China seeks to set record straight on SGR, global trade as row rages

For a country that for years was associated with insular communist orthodoxy, aversion to private enterprise, and self-imposed isolationism, it might seem odd that emerging superpower China is now the one trumpeting it’s fidelity to free trade and globalisation; while accusing the United States, the bastion of capitalism, of betraying the principles underpinning international commercial treaties.

This came out clearly when Chinese Ambassador Sun Baohong hosted a press briefing on Friday to respond to the growing number of controversies around Chinese activities in Kenya, as well as to global issues around the trade wars and tit for tat tariffs provoked by the protectionist regime of US President Donald Trump. 

Although a relative newcomer having landed in Nairobi just in May, Mrs Sun displayed a keen sense of issues when she fielded questions, and a practised diplomatic mien in evading clear answers to some of the more sensitive and controversial issues.

She was accompanied by the embassy’s Commercial and Economic counsellor, Dr Guo Ce, who first delivered an address largely focussed on the escalating trade war with the US as the Trump administration moves to imposes barriers on entry of Chinese goods, and also targets key allies such as Canada and western Europe.

Mrs Sun chose to address the media in the midst of a maelstrom over Chinese activities in Kenya, notably media exposés on discrimination and maltreatment of local workers and racial segregation at the Chinese built and operated Standard Gauge Railway.

PERSISTENT QUESTIONS

There have also been persistent questions on the cost and financial viability of the project as well as issues on possible corruption around the procurement.

Also on the table were issues about the huge trade imbalance in China’s favour and its contribution Kenya’s burgeoning foreign debt, and recent domination of major infrastructural projects, key being the SGR, as well as roads and telecommunications.  

Another hot-button issue is growing unease on the notable influx of Chinese citizens settling down to live and work in Nairobi and other urban areas, beyond those employed on the railway and other big projects.

Many are traders and businessmen who are breeding resentment because of the perception that they are competing with small scale local merchants.

After Mrs Sun and Dr Guo were through with their statements and open question and answer sessions, the ambassador granted the Sunday Nation an exclusive interview on the request for clarity on some of the issues.

The most disturbing has been alleged racism and mistreatment of Kenyan workers on the SGR by their Chinese counterparts. Mrs Sun acknowledges that there have been problems, but explains them away to language barriers and cultural differences rather than any deliberate effort to mistreat Kenyans.

She accuses the media of sensationalism and distortion, firmly rejecting insinuations revolving around “racism, colonialism and apartheid – that we cannot accept”.

SOCIAL ISSUE

But might the Chinese be in denial on a serious social issue that if not well managed could impact badly on harmonious relation between Kenyan and Chinese workers on the SGR?

“We never refuse to face difficulties on operational aspects of SGR”, she responds, conceding that the company running the railway is new in that kind of enterprise involving cross-cultural teams and may not yet have “mature” structures in place to navigate such challenges.

Her view was that isolated incidents were being blown out of proportion. “Individual issues should not be exaggerated” she insisted, “but we have asked them rectify and improve communications with Kenyan employees”.

How about the widely-circulated pictures of Kenyan workers seemingly being forced to do press-ups? The ambassador has an interesting answer.

That was not punishment, but part of Chinese workplace culture of team building, often involving group work and physical exercise, in which even the Chinese workers participate.

Even herself as an ambassador is not exempt, she said, but seemed to avoid a clear answer on why the pictures in circulation showed only the African workers doing the exercises without their Chinese counterparts.

INVESTIGATIONS

When the reports of discrimination at SGR were published in May, the Government though official spokesman Eric Kiraithe seemed to treat the manner lightly. 

While saying that discrimination would not be tolerated and promising investigations, Mr Kiraithe insisted that local staff were merely undergoing necessary orientation and training in preparation for running SGR once China Road and Bridge Corporation (CRBC) handed it over.

“We must all appreciate that the operations of the of a modern train infrastructural system like Madaraka Express in a consistently effective and efficient manner is a profession that calls for military standard discipline,” Mr Kiraithe said.

