Look East policy hits brick wall

via Look East policy hits brick wall – NewsDay Zimbabwe November 12, 2013 by Dumisani Sibanda

THE Zanu PF’s Look East policy to revive the country’s sagging economy has hit a brick-wall as Asian investors are shunning Zimbabwe perceiving it as a risky business destination, it has been learned.

Industry and Commerce minister Mike Bimha yesterday conceded that Asian investors, including Zanu PF’s much touted all-weather friend China, were withholding their money from the country.

He was speaking during a discussion of a paper titled Delivering Sustainable Growth in Africa presented by Japan Institute of Developing Economies’s Takahiro Fukunishi during a public lecture in Harare.

The investors cited political risk as the major drawback for doing business in Zimbabwe.

“There is an issue of country risk,” Bimha said.

“Insurance companies cover trade risk, but don’t have the capacity to cover political risk. This has a bearing not only on trade, but investment as well. Countries in the East which included Japan, China and India insist on cover against political risk.”

Although Bimha said that the government was not “sitting on its laurels” in trying to woo investors from the East, it emerged that “country risk” was compounded by the fact that Zimbabwe had a seemingly insurmountable debt of around $11 billion.

Recently, Zimbabwe, which is on an International Monetary Fund staff-monitored programme, was told to first pay its debt before it could access new money from the Bretton Woods institutions – the IMF and the World Bank.

The government turned to the East for investment and trade after a fall-out with the European Union and the United States following the launch of the land reform programme in 2000.

But yesterday participants confirmed that it was difficult to do business with their counterparts from the East including Japan who insisted on insurance cover for political risk.

Zimbabwe could benefit from being a Comesa member to enjoy benefits that include trade insurance, but the country has so far failed to pay the $25 million required for it to enjoy such benefits.

“As a member of the Common Market for East and Southern Africa we have the African Trade Insurance which ironically was mooted in Zimbabwe, but now is headquartered in Nairobi, Kenya,” he said. “We have started the process of being part of the initiative. Actually, we were admitted last year, but we have not paid the money we are required to pay to enjoy benefits of being a member,” Bimha said.

The government, Bimha said, needed about $25 million as insurance cover.

Zimbabwe had hoped the discovery of the Marange Diamond Fields would lift the country out of its economic abyss, but this has not been the case as it is reported that very little is finding its way into the fiscus.

“I am talking to the Minister of Finance (Patrick Chinamasa) and talking to the private sector and I think the Bankers Association of Zimbabwe must join because it also affects lines of credit, to mobilise resources to pay the money required for the African Trade Insurance,” Bimha said.

Earlier, Fukunishi said although Africa was experiencing a steady rise in its economic growth this was “unstable” in some instances as it was driven by natural resource.

“It could be affected by commodity price fluctuations,” he said. “There is a problem of limited resource endowment per capita, for example, in the case of oil Nigeria has a per capita income of $488 while it is $15 841 for Gulf countries. There is also a problem of what we call in economics the ‘resource curse’.”

Resource curse is a term which refers to a paradoxical situation in which countries with an abundance of non-renewable resources experience stagnant growth or even economic contraction.

Fukunishi said African countries should also be careful about Foreign Direct Investment without putting systems in place to benefit from the FDI spillover which refers to benefits such as technology transfer, technical assistance and access to markets.



  • comment-avatar

    Don’t understand the problem Jack STRAW SAID WE WILL BRING Zimbabwe to its knees then rebuild it – We just need the check for illegal sanctions.

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    William Doctor 10 years ago

    Ha ha ha. There it is. You f**king morons. Not even the Chinese want to do business with zanu. F**k you zanu pf.

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    No honour amongst thieves. Why is our zim ambassador so too quiet??

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    nesbert majoni 10 years ago

    Why does Zanu pf expect the west to treat them nicely yet they violently took the farms from them. Yes people needed soil but there was no need to take it so violently

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    Diego Zhaba 10 years ago

    I had wanted to go into a joint venture with a Chinese firm but they refused and said that market is “REMOTE AND RISKY”, that’s exactly their words…….

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    mucha 10 years ago

    This is a misleading Headline to say “Look East Policy Hits Brickwall” when China yesterday had just lent Zimbabwe $319m (£199m) to expand Kariba hydropower station and increase the capacity by 300 megawatts.

    The loan only attracts annual interest of 2% and has a repayment period of 20 years.

    So which brickwall is this?

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      mucha if you are able to read the full story you will see china will have negotiated a pro china deal. eg 80% of the work force will have to be chinese and all the material will be supplied by china at preferential rates etc etc etc.When you are on your knees (thanks to mugabe and thieving zanupf)you do not have much say.

