WORLD BANK GROUP AFRICA REGION, PRIVATE SECTOR UNIT 33666 v 2 Patterns of Africa-Asia Trade and Investment Potential for Ownership and Partnership October 2004 Asia-Africa Trade and Investment Conference (AATIC) Tokyo ­ November 1 & 2, 2004 The World Bank Group The World Bank Study on Africa-Asia Trade and Investment Relations Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership October 2004 Contents Acknowledgments ......................................................................................... vii Acronyms and Abbreviations........................................................................ix Executive Summary .......................................................................................xi 1. Introduction ..............................................................................................1 2. Why Trade? ............................................................................................... 3 3. Structure and Patterns of Africa's Current Trade ............................... 5 3.1 Key Features in Africa's Export Structure ............................................................ 5 Africa's export matrix ............................................................................................................ 5 Detailed analysis of Africa's major exports .................................................................... 10 3.2 Subregional Features of Africa's Exports ............................................................ 14 Product groups ...................................................................................................................... 16 Destined markets ................................................................................................................. 17 3.3 Key Features of Africa's Import Structure.......................................................... 19 Less concentration and wider distribution among countries ...................................... 19 Products to support a modern life-style and minimal business connectivity: transportation and communication.................................................................................. 20 Emerging supply chains in the automobile and textile sectors ................................. 23 Large food imports ............................................................................................................... 23 4. Structure and Patterns of Africa's Trade with Asia ...........................25 4.1 Basic Characteristics of Africa's Exports to Asia .............................................. 25 Heavy dependency on primary commodities ................................................................ 25 Heavy dependency on and high growth of a few oil exporters................................. 26 Small but growing non-oil exporters ................................................................................ 26 Does the picture change without oil and major exporters? ....................................... 26 Africa outpaces other regions in growth of exports to Asia........................................ 28 4.2 Top 20 Exports to Asia .......................................................................................... 29 4.3 Major Asian Trade Partners for Africa's Exports ............................................... 31 4.4 Trade Complementarity between Africa and Asia ............................................ 31 Oil matches ............................................................................................................................ 34 Gold-diamond matches ....................................................................................................... 34 Seafood matches .................................................................................................................. 35 Cotton-textile matches ........................................................................................................ 35 5. External Trade Regimes and Africa's Trade Patterns........................37 5.1 Africa'sTrade Regimes ............................................................................................ 37 5.2 EBA and AGOA........................................................................................................ 37 5.3 Apparel under AGOA ............................................................................................. 39 5.4 Deeper Economic Integration and Africa's Proactive Efforts ......................... 42 5.5 Market Access and Tariff Escalation in Asian Countries .................................. 43 iii iv Contents 6. Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy....................................................................................................45 6.1 Overall Export Expansion ..................................................................................... 45 6.2 Market Diversification: Complementarity of Africa's Supply and Asia's Demand ..................................................................................................................... 45 Supplying raw materials and energy resources to manufacturing sectors in Asia ...................................................................................................................................... 46 Supplying food and other consumption goods to Asia's rising consumer populations............................................................................................................................. 48 6.3 Product Diversification in Manufacturing Sectors ............................................ 49 7. Integration of Trade and Investment Relations between Africa and Asia ...........................................................................................................55 7.1 A Framework for Discussion:Three Investment Models................................ 55 Type 1 ­ Asian market ........................................................................................................ 55 Type 2 ­ African market ..................................................................................................... 56 Type 3 ­ Global market ...................................................................................................... 57 7.2 Recent Patterns of Asia's Investment in Africa and Trade and Investment Inter-Linkages ........................................................................................................... 57 Overall characteristics ......................................................................................................... 58 Asian FDI to Africa by investment type ........................................................................... 59 Japan ....................................................................................................................................... 60 Korea ....................................................................................................................................... 61 China ....................................................................................................................................... 62 Taiwan ..................................................................................................................................... 63 7.3 Investment Strategy of Asian Firms in Africa ..................................................... 64 Strong market orientation:targeted market and market linkages ............................ 64 Local availability of production resources ....................................................................... 67 Local business conditions .................................................................................................... 68 Investment facilitation mechanism ................................................................................... 69 7.4 Effective Development Assistance for Asian Investment in Africa................. 69 Donors' support of technology transfer ........................................................................... 71 South-South technology transfer between Asia and Africa ......................................... 71 Roles of international organizations................................................................................. 73 Further integration of ODA with trade and investment .............................................. 73 Recent development:The Integrated Framework forTrade-RelatedTechnical Assistance ............................................................................................................................... 74 8. Key Findings, Future Directions, and Next Steps ...............................77 8.1 Summary of Africa's Export/Import Structure .................................................. 77 8.2 Summary of Key Findings ....................................................................................... 77 Finding 1 ................................................................................................................................. 77 Finding 2 ................................................................................................................................. 78 Finding 3 ................................................................................................................................. 78 Finding 4 ................................................................................................................................. 78 Finding 6 ................................................................................................................................. 79 Finding 7 ................................................................................................................................. 79 Finding 8 ................................................................................................................................. 79 8.3 Future Directions for Africa-AsiaTrade and Investment................................. 80 Direction 1 ............................................................................................................................. 80 Direction 2 ............................................................................................................................. 80 Direction 3 ............................................................................................................................. 81 8.4 Next Steps ................................................................................................................ 81 Asian market group.............................................................................................................. 81 Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership v Global market group ............................................................................................................ 82 African market group .......................................................................................................... 84 References ......................................................................................................87 Appendices .....................................................................................................89 A. Africa's Subregions andTrade Partners............................................................... 91 B. Africa'sTop 20 Exports to the World ................................................................. 93 C. Africa's Top 20 Imports from the World ............................................................ 95 D. Trade Complementarity Score ............................................................................. 97 E. International Trade Regimes for African Countries.......................................... 99 F. African Countries' Exports to and Trade Arrangements with the European Union .....................................................................................................101 G. Growth in African Apparel Exports to the United States, by Countries' AGOA Status ..........................................................................................................103 H. Africa's Top 20 Exports to Asia ...........................................................................105 I. Africa'sTop 20 Imports from Asia ......................................................................107 Acknowledgments This report highlights the main findings of a World Francois Nankobogo, as well as the input of various Bank study on Africa-Asia trade and investment rela- other World Bank staff members, notably Alan Harold tions. The study was conducted to facilitate policy Gelb, Jeffrey Katz, Brian Ngo, Claire Thirriot, Ken- dialogue on trade and investment under the frame- neth Kwaku, and Francis Ng, and economists of the work of the Tokyo International Conference on Af- countries covered by the report. The report incorpo- rica Development (TICAD), in which the Bank par- rates analytical work conducted by Mitsubishi Re- ticipates as a co-organizer. In particular, the report is search Institute and the joint team of PADECO and expected to contribute to discussions of the Asia-Af- UFJ Institute under the study projects on Africa-Asia rica Trade and Investment Conference to be held in trade and investment relations funded by the Japan November 2004 under TICAD auspices. Consultant Trust Fund. The authors also wish to thank Nita Congress for her quality work in editing and lay- The report was prepared by Toshihiro Toyoshima ing out this report. (task team leader), Yutaka Yoshino (co-author), and Chad Leechor (chapter 5), who are the core mem- bers of the study team. The report's preparation has significantly benefited from the insightful guidance of The findings, interpretations, and conclusions expressed herein John Page, who chaired the review meeting of the are those of the authors and do not necessarily reflect the views of report, as well as valuable comments from four peer the Board of Executive Directors of the World Bank or the reviewers--Lolette Kritzinger-van Niekerk, Elke governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, Kreuzwieser, Tesfaye Dinka, and Paul Brenton. The colors, denominations, and other information shown on any map team also appreciates the helpful input of other staff in this work do not imply any judgment on the part of the World in the World Bank Africa Region's private sector unit, Bank concerning the legal status of any territory or the endorsement in particular Michel Wormser, Demba Ba, and or acceptance of such boundaries. vii Acronyms and Abbreviations AGOA African Growth and Opportunity Act ASEAN Association of Southeast Asian Nations CIF cost, insurance and freight COMESA Common Market for Eastern and Southern Africa DTIS diagnostic trade integration study EBA Everything But Arms EU European Union FDI foreign direct investment FOB free on board FTA free trade agreement GATT General Agreement on Tariffs and Trade GDP gross domestic product GSP Generalized System of Preference IF Integrated Framework IMF International Monetary Fund LDC least developed country MASSCORP Malaysian South-South Corporation Berhad MFA Multifiber Arrangement MFN most favored nation NAFTA North American Free Trade Agreement NEPAD New Partnership for Africa's Development ODA official development assistance OECD Organisation for Economic Cooperation and Development RCA revealed comparative advantage RTA regional trade agreement SACU Southern African Customs Union SADC Southern African Development Community SITC Standard International Trade Classification SKD semi-knocked down TICAD Tokyo International Conference on African Development UN Comtrade United Nations Commodity Trade Statistics Database USAID U.S. Agency for International Development WITS World Integrated Trade Solution WTO World Trade Organization ix Executive Summary African countries are highly dependent on the Euro- Against this backdrop, Asia has emerged as an im- pean Union (EU), which is presently the destination portant partner in Africa's trade and development. for more than half of all African exports (52 per- Africa's exports to Asia grew significantly in both rela- cent). In contrast, exports to Asia are a small but in- tive and absolute terms during the 1990s. Of Africa's creasing market for Africa in recent years. World- total export earnings, which are estimated at about wide, Africa's exports are predominantly primary US$130 billion per year (1999­2001 average), 16 commodities; these account for more than two-thirds percent derive from sales to Asia. The rate of in- of all African exports. Chief among these is crude crease in export values to Asia--10 percent per oil, Africa's single largest exported product. Many year--has been higher than the comparable rates for African countries export other mineral and mining the EU or United States during the past decade. Over products, as well as agricultural and fishery products. the same period, Asia's developing economies have Recently, some African countries have become more increased their imports from African countries sig- prominent as exporters of manufactured products, nificantly. In fact, Asia's imports from Africa outpaced most notably of textiles and apparel. Africa's South- its imports from other regions. Countries such as In- ern and Northern subregions have growing industrial dia, China, and Taiwan have significantly increased sectors, whose products range well beyond textiles the overall volume of their African imports. and apparel. South Africa, in particular, has emerged as an important regional industrial hub, with increas- Africa's exports to Asia are mainly driven by primary ing exports of automobiles to the rest of the world. commodities and related products. As with Africa's EU and U.S. exports, oil and oil-related products ac- Compared to its exports profile, Africa's import trad- count for a large share of the continent's exports to ing partners are more diverse, encompassing coun- Asia. However, other primary commodities such as tries around the world. Products that support the fun- agricultural and fishery products and minerals and damental economic activities of African countries, crude materials are also and increasingly being ex- such as transportation and communications equip- ported to Asia. African exports to Asia of mineral ment, are among the continent's major imports. Food fuels and other raw materials such as mineral and products are another significant import. On the other mining products have experienced strong growth hand, those African countries with growing manu- because of rising manufacturing sectors in Asia, par- facturing sectors increasingly import component prod- ticularly in China, India, Korea, Taiwan, and South- ucts. African import data show that the increasingly east Asian countries such as Indonesia, Malaysia, the industrialized countries in Africa have emerged as part Philippines, Singapore, and Thailand. Although only of the global supply chains in their respective sec- a limited number of African countries are endowed tors. with mineral and mining resources, a wide range of xi xii Executive Summary non-oil-producing countries also benefit from other recently shown strong growth in its manufacturing types of raw materials and processed raw materials, exports to Asian countries. Although only a few Afri- such as cotton, wood, and leather, as well as food can countries export manufacturing goods to Asia, a and agricultural commodities, for expanding their wider range of countries have benefited from manu- export potentials. The growth in African exports of facturing-related imports from Asia. Asian countries food and agricultural commodities to Asia can be are providing essential inputs to Africa's growing explained by the large populations with growing in- manufacturing sector, most notably its textile and come levels in Asian countries. Nonessential foods apparel sectors, and, in some cases, its automobile such as coffee, cocoa, tea, and nuts are experiencing sector. There is a positive relationship between stronger demand in Asia than in the already satu- Africa's growth in manufacturing exports to the EU rated markets of developed countries. and United States and growth in imports from Asia. Sub-Saharan Africa's share of exports, excluding ex- Some developed countries have pursued various pref- ports from South Africa and exports of oil, is around erential trade initiatives with Africa, such as tariff- 17 percent of total African exports to Asia. Albeit at and quota-free access. Notably, the textile benefits a smaller scale, this segment of Africa's exports-- afforded under the African Growth and Opportunity which is mostly agricultural commodities--has shown Act, combined with the Multifiber Arrangement quota a similar growth pattern to that of minerals and min- system, have triggered visible changes in the apparel ing products. These agricultural commodities tend to exports of some African countries. Still, it should be have dominant shares in each non-oil-exporting coun- noted that these preferential measures are often time- try. Thus, the significance of commodity demands in bound and redundant with existing Generalized Sys- Asia is also applicable to non-oil-producing Sub-Sa- tems of Preference. While continuation and expan- haran Africa countries, which are not necessarily sion of well-targeted preferential treatment is desir- strong in oil and other mineral exports. able for many African countries, these measures alone do not guarantee the full benefits of sustainable ex- Asia could thus become a strategic target in diversify- port expansion. The response of African countries is ing the markets of African products. Demand from critical. Successful African exporters must work Asian markets has a potentially good fit with the ex- proactively to improve their business environment in isting supply base of traditional primary commodities terms of governance, infrastructure, and industrial ca- in Africa. Such linkages have been revealed on a coun- pacity, and strengthen their supply-response capac- try-to-country basis from the analysis of ity to seize on just such opportunities arising from complementarity between the respective export and the external environment as preferential trade agree- import profiles of individual African and Asian coun- ments. Successful countries tend to have consolidated tries. The scope of value-added processing in Africa and carefully targeted initiatives for providing an en- is still limited, but by recognizing these linkages and abling environment for potential industries. developing consumer relations with Asian countries, African producers/exporters could significantly ben- Tariff rates for processed commodities tend to stay efit from expansion of traditional primary commodi- higher than rates for raw materials, which typically is ties, which are Africa's stagnated core business. a discouraging factor for the value-added activities in the raw material­producing countries. In Asia, this Market diversification is not the only benefit of deep- issue of tariff escalation on resource-based products ened trade relations between the two regions. Asia is generally more visible within low- and middle-in- can also contribute to Africa's quest for product di- come countries where higher growth of raw material versification in its export structure. South Africa has demand has been observed. With the expansion of Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership xiii global trade, and with more links in supply chains, goods and services. Improvement of the regional tariff escalation has become an issue not only in North- transportation and telecommunications systems must South trade but in South-South trade as well. be addressed to enhance the supply-response capac- ity of African countries. Sectoral analysis of the foreign direct investment of several Asian countries in Africa shows that relations Trade data indicate the existence of a significant po- between Asian investors and host countries in Africa tential for expanding trade relations between Africa are deeply motivated by trade. Asian investment in and Asia. To realize the full benefits of such trade Africa takes three forms. The first type is investment expansion, initiatives must be strengthened in the targeted to products to be sold in Asia; this typically following three directions. involves natural resources and processed raw materi- als (e.g., food), both of which are in high demand by The knowledge base on Africa-Asia trade and Asian manufacturers and consumers. Macro-instabili- investment relations needs to be strengthened to ties in African host countries have often hampered facilitate the discovery of market opportunities this kind of investment in the past, but, driven by between Africa and Asia and to better understand growing demand from Asia, there are signs that such how the market works between the two regions. investment may gain momentum. The second type Such a knowledge base should be strengthened of investment targets Africa's domestic markets. Such by first ensuring relevant data reporting and gath- investment has been constrained by the small size of ering and by accumulating a series of in-depth local markets and the high transaction costs resulting analytical studies based on such data. The stud- from a lack of efficient infrastructure. With lowered ies should identify existing potentials to expand tariffs, foreign investors in African production have trade and investment relations, as well as iden- found it difficult to compete against low-cost imports tify geographic and manmade constraints and from other regions. Effective regional integration and other impediments to promoting trade and in- adequate infrastructure services are essential in pro- vestment activities between the two regions. Such moting this type of investment. The third investment studies will provide the basis for formulating ef- type is targeted to the global market, typically third fective measures to improve connections to glo- countries such as the EU or United States. This type bal supply chains. of investment effectively integrates production activi- An institutional arrangement will be needed to ties in Africa with global supply chains. Investment in enhance strategic dialogue between African and less developed countries tends to focus on the textile Asian countries and to raise awareness about and apparel sectors, motivated largely by the low la- emerging opportunities among businesses in the bor costs and/or favorable trade regimes provided two regions. Building on existing frameworks such by the host country. The notable development in coun- as the Tokyo International Conference on Afri- tries such as South Africa has attracted more sophis- can Development, such an arrangement should ticated manufacturing and service investment; such facilitate broad-based, consolidated policy dia- investment is genuinely attracted to the productivity logues between African and Asian countries--by increase in these countries. both their governments and their businesses. Compared with the synergies that emerged among While exports to Asia account for 16 percent of Asian countries in the course of trade expansion, total African exports, they are no more than 2 intraregional dynamism in Africa is still weak. Afri- percent of the total imports by Asian countries. can countries could better benefit from export op- Therefore, an institutional arrangement needs to portunities by improving the intraregional mobility of be designed to avoid asymmetrical expectations. xiv Executive Summary African countries and international donors should celerate current trends if transaction costs could be renew their commitment to an enabling environ- reduced and the business information gap between ment for cross-border business activities, which Africa and Asia were narrowed. Stronger processing are essential engines for economic growth. At capacity in African countries is desired. In this con- the same time, coordination and consolidation text, the tariff escalation in many Asian countries of efforts dedicated to production capacity build- should be reviewed, which would give more motiva- ing within Africa is critically important in enabling tion for Asian businesses to invest in such areas. Also, African countries to respond to international busi- good governance and the honoring of codes of con- ness opportunities. Such domestic conditions, as duct in extractive/commodity industries are critical. well as a cross-border environment, are essential for ensuring the economic growth that is critical For the global market, a continuation of preferential to African countries' ability to achieve the Mil- measures for manufactured imports from Africa, such lennium Development Goals. as textiles and apparel as well as automobiles, needs to be considered in order to foster industrial develop- Based on the above analyses and discussions, next ment in African countries. Development of local and steps for public and private players are listed below, regional backward and forward linkages in such in- each categorized by its main targeted markets as ex- dustries are instrumental in achieving this goal. Im- plained in the key findings: provement of local and intraregional logistics systems is also essential. Sectoral capacity building is vital in 1. Goods and services for Asian markets (e.g., natu- facilitating the transfer of knowledge and skills that ral resources, agricultural, and other primary com- accompany investment flows. Asian businesses could modities). provide effective resources in this area. 2. Goods and services for the global market (e.g., For the African market, intraregional integration must textile and apparel products, automobiles and be enacted to provide a minimum market size to cap- their parts, exported to the EU, United States, ture economies of scale. Realistic and substantive re- Asia, and elsewhere). gional integration schemes must be implemented. Efficient intraregional transportation and other logis- 3. Goods and services for African markets (e.g., food tics systems are necessary to promote dynamic com- and agricultural products, goods and services re- mercial flows. The creation of merchant networks in lated to privatization projects in Africa, franchis- intraregional business activities is also essential. Fos- ing and licensing opportunities). tering alternative arrangements such as franchising and licensing could be the key to success in building For the Asian market, potential products are natural credible and mutually beneficial business relationships, resources, agricultural, and other commodities in along with trade in actual products. which African countries already have a solid supply basis. African commodity exports to Asia could ac- CHAPTER 1 Introduction The main objective of this report is to build a basic trading partners. Moreover, the minor significance of understanding of the potential of Africa-Asia trade Africa-Asia trade flows relative to those involving the and investment relations--a priority area recognized U.S. or European markets has brought limited atten- in the Tokyo International Conference on African tion from analytical researchers. According to Inter- Development (TICAD). As one of the co-organizers national Monetary Fund (IMF) data, African exports of TICAD, the World Bank has been undertaking a to Asia account for only 0.3 percent of total world series of studies on this subject with funding support trade (IMF 2002). from the Japan Consultant Trust Fund. The potential of enhanced interregional trade and investment rela- Furthermore, Africans have historically tended to view tions has generated strong interest among the par- trade with European countries as more important than ticipants of the third TICAD summit (TICAD III, which trade with other regions. It is only since the introduc- was held from September 29 to October 1, 2003, in tion of the African Growth and Opportunity Act in Tokyo), leading to a firm belief among them that bet- 2000 that the United States has begun to receive the ter business relations between Africa and Asia could continent's attention as a potential trade partner. For provide significant benefits for economic development their part, Asians have tended to view the amount of in both regions. Following up on this discussion, the imports from Africa as relatively insignificant; Afri- government of Japan announced its intention to hold can imports only account for 1.4 percent of total Asian the Asia-Africa Trade and Investment Conference in imports today. November 2004 under the auspices of the TICAD Despite these traditional perceptions, the importance initiative. Bank study findings are expected to serve of Africa-Asia trade should not be underestimated, as the baseline references for discussions during the especially for its potential in contributing to the eco- conference. nomic development of African economies. IMF trade The importance of South-South trade has been rec- data show that Asia-destined exports have grown rap- ognized for some time; however, there has been no idly in the past decade and accounted for 14.2 per- in-depth study conducted specifically on Africa-Asia cent of total African exports in 2000, up from 7.7 trade relations to date. Two major reasons why little percent in 1990. The average annual growth rate of research attention has been paid to this issue are the African exports to Asia throughout the 1990s was lack of available data and the relatively small size of 10.4 percent, much higher than either the European the trade flows between the two regions. Because Union (EU) or U.S. rate of export growth--3.7 and many African countries do not maintain and report 4.6 percent, respectively (figure 1.1). And, in reality, on their trade data, this information can only be ob- the relatively small level of trade in Asia equates to a tained--with substantial effort--with data from their quite considerable amount in Africa. Based on the 1 2 Chapter 1 ­ Introduction Figure 1.1 United Nations Commodity Trade Statistics Database Africa's Exports to Asia: 1990­2000 (UN Comtrade), as analyzed by the World Integrated Billion $ Trade Solution (WITS), the World Bank's data access 20.0 software package. UN Comtrade is the only data- 18.0 base with global coverage, containing each country's 16.0 export and import data by destination, by product 14.0 12.0 type, and over a series of years.2 One shortcoming 10.0 of this database is the limited availability of data for 8.0 some African countries that have not done routine 6.0 reporting.3 In these cases, import data from trade 4.0 counterparts were used as a proxy for country ex- 2.0 ports. Despite some inconsistencies in data treatment, 0.0 the data compiled from UN Comtrade overall show 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Exports to Asia 1990 2000 patterns similar to those of other trade data, such as Dollar amount $6.4 billion $17.2 billion the IMF's Direction of Trade Statistics Yearbook or Share of all African exports 7.7% 14.2% the World Trade Organization's International Trade Annual growth rate, 1990­2000 Statistics. We hope this pioneering work will con- European Union 3.7% tribute to the promotion of African exports in the United States 4.6% future through a broadening of Africa-Asia trade re- Asia 10.4% lations. Source: IMF (2002). 