SEYCHELLES-CHINA RELATIONSHIP – A PERSPECTIVE By Paul Chow
While China’s President Hu Jintao was in the middle of a lightning African tour with cheque book in hand, America’s George Bush presented the American Congress with a budget request of mind boggling proportion. Mr Bush wants the American Congress to approve the spending by the Federal Government alone starting October 1, this year, of the staggering sum of US$ 2,900,000,000,000. In linguistic terms this figure pronounces as two point nine trillion dollars.
There is no ordinary handheld calculator in the world than can take this number of digits. Yet this sum of money is but a small share of the value of the gross domestic product of America. The gross domestic product is the estimated value of all the goods and services produced by a country in any given year. America has 50 states, each of which has its own budget and raises its own revenue out of sales taxes to pay for it. The gross domestic product of the State of California alone is greater than that of many countries in Europe. One of America’s supermarket chains, Wal-Mart, has a turnover greater than the gross domestic product of a number of European countries combined. Bill Gates, one of America’s richest men has a net worth of US$60 billion.
In December last year our National Assembly approved a budget for our government of SR 1,500,000, 000 which, if calculated using the exchange rate our Central Bank says we should, would come to about US$ 250 million – less now since the Central Bank has been changing the rupee value of the dollar on a daily basis. Of course, this assumption is a fiction, since our government will never be able to exchange this money anywhere in Seychelles for that sum of dollars. Unlike George Bush, our President Mr Michel, is playing with monopoly money. There is currently, SR 5,000,000,000 worth in the economy and more is being created everyday, which means that the daily “devaluation” makes us a dog chasing its own tail. Our budget is worth about 50% of the estimated gross domestic product of our country, a heavy burden for our people to carry.
The Chinese currency – the Yuan, is yet to be part of the so-called basket of currencies (alongside the dollar) which our Central Bank supposedly uses to determine the daily exchange rates of our currency. When the Chinese Government gives us financial aid, (let’s not say prostitution fees or even bribe), it must first buy US dollars with that money. China has accumulated over one trillion dollars worth of foreign currency reserves. Note that this is not even half the amount that George Bush wants to spend next year alone as his budget.
The US dollar remains the only currency in the world which everybody wants to use as legal tender and store of value. There are more US dollar notes in circulation outside America than there are in circulation inside America. After the defeat of Saddam Hussein’s army in 2003, the US government airlifted US$12 billion in dollar bills to Iraq to replace the defunct Iraqi currency of Saddam Hussein. George Bush is asking for the authority to spend about US$ 700 billion on the American military alone next year, a sum greater than the combined gross domestic products of all the countries of Africa.
Because more dollars were coming into China than leaving it, the surplus dollars were accumulated as reserves – in other words the Chinese government did not just print Yuan with which to buy them to import things, even though many Chinese peasants still live in squalor. But foreign currency reserves are not for the government of China to spend freely. It is an insurance to support the international exchange rate of its currency, the Yuan – and the Chinese government is well aware of it. This reserve has been accumulated over time because China sold more to other countries (especially the US) than it buys from them and also, because investors when they come to invest in China must bring dollars to exchange for Yuan, unlike in Seychelles where foreign investors are explicitly encouraged not to exchange their dollars for our currency. We even forbid them to pay locally available goods and services or wages of Seychellois in foreign currency.
Hence, the financial aid that China gives us must first be taken out of the Chinese government’s budget before it is used to buy dollars for us to use. Without those foreign currency reserves, therefore, China would have no clout either in Seychelles, or Africa nor anywhere else in the world for that matter. That is why, even though we’ve had good relations with China since 1976, it’s only since 1997 that China’s aid has made a real contribution to the Seychelles economy. To produce armaments, machinery or consumer goods China must also import raw materials which many African countries have in abundance and foreign currency is what the African countries need too. Today, as China has plenty of it thanks to its prudent economic policies, it is projecting its influence accordingly.