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      Simukaitivapedze 10 years ago

      @Mucha China is benefiting more from the Project.They are financing they job creation because they are the one to construct & expand the power stations.They will earn interest on top, besides the fact that we don’t have an option they didn’t do us a favor either

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    easily fooled 10 years ago

    Mucha, Chinese government is separate from individual chinese investors. The Masiyiwas have invested in South Africa, Ghana, Nigeria etc. Those countries claim they have attracted a foreign direct investor. Such foreign director insvestor have their was of rating investment destinations and give a better judgement that government to government deals which are normally protected by bilateral treaties.

    Besides, for a country needing $7 billion then Chinese government brings in $300 million, its very much insignificant (4%). Governments dont benefit much from government to government projects becoz such projects have a limited timeline but most FDI (foreign direct investors) will continue to invest, re-invest, modernise they machine, export their products (generating much needed $$$) for themselves and the country. Remember the proceeds of selling tobacco comes to you account at Barclays, it is given to gvt or other borrowers until such a time you come to withdraw it, so you $$$ is also ours.

    Don’t be easily fooled, “use you medula oblongata men” a quote from the late Dr Love, Paul Matawire

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    easily fooled 10 years ago

    In fact governments try to invest in another nation to give a lead to their business people to also venture into such countries, by coming to Zimbabwe with this small somes, it is a key to unlock chinese investment into Zimbabwe…..but from this article, Chinese investors are saying Chung Yuang Ping, you have taken the correct key for the wrong door…..or the wrong key for the correct do…..if you want us to invest in Zimbabwe, its a high risk and remote destination. Risk in the sense that economic fundementals and policies are unstable….remote in the sense that the king sitting on the throne doesn’t know that business is business and not patronage, he is unreliable, he can be a friend today then workup tomorrow to take all we would have invested, or we will be lucky to remain with 49% after indegizing and empowering his people

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    I have said it many times before and will probably say it many times in the future. Until ZPF and the C

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    As has been said many times before and there is huge historical precedence for this not to mention spiritual. Until the spirit of repentance comes to Zimbabwe we will battle to find restoration. We call ourselves a Christian nation and yet our deeds tell a different story. I call on the church to spearhead the way and also for those in the ruling party who call themselves Christians to lead the way in confession and repentance within that party. This is a message for all of us. God’s blessing does not lie on this nation at this time because of our sin: individual and collectively! Our grain silos are empty, we are the tail and not the head and we are the borrowers and not the lenders. we sweep our sin under the carpet and then speak of all od’s blessings re our natural resources. We need a big wake up call and if we aren’t waking up then I do not know how big that call has to be. ZPF know what it has done as does each one of us. If we persist in our lies and deception and delusion and justifying all our evil we will continue to scrabble around in the mire. Repent and then restoration!

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    mucha 10 years ago

    Am happy that I have generated so much talk from my comment above. Thanks for your comments Guys but be rationale in future.

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    Angel 10 years ago

    The white people want to be compensated for loss of use of land and improvements on it but they have consistently refused to apologise for enslaving Africans in America and elsewhere, they have never accepted the concept of reparations, and they never paid the Africans for developing America, so why should we be asked to pay them for land they forcibly took from us? I think what Zimbabwe did by taking the land back and by embarking on indigenisation and making sure that the wealth of the country gets back into the hands of the people is misunderstood but is morally, socially, culturally economically and politically correct. Very often when we say that, the assumption is that we are saying there is no space for a white person here, NO, we have simply said we want our people to be in control of the resources of the country. If there is anyone else who is interested in investing in Zimbabwe, can they invest in structures in the hands of our people and they are free to do so up to 49% of the value of that company or investment so chosen, and what is wrong with that? I cannot think of any country in the world that has given half of its wealth to foreigners like we have done in Zimbabwe.

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    danisa tshawe 10 years ago

    This is a Chinese way of negotiating. These guys dont care about risk. What they simple doing is get the government on its knees, beg for investment till they buy Zim with peanuts. Cry my beloved country. We are not in a position to negotiate for better deals. Our leaders are behaving like a hungry prostitute giving every jack & jill a blowjob for a slice of bread.

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    Zvichapera 10 years ago

    I wouldn’t be that stupid to invest a penny in Zimbabwe when I am forced to cede control of my investments to morons called Zanu PF, there is no free lunch any more. The sooner the these election riggers and murderers realise the sooner we can fix our country. Restore some land to white farmers, like it not is our only way out. We are going have to do a trade of to get out of this mess. Truth be told Zanu PF fcuked up big time and they’re to blame for all this. Problem these people have so much pride, a bunch of shameless thieves riding on Mugabe’s weakness to accept this hero worshipping, keep Bob in power and assure themselves safety from prosecution, we all know what you have done, most of you would have been jail right now had it been the will of the was respected. The stink will not go away because you can’t even clean your own toilets at Shake Shake house. The US and the world must maintain targeted sanctions on the top brass of this banana republic.

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    SAMAZ 10 years ago

    well what do you expect from morally defunct Zanu PF thugz with no conscience in their heart.ladies and gentlemen brace yourselves this country is going for a rollercoster ride into hell.the nightmare has only just begun.