Foreign aid as foreign policy tool: competition of projects aid allocation to Kenya between Japan and China
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Foreign aid as foreign policy tool: competition of projects aid allocation to Kenya between Japan and China
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Amuhaya Claire 
Occupation: Post-graduate student, Department of Theory and History of International relations; Lecturer Assistant, RUDN University
Affiliation: People’s Friendship University of Russia
Address: Russian Federation, Moscow
Denis A. Degterev
Occupation: Head, Department of Theory and History of International Relations, RUDN University; Associate Lecturer, World Economy Department, MGIMO University, MFA of Russia
RUDN University
MGIMO University, MFA of Russia
Address: Russian Federation, Moscow

The concept of recipient foreign aid countries that seems so deceptively simple is undergoing tremendous evolution as the international development cooperation scene is also evolving. This change is exemplified by the inclusion of some global South countries as some of the new emerging donors. As the new emerging donors abandon some of the classical foreign aid approaches and instead include approaches like aid with low conditionality and respect of sovereignty in their model, they are successfully challenging the traditional donors in development cooperation with developing countries. Following the assumption that foreign aid is a tool for foreign policy, this article attempts to reconceptualise the donor-recipient country relationships by focusing on a traditional donor country, Japan, and an emerging global South donor country, China. It argues, using Kenya as a case study, that Japan and China in pursuit of their aid foreign policy engendered the competition of development cooperation projects in Kenya, thereby increasing Kenya’s bargaining power. This is evidenced by how Kenya sometimes designs tenders for infrastructure projects in order to gain maximum leverage. We conclude after several analyses and observations of Kenya’s annual debt management report that even though Japan had a head start to China in its foreign aid allocation to Kenya, over the years China has managed to surpass it to become Kenya’s leading external creditor. However, to both countries Kenya is of key strategic importance in East Africa, so Japan has been trying to change its aid foreign policy to compete with China by developing counter measures and as a result of this recently there has been a slightly upward trajectory in its foreign aid allocation to Kenya.

Foreign Aid, Foreign Policy, Competition, Development Cooperation. Emerging Donors, Recipient Countries, Kenya, China, Japan
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1 With the international scene shifting towards the East, it has had a direct impact on the global development assistance landscape and as a result it is reshaping the donor-recipient dynamics.
2 Denis Degterev in his work on International Development Assistance as an instrument of promoting economic and political interest of donor countries states that “the concept of political realism assumes that international assistance is aimed not so much at assisting recipient countries, but rather for promoting foreign policy and foreign economic interests of donor countries”. He further argues that “in practice, it is rather difficult to assess the validity of a particular doctrine; nevertheless, on the basis of a number of indirect features, some conclusions can be drawn about the presence of a “pragmatic” component in the strategies of international donors” [12].
3 This article by exploring these indirect features examines the donor-recipient dynamics because the growing number of stakeholders and initiatives in developing countries have added complexity to international development cooperation (IDC) scene.
4 Such dynamics are exemplified by the entry of new donors in the global financial aid system making it more polycentric and increasingly challenging the old balance and in the process affecting different donor countries’ foreign aid policies and recipient countries’ aid options. “This emergence of new donors on the world stage has not only resulted in an increase in relevant actors but also in a diversification of development cooperation strategies” [5]. This diversification has impacted directly on recipient countries’ aid choice, which inadvertently has led them to sometimes have more bargaining power when negotiating foreign aid than before.
5 Trumbull and Wall state that during aid allocation it is “implicitly assumed that when a donor makes its ODA allocation it does not consider the ODA that recipients receive from other sources. In fact, donors do make their decisions with knowledge of what each other are doing” [26]. However they further argue that based on this they might cooperate, but this article will argue that instead of the donor countries cooperating in development cooperation in Kenya, they are instead competing. This “possibility of competition among donors is accounted for by simply including the aid flows from all other sources among the determinants of the allocation of aid by a particular donor” [7]. This is even further complicated when the donor countries have similar aid projects.
6 Traditionally, foreign aid to Kenya was more oriented towards the Western countries but the entry of Asian countries, mainly Japan and China, to the scene has challenged them. So even “though foreign aid serves several purposes, and not least among them the wish to increase human welfare, the primary reason for aid allocations or aid restrictions is to pursue foreign policy goals” [4] and Japan and China are in pursuit of their own foreign policy goals and are strategically trying to mark their footprint in the country.


