China Helps the Powerful in Namibia - NYTimes.com

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By SHARON LaFRANIERE

BEIJING — Like parents everywhere, mothers and fathers in Namibia, an impoverished southern African nation, worry about college costs and opportunities for their children. The Chinese government has stepped forward to help — for a select and powerful few.

So far this year, the Beijing government has secretly awarded scholarships to study in China to the offspring of nine top officials, including to the daughter of Namibia’s president, Hifikepunye Pohamba. Two young relatives of Namibia’s former president and national patriarch, Sam Nujoma, also received grants.

The disclosure of the scholarships, first revealed by a feisty Namibian newspaper, has unleashed a wave of fury from the nation’s civil society groups and youth organizations. In a country where five in six high school graduates do not go on to college, many find it unconscionable for well-paid government leaders to accept overseas university scholarships for their children.

“Only senior people in government knew about the scholarships,” said Norman Tjombe, director of the nonprofit Legal Assistance Center. “No chance was given at all to the general public.”

The controversy has reignited a simmering debate in Namibia over deals with the Chinese government, already under scrutiny by Namibian prosecutors. Inquiries there and in other developing countries in Africa and Asia have cast a fresh light on how China sometimes uses its treasure chest of foreign loans and aid to create elite alliances and ease the approval of no-bid contracts.

Even some within Namibia’s governing Swapo party are asking whether China is trying to buy influence with their nation’s political leadership to gain access to mineral resources or to win business for its well-connected companies.

“How is it that this favor just comes like manna from heaven?” said Elijan Ngurare, secretary general of Swapo’s youth league, in a telephone interview. “Clearly there must be something that they are after.”

To some international relations experts, the scholarship controversy illustrates a blind spot in China’s aggressive strategy to cement diplomatic alliances, lock in natural resources and solicit trade and business on the African continent. In Namibia at least, Chinese government officials seem caught off guard by the public scrutiny exercised by a vibrant civil society.

The scholarship scandal was first revealed in Informante, a free tabloid in the Namibian capital, Windhoek, with a proud motto: “You conceal. We reveal.” It has no counterpart in China, where even the most aggressive media outlets stop short of raising unfavorable questions about the dealings of top officials or their children.

Bates Gill, director of the Stockholm International Peace Institute, said China was accustomed to opaque, controlled, government-to-government relations. “China’s engagement in Africa is moving further and faster than its ability to try and shape perceptions there,” he said. As a result, “there will inevitably be embarrassments.”

The list in Namibia is growing. In July, anticorruption investigators alleged that a state-controlled Chinese contractor had facilitated a $55.3 million deal to sell the Namibian government security scanners with millions of dollars in kickbacks. The inquiry is particularly delicate because until late last year, Hu Haifeng, the son of President Hu Jintao, ran the scanner company. A Chinese Commerce Ministry official recently said that China was cooperating with the Namibian authorities.

Another investigation centers on allegations that a Chinese weapons company funneled $700,000 to Lt. Gen. Martin Shalli, the commander of Namibia’s defense force. Namibia’s president suspended General Shalli from his post in July. General Shalli so far has declined comment.

Mr. Gill said such allegations threatened to undermine China’s impressive campaign to link its development with Africa’s. Over all, while China is making “an enormous and positive contribution to Africa’s development,” he said, it is still unaccustomed to the dynamics of some African democracies.

At the Forum on China-Africa Cooperation this month, the Chinese prime minister, Wen Jiabao, announced that China would double the amount of low-interest loans it offered Africa to $10 billion over the next three years, increase the number of scholarships and reduce tariffs on products from the poorest nations.

But he sounded frustrated when asked whether China was only after Africa’s natural resources.

“Why are there always accusations against China?” he said at a Nov. 8 news conference in Cairo. “Is this an African viewpoint or rather a Western viewpoint?”

In Namibia, political scientists say concerns are growing about whether officials are negotiating arm’s-length contracts with China. “People are thinking China is making secret deals with the government here and they are having all kinds of suspicions,” said Carola Engelbrecht, a citizen activist.

The scholarship recipients include children of some of Namibia’s most powerful officials, including the inspector general of the Namibian police and the justice minister, who is also the secretary general of Swapo.

One grant recipient is the son of the defense minister, whose agency buys weapons from China. Another is the son of the home affairs and immigration minister, whose agency is responsible for approving residence and work permits for an army of Chinese workers whose companies have won government or private contracts for business in Namibia.

Three other recipients are children of the minister, deputy minister, and a third high-ranking official at the Ministry of Mines and Energy. In July, the ministry renewed a license that gives a subsidiary of a state-owned Chinese company sole rights to search for uranium and other minerals in a prime prospecting area.