2Statistics Canada has recompiled the UN trade data (i.e., industry- specific data in the Standard International Trade Classification IMF data, total African exports to Asia make up only [SITC] Rev. 2 coding system) into the World Trade Analyzer data a little over 1 percent of Asia's total imports, but ac- set. By using partner-side data, the data set controls for statistical count for over 14 percent of Africa's total exports. discrepancies between export and import data. It also is reported Thus, Asia has undoubtedly emerged as a significant to have a significantly high level of data coverage (87 percent of bilateral trade information and 98 percent of single-direction flow business partner for African export opportunities. information). Limitations of the data set include the fact that Statistics Canada has recompiled the UN data so that they better For this reason, it is especially timely to study the match Canadian trade and industry classifications. Also, the data nature of the trade flows between the two continents. are available only up to 1997. The IMF data, however, do not break down exports 3Even for countries with sufficient data submissions, data are not by product.1 This report thus looks to identify changes always complete because governments sometimes suppress trade in patterns of African trade in the 1990s by using the statistics of individual products in individual trade flows for various reasons. Because UN Comtrade is a compilation of data sets submitted by governments, it is not possible to identify such cases 1These data also incorporate certain IMF estimates to maintain automatically in the data. These cases are treated as zero trade consistency. here. CHAPTER 2 Why Trade? World trade dramatically expanded in the 1990s--a dramatic decline in Africa's exports over the last three decade well characterized by the term globalization. decades represents a staggering income loss of $68 Globalization has been facilitated by various factors billion annually,1 equivalent to 21 percent of regional such as the end of the Cold War; the establishment gross domestic product and five times larger than the of the World Trade Organization (WTO), which sets current level of official development assistance Af- a new momentum for trade expansion; and, more rica receives.2 As competition heats up in the world importantly, the unprecedented development of in- trade market, the gap is widening between those coun- formation and communication technology, which tries that have successfully harnassed globalization and helped recreate worldwide the division of labor in those that have not--a phenomenon often described production. Countries became more reliant on exter- as marginalization. The international community must nal markets throughout the 1990s. The World Bank's take appropriate measures to enhance Africa's trade World Development Indicators show that world trade relations in the context of a multilateral framework, accounted for 38 percent of total world production but additional attention is needed to halt the stagna- in 1991; this figure jumped to 49 percent in 2001. tion in Africa's trade. This can be accomplished by Economic globalization affects developing countries, identifying unexploited opportunities for African coun- which significantly increased their share of worldwide tries to expand their trade activities and by analyzing trade during the 1990s. For example, the develop- the ways in which these countries can acquire suffi- ing country share of world exports increased by 4 cient supply-response capacity to seize these new percentage points during the decade to 27.4 percent opportunities. in 1999. In 1999, the rate of exports expansion from developing countries was twice as high as the rate The importance of trade for development has been for the world as a whole. Undoubtedly, trade has in- widely recognized and amply discussed from various creasingly significant implications in the context of aspects. In general, trade contributes to economic development. development by helping developing countries garner foreign exchanges indispensable for servicing their Against this backdrop, African economies have been external debts and improving domestic economic ef- unfavorably affected by their trade during the past ficiency by reallocating resources toward sectors in decades. Although the absolute decline in trade vol- which they have comparative advantages. Trade is ume experienced in the 1980s was halted in the also seen as playing a catalytic role in promoting tech- 1990s, Africa's export market shares were still fall- ing throughout the 1990s. The continent's share of 1All dollar figures cited throughout this report are current U.S. world exports declined from over 3.5 percent in 1970 dollars, unless otherwise indicated. to about 1.5 percent by the end of the 1990s. The 2See the WTO website, www.wto.org. 3 4 Chapter 2 ­ Why Trade? nological innovation domestically. More broadly, it nal environment and to draw specific policy prescrip- works to overcome size constraints of domestic mar- tions based on such analysis. Additionally, more ef- kets, captures benefits from economies of scale, cre- forts must be made to identify specific African prod- ates new employment, and, ultimately, reduces pov- ucts or sectors that are already growing, or that have erty. the potential to grow further, and to strategize ex- port promotion of such products by pooling together The Doha Round of the WTO shall play a key role in interregional supply and demand potentials. There is promoting integration of developing countries--in- no panacea in trade policies. Best policies for indi- cluding African countries--into the world trade sys- vidual countries need to be tailored to the existing tem and enhancing their access to world markets. supply and external demand potentials as well as to However, the multilateral framework of the interna- the environment they face. Individual African coun- tional trading system alone cannot guarantee the suc- tries, with support from the international community, cess in trade-led development of African countries need to build supply capacity to respond effectively and their integration into the world market. Although to the rising opportunities from external demand or significant, the framework is only one of the neces- from changes in the external environment. The strat- sary conditions that characterize the external envi- egy for such supply-response capacity building also ronment for African countries in trading with other needs to be formulated specifically for individual coun- regions. In parallel with initiatives under WTO aus- tries. pices, there have been accelerated moves in some developed countries to extend preferential trade treat- Trade is important for Africa not only because the ments to African countries or to form bilateral free world economy has become more integrated or glo- trade agreements, which make the environment more balized. Fundamentally, trade is an important lever- complex. These preferential treatments contain vari- age for growth. Many African countries are desper- ous rules and restrictions regarding such items as rules ate for economic growth and an opportunity to reduce of origin and eligibility of products. Although these their poverty level. However, their growth in domes- rules and restrictions should preferably be subsumed tic production has been hampered by the capacity under the multilateral framework in the long run, they constraint of their domestic markets, which are too generate some unique dynamics in the short run by small to leverage in transforming the economies. motivating various actors, including the third coun- Many African countries, with a small domestic mar- tries, to gain from opportunities through reallocating ket characterized by both low population and low in- some of their capital to Africa in the form of foreign come level, cannot attain production growth based direct investment.3 only on domestic demand. However, as illustrated by the Southeast Asian economies, many developing In the context of Africa's trade relations, it is impor- countries that have recorded a high income growth tant to analyze how African countries have seized or in recent years have strongly relied on the external can seize the opportunities arising from their exter- sector to achieve this growth. These countries have effectively used trade and foreign investment to le- 3For example, the United States' African Growth and Opportunity verage their economic growth. The use of trade as Act (AGOA) exempts the least developed among eligible countries an engine for growth remains valid. For many Afri- from its strict rules of origin which require countries to export can countries, it is a paramount task to use external products produced only from materials made either in other AGOA- trade and foreign investment effectively in their de- eligible countries or the United States in order to receive duty-free benefits under AGOA. velopment strategies. CHAPTER 3 Structure and Patterns of Africa's Current Trade This chapter presents a preliminary analysis of Africa's import structure. While exports serve as foreign-ex- current export and import patterns and structure. A change-earning opportunities, imports represent ex- matrix of export shares for product groups and desti- pense of earned foreign exchanges or provide scope nations is featured, constructed from a set of cross- for foreign exchange saving. Also, imports, in addi- sectoral bilateral trade data compiled under the United tion to foreign direct investment, serve as an impor- Nations Commodity Trade Statistics Database (UN tant channel for countries to acquire raw materials, Comtrade).1 Although several studies have reported intermediate materials, capital goods, and technolo- on the structure of Africa's exports by highlighting gies. Analyzing both the import and export structures specific aspects--such as oil versus non-oil or primary of African countries is therefore essential in provid- commodities versus manufacturing products, only a ing more dynamic scenarios for African countries to few have tried to analyze the structure of Africa's enhance their new export opportunities based on exports based on standardized product groups.2 more integrated trade strategies and providing op- portunities to save earned foreign exchanges. The chapter also analyzes Africa's major exports and imports by investigating both the types of products and the major importers and exporters of such prod- 3.1 Key Features in Africa's ucts. Here again, although a number of studies have Export Structure analyzed exports of African countries in the context of economic development, few have looked at Africa's Africa's export matrix Table 3.1 shows the export matrix for all Africa, com- piled from data from 77 of Africa's trade partners 1Products are grouped according to the Standard International (see appendix A for the list of partners).3 This matrix Trade Classification (SITC), Rev. 2. Although this is not the newest provides an overview of changing patterns in and the classification system, it has the largest coverage of trade data composition of Africa's exports by product group and submitted to the United Nations by African countries. The analysis here attempts to link the general structure of African exports with region of destination. information on specific products at highly disaggregated levels (i.e., three- and four-digit SITC codes). 2Ng and Yeats (2002) studied the patterns of African exports at 3Trade partner data were used in compiling the matrix because similarly disaggregated levels using UN Comtrade with more in- only a few African countries submitted trade data consistently to depth analysis on traditional exports of African countries. The UN Comtrade throughout the 1990s. The 77 countries represented present study, however, places more emphasis on specific in the matrix were selected for inclusion based on the availability interregional trade relations--namely trade relations between Africa of consistent data for this time period. Note that UN Comtrade and Asia--and analyzes Africa's imports from Asia as well as reports imports on a CIF basis (i.e., inclusive of insurance and exports to Asia, and discusses the implications of promoting freight costs) and exports on an FOB basis (i.e., excluding these interregional, South-South trade. costs). 5 6 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Table 3.1 Africa's Export Matrix Product Africa EU US Asia Other World Food and live animals (SITC 0) Share of total world export (1999­2001 average) 0.44 6.60 0.63 1.41 0.77 9.84 Average annual change (1990­92 and 1999­2001) 8.42 1.99 4.23 4.01 7.82 2.99 Beverages and tobacco (SITC 1) Share of total world export (1999­2001 average) 0.06 0.57 0.06 0.18 0.12 0.99 Average annual change (1990­92 and 1999­2001) 7.55 5.28 -0.11 2.55 12.89 5.05 Crude materials, inedible, except fuels (SITC 2) Share of total world export (1999­2001 average) 0.29 3.81 0.62 2.47 0.74 7.93 Average annual change (1990­92 and 1999­2001) 3.08 -0.31 2.23 5.68 3.53 1.90 Mineral fuels, lubricants and related materials (SITC 3) Share of total world export (1999­2001 average) 1.46 21.97 13.28 6.84 4.73 48.28 Average annual change (1990­92 and 1999­2001) 10.45 -0.49 4.11 21.14 9.19 3.26 Animal and vegetable oils, fats and waxes (SITC 4) Share of total world export (1999­2001 average) 0.02 0.26 0.01 0.01 0.01 0.32 Average annual change (1990­92 and 1999­2001) 3.42 -1.72 8.12 -3.26 11.16 -1.02 Chemicals and related products, n.e.s. (SITC 5) Share of total world export (1999­2001 average) 0.29 1.19 0.29 0.72 0.51 3.00 Average annual change (1990­92 and 1999­2001) 2.57 1.33 15.69 2.30 4.49 3.01 Manufactured goods classified chiefly by material (SITC 6) Share of total world export (1999­2001 average) 0.46 6.31 2.21 3.07 0.73 12.79 Average annual change (1990­92 and 1999­2001) -0.83 2.55 5.37 5.51 3.73 3.56 Machinery and transport equipment (SITC 7) Share of total world export (1999­2001 average) 0.27 3.29 0.49 0.62 0.50 5.16 Average annual change (1990­92 and 1999­2001) 3.25 14.25 24.23 13.99 1.32 11.77 Miscellaneous manufactured articles (SITC 8) Share of total world export (1999­2001 average) 0.12 6.07 1.20 0.08 0.14 7.61 Average annual change (1990­92 and 1999­2001) 8.72 6.73 17.05 12.28 8.58 7.96 Commodities and transactions n.e.c. in the SITC (SITC 9) Share of total world export (1999­2001 average) 0.01 2.11 0.29 1.02 0.61 4.03 Average annual change (1990­92 and 1999­2001) -12.57 -3.96 14.48 12.34 49.61 1.51 Total Share of total world export (1999­2001 average) 3.42 52.23 19.07 16.43 8.85 100.00 Absolute export volume (million $) 4,411 67,385 24,599 21,201 11,415 129,010 Average annual change (1990­92 and 1999­2001) 5.64 1.28 5.14 10.06 7.77 3.68 Notes: Bold data are high share, high annual change; italic data are low share, high annual change; and shaded data are high share, low annual change. High share is above 2 percent (20 percent in the last row, and 10 percent in the last column), and high annual change is above 2 percent.Average annual change was calculated by computing the changes between 1990­92 averages and 1999­2001 averages, and then annualizing these changes.All figures are based on partners' import data. Source: UN Comtrade. Three major features of African exports can be identi- Heavy dependency on EU market and high growth in fied from the table: (1) Africa's high dependency on Asian markets exports to the European Union (EU) market and the The matrix shows that in 2000 Africa as a region high growth in exports to Asian markets, (2) the depen- exported approximately $129 billion to the world, dency on primary commodities, and (3) small but prom- 52.23 percent of which went to the EU, 19.07 per- ising growth in the export of manufactured products. cent to the United States, 16.43 percent to Asia, Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 7 and 3.42 percent to Africa.4 A comparison of an- The amount of these commodities exported has been nual rates of change among Africa's trading partner largely subject to changes in commodity prices. Re- regions shows another dimension of the export pat- flecting the downward trend in major commodity tern. African exports to Asia experienced a 10.06 prices in the late 1990s, the average annual rates of percent average annual increase in value throughout increase for exports of SITC groups 0­5 have re- the 1990s; this was significantly higher than the in- mained mediocre, ranging between -0.02 percent to creases for the EU or United States over the same 5.05 percent for the period between 1990 and 2000. period (1.28 and 5.14 percent, respectively). The lim- These figures reflect the general stagnation of Afri- ited increase in Africa's exports to the EU could be can exports. For this reason, fostering diversified and partly explained by the latter's increasing reliance on competitive industries that are less dependent on imports from transitional economies in Eastern Eu- natural resources has been considered a policy prior- rope and the Commonwealth of Independent States, ity for many African countries. a trade flow that had been rather restricted prior to A regional breakdown of commodity exports, how- the end of the Cold War. Of the EU's total imports ever, provides a different view. Although most com- from developing countries, the share of imports from modity exports destined for the EU show relatively Africa declined by 6 percentage points during the stagnated or even decreasing trends, exports bound 1990s, dropping from 17 percent (1989­91 aver- for Asia, although relatively small in size, have in- age) to 11 percent (1999­2001 average), while the creased sharply for most items. Exports to Asia of share of imports from Eastern Europe and Central mineral fuels, lubricants, and related materials Asia increased by 8 percentage points, rising from (SITC 3) and of crude materials, inedible, except fu- 23 to 31 percent (IMF 2002). els (SITC 2) have shown notable annual rates of in- crease--21.14 percent and 5.68 percent, respec- Heavy dependency on primary commodities tively. Trends for food and live animals (SITC 1), which African exports depend heavily on primary commodi- include agricultural products that many African coun- ties. SITC groups 0­5 account for about a 70 per- tries rely on as their main source of export revenues, cent share of Africa's total exports. Among these follow suit. Africa's total food exports to Asia are less product groups, mineral fuels, lubricants, and related than one-third of those exports to the EU, but the materials (SITC 3) accounts for an overwhelming 48 former is growing twice as fast as the latter, with an percent share of total exports, reflecting Africa's high annual rate of increase of 4.01 percent. The rapid reliance on petroleum exports. Other heavily exported growth in Asia's importation of primary commodi- minerals include gold, silver, platinum, pearls, and ties from Africa suggests that African products are diamonds.5 Food and live animals (SITC 0) is another responding to the rising demand in Asia caused by important category of commodities for non-oil-export- rapid industrialization and growth of the consumer ing countries, accounting for approximately 10 per- population. cent of Africa's total exports. This group includes fruits and nuts, fishery products, tea, cocoa, coffee, and spices. Promising growth for manufactured products In 2000, export of manufactured products (SITC groups 6­8) represented 26 percent of total African exports. Manufactured goods classified chiefly by 4Calculated as 1999­2001 averages. The $129 billion figure is material (SITC 6)--a category that includes silver, basically consistent with those obtained from International Monetary Fund data. platinum, aluminum, pig iron, copper, diamonds, leather, and textile yarn--demonstrated relatively sig- 5Gold is classified under SITC 9 in SITC Rev. 2. 8 Chapter 3 ­ Structure and Patterns of Africa's Current Trade nificant growth in exports to all EU, U.S., and Asian SITC three-digit level reveals that apparel and textile markets. Examining these data more closely at the products have come to account for sizable shares of Table 3.2 Current Major African Exports to Asia, the European Union, and the United States, by Three-Digit SITC Level Asia European Union United States Rank Code Product Share Rank Code Product Share Rank Code Product Share 1 333 Petrol. oils & oils obt. 32.89 1 333 Petrol. oils & oils obt. 28.88 1 333 Petrol. oils & oils obt. 55.23 fr. bitum. min., crude fr. bitum. min., crude fr. bitum. min., crude 2 971 Gold, nonmonetary 7.55 2 341 Gas, natural and mfd 6.06 2 334 Petroleum prods., refined 12.31 3 681 Silver, platinum & other 4.99 3 667 Pearls, precious & semi- 4.82 3 681 Silver, platinum & other 5.54 metals of platinum group precious stones metals of platinum group 4 263 Cotton 3.55 4 334 Petroleum prods, refined 4.81 4 341 Gas, natural and mfd 1.90 5 522 Inorganic chem. elements, 3.46 5 843 Outer garments, women's, 2.84 5 667 Pearls, precious & semi- 1.85 oxides & halogen salts of textile fabrics 6 684 Aluminium 3.15 6 057 Fruit & nuts (not incl. oil 2.69 6 845 Outer garments & other 1.51 nuts), fresh or dried articles, knitted 7 671 Pig iron, spiegeleisen, sponge 2.73 7 842 Outer garments, men's, 2.57 7 843 Outer garments, women's, 1.42 iron, iron or steel of textile fabrics of textile fabrics 8 247 Other wood in the rough 2.54 8 072 Cocoa 2.52 8 072 Cocoa 1.34 or roughly squared 9 036 Crustaceans & mollusks 2.45 9 322 Coal, lignite and peat 2.17 9 842 Outer garments, men's, 1.29 of textile fabrics 10 322 Coal, lignite and peat 2.43 10 971 Gold, nonmonetary 1.96 10 671 Pig iron, spiegeleisen, sponge 1.05 iron, iron or steel 11 334 Petroleum prods, refined 1.85 11 846 Under garments, knitted 1.78 11 287 Ores & concentrates of 0.98 or crocheted base metals, n.e.s. 12 682 Copper 1.77 12 845 Outer garments & other 1.69 12 288 Nonferrous base metal 0.71 articles, knitted waste and scrap, n.e.s. 13 281 Iron ore & concentrates 1.65 13 036 Crustaceans & mollusks 1.23 13 846 Under garments, knitted 0.66 or crocheted 14 057 Fruit & nuts (not incl. oil 1.64 14 034 Fish, fresh (live or dead), 1.22 14 844 Under garments of textile 0.49 nuts), fresh or dried chilled or frozen fabrics 15 287 Ores & concentrates of 1.55 15 681 Silver, platinum & other 1.15 15 776 Thermionic, cold & photo- 0.47 base metals, n.e.s. metals of platinum group cathode valves, tubes, parts 16 667 Pearls, precious & semi- 1.47 16 071 Coffee & coffee substitutes 1.15 16 743 Pumps & compressors, fans 0.41 precious stones & blowers, centrifuges 17 251 Pulp and waste paper 1.21 17 287 Ores & concentrates of 1.09 17 781 Passenger motor cars, for 0.39 base metals, n.e.s. transport of pass. & goods 18 793 Ships, boats & floating 1.04 18 684 Aluminium 0.97 18 278 Other crude minerals 0.38 structures 19 246 Pulpwood (incl. chips and 1.02 19 743 Pumps & compressors, fans 0.97 19 684 Aluminium 0.37 wood waste) & blowers, centrifuges 20 034 Fish, fresh (live or dead), 1.02 20 248 Wood, simply worked, and 0.96 20 511 Hydrocarbons n.e.s., & their 0.35 chilled or frozen railway sleepers of wood derivatives 21 121 Tobacco, unmanufactured; 1.01 21 773 Equipment for distributing 0.93 21 784 Parts & accessories of 722-, 0.34 tobacco refuse electricity 781-, 782-, 783- 22 672 Ingots & other primary 0.92 22 781 Passenger motor cars, for 0.91 22 522 Inorganic chem. elements, 0.31 forms, of iron or steel transport of pass. & goods oxides & halogen salts 23 074 Tea and maté 0.90 23 037 Fish, crustaceans & mollusks, 0.87 23 034 Fish, fresh (live or dead), 0.30 prepared or preserved chilled or frozen 24 271 Fertilizers, crude 0.76 24 671 Pig iron, spiegeleisen, sponge 0.86 24 674 Universals, plates & sheets, 0.29 iron, iron or steel of iron or steel 25 776 Thermionic, cold & photo- 0.68 25 054 Vegetables, fresh, chilled, 0.85 25 121 Tobacco, unmanufactured; 0.28 cathode valves, tubes, parts frozen/pres.; roots, tubers tobacco refuse 26 689 Misc. nonferrous base metals0.68 26 247 Other wood in the rough 0.75 26 689 Misc. nonferrous base metals 0.28 empl. in metallurgy or roughly squared empl. in metallurgy (continued) Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 9 exports to the EU and United States (table 3.2). Con- in its industrial sector, emerging as a major producer currently, South Africa has experienced rapid growth and worldwide supplier of manufactured products, Table 3.2 Current Major African Exports to Asia, the European Union, and the United States, by Three-Digit SITC Level (continued) Asia European Union United States Rank Code Product Share Rank Code Product Share Rank Code Product Share 27 562 Fertilizers, manufactured 0.65 27 061 Sugar and honey 0.72 27 071 Coffee & coffee substitutes 0.27 28 061 Sugar and honey 0.57 28 121 Tobacco, unmanufactured; 0.68 28 057 Fruit & nuts(not includ. oil 0.27 tobacco refuse nuts), fresh or dried 29 071 Coffee & coffee substitutes 0.52 29 821 Furniture & parts thereof 0.67 29 061 Sugar and honey 0.24 30 282 Waste & scrap metal 0.52 30 292 Crude vegetable 0.65 30 075 Spices 0.24 of iron or steel materials, n.e.s. 31 341 Gas, natural and 0.52 31 562 Fertilizers, manufactured 0.63 31 673 Iron and steel bars, rods, 0.23 manufactured angles, shapes & sections 32 674 Universals, plates & 0.51 32 263 Cotton 0.59 32 672 Ingots & other primary 0.23 sheets, of iron or steel forms, of iron or steel 33 683 Nickel 0.50 33 289 Ores & conc. of prec. 0.54 33 659 Floor coverings, etc. 0.21 metals;waste, scrap 34 072 Cocoa 0.50 34 844 Undergarments of 0.54 34 292 Crude vegetable materials, 0.20 textile fabrics n.e.s. 35 278 Other crude minerals 0.47 35 281 Iron ore & concentrates 0.52 35 562 Fertilizers, manufactured 0.19 36 222 Oil seeds & oleaginous 0.44 36 522 Inorganic chem. elements, 0.51 36 232 Nat. rubber latex; nat. 0.19 fruit, whole or broken oxides & halogen salts rubber & sim.nat. gums 37 288 Non-ferrous base metal 0.42 37 611 Leather 0.49 37 651 Textile yarn 0.18 waste & scrap, n.e.s. 38 611 Leather 0.41 38 793 Ships, boats & floating 0.47 38 821 Furniture & parts thereof 0.18 structures 39 781 Passenger motor cars, for 0.41 39 776 Thermionic, cold & photo- 0.47 39 335 Residual petroleum products, 0.17 transport of pass. & goods cathode valves, tubes, parts nes. & related materials 40 673 Iron and steel bars, rods, 0.35 40 851 Footwear 0.45 40 897 Jewelry, goldsmiths & other 0.16 angles, shapes & sections art. of precious metals 41 273 Stone, sand and gravel 0.35 41 784 Parts & accessories of 0.43 41 251 Pulp and waste paper 0.16 722-, 781-, 782-, 783- 42 075 Spices 0.31 42 423 Fixed vegetable oils, soft, 0.43 42 271 Fertilizers, crude 0.16 crude, refined/purified 43 058 Fruit, preserved, & fruit 0.30 43 651 Textile yarn 0.42 43 896 Works of art, collectors 0.16 preparations pieces & antiques 44 511 Hydrocarbons n.e.s., & 0.28 44 112 Alcoholic beverages 0.38 44 971 Gold, nonmonetary 0.16 their derivatives 45 523 Other inorganic chemicals 0.27 45 674 Universals,plates & sheets, 0.36 45 058 Fruit, preserved, and fruit 0.15 of iron or steel preparations 46 211 Hides & skins (except 0.27 46 772 Elect.app.such as switches, 0.35 46 634 Veneers, plywood, improved 0.14 furskins), raw relays, fuses, plugs etc. or reconstituted wood 47 651 Textile yarn 0.26 47 074 Tea and maté 0.33 47 248 Wood, simply worked, & 0.13 railway sleepers of wood 48 516 Other organic chemicals 0.24 48 058 Fruit, preserved, and fruit 0.32 48 056 Vegetables, roots & tubers, 0.12 preparations prepared/preserved, n.e.s. 49 292 Crude vegetable 0.22 49 634 Veneers, plywood, improved 0.31 49 782 Motor vehicles for 0.12 materials, n.e.s. or reconstituted wood transport of goods/materials 50 512 Alcohols, phenols, phenol- 0.22 50 271 Fertilizers, crude 0.30 50 658 Made-up articles, wholly/chiefly0.12 alcohols, & their deriv. of textile materials Total 94.41 88.24 94.83 Notes: Shares represent percentages of total African exports to each partner region/country. For Asia, shares are based on 1998­ 2000 averages; for the European Union and United States, shares are based on 1999­2001 averages.All figures are based on partners' import data. Source: UN Comtrade. 