Dan Haglund Department of Economics and International Development University of Bath Presentation for IDS China Seminar Se...
<ul><li>“ The Chinese start to work behind the scenes, but they come and make a decision there and then. After that, they ...
INTRODUCTION <ul><li>Objective  –  to deepen understanding of Chinese economic engagement with Africa, and to nuance exist...
OUTLINE <ul><li>Motivating research question </li></ul><ul><li>Overview of key analytical concepts  </li></ul><ul><li>Why ...
MOTIVATING RESEARCH QUESTION <ul><li>Accounts of Chinese investors not operating according to ‘market’ logic, influenced b...
KEY ANALYTICAL CONCEPTS <ul><li>Organisational drivers (Levitt & March 1988) </li></ul><ul><ul><li>Objectives </li></ul></...
WHY ZAMBIA? <ul><li>Historical reasons (Tazara railway) </li></ul><ul><li>Significance of Zambia in China’s foreign policy...
OVERVIEW OF ZAMBIA’S COPPER SECTOR <ul><li>Regulatory context characterised by: capacity constraints; institutional weakne...
FINDINGS  –  OBJECTIVES/AIMS <ul><li>Low-cost strategy  –  “They are very careful with their costs … they don’t want to pr...
FINDINGS  –  ROUTINES/STRUCTURES <ul><li>Literature suggests much vertical integration (Broadman 2006, Alden 2007), geogra...
FINDINGS – NORMS <ul><li>In Zambia Chinese managers normally stay for 3-4 years at NFC Africa, stark contrast to other for...
FINDINGS  –  POLITICAL EMBEDDEDNESS <ul><li>NFCA plays key role in the establishment of Chambishi Special Economic Zone </...
FINDINGS  –  ORGANISATIONAL LEARNING  <ul><li>Evidence of organisational learning among Chinese investors: </li></ul><ul><...
ANALYSIS  –  DOES LEARNING REFLECT STAKEHOLDER INTERESTS? <ul><li>Rapid learning, but findings suggests limited ability to...
ANALYSIS  –  NATURE OF CHANGE: SUPERFICIAL OR TRANSFORMATIONAL? <ul><li>Learning appears  superficial  rather than  transf...
CONCLUSIONS <ul><li>Although NFC Africa appears to be learning, this learning is reactive and superficial … </li></ul><ul>...
REFERENCES <ul><li>Alden, C., & C. Hughes, “Harmony, Discord and Learning in China’s Africa Policy”,  China Quarterly , No...
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In it for the long term? Governance and learning among Chinese investors in Zambia's copper sector

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Presentation by Dan Haglund, University of Bath. Part of Institute of Development Studies China Seminar Series, 21 May 2009

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  • My research hinges on the question “is there anything special about Chinese investment … ”
  • The growing Chinese presences has been met with mixed feelings within African countries. It is true that most of the criticisms have come from western sources, but over the last couple of years also from African NGOs. Potential for conflicts reflect concerns that Chinese investment is not contributing (sufficiently) to local development It is important to distinguish between small private entrepreneurs and the SOEs in focus in this presentation. REGULATORS: In understanding this rel’p, we should first note that capacity constraints prevent effective supervision by host regulators .. thus ‘foreign’ standards matter Head of EIB said in Jan 2007 that EIB should lower standards to compete with the Chinese Limited transparency surrounding Chinese projects is a ‘trademark’ - prevents civil society from asking the right questions A/H note that this is a trademark, with ref to oil deal in Gabon WORKERS: Re expatriate Chinese workers, 82,000 Chinese workers to Africa in 2005... A/H note 5000 Chinese were working at the smelters in Katanga Issue of TRUST (built into investment plans)
  • The growing Chinese presences has been met with mixed feelings within African countries. It is true that most of the criticisms have come from western sources, but over the last couple of years also from African NGOs. Potential for conflicts reflect concerns that Chinese investment is not contributing (sufficiently) to local development It is important to distinguish between small private entrepreneurs and the SOEs in focus in this presentation. REGULATORS: In understanding this rel’p, we should first note that capacity constraints prevent effective supervision by host regulators .. thus ‘foreign’ standards matter Head of EIB said in Jan 2007 that EIB should lower standards to compete with the Chinese Limited transparency surrounding Chinese projects is a ‘trademark’ - prevents civil society from asking the right questions A/H note that this is a trademark, with ref to oil deal in Gabon WORKERS: Re expatriate Chinese workers, 82,000 Chinese workers to Africa in 2005... A/H note 5000 Chinese were working at the smelters in Katanga Issue of TRUST (built into investment plans)
