heard

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Speaker 1: when you were in Kenya about the viability of these projects.

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Speaker 1: Is it still a debate or is it falling in

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Speaker 1: one way or another. It's still somewhat of a debate,

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Speaker 1: But I do think that many people do think that

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Speaker 1: this is a very expensive piece of infrastructure. So and

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Speaker 1: also because this is just the first part of the line,

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Speaker 1: there will be parts beyond this, as I mentioned, which

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Speaker 1: are already in the process of being built that the

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Speaker 1: government has borrowed for as well to build to the

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Speaker 1: next part of the line. There as a loan from

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Speaker 1: Exam Bank as well for eight of that cost of that.

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Speaker 1: The next part of the line, how much is that

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Speaker 1: I can't remember. Over a billion definitely, and then then

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Speaker 1: the next part of the line after that, it's going

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Speaker 1: to be in another three point eight billion. And what's

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Speaker 1: actually happened is because there's been more pressure on the

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Speaker 1: government because of concerns about the ability to pay back

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Speaker 1: these loans. There's one arm of the of the railway

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Speaker 1: that again leads towards um the Ugandan border, which the

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Speaker 1: Kenyan government had actually agreed would be another loan. But

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Speaker 1: they've gone back to China now and said, actually, can

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Speaker 1: half of that actually be come as a grant not alone?

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Speaker 1: And they've tried to renegotiate. Now it hasn't been decided

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Speaker 1: yet whether China will let that happen. But things are

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Speaker 1: beginning to change as the Belton Road Initiative rules out,

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Speaker 1: Governments across the world, not just in Africa, are becoming

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Speaker 1: a little bit more aware about the financing issues, about

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Speaker 1: indebtedness um sort of these concerns which have been raised

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Speaker 1: by various policymakers and economists, and then revisiting exactly what

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Speaker 1: the terms of the deal might be now of course,

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Speaker 1: when for some of it it's too late because the

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Speaker 1: loans have already been made. But for things which haven't

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Speaker 1: happened yet, there is still a chance to reprocess, like

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Speaker 1: we've seen very publicly obviously in Malaysia exactly. One other

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Speaker 1: point that was made was was you interviewed a woman

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Speaker 1: who is the chief executive. Yes, the crop line, that's right,

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Speaker 1: and and and she was making the point that she's

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Speaker 1: worried that African leaders have seen the whole African continent

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Speaker 1: go to China. But at the same time she says

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Speaker 1: that there's a lot to learn from China. Now what

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Speaker 1: was she talking about there? I think she was referring

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Speaker 1: to business business practices, um, in terms of efficiency execution.

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Speaker 1: The Chinese have come in and many business leaders have said, well,

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Speaker 1: actually China get things done. They get things sounds quickly,

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Speaker 1: they get things done pretty much, you know, as there

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Speaker 1: was supposed to. So that's one thing that actually they

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Speaker 1: can look at. On innovation of something else that came

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Speaker 1: up I thought was interesting. Yes, learning known any things,

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Speaker 1: taking on board new ideas as well, and ways to

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Speaker 1: do things simple things like manufacturing exactly. Um. But of

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Speaker 1: course you know when you let another a competitor, potential

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Speaker 1: competition that there are risks as well. Um you know,

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Speaker 1: she talked about let in the African leadership, letting the

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Speaker 1: content go to China. I think in that she was

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Speaker 1: referring to basically not having strict enough checks and balances

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Speaker 1: against a for example, the rail line itself of the

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Speaker 1: financing for that, but also in her particular industry, how

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Speaker 1: ways that the government could protect her industry better. So she,

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Speaker 1: you know, is an agro chemicals and she is in agriculture.

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Speaker 1: It's a huge part of the Kenyan economy, and I

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Speaker 1: think she is voicing her opinion that there should be

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Speaker 1: more done by the government to protect them in the

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Speaker 1: face of more imports coming in from outside because of course,

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Speaker 1: whether you know better links trade links, trades coming in

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Speaker 1: as well as out, So there is that threat. But

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Speaker 1: one of the one of the points another one of

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Speaker 1: the people you spoke to, I think it was a

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Speaker 1: It was a man who was in charge of a

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Speaker 1: company that made edible oils, and he was talking about

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Speaker 1: how there's an opportunity for Africa to become a much

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Speaker 1: more important food exporter, given the fact that not much

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Speaker 1: of African food makes it to China these days. And

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Speaker 1: it set me wondering about whether there are already in

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Speaker 1: place a sort of China food excess arrangements or trade

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Speaker 1: deals between the African nations and China. Are there f

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Speaker 1: t as in place? I think this is something that's

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Speaker 1: the Afghan nations really want to try and hammer out.