The nation’s anticorruption commission has begun a preliminary inquiry into how the scholarships were awarded. Chinese government officials have reacted in a familiar fashion: three government agencies in Beijing did not answer written questions.

Xia Lili, first secretary of the Chinese Embassy in Windhoek, said he had no obligation to respond to queries. “This is over,” he said.

But with national elections scheduled at the end of the month, it clearly is not. Bill Lindeke, a political scientist with the Institute for Public Policy Research in Windhoek, said Namibian officials might be forced to pay for their children’s educations in China to quiet the controversy.

Chinese Embassy officials initially insisted that the Education Ministry was in charge of the selection process. But Namibia’s education minister, Nangolo Mbumba, said at a news conference this month that his ministry handled only 10 scholarships to underprivileged students and had nothing to do with the other grants — some of which apparently cover five years of tuition.

He said the president’s daughter, Ndapanda Pohamba, who is now studying at the Beijing Cultural and Language University, “applied for the scholarship in her own right and only notified the parents afterwards.”

The minister’s statement that “you cannot bribe someone with a bursary” set off a fresh wave of indignation in a nation whose two universities can accommodate only about 2,000 of the 12,000 high school students who graduate each year.

“Mr. Mbumba: anything of value you accept, or even worse, solicit, constitutes a bribe if you hold public office,” one citizen said in a text message posted on the Web site of The Namibian, a Windhoek daily.

Uneasy Engagement - China Spreads Aid in Africa, With a Catch - Series - NYTimes.com

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By SHARON LaFRANIERE and JOHN GROBLER

WINDHOEK, Namibia — It is not every day that global leaders set foot in this southern African nation of gravel roads, towering sand dunes and a mere two million people. So when President Hu Jintao of China touched down here in February 2007 with a 130-person delegation in tow, it clearly was not just a courtesy call.

And in fact, China soon granted Namibia a big low-interest loan, which Namibia tapped to buy $55.3 million worth of Chinese-made cargo scanners to deter smugglers. It was a neat illustration, Chinese officials said, of how doing good in Namibia could do well for China, too.

Or so it seemed until Namibia charged that the state-controlled company selected by China to provide the scanners — a company until recently run by President Hu’s son — had facilitated the deal with millions of dollars in illegal kickbacks. And until China threw up barriers when Namibian investigators asked for help looking into the matter.

Now the scanners seem to illustrate something else: the aura of boosterism, secrecy and back-room deals that has clouded China’s use of billions of dollars in foreign aid to court the developing world.

From Pakistan to Angola to Kyrgyzstan, China is using its enormous pool of foreign currency savings to cement diplomatic alliances, secure access to natural resources and drum up business for its flagship companies. Foreign aid — typically cut-rate loans, sometimes bundled with more commercial lines of credit — is central to this effort.

Leaders of developing nations have embraced China’s sales pitch of easy credit, without Western-style demands for political or economic reform, for a host of unmet needs. The results can be clearly seen in new roads, power plants, and telecommunications networks across the African continent — more than 200 projects since 2001, many financed with preferential loans from the Chinese government’s Exim Bank.

Increasingly, though, experts argue that China’s aid comes with a major catch: It must be used to buy goods or services from companies, many of them state-controlled, that Chinese officials select themselves. Competitive bidding by the borrowing nation is discouraged, and China pulls a veil over vital data like project costs, loan terms and repayment conditions. Even the dollar amount of loans offered as foreign aid is treated as a state secret.

Anticorruption crusaders complain that secrecy invites corruption, and that corruption debases foreign assistance.

“China is using this financing to buy the loyalty of the political elite,” said Harry Roque, a University of the Philippines law professor who is challenging the legality of Chinese-financed projects in the Philippines. “It is a very effective tool of soft diplomacy. But it is bad for the citizens who have to repay these loans for graft-ridden contracts.”

In fact, such secrecy runs counter to international norms for foreign assistance. In a part of the world prone to corruption and poor governance, it also raises questions about who actually benefits from China’s projects. The answers, international development specialists say, are hidden from public view.

“We know more about China’s military expenditures than we do about its foreign aid,” said David Shambaugh, an author and China scholar at George Washington University. “Foreign aid really is a glaring contradiction to the broader trend of China’s adherence to international norms. It is so strikingly opaque it really makes one wonder what they are trying to hide.”