10 Chapter 3 ­ Structure and Patterns of Africa's Current Trade including automobiles and their parts. South Africa ply from the continent, which is shipped to European has also become the hub of industrial development in and Asian countries. Also, metal and nonmetal prod- the Southern African subregion. ucts, diamonds, gold, platinum, and aluminum ap- pear on the top 20 list. South Africa again is the Detailed analysis of Africa's major exports dominant exporter of these products. In fact, there is Table 3.3 presents a list of Africa's top 20 major a large concentration of non-oil mining and minerals export products to 77 significant trade partners, cit- in the Southern African subregion. A large share of ing the leading country exporters and importers of diamonds is shipped to Europe (primarily Belgium these products. The table is based on a more detailed and the United Kingdom). Italy imports about half of chart which appears as appendix B to this report. Africa's gold exports, with the remainder shipped mostly to Asian countries such as India and Korea. The three key features of Africa's export structure Platinum is mostly imported by the leading industrial- discussed above can also be discerned with regard to ized countries in the world (the United States, Japan, the major exported products of African countries. Germany, and the United Kingdom) for both indus- trial and non-industrial purposes. On the other hand, Primary commodities constitute the major share of aluminum is imported by a mix of Asian and Euro- top exports from African countries. Crude oil is by pean countries. Korea and Japan lead in these im- far the largest among Africa's major products, total- ports, but Southeast Asian countries including Malay- ing $38 billion a year (based on a three-year average sia, Thailand, and Indonesia also import significant from 1998­2000) or about a third of the total value quantities, demonstrating their growing industrial sec- of all African exports. Nigeria, Libya, Angola, and tor. Algeria are the leading exporters of crude oil. On the importer side, the United States leads all other coun- Figure 3.1 shows the share of mining, minerals, and tries, buying 30 percent of Africa's oil exports; it is related products in total exports of individual African followed by some European countries (Italy, Spain, countries. Oil exporters are obviously significantly France, and Germany) and some Asian countries more dependent on mining and minerals as the source (China, Korea, India, and Taiwan). Other oil prod- of their export revenue. Box 3.1 discusses those Af- ucts, such as petroleum gases, motor spirits, and other rican countries that have recorded high rates of in- light oils, and fuel oil, are also top-ranked African crease in such exports in recent years. Although oil- exports; they are largely exported by Algeria. Al- exporting countries have experienced the fastest rate though several Sub-Saharan African countries export of growth for their exports, countries exporting com- oil, they have yet to develop an oil refining and pro- modities such as electricity and oil products to the cessing capacity comparable to that of Northern Af- regional market are also experiencing rapid growth, rican oil exporters such as Algeria and Libya.6 hinting at recent developments in intraregional link- age of energy resources. The leading primary commodities of African coun- tries are not limited to oil and oil products, but also Agricultural and fishery products are similarly domi- include other natural resources and resource-based nant among major African exports. Where mining products. South Africa provides most of the coal sup- and minerals are concentrated in a handful of coun- tries on the continent, a wider range of countries-- both in terms of quantity and geography--accounts 6This observation is verified in the accompanying Country Analytical for Africa's agricultural and fishery exports. As non- Briefs. In fact, the briefs show that Nigeria imports petroleum food agricultural products, cotton, in particular, and products from the EU as do other major oil-exporting countries such as Senegal, Angola, and Sudan. sawlogs are two of the important manufacturing raw Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 11 Table 3.3 Top 20 Major African Exports: 1999­2001 Annual Average Product Exporters Importers Mineral fuel Crude oil (1st, 32.1%) Nigeria (36), Libya (20),Angola (13),Algeria (11), United States (30), Italy (13), Spain, Germany, France, Gabon, Rep. of Congo, Egypt, Cameroon, China, Korea, India,Taiwan, Netherlands, Canada, Equatorial Guinea, Sudan Brazil,Turkey, Portugal,Austria, UK Petroleum gases Algeria (84), Nigeria, Libya, Rep. of Congo France (25), Spain (17),Turkey (10), Belgium, United (2nd, 3.5%) States, Brazil, Mexico, Morocco Motor spirit and other Algeria (61), Egypt (15), Libya, Nigeria, Brazil (39), United States (10), France, Italy, Belgium, light oils (6th, 2.2%) Morocco, South Africa Spain, Japan, Netherlands, Germany, Korea, UK, Canada, Singapore Fuel oil (8th, 1.6%) Algeria (36), Libya (27), Nigeria, Rep. of Congo, United States (56), Italy (24), UK, France, Greece, Angola, Egypt, Morocco,Tunisia, Cote d'Ivoire, Singapore Cameroon, Ghana, South Africa Coal (9th, 1.5%) South Africa (99) Spain (13), Germany (11), Netherlands, Italy, Belgium, France, Korea,Taiwan, Japan, India, UK,Turkey, Morocco, Colombia, Japan, Spain, China, Mauritius Metal and nonmetal mineral products Diamonds (3rd, 3.4%) South Africa (40), Dem. Rep. of Congo (18), Belgium (58), UK (26), United States, China,Thailand, Angola (13), Liberia Hong Kong Gold (4th, 2.9%) South Africa (96), Zimbabwe Italy (43), India (29), Korea, Saudi Arabia, Hong Kong, China, Germany, United States Platinum (5th, 2.4%) South Africa (100) United States (41), Japan (33), Germany (12), UK, France, Korea, Canada Aluminum (18th, 0.9%) South Africa (68), Ghana (13), Cameroon, Korea (18), Japan (18), France (12), Netherlands, Egypt, Nigeria Taiwan, Germany, Malaysia, Italy,Thailand, United States, Indonesia, Belgium,Austria, Greece, Spain, Hong Kong Nonmineral primary commodities Cotton (11th, 1.3%) Mali (14), Cote d'Ivoire (13), Egypt (12), Benin (10), Thailand (11),Taiwan (11), Italy (10), Portugal (10), Zimbabwe, Burkina Faso, Cameroon, Chad,Togo, Brazil, Indonesia, India, Malaysia, Germany, South Sudan,Tanzania, South Africa, Mozambique, Africa,Turkey, Korea, Morocco, Colombia, Japan, Central African Republic, Zambia, Senegal Spain, China, Mauritius Sawlogs (17th, 1.0%) Gabon (39), Cameroon (25), Rep. of Congo, China (25), France (17), Portugal (10), India, Italy, Equatorial Guinea, Liberia, Nigeria, Cote d'Ivoire, Spain, Hong Kong, Germany,Turkey, Japan, Morocco, South Africa, Dem. Rep. of Congo, Central African Greece,Taiwan, Netherlands, UK Republic, Mozambique Agricultural and fishery Cocoa (7th, 1.8%) Cote d'Ivoire (64), Ghana (20), Nigeria, Cameroon Netherlands (25), United States (15), Germany (15), UK (11), France, Belgium, Italy, Spain, Japan, Poland, Turkey, Canada, Brazil,Austria Coffee (12th, 1.3%) Ethiopia (20), Cote d'Ivoire (18), Uganda (15), Germany (21), Italy (12), France (10),Algeria, Japan, Kenya (13), Cameroon,Tanzania, Madagascar, United States, Spain, Belgium, Poland, Netherlands, UK, Burundi, Dem. Rep. of Congo, Rwanda, Guinea, Saudi Arabia, Portugal, Sweden, Morocco, Finland, Zimbabwe,Togo Austria, Denmark Crustaceans & mollusks Morocco (36), Mauritania (11), Madagascar, South Japan (32), Spain (30), Italy (12), France (10), Portugal, (15th, 1.1%) Africa, Mozambique,Tunisia, Nigeria,Angola, Ghana, Hong Kong,Thailand, Netherlands, Greece, United Gabon,Tanzania States Manufactured products Textile fabric trousers Tunisia (45), Morocco (28), Mauritius (10), Egypt, France (32), United States (16), Germany (12), UK (10th, 1.3%) South Africa, Madagascar, Zimbabwe, Lesotho (10), Italy (10), Belgium, Netherlands, Spain Textile fabric outer Tunisia (44), Morocco (35), Egypt, Mauritius, France (28), United States (18), Germany (16), garments (14th, 1.2%) Madagascar, South Africa, Kenya Belgium (11), UK (10), Italy, Netherlands, Spain Cotton knit under- Mauritius (26), Morocco (26),Tunisia (21), France (32), UK (19), United States (11), Germany garments (19th, 0.8%) Egypt (19), South Africa, Madagascar (10), Italy (10), Belgium, Spain, Netherlands Note: Numbers in parentheses after country names are the percentage shares of total trade values (only 10% or above are indicated.) Source: UN Comtrade. 12 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Figure 3.1 As for food products, cocoa, cof- Mining and Mineral Products as a Share of Africa's Exports: 2001 fee, and crustaceans and mollusks Comoros Chad are among the top 20 African ex- Sao Tome & Principe Malawi ports. Several Western African Mauritania Swaziland Seychelles countries account for most of Ethiopia Madagascar Burkina Faso Africa's cocoa exports, with Cote Mali Somalia Uganda d'Ivoire contributing more than Mauritius Benin half. European countries are the Lesotho Morocco Burundi main importers of African cocoa.7 Cape Verde Senegal Liberia Africa's coffee exporters are Zimbabwe Tunisia Eritrea spread across the continent, with Dijibouti Kenya Tanzania some large exporters located in Cote d'Ivoire Togo Eastern Africa (Ethiopia, Gambia Sierra Leon Namibia Uganda, Kenya, and Tanzania). Ghana Rwanda Guinea Major coffee importers include a Egypt South Africa Guinea-Bissau few European countries, the Niger Botswana United States, Japan, and Middle Cameroon ALL AFRICA Mozambique Eastern and Northern African Cent. African Rep. Zambia Gabon countries. No other Asian coun- Sudan Dem. Rep. of Congo Equatorial Guinea tries besides Japan are among the Republic of Congo Algeria Nigeria major importers of African coffee. Libya Angola The major importers of crusta- 0.0 20.0 40.0 60.0 80.0 100.0 Share of total exports (%) ceans and mollusks similarly reflect their traditional food cultures: Ja- Source: UN Comtrade. pan, Spain, Italy, France, Portu- gal, and Hong Kong. materials Africa provides to the world. Several West- ern and Central African countries are significant ex- Manufacturing exports have not yet contributed to porters of cotton, including Mali, Cote d'Ivoire, Benin, Africa's overall export value to the extent that pri- Burkina Faso, Cameroon, Chad, Togo, Central Afri- mary commodities do. However, as noted above, can Republic, and Senegal. On the importer side, some manufacturing industries--most notably the countries from various regions--but particularly de- textile and apparel industries--have shown promis- veloping countries--import African cotton. This is ing growth in recent years. Three garment products because cotton-based textile industries are the most (trousers, outer garments, and undergarments) are typical light manufacturing industry countries develop already among the top 20 exports of African coun- at the early stage of their industrialization. Although tries. The major African exporters of these products Asian countries are perhaps more visible than coun- are still limited to a handful of countries--Mauritius, tries in other regions as importers of African cotton Madagascar, South Africa, and the Northern African (Thailand, Taiwan, Indonesia, India, Malaysia, Korea, countries of Tunisia, Morocco, and Egypt. European Japan, China), it is worth noting that some of the countries are the main importers of Africa's garment growing textile-producing countries in Africa such as products. The United States is beginning to emerge South Africa and Mauritius are also buying signifi- cant amounts of cotton, creating an intra-Africa sup- 7 Switzerland is not included here because Swiss trade data were ply network for the textile industry. incomplete for the period covered. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 13 Box 3.1 3.4 lists the major exporters and African Countries with Growing Mining, Minerals and Related Exports importers of Africa's apparel The table below shows those African countries that have dramatically increased exports in recent years (2000­ their extractive exports over the 10-year period 1991­2001. Oil production has 02). Southern African countries played a prominent role in increasing Africa's exports in products related to min- such as South Africa, Lesotho, ing and minerals. Madagascar, Swaziland, Zimba- Besides confirming the region's new oil exporters,the table shows that other bwe, Malawi, and Botswana are countries--notably Mozambique and Cote d'Ivoire--have become exporters of well represented on the list of electric current, signaling an increase in regional power pool development. major exporters. The EU and Mozambique, for example, increased its electric current exports from 0 percent United States top the list of im- in 1991 to 5 percent in 2001.That country is a success story in another way as porters. well:as the site of the Mozal aluminum smelter project (see box 7.4),Mozambique has shifted from only mining minerals to processing them too.Aluminum's share Automobiles are another major of the country's exports jumped from 0 percent in 1991 to 48 percent in 2001. product exported from Africa to Kenya's increased exports of oil products are a notable example of regional the EU (22nd on the list, 0.9 per- economic integration. Kenya imports oil from Saudi Arabia and the United Arab cent of total exports to the EU) Emirates; it has downstream industries developing around its port areas such as and United States (17th, 0.3 per- Mombassa.Petroleum is there refined and made into various petroleum products; cent of total exports to the United these are then exported to neighboring countries including Tanzania, Rwanda, States). Automobiles are almost Uganda,Burundi,and Mauritius.This is a clear example of the growing significance entirely exported by South Af- of the intra-Africa energy trade. rica, where a few leading world manufacturers have assembly Fast-Growing African Exporters in Mining, Minerals and Related Products plants (box 3.2). Although the Export amount Growth Share of total auto assembly plants in South (thousand $) 1991­2001 exports (%) Africa were initially built for the Exporter 1991 2001 (%) 1991 2001 Product Eq. Guinea 770 1,469,761 19,0901 2 89 Oil purpose of assembling automo- Sudan 8,724 1,458,101 16,714 2 77 Oil biles to be supplied to other coun- Mozambique 25,419 404,905 1,593 7 58 Aluminum, tries in Africa, these plants have electricity instead emerged as important CapeVerde 89 1,062 1,193 1 6 Oil supply bases for the automobiles Kenya 32,190 245,265 762 3 13 Oil products sold in major consumer markets Djibouti 1,108 7,597 686 3 10 Oil Niger 20,980 121,629 580 9 47 Oil outside the region such as the EU Togo 11,608 42,968 370 5 16 Oil and United States. Companies Cote d'Ivoire 222,603 619,706 278 8 16 Oil, electricity such as GM, Ford, Daimler- Guinea 94,006 238,046 253 15 26 Diamonds, oil Chrysler, BMW, Volkswagen, Congo 1,086,655 2,388,093 220 83 92 Oil Toyota, Nissan, Fiat, and Volvo Angola 3,712,805 7,509,768 202 99 99 Oil all have assembly plants in South Rwanda 16,834 20,968 125 13 25 Oil Africa. Source: UN Comtrade. Although not on the list of major African exports, there are some as a significant importer as well, and will likely be, products that, while small in total value, have grown thanks to the effects of the African Growth and Op- rapidly in recent years. These so-called "dynamic portunity Act, a still stronger importer in future. Table export products" include horticulture and leather-re- 14 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Table 3.4 are the dominant major exports Major Exporters and Importers of Africa's Apparel Exports: 2000­02 of Africa. Exports of these prod- Avg. annual Share of Avg. annual Share of ucts are concentrated in a hand- exports total exports imports total imports Exporter ($ million) (%) Importer ($ million) (%) ful of countries in certain subre- Tunisia 2,899.00 34.33 France 2,514.58 29.78 gions for geographical and geological reasons. Crude oil Morocco 2,672.32 31.65 United States 1,519.52 18.00 overwhelmingly leads other com- Mauritius 922.37 10.92 U.K. 1,027.84 12.17 modities in terms of export value. Egypt 689.64 8.17 Germany 840.61 9.96 Besides developed countries such South Africa 385.80 4.57 Italy 786.07 9.31 as various European nations, the Madagascar 351.46 4.16 Belgium 519.89 6.16 United States, and Japan, cer- Lesotho 244.67 2.90 Spain 472.24 5.59 tain Asian countries with grow- Kenya 87.74 1.04 Netherlands 226.83 2.69 ing domestic industrial sectors Swaziland 64.88 0.77 Austria 67.45 0.80 are significant importers of Zimbabwe 36.13 0.43 Ireland 48.32 0.57 Africa's mineral fuels and min- Malawi 31.19 0.37 Namibia 47.69 0.56 ing and mineral products. These countries, along with rapidly in- Botswana 19.85 0.24 Botswana 38.97 0.46 dustrializing African countries Cote d'Ivoire 4.89 0.06 Canada 32.84 0.39 (e.g., South Africa and Mauritius) CapeVerde 4.68 0.06 South Africa 25.53 0.30 also buy a significant share of Mozambique 3.68 0.04 Swaziland 24.28 0.29 Africa's cotton exports. Food Mauritania 3.65 0.04 Japan 23.42 0.28 products such as coffee, cocoa, Sierra Leone 3.32 0.04 Norway 17.57 0.21 and seafood are mostly imported Namibia 2.85 0.03 Lesotho 16.57 0.20 by developed countries. Some Tanzania 2.84 0.03 Sweden 15.65 0.19 manufacturing products--nota- Cameroon 1.62 0.02 Singapore 15.37 0.18 bly garment products--constitute All Africa 8,443.76 100.00 World 8,443.76 100.00 other major African exports. South Africa has emerged as a Source: UN Comtrade. major automobile supply base, exporting to key markets outside lated products. Tables 3.5 and 3.6 show the major the region. Its export capacity, however, is still lim- exporters of two dynamic exports: cut flowers and hide. ited to only a few countries, and the importers are These products represent promising cash-earning op- basically European countries and the United States. portunities for African producers. The cut-flower trade African countries also have some dynamic exports is rather concentrated in some countries, and the Neth- for which they have seen growing export revenues in erlands is the dominant importer given its central role in recent years. the worldwide flower marketing network. Hide trading relations are more diversified. Note that several Asian countries such as Hong Kong, India, Singapore, Pa- 3.2 Subregional Features of kistan, Thailand, Malaysia, and Indonesia appear in Africa's Exports the list of top 20 importers of African hide. This section provides a brief overview of the subre- gional features of Africa's exports, based on a com- In sum, primary commodities, both mineral- and ag- parison of patterns in and the composition of ex- riculture-based, and their semi-processed products, ports at the subregional level. For this purpose, Africa Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 15 Box 3.2 Car Manufacturers in South Africa The automotive sector is the largest manufacturer in South Africa and the country's biggest manufacturing exporter. SouthAfrica's automotive exports may be small in global terms--around 0.2 percent--but its presence in the world auto industry is significant for a developing economy.The local industry has a world-beating cost ability on short or low-volume runs, competitive tooling costs and a high degree of manufacturing flexibility. It also has good access to southern hemisphere and African markets, and offers right-hand drive production facilities (SA is a right-hand driving country).Volkswagen SA produces all right-hand drive Golfs for the UK, while BMW exports 70 percent of its output. Major motor vehicle production operations are located around Port Elizabeth, Durban, East London and Pretoria. Companies include BMW, DaimlerChrysler, Delta Motor Corporation,Fiat,Ford Motor Corporation,Nissan,Toyota andVolkswagen. Current exports of built-up cars are destined primarily for Europe,the United States,the Far East,andAfrica.The majority of commercial vehicles are exported to Southern African Development Community countries, including Mozambique, Malawi, Zambia, Kenya and Zimbabwe. According to the Motor Industry Development Programme strategy,local assemblers should aim at producing over 30 000 vehicle models by the middle of the decade,with some planning on higher figures of 60 000 to 80 000.The bulk of these will be produced for export.Local model ranges will be supplemented by imports to satisfy the needs of the local market. Ford South Africa. Ford SA recently announced that it would start producing two new vehicles for export under a R1-billion investment program,joining BMW,DaimlerChrysler,Volkswagen andToyota as major exporters of vehicles from the country.The value of Ford's additional exports is expected to reach about R4-billion a year.As a result of the new investment in the country, exports of components by the local company will also increase."Production parts to support an estimated 70 000 vehicles per annum will be exported from local suppliers to other international markets," the company said. Ford's SA plant was the only industrial facility visited by U.S. president George Bush on his recent trip to the country. Volkswagen South Africa. Volkswagen SA will in future focus its export program on theAsia-Pacific region instead of the European market. According to Business Day,Volkswagen SA expects to export 30 000 vehicles this year,bringing in R4-billion,with an additional R2-billion in component exports,but will withdraw from the European market.Despite a free-trade accord with the EU,local vehicle exports are still subject to a seven percent import tariff,which makes them less competitive than European-produced vehicles.However,the similarity in freight costs from SouthAfrica toAsia and from Europe to Asia mean that South African exports can compete with European exports in the Asian region, making it the sole Asia-Pacific supplier of Golf and Polo models.In 2002,Volkswagen SA produced 30 000 Golf 4s for export to Europe and the United Kingdom.The company also exported components to the value of R1.6-billion last year. Toyota South Africa. Toyota SouthAfrica will start exporting its vehicles toAustralia this year.According to media reports,some 8 000 vehicles are expected to leave Durban for Australia, and this number is expected to increase to substantial volumes from 2004. Last year, Toyota Motor Corporation reached an agreement with joint venture partnerWesco Investments to boost the percentage of sharesToyota Motor Corporation holds inToyota SouthAfrica (TSA) from 35.7 percent to 74.9 percent.TSA is a holding company ofToyota SouthAfrica Motors,which handles production and distribution ofToyota vehicles in South Africa.Wesco currently owns 64.3 percent ofTSA.The company recently opened a new R168-million pressing plant for car side panels in Durban. BMW South Africa. Over the past five years, BMW South Africa's Rosslyn plant near Pretoria has moved from operating as a completely knocked down production facility, assembling vehicles with limited customization possibilities for the local market, to a world-class plant capable to producing customized 3 Series vehicles (four-door, right- and left-hand drive) for global export.This evolution is largely due to BMW AG's R1-billion investment in the Rosslyn plant during the mid 1990s.The investment,used to upgrade the production facility into one of the most modern in the world, brought Rosslyn in line with other BMW plants worldwide. In the five years since 1998, BMW SA has grown its overall production volume by 220 percent, while its production of cars for export has quadrupled.Almost 80 percent of BMW's production of 55,555 units in 2002 were exported. Primary markets for South African manufactured BMWs are the United States (22,000 units or 47 percent) and Japan (13,000 units or 18 percent). Australia received 5,500 units or 8 percent of production, while the balance went to New Zealand, Hong Kong, Singapore andTaiwan. Export produc- tion was up 18 percent in 2002, with over 43,000 units leaving South Africa compared with 36 750 in 2001. Source: Reprinted from the International Marketing Council of South Africa (2003). 16 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Table 3.5 across Africa: Egypt, Libya, and Major Exporters and Importers of Africa's Cut-Flower Exports: 2000­02 Algeria in Northern Africa; Avg. annual Share of Avg. annual Share of Sudan in Eastern Africa; exports total exports imports total imports Cameroon, Central African Re- Exporter ($ million) (%) Importer ($ million) (%) Kenya 172.27 50.93 Netherlands 208.99 61.79 public, Congo Republic, Demo- cratic Republic of Congo, Equa- Zimbabwe 67.43 19.93 U.K. 48.50 14.34 torial Guinea, and Gabon in South Africa 32.10 9.49 Germany 24.83 7.34 Central Africa; Guinea, Niger, Zambia 19.22 5.68 Switzerland 10.95 3.24 and Nigeria in Western Africa; Uganda 12.75 3.77 France 8.93 2.64 and Angola in Southern Africa. Tanzania 12.44 3.68 Japan 7.19 2.12 Morocco 6.30 1.86 Norway 6.33 1.87 The relative importance of min- Mauritius 4.29 1.27 United States 4.51 1.33 eral fuels differs sharply among Cote d'Ivoire 3.60 1.06 Italy 4.12 1.22 subregions. Northern, Western, and Central Africa depend on Cameroon 1.29 0.38 Australia 2.97 0.88 mineral fuels for more than 60 Rwanda 1.22 0.36 United Arab Em. 1.72 0.51 percent of their exports. In East- Egypt 1.17 0.35 Belgium 1.11 0.33 ern Africa, where oil exports are Ethiopia 1.14 0.34 Greece 0.71 0.21 much smaller than in the other Malawi 0.75 0.22 Botswana 0.63 0.19 subregions, food and live animals Madagascar 0.67 0.20 South Africa 0.60 0.18 (SITC 1) and miscellaneous Tunisia 0.46 0.14 Portugal 0.57 0.17 manufactured articles (SITC 8) Mali 0.28 0.08 Namibia 0.53 0.16 have prominent shares. (SITC 1 Burundi 0.19 0.06 Hong Kong 0.51 0.15 products include textile and ap- Ghana 0.09 0.03 Czech Republic 0.44 0.13 parel products from Mauritius, Namibia 0.07 0.02 Saudi Arabia 0.41 0.12 Madagascar, and Kenya, among All Africa 338.25 100.00 World 338.25 100.00 others; SITC 8 products include tea, fruits, nuts, spices, and fish- Source: UN Comtrade. ery products from various coun- tries in the subregion.) In South- ern Africa, manufactured goods is divided into five subregions--Northern, Eastern, classified chiefly by material (SITC 6)--including sil- Western, Central, and Southern Africa.8 ver, copper, platinum, aluminum, diamonds, leather, and textile yarn from various countries in the subre- Product groups gion--account for a higher share of exports than do Table 3.7 compares the five subregions in terms of SITC 3 products. Southern Africa--considered the the SITC product groups that account for their ex- most industrialized and fastest growing region in Sub- ports. In all subregions except Eastern Africa, min- Saharan Africa--scores high shares in various SITC eral fuels, lubricants, and related materials (SITC 3) groups including crude materials, inedible, except fuels account for significantly high shares of overall Afri- (SITC 2; this includes iron ore), machinery and trans- can exports. Major oil exporters are distributed widely port equipment (SITC 7; this includes automobiles from South Africa), miscellaneous manufactured ar- 8See appendix A for the countries constituting the individual ticles (SITC 8; this includes textile and apparel prod- subregions. ucts from countries such as South Africa and Lesotho), Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 17 Table 3.6 as in the north and south; how- Major Exporters and Importers of Africa's Hide Exports: 2000­02 ever, they do have here tangible Avg. annual Share of Avg. annual Share of non-oil exports such as food and exports total exports imports total imports live animals (SITC 0), crude ma- Exporter ($ million) (%) Importer ($ million) (%) South Africa 78.63 36.30 Italy 71.54 33.03 terials, inedible, except for fuels (SITC 2), and manufactured Kenya 31.77 14.67 Hong Kong 54.52 25.17 goods classified chiefly by mate- Ethiopia 30.18 13.93 U.K. 14.29 6.60 rial (SITC 6). These groups in- Uganda 12.33 5.69 India 12.82 5.92 clude such products as cocoa, Libya 8.93 4.12 Turkey 9.64 4.45 fruits and nuts, fishery products, Tanzania 7.95 3.67 Pakistan 8.64 3.99 cotton, diamonds, woods, Zimbabwe 7.07 3.26 France 8.33 3.85 leather, and aluminum. Sudan 6.64 3.06 Singapore 5.18 2.39 Somalia 4.45 2.06 Spain 4.75 2.19 Destined markets Senegal 4.39 2.03 Thailand 4.48 2.07 Turning to the question of how Egypt 4.13 1.91 Malaysia 2.94 1.36 subregions differ in terms of ex- Madagascar 4.01 1.85 Portugal 2.94 1.36 port destinations, table 3.8 com- Algeria 2.54 1.17 Indonesia 2.63 1.21 pares the five subregions in terms Nigeria 2.47 1.14 Japan 2.27 1.05 of their share of total African Djibouti 1.78 0.82 Tunisia 1.95 0.90 exports for each major trading Mali 1.55 0.71 Greece 1.32 0.61 partner region and average an- Tunisia 1.54 0.71 U.A.E. 1.17 0.54 nual changes in exports per trade Zambia 1.04 0.48 U.S. 1.17 0.54 partner during the 1990s. It is apparent that the EU is the lead- Rwanda 0.68 0.31 South Africa 1.03 0.48 ing export destination for all five Cote d'Ivoire 0.58 0.27 Germany 0.92 0.42 subregions. Northern, Eastern, All Africa 216.59 100.00 World 216.59 100.00 and Southern Africa score signifi- Source: UN Comtrade. cantly high shares of exports to the EU. With over 70 percent of its export earnings from sales to and commodities and transactions not elsewhere clas- the EU, Northern Africa shows the highest depen- sified in the SITC (SITC 9; this includes gold from dence on this market, a reflection of its geographical South Africa and Zimbabwe). proximity to Europe. Eastern Africa receives more than half of its export earnings from the EU market; Even in the three subregions where oil dominates all other subregions receive over 35 percent of their exports, other groups of products also have signifi- export earnings from the EU. The large EU shares cant shares. Northern Africa, for example, has a sig- of exports have held rather steady for Africa as a nificant share of exports in miscellaneous manufac- whole, but Southern Africa is increasing its exports tured articles (SITC 8), reflecting established supply to the EU rapidly as a result of a free trade agree- bases for textile and apparel products. Like South- ment between the EU and South Africa. ern Africa, Northern Africa also exports a wide range of manufactured products. In Central and Western Other significant bilateral relations include Western Africa, manufacturing products are not as diversified and Southern Africa's exports to the United States, 18 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Table 3.7 Current Subregional Export Structures by SITC Product Group SITC Northern Eastern Western Central Southern All $45,735,398,974 $6,760,354,091 $27,091,035,527 $10,518,181,658 $39,929,981,778 $130,034,952,028 0 1.69 4.80 2.16 41.56 3.02 14.49 0.45 5.56 2.54 8.26 9.86 9.86 1 0.02 0.07 0.07 1.43 0.01 0.04 0.01 0.08 0.88 2.87 0.99 0.99 2 1.04 2.95 0.57 10.98 1.90 9.11 1.35 16.70 3.14 10.24 8.00 8.00 3 21.66 61.57 0.78 15.04 13.90 66.72 5.13 63.47 6.48 21.12 47.96 47.96 4 0.19 0.53 0.01 0.11 0.10 0.46 0.00 0.03 0.03 0.08 0.31 0.31 5 1.68 4.77 0.05 1.05 0.19 0.90 0.03 0.43 1.20 3.91 3.15 3.15 6 1.55 4.40 0.21 4.06 0.88 4.22 1.01 12.43 9.11 29.68 12.76 12.76 7 1.65 4.70 0.09 1.78 0.58 2.78 0.05 0.60 2.77 9.03 5.14 5.14 8 5.24 14.90 1.18 22.63 0.09 0.42 0.02 0.20 1.03 3.35 7.55 7.55 9 0.46 1.32 0.07 1.36 0.18 0.86 0.04 0.49 3.52 11.47 4.27 4.27 Total 35.17 100.00 5.20 100.00 20.83 100.00 8.09 100.00 30.71 100.00 100.00 100.00 Notes: Share figures are based on 1999­2001 averages.Within each subregion, the first figure represents share of all African exports; the second is share of total subregional exports. Because of rounding, the figures for all subregions differ slightly from those in table 3.1.All figures are based on partners' import data. Source: UN Comtrade. Table 3.8 Current Subregional Export Structures by Partner Region Region Northern Eastern Western Central Southern All $45,735,398,974 $6,760,354,091 $27,091,035,527 $10,518,181,658 $39,929,981,778 $130,034,952,028 Africa 0.75 2.14 0.19 3.62 1.21 5.79 0.11 1.35 1.29 4.21 3.55 3.55 2.43 1.79 13.19 -2.79 4.18 5.68 EU 25.34 72.07 2.71 52.06 7.79 37.38 3.19 39.49 12.77 41.56 51.80 51.80 1.38 2.59 -1.29 -2.08 3.94 1.28 U.S. 3.06 8.70 0.54 10.48 7.02 33.71 2.29 28.28 6.00 19.52 18.91 18.91 3.80 7.47 4.02 5.91 6.91 5.14 Asia 1.93 5.48 1.46 28.03 2.80 13.42 2.22 27.43 8.57 27.90 16.97 16.97 4.59 11.73 10.96 21.57 9.15 10.06 Others 4.08 11.61 0.30 5.81 2.02 9.70 0.28 3.45 2.09 6.80 7.77 8.77 10.00 6.78 5.30 0.91 7.97 World 35.16 100.00 5.20 100.00 20.83 100.00 8.09 100.00 30.72 100.00 100.00 100.00 2.47 5.20 2.63 3.36 5.99 3.70 Notes: Share figures are based on 1999­2001 averages.Within each subregion, the first figure in the first row represents share of all African exports; the second is share of total subregional exports; the figure in the second row is average annual increase in share of total African exports (1989­2001). Because of rounding, the figures for all subregions differ slightly from those in table 3.1.All figures are based on partners' import data. Source: UN Comtrade. