China, India breaking new economic ground in Africa - WB

Updated: 2006-09-17 14:19
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SINGAPORE -- A massive increase in African trade and investment by China and India holds great potential for economic growth and job creation in Africa, if significant asymmetries within the regions' relationships are resolved, said a latest study released by the World Bank Sunday.

The study entitled "Africa's Silk Road: China and India's New Economic Frontier" recommends an array of trade and investment reforms within and between the two regions to deepen the growing South-South ties and address imbalances that could prevent African economies to benefit from the increasingly important roles China and India play in the global economy.

Based on new evidence on the operations of Chinese and Indian businesses in Africa, the study finds Asia now receives 27 percent of Africa's exports, tripling the amount in 1990 and almost on par with Africa's exports to the United States and the European Union, Africa's traditional trading partners.

Meanwhile, Asian exports to Africa are growing 18 percent per year, faster than to any other regions in the world. China and India's foreign direct investments in Africa are more modest than trade flows, but they are also growing very rapidly, according to the study.

"This new 'Silk Road' potentially presents to Sub-Saharan Africa, home to 300 million of the globe's poorest people and the world's most formidable development challenge, a significant, and to date, rare, opportunity to hasten its international integration and growth," said Harry G. Broadman, World Bank Africa Region Economic Advisor and author of the study.

This new economic frontier extends beyond trade and investment in natural resources, according to the new data presented in the study.

China and India's commerce with Africa is opening the way for the Sub-Saharan continent to become a processor of commodities and a competitive supplier of labor-intensive goods and services to Chinese and Indian firms and consumers.

Moreover, more and more Chinese and Indian businesses active in Africa are operating on a global scale, working with world class- technologies, producing products and services according to the most demanding standards, and fostering the integration of African businesses into advanced markets.

Still, there is a major unevenness in the emerging commercial relationships between the two continents, said the study. African exports to Asia constitute only 1.6 percent of what Asians buy from the rest of the world, and China and India's African purchases total only 13 percent of Africa's total exports.

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