'The goal is ... to light up a dream'

Chinese aviation giant uses part of its profit for educational, health and other needs

Liu Jun doesn't look like a man who is in the middle of a whirlwind international business trip on which he has visited six countries in a matter of weeks.

Sitting in the backroom of a conference center in Libreville, Gabon, where global business and political heavyweights mingle with their entourages in tow, the executive vice-president of AVIC International Holding Corporation of China is sharply dressed and keenly focused.

The event that has drawn Liu to Gabon's capital is the New York Forum-Africa, designed to facilitate discussion around growth strategies for the continent. Many attendees are still talking about the coup Liu's company pulled off at last year's conference when it signed an agreement with the national government to establish three trade schools in Gabon to provide about 4,000 locals a year with qualifications to operate manufacturing, construction and agricultural machinery.

With construction work expected to begin on the first school before the end of the year, Liu explains that addressing Gabon's skilled labor shortage goes beyond charity.

The schools are a sound investment, he says, both economically and in terms of social responsibility. Liu says lifting Africa's educational, health and basic infrastructure will become the foundation for solid nation building on the continent, and a rising Africa represents good business opportunities for China.

This mutually beneficial relationship is something that AVIC International officials say they are working hard to build. Liu says help, not handouts, is the way of the future, and the key for Africa and its trading partners to open up the continent's full potential.

"It is a business. We believe we use the power of commerce to help people."

Company officials say their interest in Africa is not a fly-by-night thing. The Chinese state-owned aviation giant, a subsidiary of Aviation Industry Corporation of China, has offices in 12 African countries, and Liu, who first came to Africa about 20 years ago, says the company plans to expand its presence to 20 African countries by 2020.

The plans for AVIC International's growth that Liu lays out could be mistaken for a series of goodwill projects. But it is not, he says, because any international company looking to establish itself on the continent over the long term is challenged by many of the wider systemic problems facing Africa.

Corporate social responsibility aside, Liu says it also makes sense from a business perspective for the company to do its bit to help tackle some of these issues.

"In Africa, there is a lot of unemployment, but Africa also needs a lot more skilled workers. It's a contradiction," he says.

"To build up a country, you need a lot skilled workers," Liu adds. The same goes for building up a company's operations in a new market, he says.

AVIC International's foray into Gabon is largely modeled on a successful blueprint of a similar push into Kenya in 2009.

There, an average of 5,000 students graduate from the country's skills training programs a year. The company is now in discussions with the Kenyan government to expand the initiative to cater for as many as 20,000 students a year.

"The government of Kenya wants to make the program 10 times bigger," Liu says. "One-hundred percent of our graduates are employed, and the students that graduate get a high salary compared with other African workers. Our graduates in Kenya have already undertaken many projects that have helped build up the country."

Liu says his company makes a small profit out of the training programs.

"Without the power of commerce, donations just don't go very far," he says.

"We want to earn commercial profits in Africa, but we want to use (part of) those profits to help build up the continent. The goal is not just profit; it's to light up a dream."

And the benefits run both ways. Liu says the fact African students learn on Chinese machinery, which in turn is expected to boost the sale of Chinese-made equipment, is not a hidden catch. He maintains this will only lead to further mutual benefits because the company will consider setting up spare-parts manufacturing hubs for Chinese equipment in Africa if the demand is there. He says this would mean more local jobs.

"We have construction machinery here in Africa," he says. "We could create a subcontractor here to make spare parts for our machinery, locally."

The setup costs of the trade schools in Africa are financed through a low-interest Chinese loan. The company handles any construction needs, provides teachers and oversees the education program. It's a model that has been praised by senior Chinese and African officials.

"AVIC International is the bridge that has made these schools possible," Liu says. "We supply the equipment, the design, the school and the teachers. The money comes from China, and the local government pays us back."

Liu says the company is already in Kenya, Gabon, Ghana and Zambia. "Our plan for the future is to set up other vocational training facilities in Africa."

The company's core business remains aviation. Three of its MA60 turboprop aircraft have been bought by Air Zimbabwe. Kenya is the biggest customer of the seven African countries to buy the company's Y12 light general-purpose planes. Other countries on the continent, including Mali, Sudan and Tanzania, now use the company's helicopters or transport aircraft.

But in recent years, the company has also branched out into a range of other sectors including engineering, infrastructure development, real estate development and financial services.

In Zambia, the government has contracted AVIC International to turn 480 rough urban streets into 408 km of blacktop road. The project, worth $350 million, was secured with 85 percent financing by a Chinese commercial bank loan. The company has about 70 Chinese engineers in Zambia and employs around 350 locals but is looking to expand the number of local employees to 500.

In addition to providing infrastructure, the company is also addressing one of the other fundamental problems in Zambia that Liu sees as being critical to nation - building access to healthcare.

In the remote reaches of Zambia, nine Chinese medical teams in specially outfitted vans make circuits of the towns and villages. In the past two years, they have performed 21,000 operations and treated one in six Zambians.

The $60 million to finance this project was loaned to Zambia by the Chinese government at low interest. The deal was put together by the company, which continues to cover the ongoing operating costs.

Xu Fei, the vice-president of AVIC International Project Engineering Company's Zambia branches, says the project is making a big difference to the lives of many.

"Some of these people have never had medical treatment or seen a doctor before," Xu says.

As with the trade schools, the company is making a modest profit out of the venture.

"The Zambian government had a problem," Xu says. "We pitched this solution and put together the package. We did make a little bit of profit. It's not a complete charity."

Liu says the company's model is about sustainability, and reinvesting in Africa.

"For each contract, we can make an 11-12 percent profit," he says. "But if we use 2-3 percent and reinvest here, we can use the power of commerce to make things better.

"It all starts with investment in people."

Contact the writers through josephcatanzaro@chinadaily.com.cn.

(China Daily Africa Weekly 08/01/2014 page23)