VZCZCXYZ0004
RR RUEHWEB
DE RUEHNR #1176/01 1280959
ZNR UUUUU ZZH
R 070959Z MAY 08
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 5722
INFO RUEHFR/AMEMBASSY PARIS 2736
RUEHLO/AMEMBASSY LONDON 2813
RUEHBJ/AMEMBASSY BEIJING 0434
UNCLAS NAIROBI 001176
SENSITIVE
SIPDIS
DEPT FOR AF/E AND AF/RSA
E.O. 12958: N/A
TAGS: ECON ECON EINV ENRG EFIN PREL PGOV KE CH
SUBJECT: CHINA'S ENGAGEMENT IN AFRICA - KENYA RESPONSE
Refs: A. State 41697, B. Nairobi 4246, C. 07 Nairobi 1002, D. 07
Nairobi 0075
1. (SBU) Summary: China's engagement with Kenya is primarily a
private sector-led effort, focused on trade generally, and the
supply of goods and services in key infrastructure sectors like
roads, info-tech, and energy. The Chinese government appears not
heavily involved in those areas where the U.S. is most active, such
as health, education, the environment, governance, human rights,
counter-terrorism, and private sector development. We have regular
contacts with Chinese officials (last fall the U.S. and Chinese
Ambassadors sponsored a U.S.-China "ping pong diplomacy" tournament;
we lost), but we have no cooperation on specific projects. End
summary.
2. (SBU) In response to ref A, Embassy Nairobi directs Washington
to refs B, C, and D. Ref D is a baseline cable on the China-Kenya
trade relationship. Ref C touches on the Chinese investment, or
lack thereof, in Kenya, and ref B provides insights into how Chinese
technology companies are doing business in the country.
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Chinese Engagement in Kenya - Private Sector
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3. (U) Chinese engagement in Kenya, as discussed in refs B-D, is
largely driven by private sector activities, with frequent support
from the Chinese government in the form of concessional financing.
As emphasized and analyzed ref D, Kenya's relationship with China is
underpinned by rapidly growing bilateral trade. In 2006 (the latest
year for which data is available in Kenya), Kenya's exports to China
grew by 21 percent; imports from China grew an even greater 29
percent. But Chinese exports to Kenya are growing from a much
larger base, and the trade relationship is heavily skewed in China's
favor. It exported almost 20 times more to Kenya than it imported in
2006.
4. (SBU) As noted ref C, there is little foreign direct investment
by Chinese firms in Kenya in the sense of new green field investment
in factories that generate jobs and technology transfer for Kenya.
Most Chinese firms find it easier to simply export goods to Kenya
from their manufacturing bases in China. But within Kenya, Chinese
firms are very active in several key sectors:
-- Road Building: Chinese engineering firms, backed by concessional
financing from the Chinese government, continue to win contracts to
build or rebuild Kenya's decrepit road network. A Chinese firm is
currently widening the key artery linking downtown Nairobi and the
international airport, and Chinese firms are ready to begin
construction of two long-overdue bypass highways around the city.
-- ICT infrastructure: As noted ref B, Chinese technology companies
are extremely competitive in winning government tenders to build or
supply Kenya's rapidly expanding telecom and broadband networks.
Huawei and ZTE each have contracts to build sections of a national
terrestrial fiber optic backbone network now under construction.
-- Natural Resources: Please see ref C for details on the
involvement of the Chinese National Offshore Oil Company (CNOOK) in
oil and gas exploration in Kenya. Interest by China in hydrocarbons
in Kenya appears to have waned after the expensive failure in 2007
of an Australian company to discover oil or gas off the Kenyan
coast. In July, 2007, CNOOK handed back to the Kenyan government
four of six exploration blocks it had been awarded in April, 2006.
A Chinese firm is also a major investor in a titanium mine project
whose long delays may cause the original Canadian investor to divest
its interest in the project.