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 19 and Southern Africa's exports to Asia. In terms of 3.3 Key Features of Africa's degree of reliance on the U.S. and Asian markets Import Structure among subregions, Western and Central Africa re- In general, discussion of trade issues in African coun- ceive more than a quarter of their export earnings tries tends to be concentrated more on their exports from the United States; Eastern, Central, and South- than imports. Such questions as how African coun- ern Africa each receive more than a quarter of their tries can diversify their export structure, improve their export earnings from Asia. Although the degree of export supply capacity, and acquire international com- reliance on Asian markets is not comparable to that petitiveness have been first-order concerns. However, on the EU for all subregions, the average increase in in order to obtain a more dynamic picture of Africa's export values noted in the table indicates that all sub- trade structure and see how Africa interacts with the regions are increasing their reliance on Asian mar- rest of the world through global supply chains of prod- kets; this is consistent with findings presented earlier ucts, it is important to look at both exports and im- in this report. Central Africa, in particular, is increas- ports of African countries. This perspective also al- ing its exports to Asia most rapidly. Although crude lows for an analysis of opportunities to save earned oil exports from such countries as Equatorial Guinea, foreign exchanges. Republic of Congo, and Gabon are the principal driv- ers for this growth, cotton exports from Chad also Moreover, analyzing imports helps in understanding contribute significantly. the issue of self-sufficiency African countries are fac- ing. Because Africa is a major importer of food, the In all subregions, the shares of intra-Africa trade ac- need to improve the internal supply of food becomes count for much smaller numbers as compared to other obvious. partner regions. Given that most of the subregions contain a large number of land-locked countries, the Table 3.9 is a list of major African imports from the establishment of regional infrastructure to connect 77 countries used in the previous discussion of ex- these with major seaports is a critical condition for ports. The list includes the top 20 major imported expanding trade opportunities. Improvement in products, as well as their leading exporters and Afri- intraregional transportation and logistics is undoubt- can importers. A chart of all imports is presented as edly one of the most important elements in building appendix C; key elements are further discussed be- an enabling environment that allows local private sec- low. tor development in Africa to respond effectively to opportunities in the global market. Success in regional Less concentration and wider distribution integration projects such as the Chad-Cameroon pipe- among countries line project, the Maputo Corridor project, the Nile It is immediately apparent from table 3.9 that the Basin project, the New Partnership for Africa's De- African importers of these major products are, in velopment regional infrastructure project, and the terms of country composition, much more diversi- West African Economic and Monetary Union road fied within the region than are Africa's major export- network project is critical. Also, regional integration ers. With the exception of cotton, the exporters of conducive to trade enhancement needs to be achieved Africa's major exports are limited to a few countries, through effective agreements (box 3.3). None of these largely because many of the products involved de- regional integration initiatives can succeed without pend on countries' natural endowments and because sufficient political will among and within the partici- only a limited number of countries have developed pating countries. outward-oriented manufacturing sectors. On the other 20 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Box 3.3 Regional Integration Agreements in Africa Regional integration agreements have evolved considerably inAfrica.There are currently 10 such important agreements in Africa,which are summarized in the table opposite. Several major automobile plants already operate in SouthAfrica, targeting neighboring markets in addition to South Africa itself. In 2002, two Japanese appliance manufacturers of refrigerators and air conditioners established assembling factories in Egypt,as an entry point into the Common Market for Eastern and Southern Africa. Although issues remain regarding the practical effectiveness of those regional economic zones and infrastructure within the zones,the global trend is suggesting a direction for regional integration under theWorldTrade Organization framework.One of the strategies would be to develop a regional hub with sufficient infrastructure for accommodating foreign direct investment with a concentration of services in trade, finance, transportation, communication, and other service infrastructure.SouthAfrica has already taken a hub role in SouthernAfrica,as has Egypt in NorthernAfrica.The U.S.Agency for International Development (USAID) is assisting through its program,Trade forAfrican Development and Enterprises, in developing so-called Regional Hubs for Global Competitiveness in three USAID regional missions:Acra (Ghana), Nairobi (Kenya), and Gaborone (Botswana). Viable regional integration would help African countries overcome the capacity constraints of small domestic markets in their individual countries. Regional integration will broaden the scope of market-based economic develop- ment in small African countries, each of which has a highly fragmented domestic market of factors and goods.Through regional integration, these countries could have a better allocation of resources and economies of scale. To make regional integration more conducive to trade enhancement in Africa, the regional integration agreements need a more outward-looking trade orientation and must avoid unnecessary overlapping and inconsistency among different agree- ments.Adequate infrastructure and appropriate governance over the infrastructure are essential for effective regional integration. (continued) hand, for all top 20 major African imports, except communication--such as telecommunications equip- ships and crude oil, there are more than 10 countries ment. Regardless of a country's income level, these that have a 1 percent or greater share of all Africa's products are essential for a country to maintain ex- import value of these products. With the exception ternal economic linkages with the global market. of ships and crude oil, the leading importers of the individual top 20 products are either South Africa or A few imported products support Africa's manufac- Northern African countries, reflecting the purchas- turing and mining sectors, either directly and indi- ing power of domestic consumers as well as relatively rectly. Although the largest import value is recorded developed domestic industrial sectors. for ship imports--due to Liberia's competitive tax practice toward flag-of-convenience ships--there are Products to support a modern life-style and other transportation-related products that are widely minimal business connectivity: exported to African countries in support of their transportation and communication manufacturing and mining industries. These products A significant number of the major imports of African include passenger cars (2nd largest export, 3 percent), countries are modernized manufactured products. motor vehicle parts and accessories (4th, 2.3 percent), Many are related to means of transportation--such motor vehicles for goods transportation (6th, 1.6 per- as automobiles, aircraft, and ships--or to means of cent), and aircraft (10th, 1.2 percent). Communica- Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 21 Box 3.3 Regional Integration Agreements in Africa (continued) Subregional Arrangements in Africa Agreement Date Members Description Cross-Border Initiative 1992 Burundi, Comoros, Kenya, Madagascar, Malawi, A voluntary framework agreement for the (CBI) Mauritius, Namibia,Rwanda, Seychelles, implementation of trade and investment Swaziland,Tanzania, Uganda, Zambia, Zimbabwe policies East African Community 1999 Kenya,Tanzania, Uganda Focus on regional integration of trade and (EAC) investment policy, monetary and fiscal policy, and labor and capital markets Economic and Monetary 1994 Cameroon, Central African Republic, Chad, Aims to promote harmonious development of Community of Central Congo, Gabon, Equatorial Guinea member states within the framework of an (CEMAC) African economic and monetary union Economic Community 1975 Benin, Burkina Faso,CapeVerde, Cote d'Ivoire, Promotes economic integration in all fields of of West African States Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, economic activity (ECOWAS) Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone,Togo Common Market for 1993 Angola,Burundi, Comoros, Djibouti,Egypt, Promotes intraregional trade through removal Eastern and Southern Ethiopia, Kenya, Lesotho, Malawi, Mauritius, of all internal tariffs and nontariff barriers to Africa (COMESA) Mozambique,Rwanda,Somalia,Sudan, trade Swaziland, Uganda, Zambia, Zimbabwe India Ocean Commission 1984 Comoros, Madagascar, Mauritius, Seychelles Supports economic and trade cooperation (IOC) in agriculture, fisheries, and ecosystems Southern African Devel- 1980 Angola, Botswana, Dem. Rep.of Congo, Formerly Southern African Development opment Community Lesotho, Malawi, Mauritius,Mozambique, Coordination Conference (SADC) Namibia, Seychelles, South Africa,Swaziland, Tanzania, Zambia, Zimbabwe West African Economic 1994 Benin, Burkina Faso, Cote d'Ivoire, Guinea- Aims to create a common market based on the and Monetary Union Bissau, Mali, Niger, Senegal,Togo free movement of goods, services, capital, and (WAEMU) persons Southern African 1910 Botswana, Lesotho, Namibia, South Africa, Aims to maintain free trade among member Customs Union (SACU) Swaziland countries, and common external and excise tariffs for customs area Source: Japan Center for International Finance (2003). tions-related products and parts are also among plied to industries in Africa, including mining indus- Africa's major imports (e.g., radiotelegraphic and tries. radiotelephonic transmitters, electronic line telephonic and telegraphic apparatus, and telecommunications South Africa and North African countries are the lead- equipment parts). Although the use of these prod- ing importers of these products of transportation, ucts is of course not limited to industry and does in- communication, and machinery, reflecting their rela- clude residential use, it is nonetheless important to tively large industrial sectors as well as consumers' note that these products are essential for African purchasing power. The products are exported by such manufacturers in trading with the rest of the world. leading manufacturing nations as France, Germany, Machineries and appliances are also significant im- the United Kingdom, the United States, Japan, Swe- ports for African countries; these are obviously sup- den, and Korea. 22 Chapter 3 ­ Structure and Patterns of Africa's Current Trade Table 3.9 Top 20 Major African Imports: 1999­2001 Annual Average Product Exporters Importers Agricultural and fishery Wheat, non-durum United States (44), France (26), Germany, Egypt (32),Algeria (13), Morocco (13), Nigeria, (5th, 1.7%) Argentina, Canada, Belgium,Turkey Tunisia, Ethiopia, South Africa, Kenya, Cote d'Ivoire, Senegal, Ghana, Sudan, Cameroon, Mozambique Rice (14th, 0.9%) Thailand (46), India (15), China (14), Pakistan, South Africa (19), Nigeria (19), Cote d'Ivoire (12), United States, Egypt,Taiwan, Italy, Spain Senegal, Ghana,Togo,Libya, Kenya, Benin, Somalia, Mauritius,Tanzania, Guinea, Madagascar, Rep. of Congo,Angola Sugar (15th, 0.8%) Brazil (38), France (22), Belgium (12), Algeria (18), Nigeria (17), Egypt (14), Libya,Tunisia, South Africa, Spain, Italy, Germany, Netherlands, Ghana, Mauritania, Somalia, Kenya,Angola, Morocco, UK, Zimbabwe, Mexico,Thailand Guinea, Mozambique,Tanzania, Gambia, Mali Milk and cream France (27), Netherlands (21), Belgium, Germany, Algeria (38), Egypt, Nigeria, Libya, Cote d'Ivoire, (16th, 0.8%) UK, Poland, New Zealand,Australia, South Africa, Senegal, Mauritius, Mali,Angola, Ghana, South Africa, United States, Canada, Ireland, Denmark, Spain Tunisia, Sudan, Benin, Morocco, Cameroon Maize (20th, 0.7%) United States (65),Argentina (2), South Africa, Egypt (47),Algeria (12), Morocco,Tunisia, Zimbabwe, Zimbabwe, France Kenya,SouthAfrica,Libya,Tanzania,Angola,Malawi,Zambia Automobile Passenger cars France (20), Germany (19), Japan (17), Korea (12), South Africa (25),Algeria (13), Egypt (11),Tunisia, (2nd, 2.9%) Belgium, Spain, UK, United States, Netherlands, Morocco, Libya, Nigeria, Ghana, Cote d'Ivoire,Kenya, Italy, South Africa,Turkey, Brazil,Austria Angola,Benin,Mauritius,Zimbabwe,Tanzania,Cameroon Automobile parts Germany (17), Japan (16), France (12), Italy, UK, South Africa (44), Egypt (10),Algeria, Morocco, (4th, 2.2%) United States, Oman, Spain, Korea,Taiwan, Belgium, Nigeria,Tunisia, Libya,Tanzania, Kenya, Zambia, South Africa, Sweden,Thailand,Turkey Zimbabwe, Ghana Transportation vehicles Japan (37), France (13), Germany, South Africa, South Africa (16), Egypt (14),Algeria (10),Tunisia, (6th, 1.6%) United States, UK, Spain, Korea, Belgium, Italy, Morocco, Nigeria, Kenya, Zimbabwe, Ethiopia, Ghana, Netherlands, China Libya, Mozambique,Angola,Tanzania, Mauritius, Cameroon, Cote d'Ivoire,Zambia,Malawi,Sudan,Gabon Telecommunication equipment Radio-telegraphic France (21), UK (16), Finland (14), Sweden (13), South Africa (45), Egypt (15), Morocco (11),Tunisia, (11th, 1.1%) Germany (11) Nigeria,Algeria, Cote d'Ivoire, Kenya, Dem. Rep. of Congo,Tanzania, Mauritius Telecommunication France (16), Germany (15), United States, Sweden, SouthAfrica (34),Egypt (20),Algeria,Morocco,Tunisia, equipment parts UK, Italy,Spain,Korea,Belgium,Japan, Finland, China, Nigeria, Libya,Cote d'Ivoire, Kenya,Zimbabwe,Angola, (12th, 1.1%) South Africa, Singapore, Ireland,Taiwan, Netherlands Sudan, Ghana Electric line tele- France (26),UK (10),Germany,Sweden,United States, South Africa (34),Egypt (21),Morocco, Nigeria,Algeria, phones (17th, 0.8%) Italy,Finland, Japan, Belgium, Spain,SouthAfrica,China, Tunisia, Kenya, Cote d'Ivoire, Zimbabwe, Senegal, Netherlands, Norway, Ireland,Taiwan, Singapore Libya, Ghana,Tanzania Capital goods and appliances Electric appliances,incl. France (34), Germany (19), Italy, UK, Japan, United SouthAfrica (18),Egypt (18),Tunisia (17),Morocco,Algeria, switches,relays,fuses, States, China, South Africa, Sweden, Spain, Malta, Libya,Nigeria,Cote d'Ivoire, Sudan,Ghana,Mozambique, (9th, 1.2%) Belgium, Portugal, Netherlands Zimbabwe,Tanzania, Senegal,Angola, Kenya Machinery for special- Italy (27), Germany (13), France (12), United States, Egypt (22),SouthAfrica (18),Algeria, Morocco, Nigeria, ized industries UK, Spain,Taiwan, Korea, Japan, India, China,Austria, Tunisia, Libya, Sudan,Angola, Kenya, Cote d'Ivoire, (13th, 1.0%) South Africa, Belgium, Canada, Netherlands, Sweden Ghana, Zimbabwe, Cameroon,Tanzania Construction & mining United States (68), UK, France, Germany, Italy, Algeria (16), Nigeria (15), Egypt (14),Angola (12), machinery parts Netherlands, Singapore, Sweden, China South Africa, Equatorial Guinea, Gabon, Libya, Rep. of (18th, 0.7%) Congo, Ghana, Cameroon, Sudan,Tunisia Construction & mining France (13), Japan (13),United States (11), Germany, SouthAfrica (23),Egypt (17),Tunisia, Nigeria, Morocco, machinery (19th, 0.7%) UK, Belgium, Italy, SouthAfrica,Austria, China, Brazil, Algeria, Ghana, Libya, Cote d'Ivoire, Ethiopia, Sudan, Korea, Finland, Netherlands, Sweden, Spain Angola, Zimbabwe, Cameroon,Tanzania, Zambia (continued) Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 23 Table 3.9 Top 20 Major African Imports: 1999­2001 Annual Average (continued) Product Exporters Importers Cotton-textile Cotton fabrics France (19), China, Italy, India, Germany, Spain, Tunisia (32), Morocco (22), Benin, South Africa, (7th, 1.5%) Belgium, Netherlands, Pakistan, UK, Hong Kong, Mauritius,Egypt,Nigeria,Madagascar,Togo,Cote d'Ivoire, Taiwan,Thailand, Mauritius Gambia, Kenya,Tanzania, Mali, Niger, Ghana,Algeria Other Ships (1st, 3.5%) Korea (29), Japan (20), France (15), Italy (11), Liberia (92),Tunisia Germany, Spain, Norway, Singapore, Poland, China,Taiwan Medicine (3rd, 0.7%) France (44), UK, Belgium, India, Germany, Italy, Algeria (18), South Africa (17), Nigeria, Egypt,Tunisia, Netherlands, Denmark, South Africa, United States, Cote d'Ivoire, Morocco,Libya, Kenya, Cameroon, China, Jordan,Austria, Spain, Kenya Senegal, Ghana, Uganda, Rep. of Congo, Sudan, Burkina Faso, Zimbabwe, Benin, Gabon,Tanzania, Mali Crude oil (8th, 1.4%) Nigeria (90), UK,Venezuela, Mexico Cote d'Ivoire (38), South Africa (18), Ghana (16), Cameroon (11), Senegal, Morocco, Burkina Faso Aircraft (10th, 1.2%) United States (62), France (18), Italy (11), South Africa (30),Tunisia (15), Ghana (11), Morocco Germany (11), Egypt,Algeria, Cote d'Ivoire, Kenya, Mauritius, Madagascar, Ethiopia, Nigeria Note: Numbers in parentheses after country names are the percentage shares of total trade values (only 10% or above are indicated.) Source: UN Comtrade. Emerging supply chains in the automobile sent Africa's seventh largest import, brought in by and textile sectors the major apparel-making countries on the continent Although the automobile is one of Africa's major such as South Africa, Mauritius, and Northern Afri- imports, note that South Africa is emerging as an can countries. Exporters of cotton fabric include China industrial hub for this product on the continent. The and Taiwan, both of which have invested significantly data show that roughly 2 percent of all passenger in Southern Africa's garment industry. Mauritius is cars and 6.5 percent of all motor vehicles for goods one of the important exporters of cotton textiles to transportation imported by African countries are ac- Africa, hinting at the effect of an intraregional supply tually shipped from South Africa. In fact, South Af- network for garment production. Cotton is, as men- rica is ranked fourth for the export of motor vehicles tioned earlier in this chapter, a major African export, for goods transportation after Japan, France, and Ger- particularly from a few countries in the Western and many. At the same time, South Africa imports 45 Central African subregions; the leading importers of percent of all African imports of automobile parts African cotton are--also as noted earlier--found in from these same countries. Thus, there are clear link- Asian countries. Therefore, a global value chain can ages between the imports of assembly components be traced from cotton production in Africa, to fabric from the home countries of major automobile com- production in Asia's textile industry, and back to Af- panies and the exports of assembled automobiles from rica for garment production by the African apparel South Africa. industry. While the automobile provides one example of an African country participating in the global supply chain Large food imports of manufactured products, another--perhaps more Some food products appear among the top 20 ma- visible--example is the global supply chain of cotton jor imports of African countries. Wheat is ranked fifth fabrics and garment products. Cotton fabrics repre- (1.7 percent) and is largely supplied by the United 24 Chapter 3 ­ Structure and Patterns of Africa's Current Trade States (45 percent) and France (26 percent). Rice is Table 3.10 Food Imports, by Region/Country: 1997­2002 Average ranked 14th (0.9 percent) and is supplied mostly by Asian countries such as Thailand (46 percent), India Region/country Value (million $) (16 percent), China (15 percent), and Pakistan (9 United States 49,695.91 percent). Preserved, concentrated, or sweetened milk Japan 46,684.44 Germany 37,951.49 and cream also account for a significant share of United Kingdom 28,379.58 Africa's imports (16th, 0.9 percent); these are mostly France 28,241.92 imported from Europe. Taken as a whole, Africa ex- Netherlands 22,631.19 hibits a high level of external dependency for its food Italy 22,106.23 supply, importing $16 billion annually in recent years All Africa 16,008.81 Spain 14,846.10 (table 3.10). The fact that a significant share of Africa's Canada 12,193.93 total import value is spent for food is in sharp con- Russia 10,441.24 trast to the general perception that Africa's compara- Hong Kong 9,534.15 tive advantage is in the agricultural sector. Mexico 8,482.21 Belgium 8,362.97 China 8,128.92 Sub-Saharan Africa 7,923.02 Korea 7,720.13 Denmark 5,539.53 Switzerland 4,801.98 Sweden 4,739.84 Source:World Bank (2004). CHAPTER 4 Structure and Patterns of Africa's Trade with Asia The previous chapter provided an overview of the digit Standard International Trade Classification (SITC) export structure of African countries based on ex- level. As is apparent in the figure, Africa's exports to port matrices. One of the basic findings discussed in Asia are mainly driven by primary commodities and that chapter is that Africa's exports to Asia have related products. Although the figure confirms ear- grown rapidly over the past decade, driven mostly by lier findings, it clearly illustrates that a particular driver crude oil and other primary commodities. This chap- of export growth during the 1990s was the SITC 3 ter presents a more in-depth look at the patterns of product group (mineral fuels, lubricants, and related trade between Africa and Asia throughout the 1990s. materials), exports of which increased dramatically throughout the decade.1 As with the European Union (EU) and United States, oil and its related products ac- 4.1 Basic Characteristics of count for a large share of Africa's exports to Asia. An- Africa's Exports to Asia other significant product group is SITC 9, which in- cludes gold. Asian imports of another group of African Heavy dependency on primary commodities primary commodities--crude materials, inedible, ex- Figure 4.1 illustrates trends in the value of Africa's cept fuels (SITC 2), which include cotton and woods-- exports to Asia for each product group at the one- have also increased significantly since the beginning of the decade. Figure 4.1 In contrast, a few traditional com- Trends in Africa's Exports to Asia, by SITC Product Group: 1990­2002 modity exports--notably food and Million $ live animals (SITC 0)--though 10,000 showing a steady increase in sales to Asia, do not share the same Mineral fuels (SITC 3) 8,000 Manufactured goods (SITC 6) magnitude of increase as these Crude materials, inedible, other product groups. except fuels (SITC 2) 6,000 Other (SITC 9) Food & live animals (SITC 0) 4,000 Chemicals (SITC 5) 1 Because the government of India did not Machinery & transport equipment (SITC 7) report on the country's crude oil imports 2,000 Beverages & tobacco (SITC 1) for 2000, the United Nations Commodity Miscellaneous manufactured articles (SITC 8) Trade Statistics Database (UN Comtrade) Animal & vegetable oils (SITC 4) 0 cannot provide more accurate figures 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 regarding Asian imports from Africa either in the aggregate or for SITC 3 Note: All figures are based on partners' import data. Share figures are based on averages of alone. The statistics used here therefore 1998­2000. do not include Indian crude oil imports Source: UN Comtrade. for 2000. 25 26 Chapter 4 ­ Structure and Patterns of Africa's Trade with Asia Heavy dependency on and Table 4.1 high growth of a few oil Top 20 African Exporters to Asia: 1991 and 2001 exporters 2001 1991 Of the estimated $22 billion Af- Share of total Export value African exports % change rica earns annually from its ex- Country ($ million) to Asia (%) Country 1991­2001 ports to Asia in recent years South Africa 8,409.57 37.80 Equatorial Guinea 785088.04 (2000­02), a large share of Angola 2,210.15 9.94 Republic of Congo 31847.15 earnings is concentrated in a Nigeria 1,788.94 8.04 Niger 6997.44 Republic of Congo 1,586.02 7.13 Angola 6878.22 relatively small number of coun- Sudan 1,452.68 6.53 Sudan 968.32 tries. Table 4.1 shows the major Morocco 1,017.60 4.57 Sao Tome & Principe 960.03 African countries exporting to Egypt 664.32 2.99 Guinea 879.98 Asia, and presents both share of Gabon 497.05 2.23 Comoros 730.23 total African export values and Algeria 461.04 2.07 Somalia 539.00 Equatorial Guinea 455.51 2.05 Nigeria 410.91 average annual increase in those Zimbabwe 385.64 1.73 Cameroon 372.67 values. Of the 53 African coun- Cameroon 368.96 1.66 Djibouti 366.09 tries covered in this report, the Kenya 272.28 1.22 Benin 357.49 top five exporters--South Africa Zambia 250.89 1.13 Guinea-Bissau 338.79 (37.8 percent), Angola (9.9 per- Tanzania 223.42 1.00 Uganda 223.31 cent), Nigeria (8.4 percent), Re- Cote d'Ivoire 211.04 0.95 Mauritius 186.19 Tunisia 167.46 0.75 Rwanda 162.60 public of Congo (7.1 percent), Ghana 147.48 0.66 South Africa 141.44 and Sudan (6.5 percent)--ac- Senegal 138.66 0.62 Gabon 131.54 count for more than two-thirds Madagascar 127.75 0.57 Algeria 102.27 of total African exports to Asia. All Africa 22,245.78 100.00 All Africa 148.56 These countries are primarily oil exporters. Oil exporters are simi- Notes: Share figures are based on 1998­2000 averages. Rates of changes were computed by taking annual average changes between 1989­91 and 1998­2000.All figures are based on larly notable in terms of their partners' import data. growth performance. As shown Source: UN Comtrade. in the table, many oil-exporting countries are among the fastest region's exports to Asia with a number of nontradi- growing exporters to Asia.2 tional goods, including manufactured products. Other countries with a high rate of increase in Asian ex- Small but growing non-oil exporters ports include Uganda (fish, cotton, and hide), Rwanda While oil-exporting countries have recorded high (tea), Mauritius (fish), and Comoros (vanilla).3 growth in their exports to Asia, other African coun- tries have recorded high growth due to the export of Does the picture change without oil and other--and quite diverse--products. Notably, South major exporters? Africa, which has recently and successfully embarked It is useful to determine the resilience of these trade on a path toward industrialization, contributes to the patterns across the various African countries. Spe- cifically, do the patterns hold when the oil-exporting 2Note that the countries listed in table 4.1 do not include Southern countries in North Africa are excluded, along with African Customs Union countries other than South Africa, since these did not report their trade statistics independently to UN Comtrade prior to 2000. Some of these countries have recorded 3The accompanying Country Analytical Briefs provide country- high growth in their exports of garment products in recent years. specific information on major exports and imports. