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Friday, April 28, 2006

China signs oil exploration deal in Kenya

NAIROBI (Reuters) - Kenya signed an agreement on Friday allowing China's largest offshore oil producer to prospect in the east African country.

The deal was one of a clutch of bilateral agreements signed at the end of President Hu Jintao's five-nation tour, which has cemented Beijing's economic and political clout, especially in Africa where it seeks raw materials to feed its roaring economy.

Neither Kenyan nor Chinese officials would immediately give details of the oil pact, which came two days after Beijing struck a $4 billion deal for drilling licences in Nigeria.

Kenya, which produces no oil but has foreign companies sniffing after possible reserves, said last year it planned to sign an agreement allowing China's state-controlled CNOOC Ltd to prospect in six on- and offshore blocks.

The other China-Kenya deals included grants for economic and technical cooperation, anti-malarial medicine and rice.

Hu's delegation also offered to maintain a Chinese-built sports stadium, help carry out a feasibility study into revamping Nairobi's potholed roads and patchy street-lighting, as well as providing exchange programmes for Kenyan students.

For its part, Kenya voiced support for Beijing's "One China" policy, becoming the latest nation to brush off Taiwanese diplomatic efforts in Africa.

"The Kenyan government expressed its opposition to 'Taiwan independence' in any form and expressed its support for China's efforts to realise national reunification," Foreign Minister Raphael Tuju said, reading a joint communique.


Hu's three-day trip to Kenya came after President Mwai Kibaki visited Beijing last year to sign a series of economic agreements including landing rights in several Chinese cities for national carrier Kenya Airways.

The cooperation is part of Kenya's strategy to seek investment and aid from the Far East, especially China which extends financial assistance without attaching demands for good governance unlike multilateral and Western donors.

Last year, China handed Kenya 2.6 billion shillings in aid, mainly to modernise its ailing state-run power company, agreed to boost Kenya's coffee trade, and set up a factory with the capacity to assemble 800 television sets a day.

China's offer of "no strings" aid may be welcomed in the east African country, under Western pressure to tackle rampant corruption. But critics say a flood of cheap Chinese imports is the price Kenyans pay for Beijing's "good will".

"We want the trade between us to grow. ... But we want to see more 'made in Kenya' available in China," Trade and Industry Minister Mukhisa Kituyi told reporters.

Talks between the two countries present Kenya with the delicate task of encouraging economic ties with a market of 1.3 billion potential consumers while protecting its trade.

Bilateral trade amounted to $475 million last year, according to Chinese officials. But the lion's share flowed east to pay for exports of everything from machinery to textiles.

China's exports to Kenya were worth $457 million in 2005, a 31 percent increase on the previous year, while imports from Kenya rose 4 percent to $17.6 million.

"We don't see ourselves competing with China mainly because of supply side constraints," said Martin Mutuku, researcher at the Kenya Association of Manufacturers (KAM). "If we allowed China to trade freely with us, it's obviously going to impact local manufacturers -- actually it will be a death knell."

Kenya was the final stop of Hu's tour that has taken him to the United States, Saudi Arabia, Morocco and Nigeria.

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