8 The basis of the research is that both countries view Kenya as a strategic gateway for East Africa region because regionally it is one of the countries with a strong economy and it is projected to grow even faster [2]. Similar sentiments were echoed by assistant Minister Lu Guozeng on 18th August 2005, at the Opening Ceremony of 4th summit of Forum on China-Africa Cooperation: “Kenya is an important country with a relatively better economic basis in East Africa” [1]. According to Japan International Cooperation Agency (JICA), Kenya is “a marine and air transportation gateway to East Africa, a region with a population of roughly 140 mln people, which occupies a key geographical location” [21]. So since it is well connected to the rest of the region, it means that if a project is started in the country it can quickly expand to the rest of the region. The official websites of Ministry of Foreign Affairs of China [25], JICA [20] and Kenya’s national treasury and planning annual public debt management reports [22] are the main sources of data (See: Tables 1, 2; Figures 1, 2). The embassies of Japan and China in Kenya, and Kenyan embassies in Japan and China as well are vital for source material during the research.
9 The research involves data collection through historical analysis of the various aid projects that have been taking place in Kenya by focussing on the areas of interests of the Japan and China. For example, infrastructure such as roads, railway lines, telecommunication or education and health sector. Literature used will be the one focussing on foreign aid as a foreign policy tool [4; 6]. The other main literature focuses on competition for aid allocation [3; 7; 26].
10 Literature on emerging donor countries by authors specialising in foreign aid was also used, mainly from Russia and China [12; 18; 28].


12 As stated above both countries view Kenya as a gateway to East Africa, but the foreign relations have not always been rosy. For example, in 1967, just four years after Kenya gained her independence, this country ordered the Chinese charge’ d’affaires out of the country by declaring him persona non grata, China in response barred the Kenyan charge’ d’affaires from Beijing. Both countries did not have any top level representation and their diplomatic relations were severed for eleven years [11]. This was so until the end of 1978 when Kenya dispatched an ambassador to China and opened up the embassy that had been closed for eleven years. The revival of diplomatic relations was also the start of development projects between the two countries as it spurred lower-level technical exchanges and activities such that by 2000 in Kenya, the press reported an important development or commercial initiative involving China virtually every month of the year [10].
13 As Grachikov states, this new resurgence of China in Kenya was “that in the second half of the 1990s leadership of China made an adjustment to its foreign policy and began to shape its foreign policy to that of global prevention of external threats” [18]. This policy which involved active promotion of consultation and cooperation mechanisms and the proximity of mutual interests resonated with African countries like Kenya as it was more than aid assistance but a policy of development cooperation partnership as equals.
14 Because of the rocky start of foreign relations between Kenya and China, it means that Japan had a head start on development cooperation with Kenya. Ever since independence of Kenya in 1963, this country established its diplomatic foreign relations with Japan, which have never been severed up to date. However, Japan’s relations with Kenya was low key until the 1980s, when the cooperation began to shift. This was as much a result of increased opportunity spaces found in the demise of a bipolar world as Japan’s increased interest in locating strategic economic partners and markets [8].
15 The 1990s also witnessed one of the most important shifts in Japan’s foreign policies to Africa, the initiation of the Tokyo International Conference on African Development (TICAD). TICAD was initiated in 1993 by the government of Japan, and now co-organized by the World Bank, UNDP, the African Union Commission and the United Nations) [8]. TICAD is one of the main component of Japan’s diplomatic foreign policy tools for Africa’s multilateral objectives. As a result, several TICAD conferences have been held with an emphasis on development of Africa which have contributed to deepening Japans relations with countries like Kenya.


