Chinese envoy: No Kenyan assets have been mortgaged for SGR loan

Monday May 20 2019

Wu Peng

Chinese ambassador to Kenya Wu Peng speaking to the Daily Nation at the Chinese Embassy in Nairobi. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP 

MACHARIA GAITHO
By MACHARIA GAITHO
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New Chinese ambassador Wu Peng arrived in Nairobi six weeks ago and even before settling down, was sucked into the maelstrom of Kenya’s failure to secure funding for the final phase of the Standard Gauge Railway onward to Kisumu.

Mr Wu travelled to Beijing for the second Bridge and Road Initiative Forum where expectations locally were high that President Uhuru Kenyatta and ODM leader Raila Odinga would bring good tidings on SGR funding, only to return empty-handed.

From his office at the Chinese Embassy, Mr Wu spoke to MACHARIA GAITHO on SGR and other issues around Kenya-China relations.

MACHARIA GAITHO: There were expectations that the President’s China visit would secure funding for the Naivasha-Kisumu phase of the railway. It didn’t happen and the government later said the issue was not on the agenda. At what stage was that funding dropped from the agenda?

WU PENG: I really don’t know where those expectations came from. Funding for Naivasha-Kisumu SGR was not on the agenda. The Kenya government is focused on operations of Mombasa-Nairobi SGR. This is a smart and responsible move from your government.

SGR was from inception planned to extend across the Uganda border and maybe even to serve Rwanda and DR Congo. Might terminating at Naivasha kill the project vision and make it less viable?

China supports Kenyan efforts to improve infrastructure connectivity. This is of vital importance to economic development. In the annex of joint communiqué of the leaders’ roundtable from the recent Belt and Road Forum, Northern Corridor in Africa linking Mombasa to countries of the Great Lakes region and Trans-Africa highway is included. However, Rome was not built in a day. I believe SGR will not stop in Naivasha.

Does that mean you will eventually fund extension to Kisumu and beyond?

Of course China fully respects Kenya’s opinion and decision on when to start Naivasha-Kisumu line. We believe SGR is economically viable. Note that in first year of operations, Mombasa-Nairobi SGR has earned Sh10.33 billion, which is close to the operating cost of Sh12 billion. It’s never easy for a railway project to achieve nearly break-even in a year. Kenyan and Chinese operators deserve credit for that achievement. China has full confidence in Kenya’s ability to make profits from SGR.

Kenyans have been concerned that the deals with China on SGR financing have not been made public. Would secrecy clauses raise suspicion that that there is something to hide? Would China object to the documents being made public?

Let me declare this: There is no secret between the Chinese and Kenyan governments. Any loan agreements between China and Kenya are in line with international practice. None of Kenyan national assets has been mortgaged for the SGR loan and neither would any national asset be seized or controlled by China, even in a situation of default.

Okay, we are agreed there are no secrecy clauses in the SR financing agreement. Can you then provide me with a copy?

Who are you?

Kenya media.

Ok, but are you in position to ask me for the document?

Why not?

Because according to international practice you are not qualified to have this document.

What if we believe they should be public?

Your request is not reasonable. If you were a representative of your government or your Parliament, I can discuss this issue with you, but actually you are not. I respect media, but media should also know you are not representative of your country or your people.

The public interest?

That is for your government, your Parliament or Legislature elected by the people.

There have been fears that in the event of Kenya defaulting on the loans, key assets like Kenya Ports Authority and Kenya Railways Corporation could be seized.

These assumptions are groundless and I don’t think Kenya will default. Sometimes I think we should have common sense. Kenya is a sovereign state. Any asset in your country is protected by international law and should be respected by other countries. These are unnecessary worries.

There is debate in Kenya about the trade imbalance between the two countries. Any concrete steps on how this can be redressed?

This is a sensitive issue that raises concerns. It’s important to point out that Kenya-China trade is determined by markets. The economic situation and industrial structure of each country influences the imbalance.

We do not pursue trade surplus with Kenya as policy. China’s total foreign trade in 2018 reached $4.62 trillion, of which China-Kenya trade volume was $5.3 billion. That is about 0.1 per cent of our foreign trade volume. Actually, we are paying great attention to Kenya’s desire to expand exports. President Kenyatta was right to put industrialisation as a priority of the Big Four Agenda. Only through industrialisation can Kenya reduce imports and promote exports.

If Chinese government and companies can contribute, we are ready. For instance, a Chinese firm put up a tile-building factory with investment of $80 million and the output is already meeting 85 per cent of Kenyan market needs. Those tiles would be imported but are now made in Kenya and even being exported to neighbouring countries. The lesson is that we can’t only rely on the government if we want to reduce the trade imbalance but encourage the private sector.