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Speaker 1: I'm unclear as to whether there are specific agreements in place,

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Speaker 1: but this is something that some of them would like

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Speaker 1: to take advantage of if it should happen. But again,

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Speaker 1: I think with many industries, they do feel that the

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Speaker 1: governments are not giving them enough support export items out

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Speaker 1: to other countries, China included, and they would like more

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Speaker 1: support from the government to help them to do this, so,

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Speaker 1: you know, perhaps as you say, special trade agreements or

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Speaker 1: agreements helping them to roll out products into new markets.

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Speaker 1: I think there are a lot of manufacturers in Africa

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Speaker 1: who are looking for new markets, not just within the

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Speaker 1: continent itself, but outside, and they're searching for ways to

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Speaker 1: do that, and I think they'd like a bit more

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Speaker 1: help to try and do that, especially in the phase

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Speaker 1: of seeing potential competition coming in. Yeah. Another part of

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Speaker 1: the program looks at the African Leaders Conference that took

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Speaker 1: place in Beijing, earlier this year where Sun Ping was

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Speaker 1: talking about how China may invest but it won't interfere

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Speaker 1: in African politics or in the internal workings of African government.

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Speaker 1: How much do you think that that is a selling

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Speaker 1: point for African leads when they're looking at countries which

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Speaker 1: are offering them up loans, because it's not just Africa,

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Speaker 1: is it. That's right. There's been a growing sensitivity um

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Speaker 1: to what some see as China's reach its soft power

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Speaker 1: as well into other countries. China is always maintained that

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Speaker 1: it sees the Belton Road as a way of spurring

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Speaker 1: economic development. It does not see it as a means

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Speaker 1: for political gain. But of course there are concerns because

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Speaker 1: you know, when you have one country with a lot

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Speaker 1: of power, because it has a lot of money, and

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Speaker 1: often it's the biggest trading partner as well, then some

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Speaker 1: will see concerns they're given the amount of power that

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Speaker 1: China has. UM. China has become aware of these sensitivities.

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Speaker 1: It's trying to reel back um the idea perhaps that

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Speaker 1: it has so much reach or power into other countries. UM.

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Speaker 1: And it has repeatedly said you know we are we're

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Speaker 1: when not into interfering in other nations. And this is

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Speaker 1: a line that is I think it's had for a

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Speaker 1: very long time, regardless of whether it's about the Belton

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Speaker 1: Road initiative about anything else. But whether others believe it

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Speaker 1: or not is another thing. Well, when you were there,

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Speaker 1: did you have much sense that, you know, China was

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Speaker 1: there on the ground, that there were Chinese people who

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Speaker 1: are controlling things, not on the superficial level. I think, Um,

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Speaker 1: when you went to the train, most of the people,

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Speaker 1: if at all, almost all of the people that you

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Speaker 1: saw that they encountered in terms of yes, that's right,

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Speaker 1: we got onto the str that from a bass back

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Speaker 1: to Nairobi, they were all Kenyans. But at the higher level,

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Speaker 1: the company that runs actually operates the YESDR they got

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Speaker 1: a ten ure um deal to run it is the

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Speaker 1: Chinese company that built it, which is the China Reil

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Speaker 1: and Bridge Corporation, which is a subsidiary of c C

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Speaker 1: c C, which is one of the biggest state owned

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Speaker 1: infrastructure builders in China or in the world possibly. And

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Speaker 1: then at the high levels it is the Chinese. But

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Speaker 1: you may not see them on an everyday level, right right,

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Speaker 1: because I mean, you know, years ago when China first

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Speaker 1: went into Africa, you heard a lot of stories about

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Speaker 1: China actually bringing in their own workers to build the projects.

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Speaker 1: Any evidence of that going on, I didn't see any

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Speaker 1: with my own eyes, but there's lots of controversy about that,

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Speaker 1: So there's lots of stuff written about The controversies about

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Speaker 1: China is not all these companies. Rather, I'm not hiring

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Speaker 1: enough locals. They're hiring a lot of Chinese workers who

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Speaker 1: stay there. The Chinese workers don't live in the same

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Speaker 1: places as the local workers do. They've treated differently. I

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Speaker 1: didn't see any evidence of that myself, but then it

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Speaker 1: wasn't something I was specifically digging out. And also, you

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Speaker 1: were looking at a completed project. Yes I was. There

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Speaker 1: were still apparently workers there, but I was looking at

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Speaker 1: something where people had already mostly finished building, or that

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Speaker 1: is the part that we were at there, already finished building.