George Bush, on the other hand, does not worry about foreign currency reserves. In fact a good part of his 2.9 trillion dollar budget would be financed by debts sold to China which wants to invest its vast foreign currency reserves in a secure and economically sound country. Last year the average wage packet of American workers bought more goods and services than in previous years because Chinese workers in China are prepared to produce goods Americans want for very low wages – wages that no Seychellois would want to work for even to sweep your yard, clean your house or collect household garbage. A factory worker in China would be categorised as middle class if he could earn the same in wages as a pensioner earns in pension from the state in Seychelles.
When our Vice-president, Mr Joseph Belmont claims, that we may be small but we have the same clout in the world as China with 1.3 billion people and over one trillion dollars in foreign currency reserves, he is surely exaggerating our importance in the world. For years we could not even pay our dues to remain a voting member of the UN until the Chinese Government paid the arrears so that we could vote with them in international affairs. The new Embassy in Beijing, I am told, was paid for by the Chinese Government. This is equivalent to international diplomatic prostitution. Every Seychellois with any dignity should be ashamed of it.
So after all the pomp, ceremony and rhetoric of the past week, President Michel must come down to earth and face the reality of the world we live in. The China-Seychelles relationship is not one of equals, compared to what it was when we first established diplomatic relations with China in 1976, when the Democratic Party was guiding our nation’s prosperity. Our country then, unlike China then, had substantial foreign currency reserves. It stood at over SR 100 million, which today would buy the equivalent of one billion rupees and more. Like today’s China, we accumulated all these reserves while at the same time realising real economic growth of as much as 15% a year, as well as built a new commercial port, constructed the La Gogue dam and laid pipes to carry clean water to our houses. There were no Chinese labourers or Chinese “companies” then. We did all the work ourselves with the support of skilled foreign craftsmen and engineers. We also, in the process, built international hotels to accommodate up to 60,000 tourists a year, compared to less than 2000 when we started our tourism industry in 1971. We achieved all this using the same economic principles and monetary disciplines China is using today. We were the one that did a favour to China then, by establishing diplomatic relations with it.
Mr Rene and Mr Michel squandered all this wealth in an attempt to emulate the kind of economic policy China had, which caused starvation on a massive scale in China. Today, after 30 years under their leadership, Seychelles has become a beggar country in our relationship with China; begging to be forgiven the debts we cannot repay and to pay for our membership to international organisations. Until we learn to stand on our own two feet economically, our relationship with China will remain mired in this undignified realm of international diplomacy. The so-called strategic value of our islands to China is hogwash. Seychelles is of no strategic value to China (unless we abandon our independence and become a Chinese province) except to be bribed when necessary to get a vote in international forums,. The world today has one superpower and America is and will be that superpower for decades to come, because every American President can spend trillions of dollars (money not available to any other government, not even to the Chinese government) to project that power anywhere in the world. China needs all the money it earns for economic development while the American economy is already fully developed. China’s continued prosperity is dependent on trade with a prosperous America.
With its recent economic successes, China has mustered more votes and support in international forums from others, even from America, thus giving our own vote marginal value. In the coming decades in any case, China will resemble America more and more in its economic structures and even in its internal politics, as today’s Chinese leaders know that their country cannot maintain the current economic growth under a communist system and keep the lid over the natural desire for freedom and democracy of the individual Chinese. Thus, as China changes and modernises, and become more influential in world affairs, it will not need our favours, so our prostitution value will disappear. No one desires an old prostitute with no teeth.
For the Love of Seychelles let’s get real. I have no doubt that President Michel sincerely wants the best for all our people – but time is not on his side. To achieve it, however, he must first get rid of the sycophants around him and replace them with knowledgeable economic advisors – not the types that will only tell him what he wants to hear. He must dialogue with his political opponents because the issue is too important to be treated on a purely partisan basis. We should ask China to teach us how to build and maintain foreign currency reserves so that we can be an economically viable economy. Otherwise we will remain – in international relations terms with China – a prostitute, and they do grow old too.
The writer is President/Leader of the Democratic Party
