I will preface by saying that I might be wrong on this, but seems to me that India is gearing up to protect its economic position in Mozambique as China tries to big-foot its smaller neighbor out of the African continent. A couple of days ago, India extended a credit line of US$ 500 million to Mozambique while Mozambican President was visiting New Delhi. Considering that until last week, the total amount of money extended through previous six lines of credit was only US$ 140 million (source: MEA), this figure is considerable jump. Why is it so?
It seems that India and China both are vying the extensive coal deposits in Mozambique. In the past India, along with Australia, has dominated the Mozambican coal reserves. TATA Steel and SAIL, both have extensive interests in the country. Traditionally, China has shown little interest in Mozambican coal and gas reserves, only importing agricultural products and fisheries from the country. Although the trade relations is on the meteoritic rise, China has restricted itself to importing food and selling machinery. That is, until three months ago. In June, 2010, Chinese steel companies announced their plans of entering Mozambique and investing billions of dollars in developing the coal fields in the country.
Obviously, the Chinese entry into Mozambican coal business is likely to prove a tough competition to the Indian steel companies just like the Indian oil companies have been outbid across the globe by the Chinese. In a reactionary strike not to lose dominance in another African country in race to get raw materials, India seems to have replied with doling out money to the Mozambican government.
Of course, India cannot match China in the amount of aid given. What it can match the Chinese is in how the aid is given. The Chinese are infamous in Africa for not allowing technology transfers and training to the Africans. India can win some favors in the African markets by treating them better than the Chinese in this respect.
Obviously, the Chinese entry into Mozambican coal business is likely to prove a tough competition to the Indian steel companies just like the Indian oil companies have been outbid across the globe by the Chinese. In a reactionary strike not to lose dominance in another African country in race to get raw materials, India seems to have replied with doling out money to the Mozambican government.
Of course, India cannot match China in the amount of aid given. What it can match the Chinese is in how the aid is given. The Chinese are infamous in Africa for not allowing technology transfers and training to the Africans. India can win some favors in the African markets by treating them better than the Chinese in this respect.
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