1. Why Ports on the Indian Ocean Coast?

China has been involved with port construction and operation all over the world, along the routes from the South China Sea to the Indian Ocean, then moving on from there to the Red Sea and Mediterranean Sea or to the Atlantic Ocean. These routes also coincide with the areas targeted by the Belt and Road Initiative (BRI), as well as the places where China is supplying submarine cables and other international public goods.
China’s interest in ports is due to its desire to enhance maritime connectivity. It is reckoned that China does not merely build ports and hand them over to other countries; it also intends to retain certain rights to manage and use them. Why is there such a strong need? This is related to the goals of the BRI.
First, construction of ports and obtaining their management rights lead precisely to maritime connectivity, which is the fundamental goal of the maritime silk road. When combined with overland connectivity, this also means logistic support and bases for economic activities.
Second, this is related to securing sea lanes. China imports most of its crude oil and natural gas from overseas. While it is less dependent on the Middle East than Japan, the Middle East is still the most important source of its oil and gas imports. It has also diversified its sources to Africa, Latin America, the CIS, Europe, Asia, and so forth. The bulk of these imports are transported to China via the Indian Ocean and the South China Sea. This sea lane is positively the lifeline of China’s social life, as well as its security. Furthermore, China is facing territorial disputes in the East and South China Seas and a network of U.S. allies, such as the Japan-U.S. alliance, in the West Pacific. This sea lane will be seriously compromised in the event of a contingency in the East and South China Seas.
For this reason, China provided aid for the construction of a deep-sea port at Kyaukpyu in Myanmar and laid oil and gas pipelines from Myanmar to Yunnan Province. It has also laid a natural gas pipeline from Russia. In addition, the laying of pipelines is also included in the problematic project to extend the economic corridor from Gwadar Port in Pakistan to the north. Once these pipelines are in place, China will be able to deal with contingencies in the East and South China Seas. However, this is a question limited not only to pipelines; China needs to maintain the viability of ports under all circumstances. The maintenance of ports is probably one reason China has been actively involved with the construction or joint construction of ports and securing their long-term management rights, as in the case of the Hambantota Port. It is believed that the military base China built in Djibouti is meant to play an important role in the security of the network connecting these ports.

2. Bagamoyo Port Construction Plan in Tanzania

Bagamoyo is located on the opposite side of Zanzibar, some 75 kilometers north of Tanzania’s largest city Dar es Salaam. This country already has ports in Tanga in the north, Dar es Salaam in the center, and Mtwara in the south. There had been hopes that these three ports would develop into international ports. However, the World Bank proposed the development of a new port in Bagamoyo in 2009, and Tanzania also conducted its feasibility study in 2010. In the end, China came to be responsible for executing this project.
Tanzania is "traditional friendship country" for China. Xi Jinping met with President Jakaya Kikwete during his visit to Tanzania in March 2013, and they agreed on a comprehensive partnership in bilateral relations. The two countries signed 16 different cooperation agreements and memoranda, among which the cooperation memorandum on the comprehensive development of the Bagamoyo Port became a high-profile major infrastructure project. The State General Reserve Fund (SGRF) of Oman, which has had strong relations with Bagamoyo historically, also participated in this project. This was a development program costing $10 billion, and the contract was won by China Merchants Holdings（International）Company Limited (CMHI) of Hong Kong. While this project also involved building roads connecting the Mbegani Special Economic Zone to the neighboring countries and other elements for developing Bagamoyo Port as the logistics hub of East Africa, the core component was port construction. China had hoped that Bagamoyo would turn into a key base port in the Indian Ocean, second in importance only to Gwadar in Pakistan. The groundbreaking ceremony took place in 2015[1].
The probable reason behind China Merchants Hong Kong under the state-owned China Merchants Group (CMG) going in for the Bagamoyo Port project was a regional division of labor arrangement with China COSCO Shipping Corporation Limited, another container port construction giant. While COSCO was involved with such port projects in Antwerp, Rotterdam, Vado, and elsewhere in Europe; the Suez Canal; the ports in Ambarli, Pireas, Singapore, and so forth, CMHI was undertaking port projects mainly in the western part of the Indian Ocean, including Colombo, Djibouti, and Hambantota, as well as ports in West Africa, such as Lagos and Lome[2].CMHI had once been involved with a port project on the Shenzhen West Port Area, where it succeeded in making this its launching pad to take on port projects in China’s coastal areas eventually, thus forming a port network. It had started to invest in overseas ports in the 2010s, even before Xi Jinping came to power[3].
CMG International’s port project in Shenzhen West Port Area also occasioned the start of its relationship with Tanzania. A delegation led by the Tanzanian minister of transport visited Shenzhen in late November 2011, before the start of the Xi Jinping regime, and the Tanzanians inspected CMHI’s West Port Area. A memorandum on cooperation with CMHI was signed on this visit. Later, in early 2012, CMHI Chairman Hu Jianhua visited Tanzania to do a field study. Based on this, an official agreement was reached on signing a contract when Xi made a visit in March 2013. Hu visited Dar es Salaam again on Jan. 10, 2014, where a contract was formally signed with the Tanzanian government[4].Actually, there had been suspicion from the very beginning that the port construction deal had military motives, since this also came before the construction of the military base in Djibouti. Naturally, this was denied by the Ministry of National Defense[5].In 2015, several groundbreaking ceremonies were held for this project, and the plan was to kick off the project during President Kikwete’s term of office and finish this within three years.