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 27 South Africa and its growing manufactured goods Figure 4.2 Breakdown of All Africa's Exports to Asia and to the exports, leaving the small, primarily agricultural, ex- World: 1999­2001 (Average) porters from the other parts of the continent? This Exports to Asia section, then, examines the effects on Africa's ex- ports to Asia when exports from Sub-Saharan Africa only, non-oil exports, and exports from Sub-Saharan African countries other than South Africa are sepa- rately considered. All Africa Minus Minus Average annual exports from Africa to Asia are esti- Minus South Northern oil mated to be $22.2 billion. If North Africa is excluded Africa Africa and only Sub-Saharan African exports are consid- ered, this figure drops to $19.8 billion (89.2 percent of total). If only non-oil exports from Sub-Saharan African to Asia are considered, the total value is $11.7 billion (52.7 percent of all African exports to Asia). Given the dominant position of South Africa in the overall African economy, total Sub-Saharan African Exports to the world countries other than South Africa account for a rela- tively small amount of annual non-oil exports to Asia-- All $3.7 billion, or 16.5 percent of total. Africa How does this compare with Africa's worldwide ex- Minus Minus ports, which are estimated to be $134 billion annu- South Minus Northern ally? Again excluding North Africa and focusing only Africa oil Africa on Sub-Saharan Africa, total world exports equal $86.8 billion (64.8 percent of all Africa). Total non- oil Sub-Saharan African exports are $52 billion (38.8 percent of all Africa). Sub-Saharan African countries other than South Africa export $24.9 billion (18.6 percent of all Africa) of all non-oil products. Note: Areas of circles represent proportional shares of These relative shares are presented in figure 4.2. It is respective levels of disaggregation of all Africa's exports. Source: UN Comtrade. clear from the figure that North Africa has a smaller share of all Africa's exports to Asia as compared to the amounts of oil they import from Sub-Saharan its share of all Africa's exports to the world. This dis- African countries. On the other hand, South Africa proportion reflects the dominance of the European has become very critical to trade relations between Union as an export destination for North African Africa and Asia, because of both its growing domes- countries (table 3.8). The share of non-oil Sub-Sa- tic industries and its rich natural resources. South haran exports as a proportion of all African exports Africa's growing importance as a trade partner for is higher among exports to Asia than it is for exports Asian countries, particularly Japan, makes the share to the world as a whole. Although oil is the leading of other Sub-Saharan African countries' non-oil ex- export from Africa to Asia, the United States and ports relatively small with regard to Africa's total ex- some European countries surpass Asian countries in ports to Asia. 28 Chapter 4 ­ Structure and Patterns of Africa's Trade with Asia Given the small amount of non-oil exports to Asia growth? This question can be answered by determin- from Sub-Saharan Africa except for South Africa, ing the extent to which Africa has grown its exports should it be concluded that such exports are insignifi- to Asia relative to other regions' exports to Asia. Has cant to interregional trade? And are the general trends Africa outpaced these other regions? discussed above still valid in the absence of oil and with- out South Africa and the Northern African countries? Table 4.2 indicates that it has. The table shows the annualized rate of change in exports from various Figure 4.3 shows that the general trend is still valid regions to Asia during the 1991­2001 period for 10 with regard to the relatively small amount of exports. SITC product groups. African exports have outpaced The figure traces historical trends for some major other regions' exports, recording a 10.8 percent an- categories of non-oil exports during the 1990s. Al- nual average growth rate, as compared to 7.22 per- though modest, there is an increase in total non-oil cent for Asia's total worldwide imports. Note that this exports to Asia from Sub-Saharan African countries rate is higher than that for Asia's intraregional trade other than South Africa. The trend in agricultural (9.10 percent), which is considered an important driv- exports essentially resembles the pattern for total non- ing force of economic development in the region. oil exports, suggesting that the latter are primarily driven by the former. Manufacturing exports were By product category, SITC 3 and 9 show strong growth, rather stable over the 1990s. In contrast, there was a reflecting increases in oil and gold exports. Primary small but steady increase in food exports from Africa commodities in SITC 2 and resource-based process- to Asia. Thus, the general observation that non-oil ing products in SITC 6 are apparently reflected in exports to Asia are small but are steadily increasing the above-average growth rates of those groups. The is valid. importance of Africa's small but growing manufactur- ing exports to Asia, discussed in chapter 3, is appar- Africa outpaces other regions in growth of ently also significant from Asia's perspective, as the exports to Asia increase in imports from Africa in SITC 7 and SITC 8 has outpaced imports from other regions. Although Is the strong growth of Africa's exports to Asia due only a handful of countries including South Africa and to economic growth among the Asian countries, Northern African countries are behind those figures, rather than a reflection of Africa's own economic Table 4.2 Figure 4.3 Average Annual Change in Asian Imports by Region of Trends in Non-Oil Exports to Asia from Sub-Saharan Origin and SITC Product Group: 1990­2001 (%) Africa, Excluding South Africa: 1990­2001 SITC Africa EU U.S. Asia Others World Thousand $ 4,500 0 3.26 4.26 2.36 3.58 5.01 3.66 4,000 1 5.74 2.57 2.08 7.53 7.01 3.42 Non-oil 3,500 2 5.45 6.49 -1.91 1.11 3.34 1.65 Agricultural 3,000 3 22.19 6.48 -4.02 4.34 5.31 4.77 2,500 4 -3.46 -0.79 1.18 6.13 11.17 5.89 2,000 5 5.51 5.26 3.16 11.11 3.06 6.92 Agricultural, raw 1,500 Food 6 6.46 3.07 1.51 5.86 0.09 4.47 1,000 7 13.96 7.39 8.56 12.54 9.39 10.71 500 8 18.12 4.79 8.52 9.66 5.71 8.57 Manufactured goods 9 24.25 1.56 1.17 5.07 3.42 3.70 0 Total 10.80 5.58 5.11 9.10 4.36 7.22 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: UN Comtrade. Source: UN Comtrade. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 29 it is nonetheless true that the fastest growing manu- as shares of total African exports to the region (see facturing exporters to Asia are found in Africa. appendix H for the full list). The table also shows the major exporters and importers of these products to establish a pattern of Africa's exports to Asia. Asian 4.2 Top 20 Exports to Asia countries have become important customers of Afri- Table 4.3 presents a summary of a detailed list of can products, both of those considered to be indus- major African exports to Asia by their relative value trial inputs and of consumer products. Table 4.3 Top 20 Major African Exports to Asia: 1999­2001 Annual Average Product Exporters Importers Mineral fuel Crude oil (1st, 32.9%) Nigeria (34),Angola (23),Rep.of Congo (17),Sudan, China (23), Korea (22), India (22),Taiwan (21), Japan, Egypt, Cameroon, Gabon, Niger, Equatorial Guinea Indonesia, Singapore Coal (10th, 1.5%) South Africa (99) Korea (24),Taiwan (24), Japan (24), India (24), Hong Kong, China Motor spirit and other Egypt (53),Algeria (35), Morocco, South Africa, Japan (59), Korea (28), Singapore (11), Indonesia light oils (14th, 1.3%) Sudan,Angola, Libya Metal and nonmetal mineral products Gold (2nd, 7.6%) South Africa (98), Zimbabwe India (64), Korea (19),Hong Kong,China,Thailand, Japan Platinum (3rd, 5.0%) South Africa (100) Japan (92), Korea, Hong Kong, China Aluminum (6th, 3.3%) South Africa (99) Korea (32), Japan (32),Taiwan (13), Malaysia,Thailand, Indonesia, Hong Kong, China Ferro alloy (7th, 3.1%) South Africa (91), Zimbabwe Japan (51),Taiwan (29), Korea (18) Copper (11th, 2.4%) Zambia (57), South Africa (38),Tanzania Taiwan (25), Japan (18),Thailand (17), Korea, Malaysia, China, India, Singapore, Indonesia, Pakistan Iron ore (12th, 1.7%) South Africa (99) China (54), Japan (42), Korea Diamonds (13th, 1.6%) South Africa (60), Rep. of Congo (19), Ghana (18) China (38),Thailand (37), Hong Kong (20), India Nonmineral primary commodities Cotton (4th, 3.5%) Cote d'Ivoire (13), Mali (13), Egypt,Togo, Benin, Thailand (23),Taiwan (22), Indonesia (15), India (15), Zimbabwe, Burkina Faso, Cameroon,Tanzania, Malaysia, Korea, Japan, China, Hong Kong, Philippines South Africa, Sudan, Chad, Central African Republic, Uganda Sawlogs (8th, 2.6%) Gabon, Cameroon, Equatorial Guinea, Nigeria, China (57), India (20), Hong Kong (10), Japan,Taiwan Cote d'Ivoire, South Africa, Mozambique, Liberia Pulpwood (16th, 1.1%) South Africa (99) Japan (97), Korea Chemical wood pulp South Africa (100) Indonesia (29),Taiwan (25),Thailand (16), Japan (12), (20th, 0.8%) India (10), China Agricultural and fishery Crustaceans & mollusks Morocco (51), Mauritania (20), South Africa (10), Japan (85), Hong Kong,Thailand, China (9th, 2.5%) Madagascar, Mozambique, Senegal, Ghana, Gambia Nuts (15th, 1.2%) Tanzania (36), Guinea-Bissau (16),Cote d'Ivoire (14), India (97), Japan Mozambique, Benin, Kenya, Nigeria, Senegal, Ghana Tea (18th, 0.9%) Kenya (83),Tanzania, Rwanda, Burundi, Malawi, Pakistan (95), Singapore, Japan South Africa Tobacco (20th, 0.8%) Zimbabwe (62), Malawi (25), South Africa, Japan (47), China (25), Philippines, Indonesia, Tanzania, Zambia Singapore, Malaysia, Hong Kong,Thailand Other Organic acids (5th, 3.3%) Morocco (53),Tunisia (25), South Africa (12), Senegal India (94), China, Indonesia Ships (17th, 1.0%) Liberia (72), South Africa (26) Singapore (62), India (28), Korea, Pakistan Note: Numbers in parentheses after country names are the percentage shares of total trade values (only 10% or above are indicated.) Source: UN Comtrade. 30 Chapter 4 ­ Structure and Patterns of Africa's Trade with Asia As anticipated, crude oil and gold are the top two is used for industrial catalysts, is highly concentrated exports from Africa to Asia. These two products ac- between South Africa and Japan. Coal exports from count for the basic patterns observed for the corre- Africa are mostly from South Africa. sponding one-digit SITC categories, SITC 3 and 9 (figure 4.1). A few countries export crude oil to Asia, Africa's major SITC 2 (crude materials, inedible, ex- which accounts for one-third of total African exports cept fuels) exports to Asia include cotton and sawlogs; to the region; the largest of these exporters are Ni- several African countries lead in the export of these geria (33.92 percent of total Africa-Asia oil exports), products. Cotton is the fourth-largest African export Angola (23.31 percent), and Republic of Congo to Asia, accounting for over $700 million annually. (17.32 percent). On the import side, China, Korea, The main Asian importers of this product include India, and Taiwan import the largest--and almost Thailand, Taiwan, Indonesia, India, and Malaysia, equal--shares of crude oil from Africa.4 India and each of which has rapidly growing textile and other China are experiencing particularly high growth in light industries. Although exports in fishery products oil imports from Africa. As figure 4.4 shows, these are not prominent at the one-digit SITC level, some two countries are relatively more dependent on Af- agricultural commodities such as crustaceans and rica for their oil supplies than are Japan and Korea, mollusks (shrimps, lobsters, crabs, octopus, squid, for example, which are more reliant on Gulf coun- etc.), nuts, and tea are on the top 20 exports list. tries. Asian importers of these products are concentrated in specific countries, which reflects the particular tastes and food cultures of consumers in those countries. Figure 4.4 Origins of Asian Oil Imports: 1999­2001 (Average) Japan buys 85 percent of Africa's seafood products, reflecting both its traditional food culture and the fact Share in total oil imports (%) that domestic supplies of these products have become 60.0 Middle East & North Africa Sub-Saharan Africa All Africa very costly in recent years.5 Nuts are mostly imported 50.0 by India (97 percent), where again local consumers 40.0 demand such imports. Almost all tea exported by 30.0 Africa to Asia (95 percent) is imported by Pakistan, 20.0 presumably reflecting the tea distribution network 10.0 among the British Commonwealth countries. 0.0 Japan Korea China India Asia Although not on the top 20 list, there are some non- Source: UN Comtrade. traditional exports that are being increasingly exported from Africa to Asia. Notably, table 4.4 lists the major Besides oil and gold, other minerals, mining, and re- importers of passenger cars exported by South Af- lated products are key exports, including aluminum, rica. Asian countries with a relatively higher level of ferro-alloys, iron ore, coal, copper, and diamonds. income, such as Japan, Taiwan, Hong Kong, Industrialized Asian countries such as Japan, Korea, Singapore, Macao, and Korea, are among the top Taiwan, China, Malaysia, and Taiwan are the major importers of these cars, underscoring South Africa's importers of these metal products. Some specific role as a major production base serving these Asian points are noteworthy. India dominates in terms of gold and diamond imports. Trade in platinum, which 5The fishing quota imposed on octopus in Morocco has driven up the market price in Japan, creating difficulties for vendors of tako- 4If more accurate data were available (see footnote 1), India's yaki, the popular baked octopus balls. Ninety percent of the share would likely be higher. octopus consumed in Japan is imported from Africa. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 31 Table 4.4 Agricultural and fishery products--although Major Importers of Passenger Cars from South Africa: 2000­02 Annual Average relatively small in total export value, these prod- ucts constitute a significant part of exports from Average annual Share of Importer value ($million) total (%) non-oil-exporting countries. Germany 333.89 20.90 Heavy manufacturing products--mainly pro- Japan 277.70 17.38 duced by the rapidly growing industrialized United Kingdom 275.48 17.24 United States 186.19 11.65 economy of South Africa, these products pro- Australia 166.33 10.41 vide significant export earnings to the region. Namibia 128.96 8.07 Botswana 84.31 5.28 4.3 Major Asian Trade Partners Taiwan 41.13 2.57 Hong Kong 34.44 2.16 for Africa's Exports Zimbabwe 31.00 1.94 Table 4.3 shows that the leading importers of Afri- Singapore 29.30 1.83 can products in Asia are a diverse mix of countries. Swaziland 26.26 1.64 Although Japan dominates the region as the leading Austria 13.60 0.85 partner in overall world trade, this is not true for Af- New Zealand 13.02 0.81 Zambia 8.65 0.54 rica-Asia trade relations. Countries such as China, Malawi 6.07 0.38 India, Korea, and Taiwan are significant partners with Kenya 5.63 0.35 regard to many high-share African export products. Mauritius 3.12 0.20 In fact, as shown in figure 4.5, the increase of Afri- Macao 2.91 0.18 can exports to Asia is mainly driven by exports to Korea 2.28 0.14 World 1,597.57 100.00 these four countries. Japan was the largest importer of African products in the early 1990s, but India and Source: UN Comtrade. China had surpassed it by the mid-1990s.6 Table 4.3 shows that China, Korea, India, and Taiwan are the largest importers of crude oil from Africa. Finally, markets. Also, as discussed in the chapter 3 (table note that, although the share of mineral fuels in Asia's 3.6), a number of Asian countries, including devel- overall imports from Africa has grown most rapidly oping countries, are major importers of African hide, since the beginning of the 1990s, Asia's large oil im- a so-called "dynamic export." Japan and, to a lesser porters have also increased their imports of non-oil extent, Hong Kong are among the major Asian im- products from Africa during this period. porters of cut flowers from Africa (see table 3.5). Fi- nally, some Asian countries--notably Japan and Singapore--are increasingly importing African gar- 4.4 Trade Complementarity ment products, although the volume involved is still between Africa and Asia much less than that purchased by the EU and United In the previous sections, the growing trade relations States (see table 3.4). between Africa and Asia were characterized in terms of the industries and countries contributing to this Major exports from Africa to Asia can be roughly growth. This section analyzes the extent to which categorized into three groups: Africa and Asia complement each other in their re- Minerals and mining products, including min- eral fuels such as oil--these are exported by a 6 In terms of non-oil exports, however, Japan maintained its handful of countries rich in these natural re- dominance as the major importer of African products throughout sources. the 1990s. 32 Chapter 4 ­ Structure and Patterns of Africa's Trade with Asia Figure 4.5 puting the score, the RCA figures for individual prod- African Exports to Asia, by Importer: 1989­2000 ucts are aggregated, with each product weighted by Value of imports from Africa (million $) share of total exports or imports of the country. The 7,000 India complementarity score is higher if there are particu- 6,000 lar products for which both countries are, respectively, a significant exporter and importer and have high 5,000 shares in their respective trade profiles. Appendix D 4,000 Japan presents the detailed methodology for computing the Korea complementarity score. 3,000 Taiwan 2,000 Among Asian countries, India (27.8), Korea (11.8), ASEAN China and Japan (6.3) have strong complementarity with 1,000 African countries on average; these countries are fol- 0 lowed by Thailand (3.9), Pakistan (3.3), the Philip- 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 pines (1.9), and Indonesia (1.6). Other countries such as Singapore (0.6), Hong Kong (0.1), Taiwan (0.0), Notes: The ASEAN countries are Indonesia, Malaysia, the Philippines, Singapore, and Thailand.All figures are based on China (-0.3), and Malaysia (-1.2) do not show high partners' import data. complementarity.8 The average complementarity Source: UN Comtrade. score for the 12 Asian countries studied here is 2.0. The weak complementarity for some Asian econo- spective trade profiles. More specifically, the mies such as China and Taiwan seems counterintuitive complementarity between the export structure of given the growing volume of African exports to these African countries and the import structure of Asian Asian economies. The reason for China's unexpect- countries is assessed--that is, how products that Af- edly low score, for example, is because the country rican countries are relatively strong in exporting has been obtaining raw materials mostly from do- abroad coincide with products Asian countries are mestic sources until recently. Also, commodity trad- relatively dependent on as imports. ing represents only a very small portion of well-diver- sified trading countries such as Hong Kong or Table 4.5 is a matrix of complementarity between Singapore, a fact that brings down their comple- African countries as exporters and Asian countries mentarity scores. as importers. A complementarity score in the matrix essentially represents goodness of fit of a particular India's score is outstanding compared to the rest of Asian country's import profile to a particular African the Asian countries. India imports a large amount of country's export profile relative to the world as a imports from Africa, and its dependence on these whole, applying revealed comparative advantage imports is quite high. As shown in figure 4.6, India (RCA) to African countries as exporters and its im- has a significantly higher level of dependence on im- port analogy to Asian countries as importers.7 In com- ports from Africa as compared to other Asian coun- tries. This fact certainly drives up the complementarity of the India-Africa trade structure. Specific products 7The accompanying Country Analytical Briefs contain country- and product-specific complementarity analyses using the concept of RCA and its import analogy. In the briefs, the exported and 8Some figures are negative due to log transformation of numbers imported products are ranked in order of revealed advantages. less than 1. The negative index figures simply indicate weakness The ranking concordance between the exporter side in Africa and of complementarity; they do not mean a reversal in the importer side in Asia is then analyzed for specific bilateral pairs. complementarity. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 33 Table 4.5 Africa-Asia Trade Complementarity Score Chart India Korea Japan Thailand Pakistan Philippines Indonesia Singapore Hong Kong Taiwan China Malaysia Asia Angola 98.2 41.9 20.1 14.2 8.9 7.4 4.3 2.5 0.3 -0.2 -1.4 -4.4 6.9 Burundi 4.5 0.3 0.4 0.1 4.8 -0.4 -0.2 -0.3 0.1 -0.2 0.0 -0.2 -0.3 Benin 4.3 1.5 0.0 6.4 21.8 0.3 30.6 0.0 -0.2 1.3 0.0 0.2 0.7 Burkina Faso 5.1 2.1 0.1 6.3 17.7 0.3 30.7 0.0 -0.1 1.3 -0.1 0.6 0.8 Botswana 97.3 -0.1 -0.5 1.9 0.0 0.0 0.0 -1.0 4.2 -0.5 -1.0 -0.6 0.2 Cen.Afr. Rep. 95.8 0.0 -0.8 2.5 1.6 0.1 2.8 -1.0 4.1 -0.3 -0.6 -0.6 0.3 Cote d'Ivoire 0.5 -0.1 0.0 0.3 1.4 -0.1 1.6 0.0 0.0 0.1 0.1 0.3 0.0 Cameroon 30.9 13.5 6.8 5.0 3.8 2.4 2.6 0.8 0.0 0.2 0.5 -1.4 2.4 Rep. of Congo 81.2 36.5 17.9 12.2 9.1 6.4 3.8 2.6 0.1 -0.1 -0.9 -3.8 6.1 Comoros 0.4 -0.1 0.1 0.0 1.1 0.1 0.8 0.0 0.0 -0.1 0.1 0.2 0.0 Cape Verde 0.7 0.4 1.2 0.3 1.8 -0.1 0.4 -0.2 0.7 -0.1 0.7 -0.2 0.2 Djibouti 0.3 0.3 0.3 0.1 2.7 -0.1 0.2 0.5 0.0 0.1 0.1 -0.1 0.0 Algeria 23.4 17.3 15.6 4.2 6.7 1.9 2.8 1.6 -0.2 0.4 0.0 -1.0 3.7 Egypt 21.1 10.3 5.0 3.4 3.0 1.7 2.3 0.8 0.2 0.0 -0.3 -0.9 1.7 Eritrea 52.9 8.3 0.1 1.1 7.4 0.8 0.2 -0.5 0.8 0.1 -0.1 2.3 1.4 Ethiopia 0.1 -0.2 0.3 0.0 0.4 -0.3 0.0 -0.2 0.0 -0.2 0.0 -0.3 -0.3 Gabon 74.4 33.3 16.1 11.3 6.7 6.0 3.5 1.9 0.0 -0.1 -0.1 -3.5 5.6 Ghana 7.8 0.3 0.7 0.4 0.8 -0.1 0.1 -0.1 0.3 0.2 0.1 0.2 0.1 Guinea 22.2 1.1 0.4 0.8 0.4 0.2 1.1 -0.2 0.8 -0.2 0.7 -0.4 0.1 Gambia 83.8 -0.2 0.9 1.7 0.1 0.0 0.1 -1.0 3.6 -0.5 -0.9 -0.6 0.4 Guinea-Bissau 35.5 14.0 7.5 5.2 5.1 2.5 2.1 0.7 0.0 -0.2 -0.5 -1.6 2.4 Eq. Guinea 78.1 35.4 17.6 12.4 7.1 6.3 3.8 2.0 0.0 -0.1 -0.4 -3.7 6.0 Kenya 0.0 -0.2 0.2 0.0 18.2 -0.2 0.1 -0.4 -0.1 -0.2 0.0 -0.2 -0.1 Liberia 29.2 -0.3 -0.4 0.3 0.1 -0.2 0.0 4.0 1.1 -0.3 -0.1 2.3 0.1 Libya 82.4 38.2 18.5 12.7 10.7 6.7 4.4 2.9 0.0 -0.1 -1.1 -3.9 6.3 Lesotho 9.0 -0.5 0.7 0.0 0.0 -0.1 0.0 -0.6 2.8 -0.5 -0.5 -0.3 -0.3 Morocco 2.7 -0.1 0.6 0.1 0.9 -0.1 0.1 -0.1 0.5 0.0 0.2 0.1 0.1 Madagascar 0.1 -0.2 2.0 0.0 1.3 0.0 0.7 -0.2 1.0 -0.2 -0.2 -0.1 0.1 Mali 3.9 2.1 0.0 8.8 24.4 0.3 42.0 -0.3 -0.3 1.6 -0.2 0.1 0.9 Mozambique 2.0 0.2 4.1 0.9 2.6 0.0 4.0 -0.3 0.1 0.1 0.0 -0.1 0.6 Mauritania 0.0 1.6 9.3 1.9 0.1 0.5 -0.1 -0.4 0.0 -0.2 3.2 -0.5 1.7 Mauritius 0.8 0.1 0.7 0.1 0.0 0.0 2.5 -0.3 1.5 -0.3 -0.1 0.6 0.0 Malawi 0.0 -0.1 0.4 0.3 5.0 1.6 1.9 -0.2 -0.1 -0.1 -0.1 0.2 0.0 Namibia 14.6 0.4 3.2 2.1 0.2 0.0 0.0 -0.2 0.5 -0.1 0.0 -0.2 0.5 Niger 47.4 22.0 11.4 7.3 4.6 3.9 2.4 1.2 0.0 -0.2 -0.8 -2.4 3.6 Nigeria 94.6 43.7 21.2 14.6 9.0 7.7 4.5 2.6 0.0 -0.1 -1.3 -4.6 7.2 Rwanda 18.0 2.6 0.2 0.3 9.0 -0.4 -0.1 -0.3 0.2 -0.1 0.0 0.4 0.2 Sudan 45.8 21.1 10.1 7.4 5.2 3.7 3.8 1.2 0.0 0.0 -0.6 -2.2 3.5 Senegal 3.2 0.0 3.2 0.6 1.1 0.0 0.9 -0.3 0.0 -0.1 0.0 -0.2 0.4 Sierra Leone 39.8 -0.2 -0.8 0.4 -0.7 -0.6 -0.3 -1.0 1.1 -0.8 -0.7 -1.0 -0.5 Somalia 0.0 0.0 0.2 0.1 0.7 0.1 0.3 0.1 0.0 0.0 0.0 0.0 0.0 S.Tome & Principe 0.0 0.4 3.9 3.1 1.6 -0.1 0.1 0.0 -0.1 -0.2 0.2 0.0 0.6 Swaziland 0.8 0.9 0.3 0.5 0.1 2.4 5.4 -0.1 0.4 -0.1 0.1 2.9 0.2 Seychelles 0.0 -0.1 4.2 1.0 0.0 -0.1 0.0 -0.4 -0.3 -0.3 0.0 -0.3 0.3 Chad 3.7 2.3 0.0 9.0 24.9 0.4 42.8 0.0 -0.2 1.8 -0.2 0.3 1.0 Togo 5.0 0.9 0.1 3.4 9.7 0.2 16.3 -0.1 0.0 0.6 0.0 0.1 0.4 Tunisia 1.8 0.1 0.3 0.2 0.7 0.0 0.1 -0.2 0.7 -0.2 0.1 -0.2 -0.1 Tanzania 2.6 0.1 0.4 0.7 3.1 0.1 2.8 -0.1 0.0 0.1 0.0 0.0 0.0 Uganda 0.1 -0.2 0.4 0.3 0.9 -0.2 1.1 -0.2 0.0 -0.1 0.0 -0.2 -0.3 South Africa 16.1 2.4 1.2 0.2 1.7 -0.1 0.1 -0.2 0.3 0.4 -0.1 0.3 0.5 D. R. of Congo 92.8 1.8 0.2 2.3 0.4 0.3 0.2 -0.8 3.8 -0.4 -0.9 -0.8 0.5 Zambia -0.1 2.0 0.0 0.9 0.3 -0.1 1.0 -0.3 0.0 3.1 1.4 0.6 0.4 Zimbabwe 2.0 0.7 0.3 0.6 1.9 0.6 3.2 -0.1 0.0 0.4 0.0 0.2 0.1 All Africa 27.8 11.8 6.3 3.9 3.3 1.9 1.6 0.6 0.1 0.0 -0.3 -1.2 2.0 Oil Gold, diamonds Cotton, textiles Seafood Source: Authors' computation based on UN Comtrade. 34 Chapter 4 ­ Structure and Patterns of Africa's Trade with Asia Figure 4.6 Oil matches African Imports as Shares of Total Imports to Asian Countries Strong oil-related matches are found between Angola, Republic of Congo, Nigeria, and Sudan on the Afri- Share of imports from Africa (%) can exporter side and India, Korea, and Japan on 14 India the Asian importer side. As shown in the Country 12 Analytical Briefs, oil constitutes most of the exports to Asia from these African countries: Angola (99.6 10 percent), Republic of Congo (93.2 percent), Nigeria (93.3 percent), and Sudan (88.8 percent). Some Af- 8 rican countries have emerged as major oil-producing countries in recent years. At the same time, with the 6 exception of a few countries such as Indonesia, many Asian nations are dependent on a foreign supply of 4 Korea oil--which is indisputably a most integral need for China Taiwan the numerous manufacturing activities growing up 2 Japan throughout Asia. The rising standard of living among ASEAN the Asian population also makes for a significant 0 amount of oil consumption. Since oil accounts for 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 the major portion of Africa's exports to Asia (one- Notes: The ASEAN countries are Indonesia, Malaysia, the third of the total export value is from crude oil), the Philippines, Singapore, and Thailand.All figures are based on oil trade pattern between Africa and Asia seems to partners' import data. Source: UN Comtrade. be influencing complementarity significantly. such as oil, precious metals, and gemstones make Gold-diamond matches India's complementarity with a few African countries There is a group of African countries that have sig- quite strong. nificant complementarity with some Asian countries-- most prominently with India--due to their strong pro- One caveat in interpreting these score figures is that file in gold and diamond exports. However, except countries with an undiversified export profile that have for Botswana (diamonds, 46.9 percent of exports to a high reliance on countries with an undiversified im- Asia) and South Africa (gold, 16.4 percent of exports port profile tend to have significantly high average to Asia), this type of match is not realized in actual scores. trade relations between Africa and Asia. As can be verified in the Country Analytical Briefs, other coun- Certain groups of products are considered to consti- tries with high complementarity scores with India do tute the high complementarity in some African and have strong export performance in diamonds, but Asian pairs. There are basically four types of prod- they mostly export their diamonds to the EU rather ucts that characterize the strong exporter-importer than to India. Those countries do, however, export matches between Africa and Asia, which contributes other products to Asia: Gambia (fishery), Central Af- to the higher complementarity figures between some rican Republic (cotton), Sierra Leone (fishery), Eritrea specific countries. The findings can be verified by look- (thermionic, cold cathode, and photocathode tubes), ing at the product-country specific data that were used Guinea (oil), Liberia (ships), Lesotho (wool, textile to construct the index figures. yarn), and Democratic Republic of Congo (base Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 35 metal). Thus, the gold-diamond matches are captur- to drive up their overall complementarity scores with ing overall an unrealized potential in Africa-Asia trade Asia. relations. Cotton-textile matches Seafood matches Cotton-textile is another significant type of match for As with gold-diamond matches, another match that African countries in general. Strong matches are found is quite limited to specific countries is seafood. between a group of African countries that includes Some Asian countries are known for their tradi- Benin, Burkina Faso, Mali, Togo, and Chad, and a tional seafood culture. There are strong group of Asian countries that includes Thailand, Pa- complementarities between Mauritania on the Af- kistan, the Philippines, and Indonesia. The Country rican exporter side and Japan and China (Hong Analytical Briefs show that cotton accounts for a sig- Kong) on the Asian importer side. Historically, sea- nificantly high proportion of the Asian-bound exports food (octopus, squid, lobster, etc.) has been sourced of these African countries: Chad (98.2 percent), Mali from neighboring waters. But with rising labor costs (96.2 percent), Burkina Faso (83.6 percent), Benin and declining harvests in nearby waters, a significant (70 percent), and Togo (64.5 percent). In spite of portion of seafood is now either caught in more re- such dominance in their actual export profiles, cot- mote waters by domestic fishery vessels or imported ton has not been as influential as oil, diamonds, or from other countries. African countries with strong gold in terms of driving up country-to-country fishery industries such as Mauritius and Madagascar complementarity scores. One reason is probably the have somewhat diversified export profiles (e.g., they fact that highly priced products such as oil and dia- both export garment products). Thus, although their monds weigh more in the complementary scores seafood exports to Asia are growing, they have yet which are based on trade values. CHAPTER 5 External Trade Regimes and Africa's Trade Patterns This chapter provides an overview of external trade 5.2 EBA and AGOA regimes and how preferential arrangements by its trad- Based on the belief that export growth could acceler- ing partners have contributed to an expansion of ate African development, developed countries have Africa's exports. extended preferential market access to African coun- tries with the aim of promoting the continent's exter- 5.1 Africa's Trade Regimes nal trade and thereby facilitating its integration into the global economy. In particular, the European Union Recent years have witnessed a proliferation of re- (EU) and the United States have implemented vari- gional trade agreements (RTAs), including bilateral and ous measures to facilitate exports from the region. multi-party agreements as well as preferential arrange- The EU currently extends preferential access to its ments, provided by developed countries to develop- market under the Cotonou Agreement and the Every- ing countries to facilitate market access. While it is thing But Arms (EBA) initiative (box 5.2). The Cotonou debatable as to whether RTAs actually enhance glo- Agreement, which replaced the Lomé Convention bal welfare (box 5.1), it is a fact that they have had for Africa, the Caribbean, and the Pacific, covers all significant implications for the trade-related economic Sub-Saharan African countries; the EBA initiative development of developing countries. covers all African least developed countries (LDCs). Appendix E provides comprehensive data on the Despite preferential treatment, Africa's exports to the multilateral, bilateral, and regional trade institutions EU have been stable overall during the past decade. with which African countries are affiliated. The ap- Furthermore, it is considered that the introduction of pendix also shows countries' eligibility status vis-ŕ-vis the EBA has had little incremental effect on increas- several preferential treatments provided by major in- ing African trade because all industrial and most agri- dustrialized countries. World Trade Organization cultural and fishery products exported to the EU had (WTO) membership has been extended to 41 of already enjoyed preferential access.1 Africa's 53 countries. Even though membership in the WTO is expected to provide these countries with The United States enacted the African Growth and most favored nation (MFN) status, membership itself Opportunity Act (AGOA) in 2000 with the aim of does not necessarily guarantee a growth in export earnings for African countries; this is because most 1Brenton (2003). Also, appendix E of this report summarizes the African countries have already been granted prefer- coverage of these preferential treatments and average annual ential treatment under the Generalized System of change in export values for African countries over the past decade. Preference (GSP) and accorded tariff rates much lower As shown in the appendix, there is no direct correlation between than MFN rates. extension of preferential treatments and increases in exports from Africa to the EU. 37 38 Chapter 5 ­ External Trade Regimes and Africa's Trade Patterns Box 5.1 Global versus Regional Trade Arrangements As world trade has grown in recent decades, so too has the use of regional trade agreements.About 260 RTAs were in force or under negotiation in 2000, compared to only 20 in 1979.The share of world trade conducted under RTAs has grown as well, reaching 43 percent in 2000 (WTO 2002); this proportion is expected to exceed 50 percent in 2005. Clearly,people around the world have come to view RTAs as beneficial and pursue them vigorously.This does not mean that global trade arrangements (under the aegis of theWorldTrade Organization) have been neglected;in fact,they have become more important than ever,with expanding membership and increasingly ambitious aims.But it is worth explor- ing whether the expansion of regionalism is helping or hurting the goals of multilateralism. The use of RTAs has spread across all regions,seized on by nations at all stages of development.The initial impetus