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Participation in the Paris Club of India pressures China


『International Development Journal』 2019 November edition

Despite being included in the Summit Declaration at the G20 Osaka Summit held in June of 2019, there were issues barely reported in the mass media. They include an expansion of the membership of the Paris Club, the public debt consulting organization. There is also a glimpse of the medium- to long-term strategy of developed countries including Japan, the US and Europe which want to make all BRICS, including emerging donors China and India, permanent members of the Paris Club.

India’s participation strongly welcomed

The Paris Club is an informal organization that discusses the rescheduling and reduction of public debt to help debtor countries. It was originally named in 1956 when Argentina’s debt negotiations began with creditors gathering at the French Ministry of Finance. It is a loose, informal framework. Permanent members include 21 countries that are members of the Organization for Economic Co-operation and Development (OECD) including Japan, the United States, Europe and Russia.
There are also associate members (ad hoc participating countries) such as China, Turkey, Saudi Arabia and South Africa, who can attend at any time with the approval of the permanent members and the debtor countries. In addition, the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB), and the OECD Secretariat also attended as observers. The G20 Osaka Summit Declaration, adopted on June 29, stated, “We support the ongoing work of the Paris Club, as the principal international forum for restructuring official bilateral debt, towards the broader engagement of emerging creditors and we welcome India associating voluntarily with the Paris Club to cooperate in its work on a case-by-case basis.”

Expanding economic cooperation with Africa

Behind India’s participation is the expansion of “South-South cooperation” with other developing countries. Looking at the history of economic assistance in India, we have mainly supported human resource development in neighboring countries in South Asia, centered on the “India Technology and Economic Cooperation Program (ITEC)” launched in 1964. But what has been growing in recent years is the financing of the import and export bank, a government-affiliated financial institution. In 2014, India provided 194 projects in 63 countries, totaling $ 11.7 billion, according to a report from the German Institute for International Security (SWP). Of that amount, $ 6.6 billion was for Africa. 58% of total funding for the past 10 years since fiscal 2006 is for Africa. According to reports, Ghana and Swaziland have supported the construction of the Parliament Buildings, and have also announced cooperation in the construction of conference centers in 21 African and other countries, including Niger. It seems to follow the Chinese way. India has also established the India-Africa Forum Summit (IAFS) since 2008, taking into account Japan and China’s African cooperation. In 2017, India invited and held a meeting of the African Development Bank (AfDB) in Gujarat, home of Prime Minister Narendra Modi. At that time, in collaboration with Japan, the “Asia-Africa Growth Corridor (AAGC)” was launched.
Indian companies are also actively expanding. Approximately 140 Indian companies, including IT and automotive, have entered the South African country alone and have invested more than $ 4 billion. Moving forward, the company will accelerate its entry into Africa with a view to the common market of the African Continental Free Trade Area (AfCFTA), which went into effect in May.

Growing Debts of African Countries

On the other hand, according to Yoshino Takeyama, a researcher at the Institute for International Monetary Affairs, the public debt balance of sub-Saharan African countries has increased from 31.6% of GDP in 2013 to 49.1% in 2018. The percentage of foreign currencies has increased by more than half. The public debt to GDP ratio of 60% is considered a “danger zone,” but the ratio in Sub-Saharan Africa has been rising since the Lehman Crisis in 2008. According to Sayuri Shirai, a professor at Keio University, Zambia, that has abundant metal resources, is seeing increased external debt and increasing involvement of the IMF.
India’s decision to join the Paris Club is thought to strengthen its active involvement in the African market and hedge the risk of public debt. Brazil and Russia are permanent members of the Paris Club, and China and South Africa are also associate members, so it is possible for all five emerging BRICS countries to participate. However, there are significant differences between permanent members and associate members. Permanent members are able to take the lead in debt relief and have the advantage of maintaining their own debts, but as a prerequisite, they have to disclose full information on development cooperation.
Many of the permanent members, other than Russia, have joined the OECD and are also on the Development Assistance Committee (DAC), which sets the rules for aid. Russia joined the Paris Club in 1997 and is cooperating with developed countries in development cooperation.
“The Paris Club helps to reduce the risk of financial assistance to the former Soviet countries,” said Andrei Shelepov, Research Fellow at The Center for International Institutions Research, Russian Presidential Academy of National Economy and Public Administration (RANEPA). He participated in the Northeast Asian Development Forum held at the JICA Research Institute in Tokyo in September 2019. He said, “Russia has been sanctioned for Crimean issues and would have difficulty joining the OECD, but adheres to DAC rules.”
A Japanese government source involved in the G20 Finance Ministers and Central Bank Governors’ Meeting held in June 2019 says, “In the mid- to long-term, having India as an associate member has set BRICS as a starting point to become a permanent member of the Paris Club. For the time being, China will not join the OECD, which criticizes it as “a developed country village and it’s hard to imagine it ever joining. But the Paris Club is profitable and China could be a permanent member.”

Chinese scholars think “positive”

China has already shown a positive attitude toward the Paris Club at the 2016 G20 Hangzhou Summit. At the then-Leader’s Declaration, led by the Presidency of China, “we will play a more constructive role, including continued regular attendance at the Paris Club Meeting and further discussions on possible participation. We welcome China’s intention to do so.” In the year 2016, Korea and Brazil became permanent members of the Paris Club, and China incorporated RMB into the IMF’s Special Drawing Rights (SDR).
Professor Meibo Huang, Director of the Institute for International Development and Cooperation of Shanghai University of International Business and Economics, who participated in the Northeast Asian Development Forum, said, “There is a lively debate within the government about the membership of the Paris Club as a permanent member. I think there is an advantage and a possibility of membership in expanding development cooperation.” On the other hand, some observers state that “China has more than 20 government agencies with development cooperation budget and it will take time to disclose a large amount of information”, said Xiaomin Zhang, Associate Professor of Beijing Foreign Studies University. However, few voices have strongly refused their possible membership.
In the past, China has mainly pursued bilateral negotiations with debtor countries if there is a need for debt reduction and risk reduction. But if China joins the Paris Club, developing countries will also have an advantage in debt processing.
The DAC of OECD is conducting dialogue with China over development cooperation. It is necessary to focus on China’s response to the Paris Club in the future.

editor:Yukifumi Takeuchi





 パリクラブは債務国の救済のため、公的債務の繰り延べ(リスケ)や削減について協議する非公式な組織だ。もともと1956年に、アルゼンチンの債務問題協議に債権国がフランス財務省に集まって発足したため、この名がついた。緩やかな非公式の枠組みである。 恒久メンバーとしては、日米欧など経済協力開発機構(OECD)加盟の21カ国とロシアが入っている。さらに恒久メンバーと債務国の了解を得て随時、出席する準メンバー(アドホック参加国)がある。中国、トルコ、サウジアラビア、南アフリカなどだ。さらに国際通貨基金(IMF)、世界銀行、アジア開発銀行(ADB)、OECD事務局などがオブザーバー参加している。


 インドの参加の背景には、他の開発途上国に対する“南南協力”の拡大がある。 インドの経済援助の歴史を見ると、1964年に発足した「インド技術経済協力プログラム(ITEC)」を中心に、南アジアの隣国などで主に人づくり支援をしてきた。だが、近年伸びているのは、政府系金融機関である輸出入銀行の融資などだ。ドイツ国際安全保障研究所(SWP)の調査報告によると、インドは2014年度、世界63カ国に194件、総額117億ドルの資金協力を実施した。このうち66億ドルがアフリカ向けだった。2006年度から10年間の資金協力累計でも58%がアフリカ向けだ。







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