1 / 41

China & India: What’s in it for Africa?

China & India: What’s in it for Africa?. Javier Santiso Chief Development Economist & Deputy Director OECD Development Centre. OECD Breakfast Series Washington  22 May 2006. China & India: What’s in it for Africa?. An OECD Development Centre Study May 2006

ronan-hood
Download Presentation

China & India: What’s in it for Africa?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. China & India: What’s in it for Africa? Javier Santiso Chief Development Economist & Deputy Director OECD Development Centre OECD Breakfast Series Washington 22 May 2006

  2. China & India: What’s in it for Africa? An OECD Development Centre Study May 2006 by Andrea Goldstein, Nicolas Pinaud, Helmut Reisen and Xiaobao Chen Available at: OECD Development Centre Web: www.oecd.org/dev OECD online bookshop: http://www.oecdbookshop.org

  3. Introduction: Identifying Conduits. 1 The Asian Drivers’ Global Impacts & Africa. 2 The Asian Drivers as Markets for African Exports. 3 Foreign Direct Investment. Conclusions: Issues & Challenges.

  4. Identifying Conduits Super Cycle Raw Materials China / India Growth Africa's growth ? + Governance standards & debt sustainability issues Africa's terms of trade ? + + ? + ? Declining prices of manufacturing goods & increased competition by Asian producers on local & third markets FDI in SSA SSA exports redirection twds the Asian Drivers + + + + + + Direct demand Global interest rates -

  5. Identifying Conduits. 1 The Asian Drivers’ Global Impacts & Africa. 2 The Asian Drivers as Markets for African Exports. 3 Foreign Direct Investment. Conclusions: Issues & Challenges.

  6. Identifying Conduits China / India Growth Africa's growth + Africa's terms of trade + Super Cycle Raw Materials + + Direct demand Global interest rates -

  7. China’s & India’s Contribution to Global Growth Source: OECD Development Centre’s calculation based on IMF World Economic Outlook Database, September 2005 N.B: GDP based on purchasing-power-parity (PPP) valuation of country GDP.

  8. China’s & India’s Rising Energy and Steel Use Year-on-year growth rates, percent Sources: Authors’ own calculation based on World Development Indicators (2005), International Energy Agency Data Service, Steel Statistical Yearbook (2004), International Iron and Steel Institute.

  9. The Asian Bid: Lower Interest Rates Support Commodity Prices Composition of China and India’s Foreign Exchange Reserves (end 2005) Source: US Treasury, www.treas.gov/tic; central banks of China, India and Hong Kong (Hong Kong Monetary Authority), press releases.

  10. China’s & India’s Shares in World Imports of Selected Primary Commodities Source: UN Comtrade database

  11. Commodity Prices: Rising but Volatile Source: University of Oxford. Source: AfDB/OECD (2005), African Economic Outlook.

  12. China’s & India’s as “Swing Importers” of Commodities Relevant to Africa China India Source: UN Comtrade database

  13. Increasing African purchasing power of exports & improving terms of trade Source: UNCTAD Handbook of Statistics (2005)

  14. Identifying Conduits. 1 The Asian Drivers’ Global Impacts & Africa. 2 The Asian Drivers as Markets for African Exports. 3 Foreign Direct Investment. Conclusions: Issues & Challenges.

  15. Identifying conduits Super Cycle Raw Materials China / India Growth Africa's growth + Africa's terms of trade + + SSA exports redirection twds the Asian Drivers + + + Direct demand Global interest rates -

  16. Rising Africa’s Trade with China and India ... Source: IMF Direction of Trade Statistics

  17. ... Reorienting Trade Away from OECD Countries Destinations of African Exports in 1995 Source: IMF Direction of Trade (DOTS)

  18. ... Reorienting Trade Away from OECD Countries Destinations of African Exports in 2004 35.9% 9.3% 66.9% Source: IMF Direction of Trade (DOTS)

  19. ... While not Changing the African Export Mix China’s share: 25% China’s share: 81% 1 1 1 1 Ranks in X Share of China in Angola’s Exports: 23.2% (2003) Share of China in Sudan’s Exports: 41% (2003) Source: OECD Development Centre calculations based on ITC Trademap (UNCTAD)

  20. ... While not Changing the African Export Mix China’s share: 17.5% 1 1 2 2 3 3 Share of China in Cameroon’s Exports: 4.4% (2003) Source: OECD Development Centre calculations based on ITC Trademap (UNCTAD)

  21. ... While not Changing the African Export Mix China’s share: 13.2% 1 1 1 2 2 7 28 9 Share of China in Ghana’s Exports: 1.6% (2003) Share of China in Kenya’s Exports: 0.3% (2003) Source: OECD Development Centre calculations based on ITC Trademap (UNCTAD)

  22. China’s Industry and Africa’s Exports Source: UN Comtrade, World Bank Commodity Price Data (Pink Sheet) and World Development Indicators

  23. Identifying Conduits. 1 The Asian Drivers’ Global Impacts & Africa. 2 The Asian Drivers as Markets for African Exports. 3 Foreign Direct Investment. Conclusions: Issues & Challenges.

