Africa's Silk Road

“Patterns of world trade are changing. Since 2000, there has been a massive increase in trade and investment flows between Africa and Asia. Asia’s exports to Africa are also increasing very rapidly - about 18% a year - which is higher than any region,” said Mr. Rachid Benmasoud, Acting Country Director, India, World Bank today, on the occasion of a talk by World Bank Economic Advisor, Africa Region, Mr. Harry G Broadman, on his recently published book Africa’s Silk Road: China and India’s New Economic Frontier.

The event was jointly organized by FICCI and the World Bank, a FICCI press release reports.

Mr. Rajan Kohli, Deputy Secretary General, FICCI opened the talk by bringing to focus FICCI’s long and fruitful association with the World Bank. Mr. Rachid Benmasoud set the tone of Mr. Broadman’s presentation by remarking that Asian FDI in Africa was growing at a tremendous rate.

Although its concentration in the natural resource extractive industries such as oil and mining has been grabbing media headlines, it is not so well known that China and India are diversifying into a broad spectrum of sectors ranging from apparel to fisheries and tourism to telecommunications.

Mr. Broadman who has served as World Bank’s Lead Economist for Eastern Europe, the former Soviet Union, and China on state-owned enterprise reform, WTO accession, competition policy and corporate governance reform, has also been Chief of Staff and Senior Economist on the President’s Council of Economic Advisors, The White House.

He began his address by stating that he had felt there was lack of serious research on Africa, especially on India’s and China’s trade relations with it. He surveyed 450 firms in African countries owned by or affiliated to Indian and Chinese ownerships and undertook 16 case studies of similar companies and then married the quantitative part of his surveys with the qualitative inputs of what the CEOs of these firms had told him.

In his book, he discusses how China’s and India’s new-found interest in Africa is like a second opportunity for the continent, the first one had been provided by the US and EU. Currently, EU’s share of African exports has decreased by 50%, an issue which needs to be addressed, according to Broadman.

He mentioned that in his book he has shown how India has had a long history of FDI in Africa, especially East Africa which has a significant Indian expatriate community. China and India have played major roles in modernising African industries helping the burgeoning middle classes with rising incomes.

He examines in his book the recent evolution pattern of trade between Asia (China and India, especially) and African countries; factors which are likely to condition these trade flows and the subsequent impacts on African economy and also what actions can be taken in the policy regime to help these impacts enhance Africa’s economic prospects. It is interesting how certain African countries attract more FDI from China and India than others and this is analysed in the book.

It also looks at the African customs regime and its frictions along with the interaction between trade and investment flows. Broadman said he did not deliberately focus on oil-centric countries, taking specifically Ghana, Tanzania, South Africa and Senegal into discussion. He said though Africa exported 27% of its global exports to Asia, for Asia, African exports represented less than 2% of its global numbers.

These were among certain imbalances which the book tries to resolve through a series of reforms in all African 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 exports uncompetitive; “behind the border” reforms in Africa to unleash competitive market forces and strengthen its basic market institutions; “between the border” improvements in trade facilitation mechanisms to decrease transaction costs; reforms that leverage linkages between investment and trade to allow African businesses participate in global production networks that investments by Chinese and Indian firms can generate.