Cultural orientation critical to China-Caribbean relations
Published:Monday | August 5, 2013 | 12:00 AM
Chris Tufton, Contributor
With most Caribbean countries experiencing high debt, unemployment and anaemic growth, offers by China of low-cost loans and investment projects are understandably viewed favourably by regional governments. There are many obstacles along the way to unleashing these investment possibilities, however, and it is important that both the Chinese authorities and regional governments actively address these gaps. Otherwise, there is a risk of investment potential becoming the cause of tension, resentment and even conflict. The answer to mutually beneficial relations lies in understanding and accommodating context and business culture in current and future investment activities.
Caribbean in need of Change
Among the main impediments to growth in Caribbean countries are high public debt, low factor productivity and competitiveness, high energy cost, bureaucratic business processes, high crime and inadequate legal enforcement. Chinese investors must understand these realities, even while Caribbean hosts must accommodate these investments in a manner that will seek to overcome these challenges. Host governments must not seek to justify inefficiencies with the status quo, but rather use Chinese investments as a catalyst for change in the interests of economic growth and development.
Most Chinese investments in the region have taken the form of government to government agreements, primarily for infrastructure projects, financed by China EXIM and China Development Bank, and implemented by Chinese companies. To support this thrust further, China has engaged Caribbean countries for discussions on areas of trade, investment promotion, and double taxation agreements. The last Caribbean-China investment forum was held in Trinidad a few months ago where many Chinese and regional companies and government representatives explored possible investment opportunities.
Previous similar initiatives have produced results. In 2011, China's trade with the Caribbean stood at US$8 billion an increase of 17 per cent over the year before, with US$5.77 billion representing exports and US$2.77 imports. This trend is likely to continue particularly as the countries in the region continue to struggle to find economic solutions to overcome their debt burden and job creation needs.
A strategic approach
However, countries in the Caribbean will need to be more strategic in their approach to building a long-term and mutually beneficial relationship with China. Host countries in the region have to determine their long-term interests and how these can be aligned with China's strategic outlook. This process must include an understanding of China's culture both at the macro as well as at the micro business level.
For example, Caribbean countries must understand that Chinese investors expect to make a return on their investment efforts, despite the willingness to offer concessionary loans and even grants to support specific initiatives. Similarly, it should be understood that Chinese investment culture and work ethic is rigidly disciplined and likely to conflict with our laid-back style towards effort.
It is true that Caribbean people have a history of working hard, in the right environment and if they are sufficiently motivated. This is aptly represented in our Diaspora community. In our countries of origin however, and for a number of reasons, attitude and approach to work could lead to a culture clash between Chinese bosses and local workers.
This may not always be because of lack of worker performance, but could also be due to differences in approach to management. Where disagreement arises, there is normally a need for understanding and adjustment on both sides. Worker representatives and Chinese management need to be sensitive to this.
Chinese investor
The Chinese investor must also seek to understand our culture and configure their investment activity to create that environment to unleash the best from its workers and the local and national environment generally. Similarly, local workers and their representatives must also appreciate the differences in approach that may be characterising the Chinese decisions.
A major source of concern by host countries to Chinese investment in the region is the extent to which locals versus Chinese workers are employed on Chinese-financed projects. This is likely to be a constant source of local resentment and tension. Given the employment challenges of Caribbean countries, the Chinese investor must be sensitive to that reality. At the same time, host countries must appreciate that like any other foreign investor, there will always be a desire by the primary investor to control key posts to ensure oversight of their investments.
Public-Private Partnerships, Joint Ventures
While the current time-bound government to government investment projects like Jamaica Development Infrastructure Programme (JDIP) have offered benefits to countries like Jamaica, there should be a greater push towards longer-term direct investments and partnerships with local companies and the government. Given the high debt to GDP ratio in the Caribbean and the restrictions on countries capacity to borrow or to provide sovereign guarantees, it is important that the Chinese authorities look at developing more investment models that will facilitate Public Private Partnerships (PPPs). These PPPs would see Chinese companies investing in national infrastructure and operate these infrastructures for a period of time and sell the services either directly to the public such as in the case of toll roads, or indirectly through the government agency such as in the case of sewage or water treatment plants.
This approach will become very important in the years to come as the current requirement from Chinese lending agencies for sovereign guarantees are going to become increasingly difficult to provide. For example, in Jamaica's case, the IMF agreement signed recently significantly restricts the government from borrowing, even while there is a recognition that many government-linked projects are in need of investment capital. New creative models for investment financing will therefore need to be found. However, PPPs and private sector joint ventures (JVs) are long-term relationships and so require among other things, better cultural understanding between two sides.
Need to manage perception
There are still many suspicions around Chinese investments and this is amplified due to the Chinese investors' limited time and effort on public relations and community engagement. There is always fear associated with change and it's usually up to the new entrant to work to overcome that fear though both words and action. Chinese investors are far too silent about their investments and this only serves to reinforce these negative perceptions.
Similarly, Chinese investors must develop a corporate social responsibility strategy as a critical part of their investment activity. They should demonstrate a willingness to engage in noncore community-related activity that is not for direct profit but for the well-being of the community. Otherwise, they will risk being isolated in their communities where they operate or more generally by critical stakeholders in the country.
Sports, for example, is a major form of social interaction and builder of friendships. Education support is another major area of need that could influence positively on Chinese investors perception.
A major positive to Chinese investment in the region is the perception that Chinese investment philosophy is long term (over five years) as opposed to typical western investor projections which generally require positive return over the medium term (three-five years). This long-term outlook by the Chinese augers well for Caribbean investments based on the challenges of the region and the need for direct investment and PPPs that may not yield positive returns until after five years. This is a feature of Chinese investment that should be emphasised. Regional hosts should also bear in mind that friendship and trust is better than a contract when dealing with Chinese investors. Hosts to these investors may want to spend less on lawyers and more time and effort on building relationships.
The future can be positive for Caribbean China relations. The Caribbean needs China as part of its growth and development strategy. However, much more needs to be done to understand and reconcile the positive elements of business cultures.