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Equatorial Guinea: Trade and Economic Partnerships 2011 – www.equatorialguineaonline.com

www.equatorialguineaonline.com

For the years 2007-2009, Equatorial Guinea’s trade-to-GDP ratio was 121.6. The country exported US$9.1 billion in merchandise while it imported US$5.2 billion in merchandise, making it a net exporter of merchandise, in 2009. For commercial services, Equatorial Guinea exported US$27 million while importing US2.0 billion in 2009, so it is a net importer of commercial services.

Emerging Economic Partnerships

Equatorial Guinea remains a relatively closed country; its main emerging partner is China. While there are minor presences of a few firms from a handful of countries, these are mainly project based with the focus on construction. There is a small presence of Chinese Taipei, Cuba, Argentina and Russia. The composition of emerging partners present in Equatorial Guinea corresponds to the map of diplomatic representations in the country. Equatorial Guinea has diplomatic representations in Argentina, Brazil, Russia and, as of 2010, Venezuela. The network of embassies in traditional partner countries includes Spain, the United States, France and the United Kingdom. There are foreign representations in Malabo of China, Cuba, Spain, France, Morocco and South Africa.

The country’s oil wealth has attracted the attention of emerging economies in recent years. Although US companies still dominate the country’s hydrocarbons industry, Chinese companies are increasingly active providing significant credit lines. So far, Chinese companies are increasing their influence but obtaining little return in terms of oil.

Chinese engagement is characterised by commitments to deliver projects “key in hand” and are further notable in that projects are normally completed faster than those undertaken by traditional partners. Hence, China is perceived as a more reliable partner, although it tends to import all construction materials, technical staff and workers rendering short-term economic gain negligible. It is mainly engaging in the areas of public works and infrastructure – projects undertaken for long-term economic benefits. In the 2000s, China has built hospitals, a sports stadium, port expansions, as well as the new ministries and other government buildings in Malabo II. China is not only present in big infrastructure works. Chinese entrepreneurs are gradually increasing their presence in retail business operations and import/export activities. They are also developing the market for their accessible consumer products, including furniture and spare parts. China has a long history in Equatorial Guinea. The Chinese company Sinohydro, which has important operations in other parts of Africa, is responsible for one of the largest civil engineering projects in the country: the construction of the Djibloho hydroelectric power plant, which is to be completed in 2011. A Chinese company is also building the conference hall for the 2011 summit of the African Union.

At the bilateral level, the IMF documents two examples of China-Equatorial Guinea loans on a concessional and a non-concessional basis. China extended a USD 2 billion non-concessional credit line to Equatorial Guinea in 2006. The loans were earmarked for infrastructure (four projects in electrification and improvements to Bata harbour). The terms of the loan consisted of an interest rate of 5.5%, five years maturity with a two-year grace period and a repayment guarantee in the form of liquid deposits at the Eximbank of China equivalent to 30% of the outstanding stock of debt was required. According to the IMF, the Chinese government is reported to have extended an offer for a USD 380 million long-term concessional loan for housing construction (17 years maturity, a 2-year grace period and a 2% interest rate).

While the government welcomes the ease of doing business with the Chinese, some civil servants are becoming increasingly concerned with two issues. First, the limited spin-off and/or multiplier effects of Chinese projects on the national demand for goods and services. Second, the quality of some of the projects executed could have been much higher. The latter issue is being addressed with trilateral co-operation approaches in which a company from a traditional partner takes care of the quality control. For example, a Chinese firm is installing a completely new sewerage system in the capital, while a Spanish engineering company is testing the infrastructure against international safety and quality standards.

Other emerging partners are slowly gaining importance, but remain far behind China. In 2010, Gazprom Neft, the oil arm of the Russian gas giant Gazprom, signed a production sharing agreement for two offshore oil blocks in Equatorial Guinea totalling an investment of USD 3 billion over the next 30 years. In 2008, the government awarded a second mobile telephone licence to Hist Telecom of Saudi Arabia. There has been some interest from Turkey and Argentina to sign agreements to foster trade exchanges and increase the security of investments. However, the volume of trade flows between Equatorial Guinea and Turkey reached a meagre USD 20 million during 2010 and the trade exchanges with Argentina are almost negligible. Cuba has traditionally dispatched teams of doctors for training and assistance. The Israeli firm International Medical Service (IMS) is building a 120-bed hospital outside Malabo.

Emerging partners from Africa include Morocco, Egypt and Libya. There has been a Moroccan presence since 2007 with the arrival of Maroc Telecom and the civil engineering company, Somagec, which built the airport and port facility in Annobon in 2010. The Egyptian company, Arab Contractors, is responsible for the building of the motorway and the promenade between Malabo and Sipopo. The Libyan  firm, Seguibatand, won the contract to build the villas where the heads of state will be hosted during the summit of the African Union.

President Teodoro Obiang Nguema Mbasogo maintains very close relations with some traditional partners, especially France. The French Group Bouygues, with close connections to the entourage of the president, remains the lead construction firm active in Equatorial Guinea. It was commissioned to build the luxury hotel and accompanying 18-hole golf course for the African Union Summit, which is to be delivered in March 2011. The presence of Spanish firms is particularly evident in the food and distribution sectors; however, the inputs for these activities come from imports rather than local suppliers.

Equatorial Guinea lacks the administrative capacity to engage strategically with its emerging partners. In other words, it does not negotiate terms that provide economic stimulus – using local materials and workers for example. Furthermore, the government does not have a plan to prioritise its engagement strategy with emerging partners through assessing their relative benefits for things like job or market creation. Equatorial Guinea would benefit from peer learning and exchanging best practices at the regional and African level; both of these need to be promoted to reap the greatest benefits from traditional and emerging development partners. The capacity of civil servants dealing with emerging partners still needs improvement. Although it is relatively common for civil servants at director-general level to be able to express themselves correctly in Chinese and carry out their negotiations in Chinese, the capacity of civil servants in all of their interactions and negotiations with all emerging partners needs improvement. Without the incentives or knowledge to enhance capacity and to engage strategically with emerging partners, Equatorial Guinea will continue to miss development opportunities.

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