Foreign Policy Blogs

Ethiopia’s Broadband Network – A Chinese Trojan Horse?

Two boys play with a mobile phone on 1 August 2008 in Debre Zeit, Ethiopia.

Ethiopia’s signing last month of a $800 million broadband network with Chinese telecoms giant ZTE has some pundits again focusing on Chinese economic espionage in Africa.  The agreement calls for the establishment of a 4G broadband network in the capital Addis Ababa and a 3G network throughout the rest of the country.  The project should go quite some way toward providing Ethiopians with cellphone connectivity, as estimates from the International Telecommunications Union show that less than one percent of Ethiopia’s 85 million people have access to the internet on mobile phones and about 23 percent of the population subscribe to mobile phones. The agreement with ZTE lays in place the final piece of a US$1.6 billion project split 50/50 with Huawei Technologies, the world’s second largest telecoms equipment maker.  Both ZTE and Huawei intend to provide low interest vendor financing to Ethiopia.

From the Ethiopian government’s perspective, the deal reached with ZTE and Huawei may look like a gift horse given its low interest financing, competitive pricing, fully managed systems and the project’s potential to provide low cost connectivity for the Ethiopian people. Yet the announcement comes on the heels of recent alarmist comments by U.S. officials, who believe China is developing a dangerous spy network in Africa.  Michael Hayden, a former director of the U.S. Central Intelligence Agency, in an interview with the Australian Financial Review in July, claimed China was engaged in unrestricted espionage against the West.  Hayden stated “At a minimum, Huawei would have shared with the Chinese state intimate and extensive knowledge of the foreign telecommunications systems it is involved with”. Former Department of Homeland Security secretary Michael Chertoff further elaborated on the dangers in July’s Foreign Policy magazine, stating, “There’s a great deal of concern about Huawei acting to advance the interests of the Chinese government in a strategic sense, which includes not only traditional espionage but as a vehicle for economic espionage.  If you build the network on which all the data flows, you’re in a perfect position to populate it with back doors or vulnerabilities that only you know about, you’re upgrading it, each time you upgrade the network or service it, that’s an opportunity”.

The accusations surrounding Huawei over cyber security escalated last November following the actions of intelligence agencies and security companies tracing web attacks back to China.  In the U.S., Huawei’s operations have largely been banned, with both Huawei and ZTE coming under investigation  on concerns surrounding the hacking of U.S. systems and theft of intellectual property. In 2008, Huawei and partner Bain Capital dropped their bid for computer-equipment maker 3Com Corporation following security concerns, and last year Huawei was forced to unwind the purchase of patents from a U.S. server firm, 3Leaf Systems, after failing to immediately disclose the deal and due to security concerns. In 2012, the U.S. Commerce Department, barred Huawei from participating in a nationwide emergency network, also citing security concerns.  Last year, Australia banned the company from bidding for work on its national broadband fiber network citing “national interests.”  And although Huawei has been providing networking equipment to British Telecom since 2005, the U.K. Cabinet Office announced in July its intention to review Huawei’s Cyber Security Evaluation Centre, known as the Banbury Cell, over a lack of clarity on links between Huawei and the Chinese government.

U.S. fears of espionage are partly based on intelligence reports that routing equipment supplied by Huawei to U.S. customers “acted oddly,” and the potential for routers to turn on in the middle of the night and send large packets of data to China, a process known as beaconing. Other worries concerning U.S. lawmakers surround the potential for Chinese hackers to disguise their attacks by rerouting them through the African continent. Furthermore, internal Huawei documents obtained by U.S. officials from a former Huawei employee show the company provides “special network services” to an entity the former employee believes is a cyber-warfare unit within the Chinese army.  In a report last year, U.S. counterintelligence officials called China the world’s biggest perpetrator of economic espionage, saying the theft of sensitive data is accelerating and endangering an estimated $398 billion in U.S. research spending.

Huawei spokesman William Plummer, who is based in Washington, has denied any accusations of espionage, regarding such concerns as “silliness,” and adding that westerners accusing Huawei of rampant spying “are looking into the ‘mirror’ of the U.S. PRISM and related programs and assuming like activity by other states.” The U.S. PRISM program is said to have the ability to monitor an individual’s activity on the web in unprecedented detail, both inside and outside the U.S.

With Huawei continuing to thrive throughout Africa on sales of a low-cost smart phone supported by low-cost ZTE telecoms infrastructure, African nations should be wary of the gift horse coming from China.  Of course, China is not the only nation capable of spying through telecoms networks – “lawful intercept” is common practice – but leaders should choose carefully when considering potential vendors.  One way in which African nations may be able to mitigate the risk of economic espionage is through independent audits of technology vendors’ hardware and software. Another way may be to hire independent management to put in place and operate sophisticated security assurance disciplines, including after-market service.   Through independent management and the use of outside auditors, African nations may be able to gain some confidence that their foreign-procured devices and networks are secure and will hopefully avoid receiving the gift of a potential Trojan horse.

 
  • Mike Matthews

    Very interesting, this has been happening for years now, but hasn’t the rest of the world including the US, French and English, and others been plundering Africa for centuries without providing any other types of recourses. I think the slave trade is far worse than building a few roads in exchange for resources which is predominately what the US is known for in Africa. That’s not to say the Chinese won’t dominate in the later part of the 21st century globally. Don’t forget china controls 90% of the rare earth minerals. No TV’s No cell phones!!! Still very interesting and relative.

    • Gary Sands

      yes, Chinese investment in the region can be beneficial by building the necessary infrastructure to get the oil and mineral resources out of the country. But some argue this is not enough in today’s world, that any foreign investment should go farther in hiring locals and supporting locally-owned businesses.

Author

Gary Sands
Gary Sands

Gary Sands is a Senior Analyst at Wikistrat, a crowdsourced consultancy, and a Director at Highway West Capital Advisors, a venture capital, project finance and political risk advisory. He has contributed a number of op-eds for Forbes, U.S. News and World Report, Newsweek, Washington Times, The Diplomat, The National Interest, International Policy Digest, Asia Times, EurasiaNet, Eurasia Review, Indo-Pacific Review, the South China Morning Post, and the Global Times. He was previously employed in lending and advisory roles at Shell Capital, ABB Structured Finance, and the U.S. Overseas Private Investment Corporation. He earned his Masters of Business Administration in International Business from the George Washington University in Washington, D.C. and a Bachelor of Science in Finance at the University of Connecticut in Storrs, Connecticut. He spent six years in Shanghai from 2006-2012, four years in Rio de Janeiro, and is currently based in Ho Chi Minh City, Vietnam. [email protected]

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