17 Japan’s aid foreign policy has drawn mixed reactions from member states of the Development Assistance Committee (DAC) representing global North, who claimed that “Japan’s support for southsouth cooperation, and its emphasis on self-help and economic growth, has contributed to the perception that Japan potentially offers a more empathic perspective as a donor in Africa than other members of the DAC” [27].
18 Nevertheless, to the global South countries some of the new donors (China) disburse their aid in ways similar to Japan. For instance, they are often characterised by low conditionality, respect for sovereignty and the principle of non-interference; a focus on the ‘hardware’ of development (such as infrastructure and productive sectors [27].
19 These similarities are exemplified in different forms, so for example, the priority areas of bilateral cooperation between Kenya and Japan are five-fold, namely, economic infrastructure, agriculture, health, education, and environment [15]. Their projects on infrastructure include Specialized Road Maintenance Management Unit, Sondu-Miriu/Sangoro hydropower plant project and Mombasa port expansion project. In the sphere of education, some of their projects include improvement of facilities such as primary school through Grassroots/Human Security Grant Scheme and Human resources development associated with institutions such as universities in neighbouring countries so as to have a spill-over effect inside and outside the region through African Institute for Capacity Development (AICAD) [13]. Japan was also key in the establishment and maintenance of Jomo Kenyatta University of Agriculture and Technology.
20 On the other hand, since the establishment of the diplomatic relations between Kenya and China, the projects of aid and assistance provided by China to Kenya have mainly included Moi International Sports Centre, methane-generating pit, the expansion project of Eldoret hospital, and Gambogi-Serem Highway [14], which are all infrastructure. In education as well China and Kenya signed the protocol for the cooperation in higher education, according to which China provides Egerton University with apparatuses for teaching and researches with two teachers sent over to work there. Starting from 1982, China would provide Kenya every year with at least 10 scholarships [14].
21 Both countries as well have established institutions that have a focus on development of Africa. For example, the aim for TICAD is to foster international discussion on development of Africa. Since its inception TICAD conferences were being held every five years in Japan until 2013 when they changed to every three years alternating between Africa and Japan. And in 2016 TICAD VI was held in Kenya, the first in Africa signifying the importance of Kenya in the development cooperation of Japan with Africa.
22 China on the other hand founded Forum on China Africa Cooperation (FOCAC) in October 2000 at the first Ministerial Conference in Beijing, whose objective is to strengthen Sino-African economic cooperation and trade relationships to establish a new international order that will better reflect the needs and interests of China and Africa [24]. The basis is on South – South cooperation whose aim is to provide alternative assistance to global South countries as an alternative from the traditional donors from global North. FOCAC ministerial conferences are held every three years alternating between Beijing and Africa and of the seven conferences held three of which have been in Africa none has been in Kenya so far.
23 Other than similarity of projects both China and Japan give their aid to Kenya in form of Foreign Direct Investment (FDI). FDI is particularly important to industrializing countries such as Kenya since it provides foreign capital, high technologies, advanced managing skills and new jobs [8]. So, for example, China’s development assistance to Kenya encourages direct investments of Chinese companies in Kenya through state-backed loans while Japan through TICAD emphasises on foreign direct investment (FDI) from Japanese companies.


25 Japan is an OECD/DAC member state and it is doubtful that OECD/DAC member states cooperate, which is evidenced by the fact that on several occasions Japan has received criticism from its fellow DAC members. Japan’s support for South-South cooperation, and its emphasis on self-help and economic growth have all contributed to the perception that Japan potentially offers a more empathic perspective as a donor in Africa than other members of the DAC [27].

Figure 1. Kenya’s % of External Debt by Major Creditors (Japan and China). Data from: [22].