  • Privatisation in 1997-2002, much new investment, but also much criticism, sense that locals are not benefitting. Today these are the big companies producing copper, I’m focusing on....... NFCA may seem small but is part of ZCCZ, including $800m investment (Zambia’s stock is in Jun 2008 was $5.4bn). Also, this SEZ is poised to play a big role in servicing Chinese investment in the sub-region (Davies 2008)
  • In it for the long term? Governance and learning among Chinese investors in Zambia's copper sector

    1. 1. Dan Haglund Department of Economics and International Development University of Bath Presentation for IDS China Seminar Series, 21 May 2009 In it for the long term? Governance and learning among Chinese investors in Zambia's copper sector
    2. 2. <ul><li>“ The Chinese start to work behind the scenes, but they come and make a decision there and then. After that, they start to work backward, asking for data on the projects… </li></ul><ul><li>[the] Chinese do and assess, while Indians assess and do. Indian firms need to be more aggressive, otherwise they are losing out” </li></ul><ul><li>(Felix Mutati, Zambian Minister of Commerce, Trade and Industry, quoted in the India Times, 21 March 2008 ) </li></ul>
    3. 3. INTRODUCTION <ul><li>Objective – to deepen understanding of Chinese economic engagement with Africa, and to nuance existing arguments of how this investment is inserted in local economic and social structures. </li></ul><ul><li>Research question: To what extent are current forms of engagement by Chinese SOEs in Africa’s resource sectors sustainable over the longer term? </li></ul><ul><li>Based on five months of PhD fieldwork in Zambia in 2007, semi-structured interviews with 95 individuals representing mining companies, government, civil society, and other stakeholders. </li></ul>
    4. 4. OUTLINE <ul><li>Motivating research question </li></ul><ul><li>Overview of key analytical concepts </li></ul><ul><li>Why Zambia? </li></ul><ul><li>Findings (organised around key concepts) </li></ul><ul><li>Analysis and conclusion </li></ul>
    5. 5. MOTIVATING RESEARCH QUESTION <ul><li>Accounts of Chinese investors not operating according to ‘market’ logic, influenced by PRC foreign policy. </li></ul><ul><ul><li>Underbidding for projects (Taylor 2007) </li></ul></ul><ul><ul><li>Resource security consideration (Pham 2006) </li></ul></ul><ul><ul><li>China as less sensitive to financial crisis? (2009 as a “big buying opportunity”) </li></ul></ul><ul><li>… however, also evidence of ‘getting job done’ quickly </li></ul><ul><ul><li>Limited stakeholder engagement (consultations) </li></ul></ul><ul><ul><li>Limited transparency surrounding projects (limited civil society oversight) </li></ul></ul><ul><ul><li>Focus on outcomes rather than processes (Alden & Hughes 2009) </li></ul></ul><ul><li>Evidence of social tensions (Zambia 2006, Nigeria, Niger, Ethiopia) – a priori reason to suspect lack of sustainability! </li></ul>
    6. 6. KEY ANALYTICAL CONCEPTS <ul><li>Organisational drivers (Levitt & March 1988) </li></ul><ul><ul><li>Objectives </li></ul></ul><ul><ul><li>Routines/structures </li></ul></ul><ul><ul><li>Norms </li></ul></ul><ul><li>Political embeddedness </li></ul><ul><ul><li>Implications of state-ownership </li></ul></ul><ul><li>Organisational learning (Argyris & Schon 1978) </li></ul>
    7. 7. WHY ZAMBIA? <ul><li>Historical reasons (Tazara railway) </li></ul><ul><li>Significance of Zambia in China’s foreign policy, seen in decision to locate first Special Economic Zone on the Zambian Copperbelt. </li></ul><ul><li>Currently contested presence (2006 elections, protests) – a priori reason to suspect that current engagement of Chinese capital is not sustainable! </li></ul>
    8. 8. OVERVIEW OF ZAMBIA’S COPPER SECTOR <ul><li>Regulatory context characterised by: capacity constraints; institutional weaknesses; lack of transparency; political intervention </li></ul>
    9. 9. FINDINGS – OBJECTIVES/AIMS <ul><li>Low-cost strategy – “They are very careful with their costs … they don’t want to prioritise value, quality, they don’t do that … Everything must be cheap” </li></ul><ul><li>This strategy has sustainability implications for NFC Africa: </li></ul><ul><ul><li>Environmental and safety hazards: use of dilapidated infrastructure and lacklustre regulatory enforcement </li></ul></ul><ul><ul><li>Reluctance to spend on non-core activities results in resentment among staff </li></ul></ul><ul><ul><li>Efficiency issues: 1) Low-wages means that human capital will leave as soon as given the chance; 2) Living “hand-to-mouth” (no stocking , such that in the long run they “have paid four times what they are looking for”) </li></ul></ul>
    10. 10. FINDINGS – ROUTINES/STRUCTURES <ul><li>Literature suggests much vertical integration (Broadman 2006, Alden 2007), geographically concentrated, limited linkages with local economy … </li></ul><ul><li>… partly c onsistent with Zambian case: many ‘sister companies’, serving NFCA as well as third parties </li></ul><ul><ul><li>Same routines and company policies, but unintegrated accounting systems – facilitates tax evasion </li></ul></ul><ul><ul><li>Regulatory implications – Many sister companies means that regulators ‘spread themselves too thin’ </li></ul></ul>
