Economic projects in Angola may maximise impact of transport systems built by China

24 January 2011
Malanje railway station

Macau, China, 24 Jan – Angola may maximise the impact of the transport systems built by China by developing economic projects for specific areas and should seek out “sustainable partnerships,” with the Chinese companies, according to a study by the OECD,  NEPAD and the UN.

Angola was one of the countries analysed in the study entitled, “Economic Diversification in Africa,” whose writers concluded that the country was one of the top four beneficiaries of Chinese funding for infrastructure projects, under the terms of the so-called, “Angola Model,” which was replicated in other countries.

Angolan resources are “feeding the economic ties with Brazil, the United States and china,” as well as of Portugal, which remains the country’s biggest trading partner, said the study by the UN, the New Economic partnership for African Development (NEPAD) and the Organisation for Economic Cooperation and Development (OECD).

“Angola could benefit from these partnerships if makes certain that they serve its development interests. It can develop strategies that link economic projects to transport system that are being built by China,” it said.

Another way of maximizing the impact of these systems is to create, “sustainable partnerships,” with Chinese companies doing business in the country, as the Democratic Republic of Congo is trying to do in Katanga province the study said.

Despite the “headway made through relations with China,” the document said, Angola could do more to increase the benefits for its economy, especially, “through greater diversification.”

The recent economic crisis, when the drop in the price of oil had serious repercussions in the country, shows the need to move ahead with this policy of reducing dependence on the energy sector, according to the study.

“Tremendous potential” to support diversification and the financial sector comes from the activities of Sonangol, which are “very similar to a sovereign fund.”

In 2004, China provided Angola with a credit line of US$2 billion for development of the infrastructure destroyed during the country’s civil war, whilst Luanda provides 10,000 barrels of crude oil per day to Beijing.

Angola currently provides over half of China’s oil imports from sub-Saharan Africa.

Under the terms of the “Angola model,” the country receives a subsidised loan from China’s EximBank, (interest rate from 1 to 6 percent, extended maturity and non-payment periods), the government contracts a company – usually from china – for the infrastructure project, whilst it provides rights for extracting natural resources to a Chinese company in order to pay off the loan.

The funding has been directed to electrification projects, railroads, roads, telecommunications, water and sanitation,, amongst other areas.

Although Angola “is making innovative use of its natural resources,” for reconstruction, there has been “a lack of big initiatives to improve the transport system, such as secondary roads in rural areas and renewable energy projects,” beyond making use of infrastructure, namely transport corridors to “improve trade and expand economic activities.”

The UN/NEPAD/OECD study noted that, as well as energy resources, Angola has “enormous potential,” in the mining and wood sectors, although the government urgently needs to improve its regulatory framework and ensure that public administration has the capacity to support these activities. (macauhub)