So it is highly unlikely that Japan will cooperate with China as it views it as a rival. Instead, they are most likely to compete in development cooperation. This is further cemented by the similarities in some of their aid models and in the aid projects which has led to the assumption that donor countries give aid so that they can gain as well in terms of imports to their country from the recipient country and exports in the opposite direction. Because most of the aid given is tied aid, it is therefore assumed that aid can then be seen as an instrument with the power to influence future consumption of the recipient in a direction that is beneficial to the donor. So depending on the degree and direction of trade diversion, tied aid by one particular donor country is of concern to other donor countries whose exporters may suffer from trade diversion [7], which is why the donor countries compete for aid allocations in recipient countries.


Table 1. Kenya’s % of External Debt by Major Creditors (Japan and China) Data from: [22].

29 Although TICAD led by Japan and FOCAC by China have similar agendas, their establishment could be seen as a result of competition between the two donors, which is why they collaborate and put emphasis on different models. TICAD is in collaboration with traditional donors such as World Bank whereas FOCAC puts emphasis on South – South cooperation.

Table 2. Kenya’s % of External Debt by Major Currencies/ Japanese Yen and Chinese Yuan Data from: [22].


Figure 2. Kenya’s % of External Debt by Major Currencies – Japan Yen and Chinese Yuan. Data from: [22].

32 China’s development of the Belt and Road initiative has forced donors such as Japan who are also in the infrastructure aid development to rethink their strategy. This Belt and road initiative will put China at the centre of a growing network of transportation and trade links that will ultimately stretch to encompass more than 150 countries across several continents. This will be a challenge to Japan because according to a study done by Kimura and Togo, there is robust evidence that foreign aid from Japan in particular has a vanguard effect, that is, Japanese aid promotes FDI from Japan but does not attract FDI from other countries [23], which means that Japanese aid is for selfish interests rather than for the recipient countries, which differs from Chinese aid which is for development of both donor and recipient countries because of how enormous the Belt and Road initiative is projected to be. It will link Asia, Africa, Europe, Middle East and Americas. It is thought that Japan is now rethinking their infrastructure aid strategy. For example the Japanese government announced plans to establish a $50 bln fund to boost infrastructure investment in the IndoPacific region. In 2015, Japan also announced its “Partnership for Quality Infrastructure” plan and is currently involved in the creation of India’s first high-speed rail corridor and expanding a port in Mombasa, Kenya [19].
33 Because of this competition and rivalry there is evidence that Kenyan bids for business and FDI as well as the roll out of tenders for infrastructure projects are at times designed to gain maximum leverage from the projects. This is possible given the rivalry for influence in Africa not only between traditional East-West partners but also between the East Asian superpowers of China, Japan and South Korea [8]. An example is that Kenya tends to bid the larger, longer duration and riskier projects such as the construction of the Mombasa-Nairobi standard gauge railway at a cost of US$3.6 bln or NairobiThika superhighway at a cost of US$360 mln to both Japan and China. However, Chinese companies end up winning the bid as they are backed by their government hence can afford taking the risk unlike the Japanese companies. The smaller less risky projects Kenya normally bids to the local companies.