    11. 11. FINDINGS – NORMS <ul><li>In Zambia Chinese managers normally stay for 3-4 years at NFC Africa, stark contrast to other foreign mining companies… </li></ul><ul><ul><li>Reflecting “xiān kǔ, hòu tián” (first bitterness, later sweetness) attitude (Lee 2009) </li></ul></ul><ul><ul><li>May reflect formal both formal corporate policies as well as cultural preferences </li></ul></ul><ul><li>Segregation within company (Zambians fear of “asking too many questions”) </li></ul>
    12. 12. FINDINGS – POLITICAL EMBEDDEDNESS <ul><li>NFCA plays key role in the establishment of Chambishi Special Economic Zone </li></ul><ul><li>Announcements of incoming investments through political channels (Alden & Hughes 2009) </li></ul><ul><li>Reliance on government to ‘broker’ relationships with non-state stakeholders </li></ul>
    13. 13. FINDINGS – ORGANISATIONAL LEARNING <ul><li>Evidence of organisational learning among Chinese investors: </li></ul><ul><ul><li>Labour relations (appointment of Zambian HR manager, improvements in conditions, some CSR activities) </li></ul></ul><ul><ul><li>Regulatory relations (environmental and health/safety) </li></ul></ul><ul><li>However we must query the nature of this change, to understand whether it is likely to promote or detract from the sustainability of this investment: </li></ul><ul><ul><li>Does it accurately reflect key stakeholder interests? (reactive or proactive) </li></ul></ul><ul><ul><li>What is the nature of this change? (superficial or transformational) </li></ul></ul>
    14. 14. ANALYSIS – DOES LEARNING REFLECT STAKEHOLDER INTERESTS? <ul><li>Rapid learning, but findings suggests limited ability to proactively engage with stakeholder concerns: </li></ul><ul><li>Internal segregation means that there is little ‘tapping into’ the experiences of Zambian employees (leading to less ‘embedding’ over time, Johansson & Vahlne 1977) </li></ul><ul><li>Short stays limit managers’ interest in building sustainable relationships with stakeholders </li></ul><ul><li>Reliance on state as ‘broker’ means that company is less exposed to competing (stakeholder) views </li></ul>
    15. 15. ANALYSIS – NATURE OF CHANGE: SUPERFICIAL OR TRANSFORMATIONAL? <ul><li>Learning appears superficial rather than transformational : </li></ul><ul><li>HR manager is “more like remote control”, and reactive because he was installed only after public uproar post-BGRIMM </li></ul><ul><li>Internal segregation remains… </li></ul><ul><li>Lack of engagement with non-state actors persists (reliance on state as broker) – “it is us the workers who have put pressure on management” (i.e. not the unions) </li></ul>
    16. 16. CONCLUSIONS <ul><li>Although NFC Africa appears to be learning, this learning is reactive and superficial … </li></ul><ul><ul><li>Mechanisms for stakeholder interaction are absent or underdeveloped, leading to reactive learning </li></ul></ul><ul><ul><li>Findings suggest that learning is mostly superficial , with limited evidence of reform of underlying practices </li></ul></ul><ul><ul><li>Organisational change is more lik ely to reflect political pressures, from Zambian and Chinese governments, rather than active engagement with stakeholders </li></ul></ul><ul><li>… thereby failing to promote long-term stability in relations with stakeholders. </li></ul><ul><li>This situation results in a mismatch between firm behaviour and stakeholder expectations that risks undermining sustainability of Chinese SOE investments </li></ul>
    17. 17. REFERENCES <ul><li>Alden, C., & C. Hughes, “Harmony, Discord and Learning in China’s Africa Policy”, China Quarterly , No. 199, September 2009. </li></ul><ul><li>Alden, C., China in Africa, London: Zed (2007) </li></ul><ul><li>Argyris, C. & D. A. Schön, Organizational Learning: A Theory of Action Perspective (Addison-Wesley Reading, MA., 1978), </li></ul><ul><li>Broadman, H. G., Africa's Silk Road: China and India's New Economic Frontier (World Bank Publications, 2007), </li></ul><ul><li>Johanson, J. & J. E. Vahlne, “The internationalization process of the firm–a model of knowledge development and increasing foreign market commitments”, Journal of International Business Studies , Vol. 8, No. 1 (1977): pp. 23-32. </li></ul><ul><li>Lee, C. K., “Raw Encounters: Chinese Managers, African Workers and the Politics of Casualisation in Africa’s Chinese Enclaves”, China Quarterly , No. 199 (1999). </li></ul><ul><li>Levitt, B. and J. March (1988). &quot;Organizational learning.&quot; Annual Review of Sociology 14(1): 319-338. </li></ul><ul><li>Pham, P. (2006). &quot;China's African Strategy and Its Implications for US Interests.&quot; American Foreign Policy Interests 28(3): 239-253. </li></ul><ul><li>Taylor, I., “Unpacking China’s resource diplomacy in Africa” in M. Lee (ed.) Current African Issues 33, (Uppsala: Nordiska Afrikainstitutet, 2007), p. 13. </li></ul>
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