An offer you can refuse: A host country’s strategic allocation of development financing

Abstract

Hydropower projects are one of the leading energy sectors being developed in Africa. In the past two decades, this demand has been increasingly met by Chinese financing and Chinese contractors, creating an impression that host countries have no choice but to accept Chinese advances against their preferences. This essay demonstrates through the case study of the Mount Coffee hydropower project in Liberia that host countries strategically allocate financing from different sources to different projects, based on domestic development needs, administrative capacity, flexibility of financiers, and institutional memory between the host and the financiers. This essay also shows that concerns over Chinese contractors’ environmental-and social-impact records reflect a combination of host enforcement, financier self-sorting, and Chinese contractors’ own perceptions of their comparative advantage. More broadly, this case study provides empirical observations of host countries’ agency and strategic calculus in the financier-host relation, as well as the limits of China’s role in Africa’s hydropower sector.