35 Since Japan views Kenya as the gateway and hub for East and Central Africa, it has occupied a very special position in Japan’s diplomatic relations within the region. Currently, Kenya hosts one of the largest Japanese communities in Africa (about 800 as at October 2016). This special position that Kenya holds for Japans relation with the region has resulted in Kenya to be the leading recipient of Japanese development Assistance (ODA) in the Sub-Saharan Africa. This aid is mainly focused on technical assistance; grant aid; and concessional (ODA) loans [15]. This is coupled by Nairobi being the Regional Headquarters for Japan’s Cooperation Agencies namely JICA, JETRO and JBIC. And as reported by the government of Kenya by December 2018, there were 104 Japanese companies operating in Kenya, of which 54 have physical presence in the country.
36 This could lead one to assume that Japan is the leading partner for Kenya’s development cooperation but from the trends analysed from Kenya’s Annual debt report one notices a decline of Japan’s cooperation but an increase of China’s cooperation. This can be explained by China’s gigantic projects in Kenya both by size and cost. For example, the construction of Nairobi-Thika Super Highway in 2010-2012 made it the first super highway in Kenya. It was constructed through funding from African Development Bank (AfDB), Exim Bank of China and the Kenyan government at a cost of Ksh 32 bln (US$360 mln) [9] or Mombasa-Nairobi Standard Gauge Railway 2014-2017 – at a cost of US$3.6 bln. The SGR is Kenya’s most expensive infrastructure project since independence. China Road and Bridge Construction company was granted tender to build the road in a project funded through the Exim Bank of China [9].
37 Also at present, there are over 20 Chinese companies doing their businesses in Kenya, such as Jiangsu International Economic and Technological Cooperation Co., Sichuan International Economic and Technological Cooperation Co. Ltd. etc. [14]. As a result, there is a growing number of Chinese workforce and business people in the country.
38 The reason why China surpassed Japan in aid projects and allocation in Kenya, as has been argued, is because of Japan’s relative ease with which it may have previously engaged with Kenyans for government contracts, and so China started to bid for the same projects. But this reflection is just not in Kenya but in African continent as well. In 2015 trade between Japan and Africa was $24 bln as compared to China’s $179 bln. Africa’s imports from China went from 2% in 1995 to 13% in 2012 while Japans dropped from around 7% in 1995 to 3% in 2012, and by 2014, 13.5% of Africa’s trade was with China while Japan’s was only 1% [8].
39 As a result, as reported by Financial Times on 26th August 2018, “Nearly a decade ago, China surpassed the US to become Africa’s largest trading partner. Last year, its two-way trade hit $170 bln – four times larger than US-Africa commerce” [16]. Other than that is thought that President Xi Jinping is keen for China to serve as an economic and political model for the developing world. He hopes that China’s infrastructure finance and manufacturing investment in Africa will spur industrialisation and development [16].
40 Despite all this development, according to a study that explored data from both the World Bank and the African Development Bank (AfDB), the success of Chinese firms is largely confined to the area of civil works in Africa, where Chinese firms accounted for 31% of total contract value. In contrast, the study found that Chinese firms were almost non-existent in the area of consulting services, and minimal in the area of equipment supply, where they capture a mere 3% of the market [8]. So if Japan still wants to explore and tighten its aid foreign policy in Kenya it could diversify its interest to consulting services.
41 However, recently Japan has tried to regain its footprint in the country and there is an increase in larger projects and aid allocation. For example, its total credit to Kenya for the year 2016 to 2017 was at 2.2% but 2017 to 2018 it increased to 4% while for the same period China’s total credit to Kenya dropped from 22.2% to 20%. We hypothesize that Japan’s current relationship trajectory is driven as much by the rise of China as by Kenya’s ability to exploit the rivalry of states. This is because donors are likely to increase bilateral aid in response to increases in aid by other donors who compete in terms of exports to the same recipient country so as not to suffer from trade diversion. Indeed, Kenyans may increasingly be able to leverage the ongoing Cold War between China and Japan in Africa by shopping for what works best for Kenya in regards to a particular project [8].


43 Japan had a head start to China in terms of development cooperation with Kenya but because of its lackadaisical attitude, it has been overtaken by China. Even though recent studies show that there has been a relative upward trajectory on Japans aid, this is not because their interests in Kenya have changed but it is because of China’s presence. Since both countries view Kenya as a strategic country in their foreign policy for East Africa region and Africa in general, it is highly unlikely that either will let the other continue to be dominant without counter measures. But until then Kenya can continue taking advantage of their rivalry by offering larger and riskier projects than the two donor countries would otherwise be interested in.


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