for regionalism came from the Western European push in the 1980s for a deeper and broader economic integration, which ultimately resulted in the European Union. In North America, the United States, Canada, and Mexico signed the North American Free Trade Agreement in 1994. The 1990s also saw the emergence of Mercosur (1991) in Latin America, the Association of Southeast Asian Nations Free Trade Agreement (1991) in Asia, and the Southern African Development Community (1992) and Common Market for Eastern and SouthernAfrica (1994) inAfrica.But parties to free trade agreements (FTAs) do not necessarily belong to the same geographical region.The United States,for instance, has signed FTAs with Australia and Singapore. Similarly, the EU has concluded FTAs with Mexico and South Africa. It is not difficult to see why more and more countries and groups are pursuing RTAs.Much of the original impetus came from a dissatisfaction with the lack of progress made under the General Agreement on Tariffs and Trade (GATT, now theWTO),which requires the consent of all members.With high trade barriers around the world,many countries recognized the potential for improving global welfare by proceeding with trade liberalization on a bilateral or regional basis.In addition,some countries wished to pursue a deeper integration (covering investment,labor,and harmonization of rules) that was unlikely to be achieved at the global level, but would be feasible if done selectively. But RTAs are not always beneficial or benign to global welfare. Some effectively keep out, or discriminate against, more efficient foreign competitors.Instead of creating more trade, such arrangements produce trade diversion, result- ing in less specialization and higher cost of production. In addition, the proliferation of RTAs, with multiple agreements and overlapping membership for individual countries, has added considerable complexity to the global trade environ- ment,making it difficult for each country to comply fully with all its commitments.For example,one imported item may be subject to several possible tariff rates, depending on the country of origin and whether certain standards are met. Is the spread of regionalism actually hurting or slowing the progress of multilateral liberalization?There is as yet no clear verdict. Critics argue that RTAs adversely affect multilateral goals by distracting attention and diverting energy from the multilateral process. Moreover, RTAs often exclude problematic sectors, such as agriculture,and thus blur the focus on the deeper reforms needed at the global level. It is nonetheless clear that RTAs serve important purposes, including creating competition to the multilateral approach.The potential harm of regionalism can be kept to a minimum by avoiding new trade barriers to outsiders and including all sectors under each RTA. improving economic development and political sta- were already covered by similar preferential treat- bility in the region. Overall, the impact of the initia- ments under the U.S. GSP. tive has largely been limited to apparel products and products from non-LDC AGOA beneficiaries, which The incremental effects of these new initiatives are have gained preferential treatment beyond that cov- thus limited to only a few products; expanding the ered by the U.S. GSP. As with the EU's EBA initia- scope and coverage of GSP programs would essen- tive, most African products entering the United States tially yield the same effects. In fact, Japan expanded Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 39 Box 5.2 it does not necessarily make it a EU and U.S. Preferential Trade Measures for African Countries priority for Japan to initiate an In 2001,the EU introduced the Everything ButArms initiative.The EBA regulation AGOA-equivalent program. grants duty-free access to imports of all products from the least developed coun- tries, with the exception of arms and munitions, and without any quantitative Of course, GSPs themselves are restrictions. Liberalization was immediately implemented except for three prod- not flawless. Nontariff barriers, ucts:fresh bananas,rice,and sugar,whose tariffs will be gradually reduced to zero. such as standards and other "be- Prior to the EBA initiative, the Generalized System of Preference and the Lomé hind-the-border" issues, as well Convention--the latter of which has since been replaced by the CotonouAgree- as the concept of rules of origin, ment in 2000--had existed to grant developing countries,includingAfrican coun- continue to restrict African coun- tries,preferential trade access to the EU.Under these schemes,all industrial prod- tries' access to developed coun- ucts from Africa enter the EU duty- and quota-free; most agricultural products try markets. These issues remain have been completely liberalized or enjoy preferential access such as duty-free to be discussed at various bilat- quotas. eral and multilateral trade fo- TheAfrican Growth and OpportunityAct was signed into U.S.law in 2000 as rums, including the WTO, and the latest in a series of regional initiatives in U.S.trade policy toward Sub-Saharan require further cooperation African countries. It aims at broadly promoting economic development in Africa, among countries for mutually enabling countries to embrace globalization, and securing durable political and beneficial resolution. economic stability. It offers increased preferential access for African exports to the United States.AGOA benefits are not extended automatically. Rather, the act 5.3Apparel under establishes a set of eligibility criteria involving economic reforms,rule of law,pro- AGOA tection of human rights, labor rights, corruption, and other matters. Countries The apparel benefits reaped un- must meet these criteria to be eligible for the AGOA program. der AGOA have had a tangible AGOA's impact is particularly significant for the textile and apparel sectors, effect on beneficiary countries' because such items are exported by nearly all Sub-Saharan African countries and ability to attract foreign invest- because their tariff and quota barriers are relatively high.AGOA countries enjoy ment--especially from Asia-- preferences only if they meet strict rules of origin.Apparel products assembled and on promoting trade in the and even further processed from fabrics and yarns made in the United States are sector.2 Brenton and Ikezuki unrestricted, whereas those assembled from regional fabrics made from U.S. or (2004) summarize the export African yarn are subject to a cap of 1.5 percent of overall U.S.apparel imports;this performance of AGOA benefi- cap will increase to 3.5 percent by 2008 (Office of the U.S.Trade Representative ciaries as shown in table 5.1. It 2003).For LDCs with per capita gross national product under $1,500,unrestricted is apparent from the table that access has been granted even for apparel assembled in those countries using LDC AGOA beneficiaries with foreign fabric or yarn until 2004, whereupon they will be subject to the same apparel benefits have increased restrictions cited earlier.Thus, at least until 2004, LDCs in Africa can enjoy duty- their exports considerably to the free access to the U.S. apparel market as long as their products are assembled in United States (an 80 percent in- their own countries. crease), while LDC AGOA ben- its GSP in April 2003 to provide duty- and quota- 2 Various studies have been conducted to estimate AGOA's free access to an additional 198 items from LDCs; quantitative impact. Ianchovichina, Mattoo, and Olarreaga (2002) use a computable general equilibrium model to estimate impact this means that approximately 93 percent of Japan's based on ex ante simulation. Brenton and Ikezuki (2004) use the imports from LDCs will be duty- and quota-free. Al- number of tariff lines liberalized by AGOA to claim that the AGOA though such expansion of GSP coverage is desirable, apparel preference leads to significant transfers to a small group 40 Patterns and Potential of Africa-Asia Trade and Investment eficiaries without apparel benefits have moved in the Table 5.1 Export Performance of AGOA Countries opposite direction (a 30 percent decrease in exports). A similar pattern exists for non-LDC non-oil-import- U.S. share of Growth in Growth in total exports total exports U.S. exports ing countries, albeit with a lesser degree of deviation (2002) (1999­2002) (1999­2002) between those countries with and without apparel LDCs without benefits. (Oil-exporting AGOA countries have in- apparel benefits 6.4 2.6 -30.2 creased their exports to the United States primarily LDCs with apparel benefits 13.7 19.5 80.1 in crude oil during the same period; this presumably would have happened without AGOA.) In fact, the Non-LDC non-oil exporters without positive effect from the apparel benefit is the most apparel benefits 8.2 15.4 -16.8 and perhaps only visible gain in African exports re- Non-LDC non-oil sulting from AGOA.3 exporters with apparel benefits AGOA's apparel benefits have had such visible im- (liberal rules of origin) 6.6 21.5 38.0 pacts because general tariff and quota barriers are relatively high for these products in accordance with Non-LDC non-oil exporters with the Multifiber Arrangement (MFA). Absent the quota apparel benefits system of the MFA regime, the boom in these prod- (restrictive rules of origin) 13.0 11.1 30.9 ucts in Africa triggered by AGOA would have been much less pronounced, given that it has been driven Source: Brenton and Ikezuki (2004). by the rapid influx of capital from Asian countries. Thus, it is the combination of AGOA and MFA--and not AGOA alone--that has created a window of op- Most of the countries that have taken advantage of portunity for some African countries. And it is ques- the AGOA apparel and textile benefits are located in tionable whether this window remains open and Southern and Eastern Africa. Presumably, this is in whether the opportunity is in any way sustainable. some way correlated to the rapid inflow of foreign Because many African countries--notably South Af- direct investment (FDI) from Asian economies such rica and Mauritius--had been exporting apparel and as India, China, and Taiwan in response to AGOA's textile products before the year 2000, Africa already introduction. Geographic proximity, accessibility to had some industrial bases in the sector. hub ports (e.g., Durban), and language (that is, Anglophone) may have attracted Asian investment more to Southern and Eastern Africa than to Central and Western Africa. of beneficiaries but that, for most countries, AGOA's overall impact is likely to amount to no more than one-tenth of 1 percent of There are two caveats behind this growth of apparel gross domestic product at present. and textile exports in some African countries. One is 3Appendix G ranks countries by growth in export of garment that the growing apparel and textile exports of Afri- products (SITC 842­846), highlighting the countries eligible for AGOA's apparel and textile benefits. Because AGOA was can countries are still small in absolute terms as com- introduced in 2000, changes, if any, should be observed by pared to the amounts exported by countries in other comparing the years before and after its introduction. As the regions (box 5.3). Apparel and textile industries in appendix shows, changes have clearly occurred in some countries Africa are in their infancy. Another caveat is that high after 2000. For example, growth in apparel and textile exports from Namibia, Tanzania, and Botswana shifted from negative to growth in production does not necessarily imply an positive from 2000­01 to 2001­02; and Ethiopia, Kenya, and increase in profitability. Compared to other regions Lesotho have registered high rates of positive changes from 1999 such as Asia, production costs in Africa remain high to 2002. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 41 Box 5.3 Big in Africa, Big in the World? Africa's Apparel and Textile Exports Although growing rapidly, the apparel and textile industries in African countries are still small compared to the top producers in other regions.The following table clearly shows thatAfrica's major apparel and textile exporters are in fact not very prominent in a worldwide ranking. For apparel products,Tunisia and Morocco barely make the top 20.And Mauritius, the leading exporter in Sub-Saharan Africa, ranks only 40th worldwide. China, Italy, Hong Kong, and Mexico each export more apparel products than all 53 African countries taken together.Twenty-six countries--including 12 Asian countries (China, Hong Kong, Indonesia, Korea,Thailand, Malaysia,Taiwan, Philippines, Sri Lanka, and Pakistan)-- export more apparel than the entire Sub-Saharan African region.A similar pattern holds for textile products,for which Africa's share of exports is even less than for apparel products. Top Apparel and Textile Exports (Annual Average 2000­02) Apparel Textile Annual average trade Share Annual average trade Share Rank Country volume ($million) (%) Rank Country volume ($million) (%) 1 China 54,606.34 25.92 1 China 17,907.43 12.22 2 Italy 11,670.74 5.54 2 Italy 11,719.69 7.99 3 Hong Kong 11,287.84 5.36 3 United States 10,756.49 7.34 4 Mexico 8,549.53 4.06 4 Taiwan 10,100.44 6.89 All Africa 8,440.44 4.01 5 Germany 9,997.06 6.82 5 Turkey 7,810.76 3.71 6 Korea 9,383.02 6.40 6 India 5,828.04 2.77 7 Japan 6,418.13 4.38 7 Germany 5,412.97 2.57 8 France 5,878.40 4.01 8 Bangladesh 5,082.75 2.41 9 India 5,590.09 3.81 9 United States 4,869.50 2.31 10 Belgium 4,770.41 3.25 10 Indonesia 4,840.38 2.30 11 Pakistan 4,224.30 2.88 11 Korea 4,598.75 2.18 12 United Kingdom 3,969.63 2.71 12 France 4,475.86 2.12 13 Turkey 3,398.36 2.32 13 Thailand 4,162.50 1.98 14 Netherlands 3,326.22 2.27 14 Romania 3,372.78 1.60 15 Hong Kong 3,280.24 2.24 15 Malaysia 3,128.53 1.48 16 Spain 2,869.28 1.96 16 Taiwan 3,103.07 1.47 17 Indonesia 2,807.89 1.92 17 Tunisia 2,899.00 1.38 18 Canada 2,262.98 1.54 18 United Kingdom 2,797.47 1.33 19 Mexico 1,899.56 1.30 19 Portugal 2,689.08 1.28 20 Free Zones 1,775.39 1.21 20 Morocco 2,672.32 1.27 21 Thailand 1,743.54 1.19 21 Philippines 2,656.08 1.26 22 Portugal 1,511.07 1.03 22 Honduras 2,577.20 1.22 23 Switzerland 1,507.78 1.03 23 Sri Lanka 2,559.55 1.21 All Africa 1,431.33 0.98 24 Dominican Republic 2,389.85 1.13 24 Austria 1,413.09 0.96 25 Pakistan 2,221.95 1.05 25 Czech Republic 1,295.05 0.88 26 Netherlands 2,180.42 1.03 26 Malaysia 1,220.89 0.83 Sub-Saharan Africa 2,178.78 1.03 27 Brazil 828.50 0.57 27 Belgium 2,056.40 0.98 28 Poland 735.41 0.50 28 Poland 2,032.24 0.96 29 Denmark 730.96 0.50 30 Sweden 663.64 0.45 40 Mauritius 922.37 0.44 31 Australia 626.41 0.43 32 Israel 616.31 0.42 46 Egypt 689.64 0.33 Sub-Saharan Africa 614.92 0.42 33 Iran 506.94 0.35 61 South Africa 385.80 0.18 34 Ireland 492.16 0.34 35 Egypt 482.52 0.33 64 Madagascar 351.46 0.17 41 South Africa 356.51 0.24 71 Lesotho 244.67 0.12 53 Tunisia 204.46 0.14 World 210,703.78 100.00 World 146,595.39 100.00 Source: UN Comtrade. 42 Chapter 5 ­ External Trade Regimes and Africa's Trade Patterns due to low labor productivity and high logistical costs. The expansions of scope and the depth of economic Unilateral preferential measures such as AGOA could integration provide multifaceted windows of oppor- provide visible opportunities for African countries. tunity for African countries, encompassing not only Such measures alone do not make for a substantial free movement of goods and services, but also other transformation of the economies and industries in aspects of market access and economic integration. African countries. These latter include investment and behind-the-bor- der issues such as standards and competition policies 5.4 Deeper Economic Integration (box 5.4). and Africa's Proactive Efforts While the merits of unilateral preferential tariff and quota treat- Box 5.4 The Expanding Scope of Free Trade Agreements ments, which focus on the liber- alization of the movement of As global trade barriers have become progressively liberalized, the focus of inter- goods, are essentially subsumed national trade agreements has shifted away from what is traditionally called"trade," under GSPs, deeper bilateral and or the exchange of physical goods. Since the 1990s, the scope of international interregional economic integra- agreements has expanded significantly to include services (or "invisible trade"), tion initiatives--such as FTAs and the cross-border movement of investment (FDI), and labor.This is a significant economic partnership agree- change, since services represent about 20 percent of total world trade, and the ments--could potentially provide value of FDI in some cases exceeds export revenue.This expanded scope means new and additional opportunities that FTAs facilitate much deeper economic integration than is suggested by the for African countries to enhance term "free trade agreement." their trade activities. The move toward broader FTA scope and coverage is evident at all levels. At the global level,WTO rules were broadened under the Uruguay Round The EU already has FTAs with in 1994 to include the removal of barriers to services and reduce subsi- Northern African countries and dies;investment became part of the agenda somewhat later with the Doha with South Africa. The United Round in 2001. States has initiated an FTA ne- At the regional level,major agreements such as the EU Single MarketAgree- gotiation with Southern African ment and the North American Free Trade Agreement provide for the re- Customs Union (SACU) coun- moval of barriers on investment, freer movement of personnel, and har- tries. On a broader scale, the EU monization or cross-recognition of policies and standards. has initiated discussions with Af- At the bilateral level, the free trade agreement between Australia and the rican, Caribbean, and Pacific United States, concluded in February 2004, is a good example of the new countries to form economic part- trend toward deeper integration. Each country has agreed to provide an nership agreements as a follow- open and secure environment for investors from the other country.The up to the Cotonou Agreement. agreement also covers cross-border trade in services, financial services, Similarly, the United States has telecommunication, and competition policy, as well as government pro- trade and investment framework curement. agreements with the West Afri- In the context of Africa, the members of the SACU (Botswana, Lesotho, can Economic and Monetary Namibia, South Africa, and Swaziland) entered into FTA negotiations with the Union and the Common Market United States in June 2003, as a substantive follow-on to the South Africa-U.S. for Eastern and Southern Africa, Trade and Investment FrameworkAgreements.African countries are also,as mem- as well as with the individual bers of theAfrica,Caribbean,and Pacific group,at an advanced stage of negotiation countries of Nigeria, Ghana, and for economic partnership agreements with the EU. South Africa. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 43 Regional integration initiatives within Africa play a nonreciprocal duty-free arrangements for African potentially significant role in facilitating intraregional exports. economic integration, which is much needed to en- hance the production and trading capability of Afri- Like the rest of the world, Asia's tariff structure tends can countries, particularly of small and land-locked to be more liberal and less restrictive as level of de- countries (see box 3.3). velopment (or per capita income) rises. (For a snap- shot of tariff rates, see table 5.2.) As India and China It is clear that favorable inter- and intraregional trade are the largest countries in the region, with a total regimes for deeper economic integration will help population of more than 2 billion, it might be as- African countries tap into and develop their indus- sumed that their trade regimes determine market trial potential. However, they alone do not guarantee access conditions for Asia as a whole. That percep- the full benefits of export expansion. These trade tion, however, is at some variance with reality: regimes must be supplemented and complemented by the proactive efforts of African economies to build Most Asian countries have either relatively low their local industrial capacities to respond to rapidly rates of protection or completely free trade. In- increasing external demands and provide a business- donesia and Malaysia, for example, have lower enabling environment, accompanied with a strong tariffs than most countries at their respective lev- commitment on the part of their governments. els of development. Furthermore, the economies of Hong Kong, Singapore, and Macao, which together have a gross domestic product of $230 5.5 Market Access and Tariff billion, historically have applied no tariffs on im- Escalation in Asian Countries ported goods. The low levels of protection in Asia While African countries need to take proactive mea- are augmented by a network of bilateral and re- sures in order to realize the full benefits of preferen- gional free trade agreements that further expand tial schemes extended by some developed countries, trade. the issue of market access is still a significant concern to African Table 5.2 producers. As they look to ex- Average Applied Tariff Rates of Asian Countries on Imports from Africa, by SITC pand their Asian export oppor- Product Group (%) tunities in terms of both volume SITC Asia and value-added, they need to group China India Indonesia Japan Korea Malaysia Singapore average consider Asia's specific market 0 31.77 36.58 5.14 5.69 7.02 1.15 0.00 11.65 1 34.06 36.87 5.08 1.27 16.53 0.00 18.59 access conditions. These condi- 2 2.24 9.31 0.26 0.08 4.20 0.10 0.00 2.32 tions are much more favorable 3 7.09 28.60 0.00 0.17 4.78 0.38 0.00 5.04 to African exports than it might 4 56.77 44.67 5.00 1.04 8.00 3.21 0.00 24.97 appear at first glance. Nonethe- 5 10.24 33.34 3.73 0.05 6.87 1.23 0.00 22.22 less, the scope for improving ac- 6 6.12 28.48 2.27 0.63 3.74 1.47 0.00 3.60 cess--and thus expanding trade 7 14.09 29.35 0.40 0.00 2.84 6.30 0.00 5.59 8 27.69 32.37 10.64 5.33 8.24 2.59 0.00 8.47 and investment--remains sub- 9 6.25 35.00 5.78 0.00 3.00 0.06 0.00 34.14 stantial. Asian countries could assist in this effort by implement- Notes: Average applied MFN rates are weighted by imports from the 53 African countries to individual Asian countries.All tariff rates used are for 2001, except for Korea, for which ing such reforms as flattening tar- 1999 rates are used.The Asia average is the average rates for the 12 Asian countries iff escalation and tariff peaks and covered by this study. by adopting new and Source: WITS analysis of UNCTADTRAINS and UN Comtrade. 44 Chapter 5 ­ External Trade Regimes and Africa's Trade Patterns Japan has relatively open markets in line with Although trade and investment have grown rapidly those of the United States and EU. Restrictions between Africa and Asia, substantial opportunities on access to Japan mainly involve a few agricul- remain. A win-win approach open to most Asian tural products, including rice, which enjoys large countries would be to flatten tariff peaks and escala- domestic subsidies. Furthermore, Japan's tions; this could be accomplished by capping tariffs economy accounts for two-thirds of Asia's gross across the board at 15 percent. Trade and invest- domestic product. If the Asian market were to ment options would be significantly expanded as Asian be illustrated by a single country, Japan might be investors relocated legacy industries to Africa while the most representative. retaining access to Asian markets. The more advanced Asian economies, including Japan, Korea, and the This openness notwithstanding, Asia's tariff structure, members of the Association of Southeast Asian Na- like that of all other countries in the world, consists tions, could consider nonreciprocal duty-free arrange- of many peaks and sharp escalations. Raw materials ments to boost investment and employment in Sub- can be imported by domestic industries at relatively Saharan Africa--an arrangement modeled on the low tariff rates, but increasingly higher rates are im- EU's Everything But Arms initiative and the U.S. posed on imported processed or finished products. African Growth and Opportunities Act. Consumers This cascading pattern of tariff rates is especially pro- in Asia would benefit from the resulting expanded nounced in China, India, and Korea (table 5.3). Re- choice and lower prices. cent multilateral efforts to reduce tariffs on industrial products have cut the average rates on industrial goods. But a Table 5.3 significant array of tariff peaks Examples of Tariff Escalation in Asian Countries (%) and escalations remains, espe- Asia cially on sensitive, labor-intensive SITC Product China India Indonesia Japan Korea avg. manufacturing products such as 263 Cotton 90.00 5.06 0.02 0.00 1.00 2.73 textiles, garments, and footwear. 6513 Cotton yarn 9.12 20.00 5.00 2.88 8.00 8.43 652 Cotton fabrics, woven 17.00 34.06 10.00 4.68 10.00 19.21 84512 Jerseys, etc., of cotton 25.00 8.11 13.00 2.86 These escalations and peaks 8462 Undergarments, knitted 21.76 35.00 10.02 13.00 8.29 have major implications for trad- 211 Raw hides/skins (except furs) 14.00 0.04 0.00 0.00 2.00 0.86 ing relations between Africa and 212 Raw furskins Asia. For one thing, the markets 611 Leather 11.44 25.00 1.28 0.96 5.00 9.22 for Africa's manufactured prod- 612 Manufactures of leather 23.26 35.00 5.00 6.18 8.00 2.86 ucts are much more restricted 613 Tanned furskin 20.00 7.00 5.00 8.60 222 Oil seeds 7.00 35.00 4.87 0.77 40.00 0.88 than those for primary products. 423 Vegetable oil 74.92 44.94 0.00 8.00 42.59 Trade in manufactured products 0721 Cocoa beans 9.60 35.00 5.00 0.00 5.00 4.07 is thus constrained. More signifi- 0722 Cocoa powder 19.00 35.00 15.77 cantly, incentives for investing in 07111 Unroasted coffee 15.00 3.33 0.00 2.00 0.06 Africa's processing facilities are 07112 Roasted coffee 31.00 5.00 8.59 8.00 8.12 thereby undermined. Foreign 333 Crude oil 0.00 0.00 5.00 3.98 334 Oil products 8.82 35.00 1.96 2.12 5.72 3.45 and local investors concentrate on traditional products, thereby Notes: Average applied MFN rates are weighted by imports from the 53 African countries to limiting Africa's prospects for individual Asian countries.All tariff rates used are for 2001, except for Korea, for which 1999 rates are used.The Asia average is the average rates for the 12 Asian countries moving up the technological lad- covered by this study. der. Source: WITS analysis of UNCTADTRAINS and UN Comtrade. CHAPTER 6 Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy This chapter discusses the major implications of the Figure 6.1 Change in Share of African Exports by Trading Partner: growing trade relations between Africa and Asia. 1990­92 to 2999­2001 Specifically, it looks at how this trade relationship 100% 4 will contribute to: Africa 5 90% 80% Overall export expansion for African countries. 70% European Union 52 64 60% Market diversification for the primary commod- 50% ity exports on which African countries rely. 40% 19 30% United States Product diversification in the manufacturing sector. 17 20% Asia 16 10% 10 Other 9 6.1 Overall Export Expansion 0% 6 African exports, African exports, 1990­92 average 1999­2001 average Africa's total trade values in nominal terms increased by 3.7 percent annually over the period 1990­2001 Note: All figures are based on partners' import data. (see table 3-1). Exports from all Africa to Asia grew Source: UN Comtrade. by 10.06 percent annually over the same period. Fig- ure 6.1 shows the change in the share of exports share as a destination for African exports underscores from all Africa consumed by each trading partner the importance of understanding patterns of Africa- group between the periods 1990­92 and 1999­ Asia trade within the overall export expansion of Af- 2001. Based on the 1990­92 average, Asia ac- rican countries. Setting aside the issue of terms of counted for 10 percent of total exports from Africa, trade, an increase in exports in terms of value is ba- which increased to 16 percent when calculated based sically an increase in export earnings, which should on the 1999­2001 average. The increase in Asia's be considered a viable first step toward promoting relative weight as Africa's export partner remains even more growth-oriented trade relations between the two when oil is excluded. All non-oil exports from Africa regions. to Asia amount to $13 billion (1999­2001 average), which is about 20 percent of Africa's total non-oil 6.2 Market Diversification: exports and an increase from 15 percent in the early Complementarity of Africa's 1990s. Supply and Asia's Demand Thus, Asia clearly contributes to the expansion of Overall export expansion brings an immediate ben- Africa's exports in the aggregate. Asia's increase in efit from foreign exchange earnings, but the next 45 46 Chapter 6 ­ Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy question is how such earnings from trade can be ex- tined markets by targeting untapped demand for prod- panded in more structured ways. Analyzing the Asian ucts for which African countries already have well- contribution to African countries' overall export ex- established supply bases. There is no doubt that in- pansion reveals that Asia contributes to Africa's ex- creased demand in terms of both number of trade port diversification in two important ways: in terms partners and volume of product required will bring of destined markets (market diversification) and in enormous benefits to suppliers. Such an increase in terms of products (product diversification). Trade in demand will be forthcoming if African suppliers ef- commodities should not be underestimated in build- fectively connect to emerging markets in Asia, in- ing export-led growth strategies as it still constitutes cluding China and India. the most solid foundation for production activities in Africa and the core business of many countries. Even There are two ways in which African exporters can though their scope of value creation is limited com- effectively meet rising demand in Asia. First, Africa pared to manufactured products, primary commod- is an important supplier of raw materials and fuels to ity sectors are large-scale industries in Africa in terms Asian industries. Endowed with rich natural resources, of employment. Because these characteristics are un- Africa supplies essential minerals and mining prod- likely to change in the short run, no realistic trade-led ucts to growing manufacturing sectors in Asia, which growth strategies can be defined without addressing increasingly demand raw materials and energy re- how to enhance earnings from commodity exports. sources to support production. Second, Africa is an important supplier of consumption goods such as food Market diversification is particularly relevant to pri- to rising consumer populations in Asia. Asia is the mary commodity exports, which are considered to most populated region in the world, and the average be the traditional exports of most African countries. income level of its population is increasing more rapidly Unfavorable decreases in the prices of their commodi- than in other developing regions. Growing purchas- ties over the past decades have lessened the magni- ing power in Asia provides a new set of opportuni- tude of export earnings for primary commodity ex- ties for African food producers to expand their exports. porters in Africa; additionally, African countries have experienced difficulty in expanding their exports in Supplying raw materials and energy real terms because of stagnant demand in their exist- resources to manufacturing sectors in Asia ing export destinations. By exploring--and exploit- Natural resource­based products, such as minerals ing--markets in Asian countries, where there is un- and mining products, are relatively homogeneous on saturated rising demand for primary commodities, and the supply side due to their nature as endowed re- by establishing new market relations with them, Afri- sources and have high substitutability on the demand can exporters can find new opportunities to expand side due to the presence of alternative resources and their exports of these products. This is clearly indi- technological advancement. This difference between cated in the complementarity score discussed in chap- supply and demand makes the market mechanism ter 4, where strong complementarity between Africa's more demand-driven. Despite this characterization, supply capacity and Asia's demand exists for several exporters of such products can still implement pro- primary commodities. active strategies from the supply side by exploring As discussed earlier, the expansion of Africa's exports new markets with untapped potential, thereby broad- to Asia during the 1990s was mainly driven by ex- ening their customer base. This is an effective way to ports of primary commodities (see table 4.3). It is offset negative impacts from more established trade therefore quite logical to form an export expansion relations with traditional customers in industrialized strategy for African countries that diversifies their des- countries. