MALAWI: REQUEST FOR INFORMATION ON CHINESE ENGAGEMENT

2010 Feb 17: SUBJECT: MALAWI: REQUEST FOR INFORMATION ON CHINESE ENGAGEMENT   REF: A. 09 LILONGWE 77; B. 10 STATE 10152   CLASSIFIED BY: Bodde Peter, Chief of Mission; REASON: 1.4(B), (D)

(SBU) SUMMARY: Malawi terminated its relationship with Taiwan  and established ties with the People’s Republic of China in  December 2007. Malawi made the abrupt change in hopes of obtaining  significant PRC grant aid (ref A). Apart from a few projects taken  over from Taiwan, Chinese assistance has instead taken the form of  soft loans for showpiece projects – that the Malawian people must  someday pay for – rather than grants. There is no collaboration  between the U.S. and China at this time in Malawi. Potential areas  for future collaboration appear limited given the differences  between the USG’s emphasis on long term economic and social  development, and China’s emphasis on high profile projects.  Responses below are keyed to the questions in ref B.  End summary.

OVERALL CHINESE ENGAGEMENT

(C) China’s two-year old partnership with Malawi is having an  impact. China has undertaken several high profile commercial  projects that are, among other things, transforming Lilongwe’s  Capitol Hill with construction of a 5-star hotel and conference  center. While the GOM and the Chinese have steadily increased their  engagement over the intervening two years, the vision of a strong  trade relationship, along with generous PRC development aid,  remains unrealized. Nonetheless, President Mutharika and senior GOM  officials pay frequent homage to their new relationship with China  both in public and in private, highlighting the lack of  conditionality attached to Chinese assistance. What GOM officials  fail to publicly acknowledge, however, is that except for two  grants to complete projects started by Taiwan, China’s engagement  has been almost exclusively concessionary loans. The Chinese  Government has sought to curry favor with the ruling party, certain  ministries and influential journalists by offering numerous  training trips to China, scholarships and other inducements.

(U) The catalogue of Chinese assistance and investment in Malawi  includes:    –          Completion of the Karonga-Chitipa Road in northern Malawi (88 km of roadway, project started by the Taiwanese, grant  of $70M)  –          Completion of a new Malawi Parliament Building (project  started by the Taiwanese, grant of $41M)  –          Construction of a five star hotel and conference complex  in Lilongwe (concessionary loan estimated at $25M)  –          Construction of a new soccer stadium (concessionary loan  estimated at $65M)  –          Construction of a new Ministry of Defense and Malawi  Defence Force Headquarters Building (grant of $4M)  –          Construction of two primary schools (grant of $1.4M)  –          Furniture and vehicles for GOM’s MFA (grant of goods  valued at $300,000)

EXAMPLES OF CURRENT U.S. – CHINA COLLABORATION

(U) There is currently no collaboration between the U.S. and  China at the project level in Malawi. Our Ambassador enjoys a  cordial relationship with the Chinese Ambassador to Malawi and both  participate in the Heads of Mission working group that meets  regularly to discuss policy issues.

POTENTIAL AREAS FOR U.S. – CHINA COLLABORATION

(C) Potential areas for U.S. – China collaboration in Malawi  appear limited. China’s emphasis on commercial investment and  showpiece projects is quite different from the USG’s focus on long  term economic and social development.  This dissonance, coupled  with lack of transparency on project financial controls and  procurement systems, would make working with the Chinese  challenging.

(C) Post sees two areas where limited coordination may be  possible: 1) Agricultural value chains such as cotton and maize,  where the Chinese are already doing some work, and where USAID will  soon be starting a new program under the Food Security Initiative;  and 2) the Health sector, where there are reports that the Chinese  may be preparing to help Malawi establish a national public health  institute.  BODDE

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