Until recently, wealthy nations could hardly hold themselves out as an example of how to run foreign aid, either. Many projects turned out to be tainted by corruption or geared to enrich the donor nation’s contractors, not the impoverished borrowers. But over the past 10 or 15 years, some 30 developed nations under the umbrella of the Organization of Economic Cooperation and Development (O.E.C.D.) have made a concerted effort to clean up their assistance programs.

They demanded that foreign money be awarded and spent transparently, using competitive bidding and outlawing bribery. Increasingly, they also are also pushing to give borrowers more choice among suppliers and contractors, rather than insisting that funds be recycled back to the donor nation’s companies.

China, which is not a member of the O.E.C.D., is operating under rules that the West has largely abandoned. It mixes aid and business in secret government-to-government agreements. It requires that foreign aid contracts be awarded to Chinese contractors it picks through a closed-door bidding process in Beijing. Its attempts to prevent corrupt practices by its companies overseas appear weak.

Some developing nations insist on independently comparing prices before accepting China’s largesse. Others do not bother. “Very often they are getting something they wouldn’t be able to get without China’s financing,” said Chris Alden, a specialist on China-African relations with the London School of Economics and Political Science. “They presume that the Chinese are going to give value for money.”

Development experts say they have tried to convince the Chinese government that better safeguards and a more open process will enhance its efforts to gain influence and business. If its projects collapse because of kickbacks or inflated costs, they argue, China will end up exporting not only goods and services, but a reputation for corruption that it is already battling at home.

But Deborah Brautigam, the author of a coming book on China’s economic ties with Africa titled “The Dragon’s Gift,” says Beijing is hesitant to hobble its companies with Western-style restraints before they have become world-class competitors.

Thinking Business, Not Ethics

“The Chinese are kind of starting out where everyone else was years ago, and they see themselves as being at a disadvantage,” Ms. Brautigam said. “The Chinese don’t particularly want a big scandal. That doesn’t further their interests. They just want their companies to get business.”

Sometimes they get both. In 2007, the Philippines was forced to cancel a $460 million contract with the Beijing scanner company, Nuctech Company Ltd., to set up satellite-based classroom instruction after critics protested the company had no expertise in education.

It also canceled a $329 million contract awarded to ZTE Corporation, a state-controlled Chinese communications company, after allegations of enormous kickbacks. ZTE denied bribing anyone, but the controversy has lingered. Last month an antigraft panel recommended filing criminal charges against two Philippines officials in connection with the contract.

A Manila-based nonprofit group, the Center for International Law, has mounted a legal challenge against still another Chinese contract in the Philippines, to build a $500 million railroad. Professor Roque, who leads the center, contends that the price of China’s state-owned contractor “was simply plucked out of the sky.” Officially, China’s directive to its companies is toe an ethical line overseas.

“Our enterprises must conform to international rules when running business, must be open and transparent, should go through a bidding process for big projects and forbid inappropriate deals and reject corruption and kickbacks,” Wen Jiabao, China’s prime minister, told a group of Chinese businessmen in Zambia in 2006.

But China has no specific law against bribing foreign officials. And the government seems none too eager to investigate or punish companies it selects if they turn out to have engaged in shady practices overseas.

Indeed, it has an added incentive to look the other way because of the state’s ties to many foreign aid contractors — connections that sometimes extend to families of the Communist Party elite.

In January, for example, the World Bank barred four state-controlled Chinese companies from competing for its work after an investigation showed that they tried to rig bids for bank projects in the Philippines. But two of those companies remain on the Chinese Commerce Ministry’s list of approved foreign aid contractors, according to its Web site.

The Namibia controversy is especially delicate because until late last year, the contractor’s president was Mr. Hu’s son, Hu Haifeng. The younger Mr. Hu is now Communist Party secretary of an umbrella company that includes Nuctech and dozens of other companies. As soon as allegations against the company surfaced this summer, China’s censors swung into action, blocking all mention of the scandal in the Chinese news media and on the Internet.

“This is a signal to everyone to back off,” said Russell Leigh Moses, an analyst of Chinese politics in Beijing. “Everyone goes into default mode, because once you get the ball rolling, no one knows where it will stop. No one wants their rice bowl broken.”

Nuctech has denied any wrongdoing in court papers filed here in Windhoek. A spokeswoman said the company had no comment because the matter was unresolved. China’s Commerce Ministry and other government agencies did not respond to repeated requests for comment.

Namibia’s anticorruption investigators allege that Nuctech funneled $4.2 million in kickbacks to a front company set up by a Namibian official, who split the funds with her business partner and Nuctech’s southern Africa representative, a Chinese citizen.