3. Failure of the Project

Kikwete’s successor, President John Magufuli, who was also from the Party of the Revolution of Tanzania (CCM), took office in November 2015. Yet the Bagamoyo port project had remained stagnant. It is said that this was because Magufuli prioritized the development of the Dar es Salaam Port over Bagamoyo, which happened to be former President Kikwete’s hometown. However, objectively speaking, the reason could also be that Bagamoyo is a mere 75 kilometers from Dar es Salaam, and it is also located far from the potential natural gas producing areas. This was also the basis of criticisms that not much thought had been given to the actual economic effects and that this was merely a case of a political leader bringing a project to his hometown.
Nevertheless, even as late as 2016, the then ongoing working-level discussions by China, Oman, and Tanzania still agreed that the project should be executed at an early date[6].In spring 2018, it was also reported that the Chinese side remained opposed to any changes in the plan and was poised to continue negotiations[7].The crucial issue here was probably ownership. The Tanzanian government was also supposed to contribute to the cost of the project, but it had been unable to come up with funds and was at risk of losing ownership[8].
At the Forum on China-Africa Cooperation (FOCAC) held in Beijing in September 2018, Xi Jinping announced 10 major cooperation initiatives, with China providing $60 billion in aid. Tanzania also participated in this conference and was a signatory to the FOCAC memoranda and documents. Relations with China had not deteriorated on account of the Bagamoyo issue. Yet Tanzania, China, and Oman failed to make any headway in their coordination efforts in 2019, and the Tanzanian government finally came to acknowledge the impasse[9].Even though a China-Tanzania foreign ministerial meeting was held on June 24, 2019 (minutes of the meeting indicate no discussion of Bagamoyo)[10], Magufuli announced his intention to terminate the project subsequently. While noting the importance of this project, he said: “This project has very difficult conditions. They are exploitative and awkward. We can’t allow it,” indicating that the conditions China set led to his decision. He also stated that port development would now be undertaken in Dar es Salaam, Mtwara, and other locations with aid from the World Bank[11].There were reports then that what was meant by the term “exploitative” was 99-year management rights, preferential tariffs, and numerous other conditions[12].Meanwhile, 2019 was also the year when China ended its previous practice of “splashing out” loans and began to set certain conditions while upholding such policies as “high quality infrastructure.”

4. Analysis of the Bagamoyo Project

This project showed China that even though a project might have been proposed by another country initially, this could still go wrong with a change of leader if it accommodated the wishes of the incumbent leader too much. Still, China must have been aware that such risks existed and that it was necessary to coordinate with the new president when the former president stepped down. It appears that there had been problems with the Chinese side’s coordination efforts, but this did not result in the removal of Ambassador Wang Ke, who started his tour in 2017.
In 2019, there was growing international criticism of China’s “debt trap.” China itself shifted away from its previous policy of unconditional loans and started to set various conditions in its own interest. It can be said that these were also contributing factors.
An interesting question is who takes responsibility when a project like this suffers a setback? Although this project indeed had Xi Jinping’s blessing, it all started with the Tanzanian government making the proposal to CMHI. It would seem that for this reason, CMG also took charge of cleaning up after the debacle. In the future, the players responsible for resolving the situation in the aftermath of a failed project like this will also need to be studied.
Lastly, the impact of this project’s failure on China’s BRI needs to be noted. With the debacle in Bagamoyo, which China had envisioned to serve as the logistics hub of East Africa, it will be forced to rethink its strategy to some extent. Most importantly, the African countries’ criticism of how it conducted the project and its policies did tremendous damage. It is necessary to continue to watch how China restructures its relations with the African states while adjusting and modifying its approach to foreign aid and investment under a new perspective from now on.

（Submitted on March 23, 2020）