“The ongoing training of staff, therefore, is not about transferring technical skills only but is aimed at inculcating the right mindset, a set of moral principles and workplace values that will build a foundation for the rail to operate effectively in future.”

The matter was however taken up by Parliament, where Transport and Infrastructure Cabinet Secretary James Macharia was grilled by a departmental committee.

“If it is confirmed that discrimination occurred, then we shall take some very serious actions,” Mr Macharia told the National Assembly Transport committee chaired by Pokot South MP David Pkosing.

SGR OPERATIONS

An investigation conducted by Kenya Railways Corporation, the actual owners of SGR, was expected to be tabled before the Committee at the end of this month.

This might make for interesting reading as Kenya Railways is believed to be sympathetic to claims levelled against the Chinese counterparts it apparently believes have shut them out of SGR operations. 

SGR aside, there have also been reports on growing unease in Kenya and elsewhere in Africa over the huge influx of Chinese citizens opening up shops and other trading outlets, often in direct competition with local small scale business people.

Mrs Sun agrees negative stories have periodically appeared in the media, saying the Embassy is also keen to address them, but investigations it carries out show most of the claims are baseless.

Chinese citizens living in Kenya are advised to obey the laws and be in conformity with their Immigration status, she says, pointing out that those who fall on the wrong side will have to face local justice without interference from Embassy.

However there have been open complaints by small scale Nairobi traders that Chinese rivals are running them out of business as they have the networks to import goods directly from manufacturing plants in their country, under-cutting local middlemen.

Indeed Mrs Sun spoke soon after a lobby group of Nairobi traders complained the Chinese were taking away their business.

SMUGGLED PRODUCTS

Mr Ben Mutahi, the chairman of Kenya World Wide Importers and Traders Association complained at a government forum on combatting trade in counterfeit and smuggled products that the Chinese “are all over Gikomba Market and Biashara Street”, he was quoted by the Business Daily, complaining that the foreigners undercut local traders by evading import duties.

This might not be strictly true as duty evasion on goods imported from China, Dubai, Turkey and other popular sources is a widespread phenomenon that cannot be blamed on the Chinese alone.

The government has recently launched a crackdown on the cargo-handling companies that specialise in bringing in container-loads of goods that somehow avoid Custom Duty inspection, carrying out raids at godowns in Mombasa and Nairobi’s Eastleigh district where most of the illicit trade is centred. 

The crackdown has provoked protests from traders, including members of the notorious ‘Nairobi Business Community’ group which was used by the government and the Jubilee Party to violently counter opposition demonstrations ahead of the General Election last year. The traders have seemingly been demanding the right to deal in counterfeit and contraband goods.

Trade Principal Secretary Chris Kiptoo termed the issue as sensitive, but promised the traders that their concerns would be addressed. He said the matter was being handled through “high-level” intervention at the Immigration ministry.

WORK PERMITS

One issue is that Chinese citizens have landed in Kenya in droves, getting residency and work permits to engage in all manner of small jobs that don’t require expatriate skills.

In 2015, Daily Nation carried an extensive investigative report on the problems facing Kenyan and other Africans citizens trying to do business in China.

Despite considerable investment and buying and shipping massive volumes Chinese goods to Africa, it was almost impossible for them to get work permits or residency visas.

They were forced to operate on sort-term tourist visas, which forced them to leave the country every three months to get fresh visas in nearby territories such as in semi-autonomous Hong Kong.

By contrast, Chinese business people in Kenya get work permits and residency as a matter of course.

Does the Ambassador see the need for reciprocity? Has the Kenya government appealed with Chinese authorities for similar treatment?

To this question Mrs Sun gives a long-winded answer on each country having the sovereign right to make and enforce its own visa and work permit rules, and to make its decisions either in favour of protecting the local labour force or running a liberal Immigration regime.

INDICTMENT

The issue of reciprocity has never been discussed, which even without her saying so may well be an indictment of Kenya’s approach to the issue. 