A Deal Ends in Arrests

China has promoted Nuctech as one of its global “champions.” In 10 years the company has gained customers in more than 60 countries, marketing advanced-technology scanners that help detect contraband or dangerous materials inside cargo containers. Nuctech’s spokesman says it is the only Chinese company that makes such equipment.

The Namibian government was interested in equipping its airports, seaports and border posts with scanners to comply with stricter regulations on international commerce. On a state visit to China in 2005, Hifikepunye Pohamba, Namibia’s president, visited Nuctech’s headquarters and factory, according to court testimony. The following year, Nuctech sent a representative, Yang Fan, to Windhoek, Namibia’s capital.

Hu Jintao’s visit to Windhoek a few months later opened up an option for finance. “China says the sky is the limit. Just say what you want,” said Carl Schlettwein, the permanent secretary of the Namibian Finance Ministry, who participated in the negotiations.

At first, Mr. Schlettwein said, the talks stalled because Namibia was unwilling to grant China access to its substantial mineral deposits in exchange for lines of credit. Once China dropped that condition, Namibia agreed in principle to a $100 million, 20-year-loan at a 2.5 percent interest rate, then well below the market. “Purely from a financial point of view, it was a fine deal,” Mr. Schlettwein said.

Namibian officials decided to draw on the credit line to finance most of the cost of the scanners. Mr. Schlettwein, who negotiated the scanner contract, said he wanted to seek competitive bids from scanner suppliers around the world, but Chinese negotiators refused.

“They said ‘that is not our system,’ “ he said. “ ‘We tell you from whom you buy the equipment.’ All of us, including the minister, were very worried about the nontransparent way of doing things,” he said, but reasoned that the Chinese government “will not unduly cheat us.”

Last March, less than a week after the Finance Ministry paid Nuctech an initial $12.8 million, Mr. Schlettwein’s unease turned to distress.

A Windhoek bank official, following the strictures of Namibia’s new money-laundering act, called to ask why Nuctech had deposited $4.2 million in the account of a consulting company set up by Tekla Lameck, a Namibian public service commissioner.

Mr. Schlettwein, who says that he has never met Ms. Lameck and that she had nothing to do with the scanner purchase, alerted Namibia’s anticorruption commission. In July, Ms. Lameck, her business partner and Nuctech’s representative in Windhoek were arrested on suspicion of violating Namibia’s anticorruption law. All three have denied wrongdoing.

Investigations Galore

Investigators charge that Nuctech agreed to hire Ms. Lameck’s consulting company, Teko Trading, in 2007, a month after President Hu’s visit. Nuctech agreed to pay Teko 10 percent of the contract if the average price of one scanner was $2.5 million. If the price was higher, Nuctech would pay Teko 50 percent of the added cost. A subsequent agreement fixed the amount of commissions at $12.8 million, according to court records.

At his bail hearing last month, Yang Fan, Nuctech’s representative, said his company hired Teko because “Teko explained how to do business here in Namibia.” He did not elaborate. But in 2007, another Namibian official complained to the anticorruption commission that Ms. Lameck had introduced herself to the Chinese Embassy in Windhoek as a representative of Swapo, Namibia’s governing political party. She claimed that no business could be done in Namibia without Swapo’s involvement, the complainant said.

Investigators have been seeking Nuctech’s explanation of the affair for more than two months. There is little sign the company has complied with their requests, although investigators say they remain hopeful.

Namibia’s chief national prosecutor, Martha Imalwa, traveled to Beijing in July, hoping to question officials from Nuctech and another company involved in a separate inquiry. But according to her deputy, Danie Small, Ms. Imalwa was allowed to present questions only to the international division of China’s Supreme People’s Procuratorate.

A court has temporarily frozen $12.8 million in Nuctech’s assets while the inquiry continues. Meanwhile, at Namibia’s Finance Ministry, Mr. Schlettwein is belatedly trying to determine what other buyers paid for comparable scanners. When he asked South African officials for pricing information, he said, he was told Nuctech’s contract there is also under investigation.

Perhaps predictably, competitors say Namibia agreed to pay far too much. Peter Kant, a vice-president at Nuctech’s American rival, Rapiscan Systems, said that comparable equipment and services costs about $28 million, or $25 million less than Nuctech’s contract.

Mr. Schlettwein last month tried to send a letter through official channels to Rong Yonglin, Nuctech’s chairman, to ask that the contract be renegotiated. But a Chinese Embassy official in Windhoek refused to accept the correspondence, saying he knew no one with that name.

Stephen Castle contributed reporting from Brussels, and Carlos H. Conde from Manila. Jonathan Ansfield contributed research from Beijing.