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 47 This approach could be interpreted as a way to diver- countries for the past 20 years, per capita oil im- sify the risk associated with economic fluctuation ports (quantity) for individual countries in specific years among partner countries, but by diversifying the types are plotted against per capita real GDP, again for of customers, exporters could locate additional un- individual countries in specific years. Taking into ac- saturated demand for their products. Like income count the different development stages of Asian coun- level, production techniques and technology vary tries, the plots clearly show a positive correlation be- among countries. What is obsolete in industrialized tween the two variables. An upward sloping concave countries is not necessarily obsolete in developing curve can be drawn based on the plots, which indi- ones. As Asia's industrial sectors continue to grow, cates that per capita oil imports are increasing at a they will need a seamless supply of raw materials and decreasing rate with per capita real income. Imports energy resources. African exporters can use this win- are almost zero when a country is very poor. But dow of opportunity to develop new Asian markets once a country gains momentum from economic for their commodities. The Asian countries with ris- growth beyond some critical income level, oil imports ing manufacturing sectors, such as China, India, Ko- rise very sharply (e.g., India and China). Consump- rea, Taiwan, and members of the Association of tion of imported oil continues to grow with industrial- Southeast Asian Nations (ASEAN), are increasingly ization (e.g., Korea, Taiwan, the ASEAN countries). importing industrial raw materials and energy re- As income level saturates, consumption growth is sta- sources, which provide potentials for African coun- bilized (e.g., Japan). tries to tap. One widely accepted view is that countries should Figure 6.2 illustrates how an increase in an economy's not rely excessively on exports in these products be- per capita gross domestic product (GDP) is associ- cause of unpredictable price changes and the risk of ated with an increase in oil imports among selected loss in export earnings. This concern, although valid, Asian countries. Using the oil import data of Asian should not make countries shy away from opportuni- ties to attract foreign investment and expand exports in these sectors. As the examples of Botswana (dia- Figure 6.2 Per Capita Oil Imports and GDP of Asian Countries monds) and South Africa (gold) clearly show, resource- rich countries can use their natural endowments as a Per capita oil imports (log) 9 viable first step toward increasing export earnings, attracting foreign investment, and effectively reallo- 8 China India cating economic resources for other sectors in order 7 Japan to diversify the structure of production and exports. 6 Korea Botswana and South Africa have successfully main- 5 Taiwan ASEAN tained good governance and management policies 4 over their natural resources. It is also recognized that 3 proper governance in natural resource management 2 is critical to helping countries maintain political sta- 1 bility and in facilitating efficient distribution of re- 0 source-based income in the economy (box 6.1). They 0 2 4 6 8 10 12 Per capita GDP (log) also implement sound macroeconomic policies--such as avoiding external debt and excessive public invest- Notes: Data are for 1980­2001.The ASEAN countries are ment during boom periods--which help their econo- Indonesia, Malaysia, the Philippines, Singapore, andThailand. Sources: UN Comtrade,World BankWorld Development mies reallocate export earnings from natural resources Indicators, and IMF Commodity Price Statistics. to strengthen production sectors. 48 Chapter 6 ­ Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy Box 6.1 explore the possibility of expand- Governance in Natural Resource Management ing exports in such markets by Recent World Bank research on the causes of conflict and civil war finds that differentiating the product char- those countries most likely to be blighted by conflict are those whose economies acteristics, exporting products at depend heavily on natural resources.Proper governance in natural resource man- more processed levels, or devel- agement is critical to helping such countries avoid political instability and in facili- oping production processes ca- tating efficient reallocation of earnings from natural resources to longer term tering to emerging tastes in high- development programs. income countries (for example, Current policies among various African countries suggest two key elements organic foods). However, the in successful governance of natural resources: scope of such differentiation is Transparency of revenue information. often limited in the short run be- The involvement of international organizations, such as the World Bank cause of the established structure and the International Monetary Fund (IMF), in developing these policies. of the industry organization. Botswana is a primary example of how a government's fairly open disclosure Many exporters also lack suffi- policy of revenue information from natural resources (in this case,diamonds) has cient capacity to develop more supported stable governance over these resources, allowing the country to real- differentiated products. locate its earnings from the natural resources to longer term development pro- grams. As in the case of natural resource Angola borrowed heavily, and at a premium, over the last decades from the commodities, establishing new international market, using future oil revenues as collateral. Its growing debt bur- trade relations with Asia-- den caused the Angolan government to turn to the IMF and theWorld Bank.The thereby diversifying their des- resulting oil diagnostic program entailed IMF monitoring of the Angolan tined markets--is an effective government's oil revenues, improving transparency in the government's oil devel- way for African exporters of opment policy. food-related commodities to ex- The Chad-Cameroon Petroleum Development and Pipeline Project exempli- pand exports. Food products are fies the use of conditionality in attracting foreign investment on a natural resource usually characterized as products development project. One of the Majors has agreed to invest in the project, on with low income elasticity-- the condition that the Chad government sign an agreement with theWorld Bank meaning that the demand for the and IMF arranging for a large portion of the government's oil revenues to go to products increases at a much priority development projects. Consequently, the government passed a law that slower rate than does income. requires 10 percent of revenue to be invested in a future generations fund, and Low income elasticity is often dedicates 80 percent to health, education, and vital infrastructure. considered the main reason for the stagnant demand for the pri- Source: Bannon and Collier (2003). mary commodities exported by African countries. As mentioned earlier, consumers in Asia's de- Supplying food and other consumption veloping countries are rapidly in- goods to Asia's rising consumer populations creasing their purchasing power. Building new trade Agricultural, fishery, and other food-related commodi- relations with such countries can help African export- ties have characteristics of high homogeneity com- ers overcome the constraint of low income elasticity. pared to manufactured products. Thus, exporters of In fact, given the low income elasticity of food de- such commodities face constraints in expanding their mand, expanding trade with new partners in Asia exports in the saturated markets of industrialized coun- will have more significant consequences than expand- tries. Food-related commodity producers could still ing sales within existing saturated markets. Figure 6.3 Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 49 Figure 6.3 diversification, namely diversifying the line of export Trends in Asia's Food Imports from All Africa products away from concentrated exports in primary Value of food imports from Africa (million $) commodities. Asia contributes to Africa's product di- 1,600 versification in the export structure by supplying nec- 1,400 essary materials and capital goods for growing manu- 1,200 facturing sectors. Africa's total export earnings from 1,000 manufacturing products doubled during the 1990s to 800 Japan $31 billion (1999­2001 average). Europe and the ASEAN 5 600 India United States have been significant markets for China 400 Africa's manufactured products. Currently, the Euro- Korea Taiwan pean Union (EU) accounts for about 65 percent of 200 total African manufacturing exports, and the United 0 States accounts for about 12 percent. Although the 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 EU share is dominant, African exports to the United Notes: The ASEAN countries are Indonesia, Malaysia, the States grew by 236 percent during the 1990s. As Philippines, Singapore, and Thailand.All figures are based on mentioned earlier, the EU and the United States now partners' import data. Source: UN Comtrade. provide enhanced market access opportunities to African countries through preferential measures, in- cluding the African Growth Opportunities Act (AGOA) shows how Asian countries--particularly India and and the Everything But Arms initiative. Although these the five ASEAN members--are already increasing measures cover a wide range of eligible products, their imports of food from Africa. exporters generally look to basic, labor-intensive, The agricultural commodities that appear in the list manufactured products such as textiles and apparel of major African exports are either nonessential or in exploiting these opportunities. exotic. Nonessential agricultural commodities such as Africa's exports of manufactured products to Asia are coffee and cocoa, or exotic commodities such as fruits in no way comparable in size to its exports to Europe and nuts, tend to be more elastic with regard to in- or the United States. Nonetheless, Asia is emerging come than essential food items such as cereals. De- as an important partner in Africa's quest for product mand for such products rises with income. And it diversification in two ways. The first and most impor- rises more rapidly when the absolute level of income tant way is that Asia is helping bring Africa to the is relatively low. Using the example of coffee, box global supply-chain mechanism in manufacturing 6.2 discusses in more detail how Asian countries pro- products. Asian countries are important suppliers of vide potential market opportunities for African ex- necessary inputs for Africa's manufacturing sectors, porters. Potentials exist not only in countries such as particularly the textile and apparel sectors. Table 6.1 Japan, where people with a higher level of income identifies major exports from Asia to Africa; it sum- than other Asian countries consume more coffee per marizes the more detailed table of major African im- capita, but also in countries such as China and India, ports from Asia at the four-digit Standard Interna- where demand for coffee is rising faster. tional Trade Classification (SITC) level included as appendix I. From the table, it is clear that the raw 6.3 Product Diversification in and intermediate materials of textile and garment Manufacturing Sectors products figure prominently among Africa's major Another important aspect of Asia's partnership with imports from Asia. China, Taiwan, India, Pakistan, Africa is related to the more traditional concept of and Korea provide a significant amount of various 50 Chapter 6 ­ Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy Box 6.2 Per Capita Coffee Imports of Asian Countries Coffee is one of the major agricultural commodities Africa exports to the world. It is a nonessential food item and has more income-elastic demand than essential food items, so demand rises as income rises. Moreover, coffee's income elasticity decreases with level of income.In other words,the marginal increase in demand for coffee with an increase in income is larger when the absolute level of income is lower.To illustrate this point, annual per capita coffee imports by Asian countries from 1980 to 2001 were plotted against the levels of per capita income of corresponding countries in the corresponding years in the figure below. The figure clearly shows the pattern of decreasing income elasticity: demand for coffee increases as countries become richer, with a caveat that growth of coffee demand is "faster" when level of income is low.(The slope of the curve in the figure represents income elasticity of demand for coffee imports.) Coffee imports by Japan are in a mature phase,in the Income Elasticity of Coffee Imports for Asian Countries sense that coffee has low income elasticity.However,Japa- nese imports--as well as increases in these imports-- Per capita coffee imports (log) 18 are of significantly higher amounts in absolute terms than 16 China are imports to the rest of Asia. India and China have im- 14 India ported much less, but their demand is increasing more 12 Japan 10 rapidly as their incomes increase. Countries such as Ko- Korea 8 Taiwan rea,Taiwan,and the ASEAN countries lie in between.The 6 ASEAN 4 export expansion strategy for coffee exporters would 2 target both the lower income segment of consumers, 0 0 2 4 6 8 10 12 where demand increases rapidly, and the higher income Per capita GDP (log) segment, where the demand increase is not rapid but Notes: Data are for 1980­2001.The ASEAN countries are comes at a higher order. Indonesia, Malaysia, the Philippines, Singapore, andThailand. On average,other agricultural and food products have Sources: UN Comtrade,World BankWorld Development lower income elasticity than coffee.This means that the Indicators, and IMF Commodity Price Statistics. income elasticity decreases faster (its curve is flatter than for coffee).An export strategy for food products other than coffee targeted at the higher segment of consumers would not yield as much expansion as would coffee.However,an expansion strategy targeted at the lower segment of consum- ers remains effective, and the marginal increase in aggregate demand for such exports is significant. fabrics to Africa. Also, Asia exports motor vehicle most cost effectively using inputs from home or from parts and telecommunications equipment to Africa the third countries and where they have better ac- to be assembled at plants owned by Japanese or cess to large consumer markets, usually in developed Korean enterprises. countries (intermediary or indirect trade). In many cases, they are located in developing countries where These industries are generally characterized as glo- the local industries receive generous preferential treat- bal supply-chain industries and are often managed ments from developed countries in accessing their by multinational corporations. Global supply-chain markets. Countries such as Mauritius, Madagascar, industries have emerged in step with the rapid inno- and Lesotho actively attract foreign investment in vations in communications technology that are tak- those industries by establishing industrial zones tar- ing place at the global scale and integrating the world geted for foreign direct investment (FDI) and promot- economy. These industries have effectively invested ing export-oriented, private sector development in locations where they can process their products Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 51 Table 6.1 Top 20 Major African Imports from Asia: 1999­2001 Annual Average Product Exporters Importers Automobile Passenger cars Japan (55), Korea (41) South Africa (25), Egypt (16), Libya (12),Algeria (12), (2nd, 4.5%) Morocco, Kenya, Nigeria,Tanzania, Mauritius, Sudan, Zimbabwe,Angola, Ghana,Tunisia Transportation vehicles Japan (84), Korea, China,Thailand, India Egypt (21), South Africa (19), Morocco,Tunisia, Kenya, (4th, 3.5%) Algeria, Libya, Mauritius, Ethiopia, Zimbabwe, Nigeria, Tanzania, Sudan, Ghana, Uganda, Cote d'Ivoire, Gabon Automobile parts Japan (59), Korea (13),Taiwan (11),Thailand, India, South Africa (65), Egypt (14), Nigeria, Libya,Algeria, (5th, 3.0%) China, Singapore Kenya, Morocco, Ghana,Tunisia Public service pas- Japan (72), Korea (20), India, Indonesia Algeria (22), Egypt (19), Nigeria (15),Tanzania, Sudan, senger vehicles (buses, Ethiopia, Madagascar, Mauritius,Tunisia, Ghana, Gabon, etc.) (15th, 1.0%) Angola, Morocco,Kenya, South Africa, Zambia, Mozambique, Libya Internal combustion Japan (91),Thailand South Africa (88), Egypt, Nigeria, Ghana piston engines (16th, 0.9%) Tires for buses and Japan (53), Korea (22), China (12), India,Thailand, Egypt (22),Algeria (13), South Africa, Nigeria, lorries (17th, 0.9%) Singapore Ethiopia, Ghana, Cote d'Ivoire,Morocco, Kenya, Sudan, Cameroon,Tanzania, Djibouti, Madagascar, Libya,Tunisia, Mali Automobile Passenger cars France (20), Germany (19), Japan (17), Korea (12), South Africa (25),Algeria (13), Egypt (11),Tunisia, (2nd, 2.9%) Belgium, Spain, UK, JS, Netherlands, Italy, Morocco, Libya, Nigeria, Ghana, Cote d'Ivoire,Kenya, South Africa,Turkey, Brazil,Austria Angola,Benin,Mauritius,Zimbabwe,Tanzania,Cameroon Automobile parts Germany (17), Japan (16), France (12), Italy, UK, South Africa (44), Egypt (10),Algeria, Morocco, (4th, 2.2%) United States, Oman, Spain, Korea,Taiwan, Belgium, Nigeria,Tunisia, Libya,Tanzania, Kenya, Zambia, South Africa, Sweden,Thailand,Turkey Zimbabwe, Ghana Transportation vehicles Japan (37), France (13), Germany, South Africa, South Africa (16), Egypt (14),Algeria (10),Tunisia, (6th, 1.6%) United States, UK, Spain, Korea, Belgium, Italy, Morocco, Nigeria, Kenya, Zimbabwe, Ethiopia, Ghana, Netherlands, China Libya, Mozambique,Angola,Tanzania, Mauritius, Cameroon, Cote d'Ivoire,Zambia,Malawi,Sudan,Gabon Cotton-textile Cotton fabrics China (39), India (30), Pakistan (13), Hong Kong, South Africa (13),Benin (13), Mauritius (11), Egypt (11), (6th, 2.5%) Taiwan,Thailand, Indonesia, Malaysia, Korea Nigeria, Gambia, Cote d'Ivoire, Kenya,Togo,Tanzania, Ghana, Morocco, Niger, Mauritania, Senegal, Rep. of Congo, Lesotho, Zimbabwe, Malawi Capital goods and appliances Construction & mining France (13), Japan (13),United States (11), Germany, SouthAfrica (23),Egypt (17),Tunisia,Nigeria, Morocco, machinery (19th, 0.7%) UK, Belgium, Italy, SouthAfrica,Austria, China, Brazil, Algeria, Ghana, Libya, Cote d'Ivoire, Ethiopia, Sudan, Korea, Finland, Netherlands, Sweden, Spain Angola, Zimbabwe, Cameroon,Tanzania, Zambia Construction & mining Japan (61), China (16), Korea (12), Singapore, South Africa (27), Egypt (23), Sudan,Tunisia,Algeria, machinery (20th, 0.7%) Malaysia, Indonesia,Thailand Kenya, Zambia, Ghana, Gabon, Morocco,Tanzania, Nigeria, Liberia,Djibouti, Cote d'Ivoire, Eritrea, Senegal Agricultural and fishery Rice (3rd, 3.8%) Thailand (52), India (17), China (16), Pakistan,Taiwan Nigeria, South Africa, Cote d'Ivoire, Senegal,Togo, Kenya, Libya, Benin, Ghana, Somalia, Mauritius, Tanzania, Madagascar, Guinea, Rep. of Congo Other Organic acids (5th, 3.3%) Morocco (53),Tunisia (25), South Africa (12), India (94), China, Indonesia Senegal Ships (17th, 1.0%) Liberia (72), South Africa (26) Singapore (62), India (28), Korea, Pakistan Note: Numbers in parentheses after country names are the percentage shares of total trade values (only 10% or above are indicated.) Source: UN Comtrade. 52 Chapter 6 ­ Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy through the establishment of export processing zones. by plotting value increases in manufacturing exports As a result, these countries have achieved high growth from individual African countries to the EU and United in the production and export of textile and apparel States during the 1990s and value increases in their products (box 6.3). imports from Asia. On average, an African country with a large increase in manufacturing exports to the Figure 6.4 illustrates how Africa's imports from Asia EU and United States has also experienced a simi- are integrated with Africa's manufacturing exports larly large increase in imports from Asia, irrespective Box 6.3 Growing Mauritius's Apparel Exports In Sub-Saharan Africa, few countries have attained a high standard of living.Mauritius is the notable exception. Between 1973 and 1999, Mauritius's real GDP averaged 5.9 percent annual growth, compared to 2.4 percent for Sub-Saharan Africa as a whole.The average income of Mauritanians has more than tripled over the three decades, while that of Africans as a whole increased only 32 percent.The biggest contributor to Mauritius's strong growth is the textile and apparel industries.This sector accounts for the lion's share of the country's exports--65 percent of all its exports in 1999.Three possible explanations underlie the impressive growth of Mauritius's apparel exports. Strategic trade policy to set up an export processing zone. Mauritius has experienced remarkable success in expand- ing its manufacturing industry and export base since the early 1980s.After having failed to pursue a policy of import substitution in the years immediately following independence, the government focused on promoting exports and creating an export processing zone. Mauritius's openness to FDI, facilitated by the creation of an export processing zone, attracted investment from India and China and, later, from Europe, especially in the textile industry. Investors have various incentives, such as import duty exemptions and zero taxation of divi- dends, if they locate their subsidiaries in Mauritius. In addition, investors are not required to establish joint ventures with the Mauritius government, as they are in other African countries. Strong domestic institutions. Strong domestic consultation mechanisms have contributed to the growth of Mauritius's apparel industry to a significant extent.In the early 1980s,a macroeconomic adjustment policy was set forth by three different governments of varying ideological beliefs.Adjustment literally preconditioned a national consen- sus among different opinions, which accordingly necessitated workable consultation mechanisms. Further, a Mauritanian culture of transparency and participatory politics approved an early economic warning and feed- back system, allowing emerging economic problems to be dealt with at an early stage. Ethnic diversity. Unlike any other country in Sub-Saharan Africa, Mauritius has a culturally and ethnically diverse population. In Mauritius,descendants of indentured workers from India make up about 60 percent of the popu- lation,with the remainder comprised of blackAmericans,Creoles (native to the region),Chinese,and Europeans. This diversity has enabled the country to maintain economic ties with the roots of its diverse ethnic groups and attract investments from them.For instance,the Chinese community has attracted investment from Hong Kong entrepreneurs looking for overseas locations for their textile operations to avoid the quotas imposed in their own country. Such a mix of factors, especially this last, is not easily replicated by other African countries. However, the example of Mauritius vividly shows that good governance and appropriate economic policies, which have been regarded as important conditions for development, are ideal factors for achieving export gains as well. Sources: Subramanian (2001), and Basu and Srinivasan (2002). Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 53 Figure 6.4 ese investors to build garment Africa's Manufacturing Exports to the European Union and United States factories to export their products Exports to European Union Exports to United States to the EU and the United States (box 6.4). 10 10 8 log) 8 log) 6 $, $, The second way that Asia con- 6 4 2 tributes to Africa's product diver- manufacturing 4 (million manufacturing 0 in (million in sification is in its role in provid- 2 -20 2 4 6 8 10 -4 ing important capital goods for 0 exports exports Increase 0 2 4 6 8 10 -6 Increase the manufacturing sectors. Table -2 -8 6.1 lists several products from Increase in Africa's imports Increase in Africa's imports from Asia (million $, log) from Asia (million $, log) the SITC 7 group--passenger motorcars, motor vehicles for Notes: Data points are for African countries with positive increases in imports from Asia and manufacturing exports to the EU and United States. Increases represent absolute increases transportation, mass transit pas- from the early 1990s (1989­91 average) to the late 1990s (1999­2001 or 1998­2000 senger motor vehicles, and con- average). struction and mining machinery. Source: UN Comtrade. With the exception of ships, which serve flag-of-convenience fleets in Liberia, these of the size of domestic markets. In the case of textile products are exported to Africa to support the and apparel products, the positive linkage between continent's manufacturing activities in production, Asian inputs is especially apparent because many transportation, and communication. Although Africa African countries now rely on Chinese and Taiwan- imports finished products such as passenger cars and Box 6.4 AGOA Textile Benefits and Textile Yarns and Fabrics from Asia The introduction of AGOA has prompted a number of foreign investors to invest in the apparel sector of Sub-Saharan African countries; many of these investors are Asian. In Namibia, for example, a Malaysian-based firm has invested over $200 million in a textile and garment manufacturing plant, AGOA Apparel and Textiles Beneficiaries and Fabric generating over 4,200 jobs. In Mauritius, a Chinese firm Yarn Importers has begun construction of a $60 million cotton yarn spin- 14 ning mill,and an Indian firm has started building a spinning to log) 12 mill,to take advantage ofAGOA's textile and apparel ben- $, 10 efits. In Swaziland, there are currently 20 Taiwanese in- exports 8 vestment companies;only 3 of these were operating there (thousand 6 prior to AGOA's passage.Taiwanese entrepreneurs have apparel 4 States also invested large amounts in South Africa and Lesotho. 2 The figure to the right plots AGOA textile benefi- Current 0 United 0 0.5 1 1.5 ciary countries according to their volumes of garment Asian share of total imports of exports to the United States and the Asian share of total textile yarn and fabrics imports of raw materials--i.e., textile yarn and fabrics Notes: Data are based on 1990­2001 averages and are for (SITC 65). In general, countries with high volumes of gar- individual African countries eligible for apparel and textile benefits under AGOA. ment exports tend to rely more on imports of fabric from Source: UN Comtrade. Asian countries. 54 Chapter 6 ­ Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy trucks, it also imports components of those products As shown in table 3.2, which lists Africa's top ex- and complementary products such as tires. ports to its major trade partners, no trace of past import substitution strategies undertaken by African An import substitution strategy was once popular countries exporting to the EU or United States can among developing countries to help grow their manu- be detected. Moreover, many African countries do facturing sectors. Countries invested in various manu- not have sufficiently large domestic markets to sup- facturing sectors and supported various industries, port import substitution strategies. As shown in fig- inviting foreign capital to expand domestic produc- ure 6.4 and the figure in box 6.4, Africa's strategy tion capacity markets--which were often accompa- for product diversification is more prominent in glo- nied with high tariff protections. Such policies fre- bal supply-chain industries such as textile and apparel quently resulted in inefficient rent-seeking behaviors than in inward-looking import substitution industries. by the protected industries. As countries began to Asia plays an integral role in Africa's development in implement more liberalized trade policies, those in- global supply-chain industries by providing interme- dustries have found themselves unable to compete diate materials as well as capital and skills. against more cost-competitive foreign imports in the domestic market. CHAPTER 7 Integration of Trade and Investment Relations between Africa and Asia As mentioned in the previous chapter, Asian exports Type 3--targets the global market, including the to Africa related to Africa's own manufacturing ex- European and North American markets. ports are often accompanied by direct investment from Asian firms. These corporations have made Type 1 ­ Asian market these investments as a means of strategically diversi- Type 1 investment is targeted at producing goods fying their production channels in global supply chains to be sold in the investors' own countries in Asia. and exploiting the preferential market access mea- Typical examples of such investment include natu- sures given by some industrialized countries. Asia's ral resource extractive industries for mineral and foreign direct investment (FDI) in Africa exemplifies mining products, as well as agricultural and food how trade and investment activities become integrated processing projects such as fish cannery plants. In- and their strategies seamlessly aligned. This chapter vestment in extractive industries is large scale, of- discusses three types of Asian investment to Africa ten initiated by governmental agreements followed based on how trade and investment can be integrated, by private sector engagement, and frequently in- analyzed some current investment cases of Asian firms cludes some degree of technology transfer. Al- in Africa, and identifies measures to facilitate further though Asian firms have invested in such projects integration of trade and investment in the context of in the past, unpredictable changes in local govern- Africa-Asia relationship. ments' policies and macro-instability have often hampered the flow of investment of this kind in 7.1 A Framework for Discussion: Africa. Potential investors are trading houses, re- Three Investment Models source suppliers, and plant construction companies. A useful way to analyze how trade and investment Korean investment in Angola is a typical type 1 are integrated in the business relations between Af- investment case study, involving substantial amounts rica and Asia is to categorize investments in accor- of investment for a processing plant (box 7.1). Of- dance with the various markets targeted by Asian ficial development assistance (ODA) loans and ex- businesses in selling their products and services. These port credit are powerful policy instruments to sup- investment models are listed below and further de- port this "investment-cum-trade project." scribed in the following subsections and boxes. Investment projects for food and agro-based prod- uct processing require smaller--but still substan- Type 1--targets the Asian market (home countries). tial--amounts of investment as compared to min- ing and energy resource projects. Type 2--targets the African market (local host countries and regional and subregional markets). 