  24. Identifying conduits Super Cycle Raw Materials China / India Growth Africa's growth + Africa's terms of trade + + + FDI in SSA SSA exports redirection twds the Asian Drivers + + + + + + Direct demand Global interest rates -

  25. Foreign Direct Investment • Low degree of direct competition for projects • Textiles an exception (but note MFA, AGOA, EBA) • Low degree of production complementarities (different from Asia, more similar to Latin America) • No inflows of FDI to Africa driven by production networks • Asian FDI to Africa • Oil mostly, but not only

  26. Foreign Direct InvestmentChinese and Indian FDI in Africa Period 1995-2004: China’s OFDI : USD11.2bn / China’s FDI in Africa: USD1.1bn India’s OFDI : USD14.3bn / India’s FDI in Africa: USD2.3bn Source: UNCTAD, Ministry of Commerce of India and China

  27. Chinese and Indian FDI in Africa: the Case of Natural Resources • Sudan • CNPC owns 40% of the Greater Nile Petroleum Operating Company. • ONGC is building a 720km pipeline to the Red Sea, as well as a stadium. • Nigeria • CNOOC acquired a 45% working interest in an offshore oil mining licence “OML 130” for US$2.268b cash; CNPC invested in the Port Harcourt refinery; PetroChina is interested in the Kaduna refinery. • ONGC Mittal Energy Ltd (OMEL), the joint venture between Oil and Natural Gas Corporation and L. N. Mittal Group, will invest US$6b in railways, oil refining and power in exchange for oil drilling rights. • Gabon • Sinopec and Unipec’s joint venture with Total. PanOcean exploits the Tsiengui on-shore basin and is associated with Shell to explore Awokou-1 • An Indian consortium signed an exploration and production sharing contract in November 2005.

  28. Chinese and Indian FDI in Africa: the Case of Telecommunications • ZTE, a Chinese vendor, runs a joint venture mobile operation in the Republic of Congo with the local operator and bought a 51 percent stake in Niger Telecommunications when the company was privatized. • Distacom of Hong Kong became the strategic investor in Telecom Malagasy (Telma) in Madagascar, paying $12.6 million for a 68 percent stake and committing $165 million in additional investments over five years. • In August 2005 Mahanagar Telephone Nigam (in which the Govt. of India currently holds a 56.25% stake) launched a wholly owned subsidiary in Mauritius, the first competitor to the state-owned incumbent

  29. Identifying Conduits. 1 The Asian Drivers’ Global Impacts & Africa. 2 The Asian Drivers as Markets for African Exports. 3 Foreign Direct Investment. Conclusions: Issues & Challenges.

  30. Issues & ChallengesAfrica: Stuck in the Raw Material Corner? China / India Growth Super Cycle Raw Materials • Competition on third and local markets Africa's growth + Africa's terms of trade ? + + + Declining prices of manufacturing goods & increased competition by Asian producers on local & third markets FDI in SSA SSA exports redirection twds the Asian Drivers + + + + + + Direct demand Global interest rates -

  31. Issues & ChallengesAfrica: Stuck in the Raw Material Corner? Real Effective Exchange Rates (2000 = 100) • Dutch Disease? Source: IMF, Regional Economic Outlook: Sub-Saharan Africa, Supplement, September 2005

  32. Issues & ChallengesAfrica: Stuck in the Raw Material Corner? Leamer Triangle and Resource Boom Source: Leamer et al. (1999)

  33. Issues & ChallengesAfrica: Stuck in the Raw Material Corner? • Less & more diversified African countries: 1996 - 2003 Herfindahl-Hirschman-Index Less diversified More diversified Sources: African Economic Outlook 2005/2006

  34. Issues & Challenges “Softer” Economic Ties with China & India Africa's growth ? + Governance standards & debt sustainability issues Africa's terms of trade ? + + ? + ? Declining prices of manufacturing goods & increased competition by Asian producers on local & third markets FDI in SSA SSA exports redirection twds the Asian Drivers + + + + + + Direct demand Global interest rates - China / India Growth Super Cycle Raw Materials

  35. Issues & Challenges “Softer” Economic Ties with China & India • China & India as “emerging” non-DAC donors • Diminished IFIs leverage? • Less transparency in public finance? • HIPC achievements at risk? • Improvements in Aid efficiency in jeopardy? • Chinese Corporations and Governance • Standards & Codes in extractive industries • Procurement • Corporate Social Responsibility

  36. Issues & Challenges China, India & Africa: Governance Issues Trade Ties with China and India and Corruption in Africa Source: Authors’ own computations based on Transparency International (2004) and OECD (2005), African Economic Outlook

  37. Issues & Challenegs Policy Implications • Reorient development strategies • Avoid competition in labor-intensive manufactures (e.g clothing) • Support diversification into sectors that are complementary to Asian growth (e.g. soft commodities and FFV) • Maximize the potential benefits of PTAs and geographical proximity • The raw material boom calls for a policy mix that • Restrains public consumption • Leans against nominal appreciation (including through at least partial foreign investments of the surplus). • Donor policies • Caution in emphasis on governance • Less bureaucracy and more practical action • Capacity-building in rural and agricultural areas • Despite PSD, government-to-government linkages remain crucial

  38. Thank you. An OECD Development Centre Study May 2006 by Andrea Goldstein, Nicolas Pinaud, Helmut Reisen and Xiaobao Chen Available at: OECD Development Centre Web: www.oecd.org/dev OECD online bookshop: http://www.oecdbookshop.org

  39. Annex 1: China & India as “Swing Importers”: the Case of Cotton China, India and the international cotton market Source: Authors’ estimates based on Cotton Outlook (August 2005)

  40. Annex 2: High terms of trade variability Source: Authors’ own computations based on UNCTAD Handbook of statistics (2005)

  41. Annex 3: China Greatly Contributes to Demand Growth for African Commodities Source: Authors’ own calculations based on ITC Trademap (UNCTAD)

More Related