She gives an example of how in the 1960s before China came out of isolationism, students seeking opportunities to study in the United States were routinely denied visas.

The situation has now changed as China became a global economic and technology power, with Chinese people valued for their contribution American universities and corporations for their expertise in technical research and development.

Beyond relations between Kenyan and Chinese managers at SGR, however, are more serious issues focussing on the commercial viability of President Uhuru Kenyatta’s flagship project presently consuming billions in operational losses.

Mrs Sun told the Nation that after just one year since the passenger train service was launched and just a few months of cargo operations, it is too early to reach judgment.

She pointed out that the value of big infrastructural projects is measured in terms of overall contribution to social and economic development rather than immediate financial returns.

“If you think narrowly you’ll never build railways”, she said, wondering if the British colonisers would ever have built the ‘Lunatic Express’ line that opened up East Africa from the Kenya coast to Lake Victoria and onwards to Uganda if they simply counted quick profits.

EXPANSION OF COMMERCE

She pointed out countries such as France and the United States where expansion of commerce and industry was built on ambitious development of railways that eased movement of goods and people across vast distances.

Kenyans, she opined, should now be casting their eyes beyond what SGR cost to how the railway network can be expanded to open up other parts Kenya, and beyond to linking up transport infrastructure projects across the wider eastern African region.

She has no doubt it will eventually pay for itself, but that still leaves open the issue of how long it will take to break even, and for how long cash-strapped Kenya can afford the billions in the operational costs currently being consumed.       

There is also the issue of procurement and allegedly inflated construction costs. Again, Mrs Sun dismisses allegations of improper practices, insisting China has strict internal controls mechanisms to assess proper costs for each project.

“People have the misconception that it’s easy to borrow money from China. No its not. We adopt very responsible assessment and never want to over-burden anyone with debt.

No decisions are made by a single entity, there is always third-party oversight”, she responds on accusations that SGR construction costs were inflated compared to similar projects elsewhere.

UNFAVOURABLE BALANCE OF TRADE

In the same vein Mrs Sun make light of allegations that Kenya and other African countries are becoming massively indebted to China.

She argues that most countries must of necessity borrow to finance development, adding that way before China came onto the scene, African countries were still indebted, but to western countries .

Another issue at the press conference the unfavourable balance of trade, last year standing at US $5 billion in China’s favour.

Both Mrs Sun and Mr Guo preferred not to dwell on the numbers, taking the view that it was up to Kenya and other African countries to move more aggressively in entering the Chinese market.

The country, she said, was open to trade, but African countries have the responsibility to do their own market research and determine what goods and services might find demand in the vast market, and make concrete efforts to ensure supply.

She singled out tourism as a low hanging fruit for Kenya that could be exploited to bridge the trade deficit, with the numbers of Chinese visitors multiplying rapidly to over 70,000 per annum in just a few years. The numbers can grow even more, she said, but it was up to Kenya to enhance marketing efforts in China.

CHINESE TOURISTS

On the issue of Chinese tourists that ‘come and stay’ or those who come to work on the railway and other projects but end up doing their own business, however, Mrs sun was non-committal on actual numbers of those living and working in Kenya. She said the embassy had no figures and suggested the Kenya Immigration department should have the accurate numbers.

The Chinese embassy response is itself an acknowledgment that issues are being raised that answers and resolution.

This will not be easy. Like the British from the colonial era to present or the Indian traders and merchants and who dominate commerce and industry across Nairobi and other major towns, the Chinese newcomers are beginning to stand out in fashion that can easily breed resentment.

In times of economic hardship, it is easy for those feeling the pinch to take out their frustrations on the most visible scapegoats in those of another colour or race who seem to be doing well.

Both the Chinese embassy and the Kenya government would do well recognise a brewing problem and adopt measures to arrest it before it gets out of hand.

Pretending there is no issue or pointing the finger at the media or external forces is not the answer.