Mr Kenyatta, on his recent visit, witnessed an agreement opening the Chinese market for Kenyan avocados. Does it open prospects for other Kenyan horticultural products to enter Chinese market?

Yes, and we are working on it. As brothers, we understand how important agriculture export is to Kenya. Last year as an outcome of President Kenyatta’s visit to our country, China and Kenya signed an agreement on the export of stevia to China, and the phytosanitary MoU which paves the way for access of Kenyan horticultural produce. Within four months, China Customs Authority sent an inspection team here on avocados. Both sides signed an agreement on the export of frozen fruits, which was witnessed by the two heads of state at the second Belt and Forum last month.

This will make Kenya the first African country to export avocados to China. Just yesterday, the commercial counsellor at our embassy visited a frozen avocado processor in Nakuru. We are very proactive to make the agreement real. Both sides are working closely to seal a deal on the export of fresh avocado and other products. There’s growing need in China for high quality agricultural products and Kenya has prime opportunity. The market and policies are there, now both sides need to engage the right market players so that the deals bear fruits.

The common belief is that most Chinese aid to Kenya is tied to expensive commercial loans. Are there examples of significant projects financed through grants?

The Moi International Sports Centre, Kasarani, was entirely funded by Chinese government grants. In the 1980s, China was a relatively poor country yet it used taxpayer funds to build Kasarani. It was not easy for China.

From Kenya’s independence, China has implemented more than 100 projects in Kenya under grants and interest-free loans. In last five years, seven construction aid projects and 13 material aid ones have been implemented. Five are in progress. These are grant projects.

Note also that half of all loans from China are on preferential export buyers credit and government concessional loans with very low interest, which is just a quarter or even less than the prevailing global financial market rates.

Railways, roads and other big infrastructural projects supported by China in East Africa are seen as components of the Belt and Road Initiative. Shouldn’t China not meet most of the cost?

This is a biased question. You say that BRI is a Chinese strategic objective. No. BRI comes from China but belongs to the world.

Opportunities and achievements are for the world to share. More than 150 countries and international organisations have joined BRI based on their judgement and assessment of benefits.

The principle of BRI has always been extensive consultations, joint contributions and shared benefits. China is ready to engage with other countries for mutually beneficial cooperation, and offer support within our capacity.

Kenya is a cosmopolitan country with settlers, businesspeople and expatriates from India, Europe, the Arab world and the US already established and accepted, yet Chinese living, working and doing business here seem to attract resentment. What can be done to address such issues?

As a new ambassador, the first thing on my schedule was to visit as many Chinese communities and companies as possible. I wanted to see their achievements and challenges and set clear to them to obey the laws of Kenya and respect the culture and people.

I believe culture and language barriers can be ovecome with mutual respect and understanding. The Chinese community in Kenya is doing better to get along with host communities.

In 2015, I found a large Kenyan and African community in Guanghzou. They had complaints about the difficulty in getting work, residence permits and long-term or multiple-entry visas despite doing legitimate business. They blamed this on discrimination and pointed out that the Chinese in Kenya do not have similar restrictions. Have these issues been addressed?

It is the same with Kenya. Foreign workers and businessmen are required to go through legal procedures to get permits. I know there are many Kenyans in Guanghzou. They don’t have many problems as long as their status is legal. If you find any individual facing problems, you can bring it to the attention of our embassy, to my attention. We will try our best to help. However, we don’t want generalisations.

Britain, the US and other western nations have expressed concern about growing Chinese engagement in Africa. Are we seeing the continent becoming a theatre for super power competition as seen during the Cold War?

There are some concerns, but not always in that way. The British Foreign Secretary visited Kenya recently and if you listened to what he said, it was not all about China and western countries competing in Africa.

We see support for African peace and development as a common responsibility of the international community.We approach international community cooperation in Africa with an open attitude. We welcome greater input from members of the global community to support Africa’s development, but we maintain that such cooperation shall respect Africa’s wishes, refrain from interference in domestic affairs and come with no political strings.

China’s growing economic and military clout is seen as a challenge to western dominance, yet it still refers to itself as a developing country. Is China a superpower?

This question is always asked by other countries as well and I understand. My answer is clear: China’s total economic volume is huge, but the GDP per capita is just a little over $9,000 ranking it 72nd on the planet. China still belongs to the group of developing nations.

You laugh, but I can understand. We will join hands with other developing nations in formally safeguarding our basic rights.

As the world’s biggest developing country, China is ready to assume obligations compatible with its development level and capacity. Yes, we are still developing, but we try our best to help other developing countries. And we are not a superpower.