Africa's Silk Road: China and India's New Frontier

[Kala]

http://web.worldbank.org/WBSITE/EXTE...258644,00.html
Africa's Silk Road: China and India's New Economic
Frontier
by Harry G. Broadman

Recently accelerating Asian trade and investment in
Africa hold great promise for Africa’s economic growth
and development—provided certain policy reforms on
both continents are implemented. This is a central
finding of a new book, Africa’s Silk Road: China and
India’ New Economic Frontier .
The author of the book, World Bank Economic Adviser
Harry Broadman, says that skyrocketing Asian trade and
investment in Africa is part of a global trend towards
rapidly growing South-South commerce among developing
countries.

Africa’s Silk Road provides, for the first time,
systematic empirical evidence on how the two emerging
economic giants of Asia— China and India—now stand at
the crossroads of the explosion of African-Asian trade
and investment.

Broadman surveyed 450 firms, including Chinese and
Indian companies, operating in four African
countries—South Africa, Tanzania, Ghana, and
Senegal—and developed in-depth business case studies
in the field of additional 16 Chinese and Indian firms
in Africa. Africa's Silk Road offers original
firm-level data on the African continent of Chinese
and Indian firms operating there.

Growing demand and greater investment

The book shows that exports from Africa to Asia
tripled in the last five years, making Asia Africa's
third largest trading partner (27 percent) after the
European Union (32 percent) and the United States (29
percent).

Indian and Chinese foreign direct investment in Africa
also grew, with China's amounting to $US1.18 billion
by mid-2006.

China and India each have rapidly modernizing
industries and burgeoning middle classes with rising
incomes and purchasing power. These societies are
demanding not only natural resource-extractive
commodities, agricultural goods such as cotton, and
other traditional African exports, but also
diversified, nontraditional exports such as processed
commodities, light manufactured products, household
consumer goods, food, and tourism.

Because of its labor-intensive capacity, Africa has
the potential to export these nontraditional goods and
services competitively to the average Chinese and
Indian consumer and firm.

"To be sure, if you take a snapshot of today, the
overwhelming bulk of Africa's exports to Asia is
natural resources," says Broadman. "But what's new is
there is far more than oil that is being invested
in—and this is an important opportunity for Africa's
growth and reduction of poverty because Africa's trade
for many years has been concentrated in primary
commodities and natural resources."

Roadblocks along the way: asymmetries and the need for
policy reforms

While growing Asian trade and investment is cause for
optimism, the book cautions that there are major
asymmetries in the economic relations between the two
regions. While Asia accounts for one-quarter of
Africa’s global exports, this trade represents only
about 1.6 percent of the exports shipped to Asia from
all sources worldwide. By the same token, FDI in Asia
by African firms is extremely small, both in absolute
and relative terms.

And, the rise of internationally competitive Chinese
and Indian businesses cuts into both domestic sales
and exports of African producers of, for example,
textiles and apparels.

“It is imperative that both sides of this promising
South-South economic relationship address asymmetries
and obstacles to its continued expansion through
reforms,” says Broadman.

The study details a series of reforms that should be
undertaken by all the countries:

“At-the-border” reforms, such as elimination of China
and India’s escalating tariffs on Africa’s leading
exports; and elimination of Africa’s tariffs on
certain inputs that make its own exports
uncompetitive.
“Behind-the-border” reforms in Africa, to unleash
competitive market forces, strengthen its basic market
institutions, and improve governance.
“Between-the- border” improvements in trade
facilitation infrastructure and institutions to
decrease transactions costs, such as customs
administration, transport and communications.
Reforms that leverage linkages between investment and
trade to allow African businesses’ participation in
modern global production-sharing networks generated by
Chinese and Indian investments in Africa.
With this newest phase in the evolution of world trade
and investment flows taking root—the increasing
emergence of South-South international
commerce—African businesses cannot afford to be left
behind. Those reforms are critically important to
allow Africa to be able to genuinely participate—and
most importantly, benefit from—the new patters of
international commerce.

[Olùkọ́ Ọbádélé]

O «é fún ìròyìn yìí o. Àwa ènìyàn dúdú ní láti «ôra nítorí tí gbogbo àwæn gúnnugún tí wôn retí àtij÷ nínú òkú Ilë Adúláwö.

Thanks for this news. We Afrikans must be careful of these vultures who are hoping to eat off the body of Afrika.

Obadele Kwame