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Speaker 1: Now the company will say that actually, you know, we

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Speaker 1: employ a lot of locals. So until unless you know

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Speaker 1: the actual numbers or you can actually compare what they're

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Speaker 1: talking about, is difficult to know really where the truth lies,

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Speaker 1: which brings me to the transparency issues. Is there an

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Speaker 1: issue about transparency with how these loans are set up

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Speaker 1: with how these companies are organized. Can your ordinary Kenyon

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Speaker 1: actually find out exactly what the terms are that have

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Speaker 1: been agreed with China on a lot of these projects. Well,

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Speaker 1: I think this is one of the issues that many

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Speaker 1: critics have is that a lot of these deals as

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Speaker 1: loans are not as transparent as they should be. Now,

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Speaker 1: for example, there was a case not in Kenya, but

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Speaker 1: in Pakistan where Pakistan said, you know, we need to

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Speaker 1: borrow the money. We might turn to institutions the World

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Speaker 1: Bank for example, for that money, and China said, well,

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Speaker 1: if you do that, then they threatened to reveal the

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Speaker 1: terms of its loans to Pakistan. Now, this is something

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Speaker 1: which could which could have been politically embarrassing for the

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Speaker 1: well the previous government suppose yes, So this is something

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Speaker 1: where there has been a call for a lot more

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Speaker 1: transparency over the terms of these loans, exactly what they involved. Um.

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Speaker 1: And of course there is also a lot of discussion

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Speaker 1: and talk about how clean the deals actually are, you know,

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Speaker 1: because if you don't really know what the deals are,

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Speaker 1: what's been agreed, then everything under that is very murky.

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Speaker 1: I suppose the bottom line about all of this and

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Speaker 1: and in particular, the Belton Road initiative and how it's

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Speaker 1: been laid out in in Africa marks a complete sea

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Speaker 1: change in the development model that we saw before in Africa,

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Speaker 1: which was more of an AID based development model. How

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Speaker 1: how is it is it is it true that there

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Speaker 1: is a sea change has happened? Have we moved from

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Speaker 1: one model to another? I think probably things that Belton

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Speaker 1: Road are getting a lot more coverage, So it does

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Speaker 1: seem like, oh, we're moving from one mode to another.

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Speaker 1: I think that there are still many other places and

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Speaker 1: institutions helping with loans and offering money to African nations

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Speaker 1: to build infrastructure projects and other things. Um, there are projects.

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Speaker 1: For example, Tanzania is building its own real line and

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Speaker 1: that's where the Turkish company doesn't have to be, you know,

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Speaker 1: from from China. Each nation can make their own decisions

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Speaker 1: on what and how they're going to build. But um,

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Speaker 1: there is probably an increasing move away from aid. But

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Speaker 1: you know, when it comes down to it, as one

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Speaker 1: of the businessmen said, vere More Shah here, the chairman

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Speaker 1: of Vico. He said, in the past it was aid.

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Speaker 1: Now many of the loans can there are the option

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Speaker 1: of having loans which don't seem to have as many

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Speaker 1: ties attached to it, which seems more attractive. But in

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Speaker 1: the end, what they need is investment. They just need

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Speaker 1: the money. They need the money to build, because I

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Speaker 1: can tell you now some of that infrastructure really needs upgrading.

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Speaker 1: The roads fully jammed all the time, because the roads

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Speaker 1: need a lot of that. But some of the fantastic

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Speaker 1: picture is that we were looking at You've taken some

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Speaker 1: very interesting footage of the old infrastructure, of the new infrastructure,

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Speaker 1: and quite a lot of camels, a few camels in

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Speaker 1: the market. It looked hot. How hot was it there

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Speaker 1: when you were doing you're surprised? I me, my battle

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Speaker 1: was quite warm. There was woman sunny, but Airobi because

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Speaker 1: it's quite actually quite chilly, and you'll see in some

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Speaker 1: of the pictures people are wearing jackets and coats because

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Speaker 1: it's not as a woman. Fact, when we first got there,

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Speaker 1: Rish and I likened it to London in the autumn,

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Speaker 1: not quite like sweltering Hong Kong. No, but my bats

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Speaker 1: at me very warm and very sunny. Please thank you

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Speaker 1: very much indeed for talking to me. Next next time

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Speaker 1: we're going to be talking about the fourth installment of

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Speaker 1: the series. Which looks at what the b r I,

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Speaker 1: the Built and Road Initiative, is doing in Europe and

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Speaker 1: how the Europeans are responding. So I hope you'll come

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Speaker 1: back and listen to that as well. I'm David Tweed.

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Speaker 1: Thank you,