Washington has gained a major victory in its push to challenge Beijing's economic influence around the world as a US-backed consortium beat another financed by China in a closely watched telecommunications auction in Ethiopia.
According to The Wall Street Journal (WSJ), Ethiopia said on Saturday that it tapped a group of telecommunications companies led by the UK's Vodafone Group PLC to build a nationwide 5G-capable wireless network. The group had financial backing from a newly created US foreign aid agency for the multibillion-dollar project.The losing bidder was South Africa's MTN Group Ltd., whose proposal was financed partly by a Chinese investor.
The US agency, International Development Finance Corporation (DFC), offered low-interest loans to Vodafone on the condition that the money won't be used to buy telecom equipment from China's Huawei Technologies Co. and ZTE Corp as Washington considers both companies a spying threat.
The DFC was created in 2019 with the aim to offer alternatives to cheap Chinese financing for foreign infrastructure projects, reports WSJ.
The telecom license auction in Ethiopia took on wider geopolitical significance amid heightened competition between the US and China over key technological pursuits, from the rollout of 5G to chip manufacturing.
"The US and China are fighting a proxy war in Ethiopia for influence," said Zemedeneh Negatu, chairman of Fairfax Africa Fund LLC, a US-based investment firm.
The US is using new financial tools to win influence and ensure that strategic assets in foreign countries, while challenging Beijing's economic footprint overseas.The MTN Group of South Africa, which is a longtime customer of Huawei and ZTE, said it made its bid in partnership with China's Silk Road Fund, which has investments from a couple of Chinese banks.
"This marks the beginning of a new era in our country," the Ethiopian Communications Authority tweeted on Saturday after announcing the winning bidder.
The DFC on Friday said that it is also working closely with US government agencies to monitor the violent conflict in Tigray, which the US has called 'ethnic cleansing', adding that it will carefully consider the impact of any potential financing if the Vodafone consortium, reports WSJ.
The US loans would carry interest rates well below those of commercial banks if the financing goes ahead. The idea is to help the carrier buy equipment from non-Chinese suppliers, such as Ericsson AB, Nokia, or Samsung Electronics. Their equipment is often more expensive than Huawei or ZTE hardware, according to wireless executives and US officials.
Ethiopia is an important US strategic ally because of its location near the Red Sea. The US has tried to neutralise terrorist groups, including al-Qaeda and Islamic State in the region.