-- Energy: A Chinese engineering firm has the contract to enhance
the capacity of the primary pipeline that carries oil and gas from
the port of Mombasa into the interior of East Africa.
-- Airport construction: A Chinese engineering firm won the Kenya
Airports Authority (KAA) contract for the Sh2.6 billion first phase
of the expansion of Jomo Kenyatta International Airport (JKIA) and
is likely to win the contract for the second phase. Phase 1 involved
construction of a taxiway, an apron, work on the new terminal
building, extension of the fuel hydrant system and fencing. Phase 2
will expand the cargo apron loading capacity. Another Chinese firm
won the KAA contract for the Sh3 billion reconstruction of Kisumu
Airport. The project will expand the terminal, car park, apron and
taxiway, lengthen the runway to three km and widen it, enabling the
Kisumu to handle Boeing 737 aircraft and become an international
airport.
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Chinese Government Engagement
-----------------------------
5. (SBU) In the absence of greater transparency on the part of the
Chinese embassy in Nairobi in terms of its activities and assistance
and exchange programs, it is difficult to ascertain exactly where
and how the Chinese government is engaging in Kenya. An in-house
survey of relevant USAID/Kenya offices yielded virtually no
indication of current Chinese involvement in the health,
primary/secondary education, environment, or security sectors. The
Chinese government does provide sponsorship for around 80 Kenyans to
study at Chinese universities each year, and has also developed a
cultural exchange program under which Kenya acrobats (usually
children) study that sport in China. The Chinese embassy provided
nearly $5 million in 2007 to repair the Moi International Sports
Center in Nairobi, which the Chinese government built in the 1980s.
The Chinese Foreign Service Institute hosted the Kenyan Foreign
Service Institute Director and some of his staff for two weeks in
January 2008 to see how China trains its diplomats, and the Chinese
Institute will provide further training to Kenyan diplomats.
6. (SBU) On the military side, the Chinese donated about $3 million
late in 2007 to the Kenyan military to acquire spare parts for
aircraft the Chinese had sold to Kenya several years earlier. The
Chinese and Kenyan militaries are also scheduled to conclude a sale
this year of a small number of troop transport helicopters. The
Chinese do not have a resident defense attache in Nairobi, but they
do offer a limited number of military training slots, similar to the
U.S. IMET program, each year to the Kenyan military.
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Current Level of Engagement with U.S.
-------------------------------------
7. (SBU) Given the apparent lack of Chinese involvement in sectors
in which the U.S. Mission is active (e.g. health, education, the
environment, governance, counter-terrorism, and private sector
development), bilateral engagement in Kenya between the U.S. and
China is limited. As noted previously, the key structural
difficulty in working with the Chinese is that the Chinese embassy
has thus far declined to join the Nairobi donor umbrella
organization, the Donor Coordination Group, chaired by the World
Bank. It is thus problematic to know precisely what kinds of
assistance China is providing to Kenya and where therefore other
donors such as the U.S. might be able to work together with it.
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Areas of Potential Bilateral Cooperation
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8. (SBU) That said, at a standing-room-only seminar on April 24
entitled "China in Africa: Opportunities and Challenges," Chinese
Ambassador to Kenya Zhang Ming spoke candidly to the many civil
society members in attendance about China's policies and activities
in Africa generally, and Kenya specifically. He expressed interest
in greater engagement and cooperation with civil society and other
donor governments in the following areas, which Embassy Nairobi will
further explore with Zhang and his staff in the months ahead. These
included:
-- Media Capacity Building: Xinhua news agency's headquarters in
Africa is in Nairobi.
-- Bird Flu: Given the global nature of the bird flu threat, China
is interested in helping in detection and surveillance
-- Peacekeeping: There are 1,500 Chinese UN Peacekeepers, 350 of
whom are in Darfur. Citing AFRICOM, Zhang asked if there was room
for military cooperation in Africa.
-- Corporate social responsibility and labor rights.
Ranneberger