55 56 Chapter 6 ­ Implications of Africa-Asia Trade Relations for Africa's Overall Trade Strategy Box 7.1 Type 1 Investment Case Studies: Samsung (Korea) in Angola and Mozal (Japan and Others) in Mozambique Samsung. With the economic reforms under way inAngola,foreign investors have found increasing business opportuni- ties in the country's energy, mining, telecommunications, manufacturing, agriculture, and fishing industries.Angola's cur- rent ranking as third in the world for new oil discoveries and Sub-Saharan Africa's second largest oil producer will also accelerate new business ventures.Angola is now Korea's second largest trading partner inAfrica and its seventh largest supplier of crude oil.In 2000,Korea imported $654 million in oil fromAngola and exported $17 million in cars and auto parts. In 2000, Samsung won a $4.4 billion contract in Angola to build a 200,000-barrel-a-day oil refinery and offshore exploration platforms.The contract was facilitated by a bilateral agreement between the Multilateral Investment Guar- anteeAgency and the Korea Export Insurance Corporation,by which both agencies will cooperate in re- and coinsuring projects in order to share risks and increase the availability of insurance for Korean investors.The agreement stemmed from Samsung's desire to seek such coverage and risk-sharing for its intended resource-based projects in Central and WestAfrica. Mozal. Mozal, one of the largest aluminum smelters in the world, is located near Maputo, the capital of Mozambique. It was constructed in two phases with approximately $2 billion in funding and $1.1 billion in nonrecourse project funding from international enterprises. Shareholders in the enterprise are BHP Billiton (47 percent owner, and the smelter operator), Mitsubishi Corporation of Japan (25 percent), the Industrial Development Corporation of South Africa (24 percent), and the government of Mozambique (4 percent). Phase 1 was the first major project to be implemented in Mozambique in the past 50 years and took 31 months to complete after its approval in May 1998. Mozal 1 began production in June 2000 and reached its full output rate the following year.The investment of $1.34 billion in Mozal 1 boosted the country's economy as well as the economies of Mozambique's major trading partners--South Africa, Swaziland,andAustralia.Phase 2,an expansion project,took 26 months to complete.InAugust 2003,the first metal was produced six months ahead of schedule and at a final cost of $665 million,some $195 million under the original budget. The expansion has doubled the smelter's capacity to 506,000 tons of primary aluminum per annum. Type 2 ­ African market such investment has been bound by the constraints Type 2 investment is targeted at Africa's domestic of small local markets and high transaction costs. markets. Examples include investments by Japanese Because of the small size of the domestic market, the firms in home electronic appliance and textile plants mass production business model commonly used in from the 1960s to 1980s. These investments were industrialized countries is not suitable. aimed at supplying these products to Africa's local markets, which were protected by high tariffs under However, there are cases in which small and medium- governments' import substitution policies. The invest- sized production is feasible--possibly through local ments were often arranged in conjunction with these licensing and franchising, as in the case of the Japa- import substitution policies. More recently, however, nese chemical company described in box 7.2. As this regional economic integration and local governments' case shows, type 2 investment does not necessarily import liberalization have eliminated the competitive take the form of direct investment. If the concept of advantage of such investments vis-ŕ-vis goods impor- investment is broadened to include other types of tation. Consequently, accessing even more competi- business partnerships, type 2 investment has a few tive global markets has been out of reach for those potentially useful tools for business development in protected industries in most cases. In various ways, partnerships between Asian and African entrepre- Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 57 Box 7.2 Type 3 ­ Global market Type 2 Case Study: Sumitomo Chemical (Japan) in Tanzania Type 3 investment is targeted at third countries, es- pecially those in other industrialized regions such as TheWorld Health Organization and a group of major the European Union (EU) and United States. Invest- multinational companies have begun production in ment of this type is often conducted by multinational Africa of a new kind of insect-repellent plastic that corporations based on global supply chains. Type 3 disease experts said could have a major impact on investment can be further subdivided based on other slowing the spread of malaria... characteristics: Experiments by a Japanese company, Sumitomo Chemical, resulted in a plastic polymer known as There are footloose industries in the textile and Olyset that incorporates insecticide in the material's apparel sectors or in the services sector (e.g., data crystal structure. In a net, Olyset offers numerous services and telemarketing outsourced to Africa) advantages over conventional counterparts. In addi- that are largely motivated by the low labor costs tion to oozing insecticide for up to five years, the in Africa and the existing trade policies in third material lasts longer than conventional netting. If the countries where their products and services are density of houses using the nets is high enough, the destined. The Taiwanese enterprise investment repellant properties of the nets can shield entire vil- in Swaziland and Lesotho is one such example lages from insects... (box 7.3). The size of investment is limited, but Recognizing a small market for profits from sell- such investment has effectively generated employ- ing the material but great public health benefits, ment for local economies. Sumitomo agreed to transfer the technology to Af- rica.Led by theWorld Health Organization and coor- A second, more forward-looking, type of invest- dinated with UNICEF, ExxonMobil and a Tanzanian ment is genuinely attracted to the potential pro- mosquito-net maker, an alliance was created to pro- ductivity increase within Africa. To seize on fu- duce and distribute the technology to the African ture potential in the region--as well as exploit markets most in need of the protection...The arrange- existing favorable trade regimes--major automo- ment followed the thrust of a new policy by the UN bile companies, for example, have established health agency to seek private sector links supporting plants in South Africa, which is rapidly becom- public health projects. "We try to focus the private ing an important economic hub in Africa. sector on niche markets that would normally be of little financial interest," said David Alnwick, a World 7.2 Recent Patterns of Asia's Health Organization malaria expert."By transferring Investment in Africa and Trade the technology to a local company they can adapt to the local market and open the potentially huge im- and Investment Inter-Linkages pact on public health." This section provides an overview of recent patterns of investment from individual Asian countries to Af- Source: Excerpted from Crampton (2003). rica and discusses how trade and investment are inte- grated in relations between Africa and those Asian countries according to the framework presented neurs. These tools include local licensing and fran- above. FDI data are even more limited in scope and chising of domestic or regional sales of Asian prod- coverage than are data on international trade. While ucts and services in African countries, as well as joint aggregate flows and stocks of FDI are reportable at ventures between African and Asian firms in conduct- the national level as macroeconomic variables, the ing construction work. sectoral composition and origin-destination informa- 58 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia Box 7.3 Type 3 Case Studies: Tex-Ray (Taiwan) in Swaziland and Toyota (Japan) in South Africa Tex-Ray.Tex-Ray is an important apparel company inTaipei,which has of late been focusing on research and development of cotton products. Sales subsidiaries have been established in Los Angeles and NewYork, and a raw material procure- ment company was recently founded in China,in addition to a number of production factories abroad.Tex-Ray founded three factories in Swaziland in 2001 and 2002.The products of these factories are exported to the United States.Tex- Ray's main reason for investing in Swaziland was to obtain benefits under the African Growth and Opportunity Act (AGOA).Since local procurement of raw materials will become compulsory underAGOA after October 2004,the firm decided to set up a spinning factory in Swaziland as well.These products are sold domestically and will be sold toTex- Ray's factory in SouthAfrica as well. Toyota. The recent emergence of South Africa as an important automobile assembly location has triggered major Japa- nese car manufacturers such asToyota to increase their investment in SouthAfrica.Toyota established a subsidiary plant in South Africa in 1962, which has long been the company's main assembly plant for cars and trucks to be sold in South Africa and elsewhere in Africa. Recently, the firm's headquarters signaled a growing interest in its South African opera- tions by increasing its share holding of its subsidiary plant from 35.7 to 74.9 percent. Moreover,Toyota plans to use its South African production hub to expand its sales to the European market as well as to the African market. tion on FDI are not readily available for many non- tonishing growth in the late 1990s, with its annual Organisation for Economic Cooperation and Devel- average value surpassing that of Japanese FDI after opment (OECD) countries. Several countries report 1998. For all four countries, annual average FDI val- their FDI statistics in their own format, which makes ues increased after 1998 as compared to the period it difficult to conduct a consolidated analysis of pat- 1990­97.1 terns of FDI flows between Asia and Africa. To avoid these data limitations while presenting a clear pic- Figure 7.1 ture of investment relations between Asia and Af- Value of FDI Flow to Africa from Four Asian Economies rica--or, more precisely, of Asia's investment in Af- Million $ rica--this analysis uses data for Japan, Korea, China, 140 1990­97 1998­2002 and Taiwan only. That is, this section looks at na- 120 tional firms' investment patterns in Africa based on 100 data obtained from official sources in these four coun- 80 tries. 60 40 Overall characteristics 20 On average, Japan leads the other three Asian coun- 0 Japan Korea China Taiwan tries studied here in total value of FDI outflows to Sources: Ministry of Finance of Japan, Export-Import Bank of Africa in the 1990s. Even without its sizable invest- Korea, Ministry of Commerce of People's Republic of China, ment in Liberia due to the flag-of-convenience prac- and Ministry of Economic Affairs of Taiwan. tice, the annual average value of Japanese FDI in Africa was, for the most part, larger over the decade 1 than that of the other countries. As shown in figure These periods (1991­97 and 1998­2002) were used so as to capture trade characteristics before and after the Asian financial 7.1, however, Chinese FDI to Africa recorded an as- crisis that occurred in the summer of 1997. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 59 In terms of number (as opposed to value) of invest- Figure 7.3 Average Size of FDI Investment in Africa by Four Asian ments, China has dominated throughout the 1990s Economies to Africa (figure 7.2). The surge of Chinese investment is promi- Million $ per case nent after 1998, recording close to 50 investment 25 cases a year. The other three countries are rather 1990­97 1998­2002 similar in terms of their numbers of investments. 20 15 Figure 7.2 Number of FDI Investment Cases in Africa by Four Asian Economies 10 Number of cases 5 60 1990­97 1998­2002 50 0 Japan Korea China Taiwan 40 Sources: Ministry of Finance of Japan, Export-Import Bank of 30 Korea, Ministry of Commerce of People's Republic of China, and Ministry of Economic Affairs of Taiwan. 20 10 Tables 7.1 to 7.7 present the sectoral and/or host 0 Japan Korea China Taiwan country composition of FDI of four Asian countries to Africa either in flow or cumulative stock values. Sources: Ministry of Finance of Japan, Export-Import Bank of Korea, Ministry of Commerce of People's Republic of China, the tables show that a significant amount of FDI went and Ministry of Economic Affairs of Taiwan. into mining industries or resource development (27.5 percent from China, and 22.8 percent from Korea). Interestingly, Japan's investment in Africa's mining Figure 7.3 looks at the average size of investment for industries was rather limited in scale in the 1990s as the four Asian countries. In general, Chinese and compared to the 1970s, when over 30 percent of Taiwanese FDI are relatively small in scale, as these the country's investment supported these industries. countries are active in light industries such as textile Careful analysis of the experiences of Asian invest- and apparel products. Japanese FDI became much ment in mining industries (type 1) is necessary to draw larger in scale in the late 1990s, reflecting that lessons from both successful and unsuccessful cases. country's investment in heavier manufacturing sec- tors such as automobile and natural resource process- Global supply-chain investment (type 3) is made in a ing. more dramatic way. In the case of Japan, large ma- jor manufacturing investments started to flow to Asian FDI to Africa by investment type Africa's transportation product sector in the 1990s. In terms of its sectoral and host country composi- Most of this investment went to South Africa, where tion, Asian investment to Africa clearly shows inter- a major Japanese automobile manufacturer (Toyota) linkages with Africa's various trade relations. In the started assembling cars, some of which are now ex- context of Africa-Asia trade relations, natural re- ported from there to the European market. Korean source­based investment (type 1) and global supply- data do not reveal much about how its manufactur- chain investment (type 3) are critically linked to a strat- ing investment is divided by sectors. However, Korea's egy for Africa's market and product diversification of investment in the telecommunications sector has defi- its exports. nitely generated assembly of telecommunications 60 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia equipment (e.g., mobile telephones) in countries such ships, Japan's substantial direct investment is con- as South Africa and Ghana. China and Taiwan put a centrated almost exclusively in South Africa. large part of their investment in the textile and ap- parel sectors in South Africa, Lesotho, Swaziland, By sector, too, Japanese direct investment to Africa and Mauritius. is relatively concentrated (table 7.2). Within the manu- facturing sector, transportation machinery boasts the Although it is hard to capture the totality of type 2 highest rate of investment. Although Japanese direct investment, investors pursing this strategy are likely investment to South Africa is concentrated on the to be found in Asian countries where small and me- transportation industry--mainly automobile assembly dium-sized enterprises are active, such as Korea and and related parts manufacturing--it extends to other Taiwan. Investment in the service or retail sector is industries as well, such as mining, metal manufactur- an example of type 2 investments; local licensing and ing (ferrous and nonferrous), and various trading in- franchising examples are clearly presented in the dis- dustries. Among other industries and countries to cussion on corporate-level investment strategies. which Japan's FDI has been delivered during the 1990s, food manufacturing (Tanzania), service The following subsections look at each of the four se- (Mauritius), and chemical and metal manufacturing lected Asian countries to discuss overall trends of invest- (Egypt) are notable. ment flows to Africa and how the three types of in- vestment can be observed in their investment patterns The historical comparison of the sectoral composition in terms of sectoral and host country composition. of Japanese FDI to Africa presented in table 7.2 shows how Japanese FDI's sectoral focus has shifted over Of the four selected Asian economies, outward di- the past three decades. Transportation has been domi- rect investment data for African countries at the nant in all three decades due to the unchanged flag- sectoral level are available only for Japan and Korea. of-convenience practice in Liberia. On the other hand, China has country and sector outward investment mining investment, which had more than a 30 percent data, but these are not broken down by specific coun- share in the 1970s, shrunk to only 1 percent in the try and sector. Taiwan has by-country outward invest- 1990s. Among other reasons, political instability in many ment data for a limited number of African countries, resource-rich African countries in the 1980s, and weak but with no sectoral breakdown. Despite these data governance and a lack of transparency in the regula- limitations, the evidence supports the framework of tory regime during the period, seems to have dis- the three channels of trade and investment linkages couraged many Japanese firms from continued in- set forth above. volvement with Africa's mining and mineral resources. Japan Table 7.1 As shown in table 7.1, current Top Five African Countries Receiving Japanese FDI: 1971­2002 Japanese direct investment to Rank 1971­80 1981­90 1991­2002 Africa is concentrated in two 1 Liberia (57.9%) Liberia (92.3%) Liberia (74.9%) countries, Liberia and South Af- 2 Zaire (16.9%) Zambia (2.2%) South Africa (18.2%) 3 Nigeria (10.5%) Egypt (1.1%) Tanzania (2.7%) rica (together accounting for 93 4 Niger (5.4%) Gabon (0.9%) Mauritius (1.1%) percent of Japan's total African 5 Gabon (2.3%) Zaire (0.9%) Egypt (0.9%) FDI value for 1991­2002). How- ever, because most direct invest- Note: Figures in parentheses indicate countries' share in total cumulative investment in each ment to Liberia has been made period. to obtain flag-of-convenience Source: Ministry of Finance of Japan. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 61 Table 7.2 Africa during the 1990s. These increases may be Japanese Investment in Africa by Industrial Sector (%) linked to Africa's exports of food and agricultural prod- Sector 1971­80 1981­90 1991­02 ucts (e.g., to Japan and other Asian countries, which Manufacturing 5.3 3.1 20.2 are another set of examples of type 1 investment). Food 0.2 0.0 2.6 Textile 1.6 0.0 0.1 Lumber & pulp 0.0 0.0 0.0 A unique element of Japanese FDI is found in the Chemical 1.0 0.2 0.5 trade industry, which captures the activities of general Metal 1.3 2.5 2.0 trading companies (Sogo Shosha), facilitating exter- Machinery 0.0 0.0 0.2 nal exports and imports of domestic firms in Japan. Electrical 0.2 0.1 0.1 Transport 0.4 0.2 11.6 Other 0.4 0.0 3.1 Korea Nonmanufacturing 94.5 96.9 79.7 Although there are no readily available data for his- Farming & forestry 0.4 0.0 2.2 Fishery 3.6 1.1 1.1 torical comparison of the composition of Korean FDI Mining 30.5 2.5 1.2 to Africa, reasonably detailed information on coun- Construction 1.5 0.1 0.2 try/sector allocation is available (table 7.3). The ma- Trade 0.1 0.3 1.2 jor FDI destination countries for Korea are Algeria Finance & insurance 0.0 0.8 4.5 and Sudan--which together account for over $100 Service 1.6 16.1 1.4 Transportation 56.6 73.8 67.4 million in cumulative investment--followed by South Real estate 0.0 1.6 0.0 Africa, Morocco, Gabon, and Ghana. The major sec- Other 0.0 0.6 0.6 tors for investment are diversified, to some extent, in Total 100.0 100.0 100.0 the hotel and restaurant, manufacturing, mining, and retail and trade areas. Different countries receive in- Note: Data are shares of total cumulative investment in each period. vestments in these sectors: Algeria (mining, hotel and Source: Ministry of Finance of Japan. restaurant, trade and retail), Sudan (manufacturing, trade and retail, hotel and restaurant), South Africa (manufacturing, trade and retail), and Morocco (manu- Investment in the automobile industry showed a sig- facturing, hotel and restaurant). nificant increase in the 1990s, due to the ending of apartheid in South Africa. Trade statistics report on Manufacturing is the industry for which Korean com- a similar phenomenon, with Japanese exports of panies have most actively provided FDI to Africa. As automobiles and automobile parts to South Africa con- shown in table 7.4, this investment involves various stituting a major African import. Although automo- businesses including textile and apparel, leather and bile imports have been targeted at Africa's domestic footwear, wood and furniture, petroleum and chemi- markets (type 2), South Africa now hosts automobile cal products (including medical implements and phar- assembly plants of leading car manufacturers, includ- macies), electrical and electronic appliances, food, ing Japanese firms. With increasing Japanese invest- metals, motors, and automobile tires. There are clear ment in the automobile sector, imports of automo- linkages between trade and investment in products bile parts are now linked with automobiles assembled targeted to the Asian market (type 1) and to the glo- to be shipped to both the global market (type 3) as bal market (type 3). Although the data do not reveal well as domestic and regional markets. much about how Korea's manufacturing investment is divided across these sectors, the telecommunica- Although not as prominent as the transport sector, tions sector has definitely been a beneficiary, evi- the food sector and the farming and forestry sector denced by the assembly of telecommunications equip- gained in their shares of total Japanese FDI flow to 62 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia Table 7.3 Korea's Major Country and Industry Investments in Africa: 1968­2002 (thousand $) Manu- Con- Trade Trans- Finance Hotel & Real Agri- factur- struc- & porta- Tele- & ins- restau- estate Country Total culture Mining ing tion retail tion com urance rant services Other Ghana 1,857 0 24 860 0 650 0 20 0 42 261 0 Gabon 9,089 0 0 0 0 9,089 0 0 0 0 0 0 Nigeria 22,676 0 0 526 542 1,806 0 19,802 0 0 0 0 S.Africa 76,084 25 322 20,127 100 55,196 0 0 0 0 314 0 Liberia 260 0 0 0 0 10 250 0 0 0 0 0 Morocco 53,166 1,348 1,050 23,993 0 2,665 0 0 0 24,110 0 0 Sudan 148,321 0 0 91,050 0 33,271 0 0 0 24,000 0 0 Algeria 214,623 0 18,714 0 0 16,191 0 0 0 179,718 0 0 Angola 125 105 0 20 0 0 0 0 0 0 0 0 Rep. of Congo 742 0 0 242 0 0 0 0 0 0 500 0 Source: Export-Import Bank of Korea (2003). Table 7.4 (Government of Korea 2002). The service industry is Korea's Current FDI in Africa for Manufacturing another focus of Korean investment; this includes No. of hotels and restaurants, casinos, trading, department Country projects Manufacturing subsector stores, and photo studios. Such businesses are typi- Ghana 5 Food,wood,nonmetal,electronics, motors cal examples of type 2 investment, and offer the pos- South Africa 8 Textile,leather (2),petroleum, sibility of local franchising and licensing. In particu- metals, machine, electronics lar, photo studios are said to be a most successful Morocco 2 Textile, electronics business, affording the opportunity for local licensing Mauritius 2 Electronics, motors Senegal 2 Others of Korean equipment. Sudan 4 Textile (2), leather, petroleum Swaziland 1 Electronics Like Japan, Korea has active trading companies fa- Angola 1 Others cilitating the external exports and imports of domes- Egypt 4 Textile, electronics, motors (2) tic firms. Central Africa 1 Others Cameroon 1 Nonmetallic Kenya 2 Textile, petroleum China Cote d'Ivoire 1 Basic metals The country composition of China's direct investment D.R. of Congo 2 Others (2) in Africa is highly diversified. Even the two largest Tanzania 3 Textiles (2), metals Togo 1 Textiles countries in terms of cumulative investment, Zambia Tunisia 2 Petroleum, others and South Africa, account for only 18.5 percent and Total 42 15.3 percent shares, respectively, of total Chinese FDI in Africa (table 7.5). Most of this diversified di- Source: Export-Import Bank of Korea (2003). rect investment was made during the 1990s, at a rate of growth surpassing other Asian countries tra- ment (e.g., mobile telephones) in countries such as ditionally active in Africa. South Africa and Ghana. By sector, manufacturing and resource development Korea expects to make further investments in vari- account for a large percentage of China's investment ous labor-intensive industries in African countries Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 63 Table 7.5 Table 7.6 Top 20 African Countries Receiving Chinese FDI: Chinese FDI in Africa, by Industry: 1979­2000 Cumulative Value to 2001 No. of Amount invested No. of Investment Industry projects ($ million) Country investments amount (thousand $) Service 200 (40.1%) 124.50 (18.3%) Zambia 17 (3.8%) 134,126 (18.5%) Manufacturing 230 (46.1%) 315.27 (46.3%) South Africa 83 (18.5%) 110,849 (15.3%) Machinery 20 (4.0%) 16.06 (2.4%) Mali 5 (1.1%) 58,122 (8.0%) Electric appliances 36 (7.2%) 25.40 (3.7%) Tanzania 14 (3.1%) 39,483 (5.4%) Light industries 82 (16.4%) 86.54 (12.7%) Zimbabwe 11 (2.5%) 33,257 (4.6%) Spinning and weaving 58 (11.6%) 101.60 (14.9%) Nigeria 33 (7.4%) 31,144 (4.3%) Others 34 (6.8%) 85.67 (12.6%) Egypt 17 (3.8%) 30,635 (4.2%) Agriculture 22 (4.4%) 48.13 (7.1%) D. R. of Congo 7 (1.6%) 24,242 (3.3%) Resource development 44 (8.8%) 187.60 (27.5%) Other 3 (0.6%) 5.85 (0.9%) Ghana 17 (3.8%) 19,212 (2.6%) Total 499 681.35 Kenya 21 (4.7%) 18,475 (2.5%) Gabon 11 (2.5%) 17,045 (2.3%) Notes: Figures in parentheses indicate sectors' shares of total. Benin 4 (0.9%) 16,723 (2.3%) Source: Ministry of Commerce, People's Republic of China. Mauritius 20 (4.5%) 16,657 (2.3%) Cote d'Ivoire 13 (2.9%) 16,033 (2.2%) Cameroon 15 (3.3%) 15,851 (2.2%) Taiwan Niger 3 (0.7%) 14,964 (2.1%) Taiwan's direct investment in Africa has mostly con- Mozambique 6 (1.3%) 14,638 (2.0%) centrated on Liberia (due to the flag-of-convenience Guinea 5 (1.1%) 11,827 (1.6%) practice), and, to a much lesser degree, South Af- Sudan 9 (2.0%) 11,675 (1.6%) rica. Since the end of the 1990s, however, a diversi- Eq. Guinea 4 (0.9%) 11,315 (1.6%) fying tendency seems to be emerging. Excluding in- Africa total 448 726,532 vestments in Liberia, Taiwanese companies are increasingly investing in spinning, apparel, and trade Notes: Figures in parentheses indicate countries' shares of total.Africa total consists of 49 countries. (table 7.7). Like Chinese investment in these sectors, Source: Ministry of Commerce, People's Republic of China. this investment has been motivated by trade quotas imposed by the EU and United States. It is linked to the growing export of garment products by such Af- in Africa. Within manufacturing, light industry (not rican countries as South Africa, Lesotho, Swaziland, specified) and spinning and weaving are the main and Mauritius to the global market (type 3) and to the targets of investment (table 7.6), clearly illustrating EU and United States. Again as with China, invest- how investment is linked to trade patterns in Africa. ment in these sectors corresponds to a significant Specifically, investment in these sectors is associated amount of fabric imports from Taiwan. with the import of textile materials (e.g., cotton fab- rics) from China to African countries with a growing Although Taiwan's investment in Africa is limited to apparel sector. Investment in these sectors is linked a small set of countries, its investment in the gar- to the growing African exports of garment products ment sector has a clear regional focus, i.e., Southern to the global market (Type 3), most notably to the Africa. As discussed later in this chapter, some Tai- EU and United States. wanese firms have started diversifying their invest- ment at the subregional level to take advantage of Chinese investment related to resource development the relatively integrated subregional economy. is mostly for exports to Asia of mineral and agricul- tural primary commodities (type 1). 64 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia Table 7.7 their products or services. This Taiwan's FDI in Africa, by Major Country and Industry: Cumulative Value to December 2002 is perhaps the most easily observ- able aspect of the inter-linkage No. of Invest- invest- ment amt. between trade and investment. Country ments ($ million) Industry Again in accordance with the South Africa 620 1,500 Spinning, plastic processing, shoes, trade and framework introduced earlier, distribution these targeted markets are cat- Lesotho 30 600 Spinning and apparel Swaziland 20 45 Apparel, restaurant, entertainment and mold egorized as either the Asian mar- manufacturing ket (type 1 investment), the Afri- Mauritius 8 20 Hotel, apparel, shoes, food processing and pottery can market (type 2 investment), manufacturing or the global market (type 3 in- Cote d'Ivoire 9 11 Steel, restaurant, trade and vegetables Ghana 12 8 Steel, car part import, farm and trade vestment). Senegal 4 3 Battery, fishery and trade Malawi 9 23 Apparel, lumber processing, metal goods and trade Type 1 (Asian market) Africa total 712 2,209 A few Asian firms invest in Af- rica to export their products back Source: Ministry of Economic Affairs,Taiwan. to their home countries. Since in- vestment is made in those sec- tors that produce products de- manded (at least potentially) at home, the types of sectors or products attracting investment are quite 7.3 Investment Strategy of Asian specific and often reflect the availability of a specific Firms in Africa endowment on the part of the host country. In the As part of this study on Africa-Asia trade and invest- case of investment for Asia-bound products, the in- ment relations, a few cases of actual Asian enter- vesting firms are mostly in agricultural, mineral and prises investing in Africa have been collected for analy- mining, and other primary commodities-processing sis. This section discusses these cases from the businesses. following points of view: Notable examples of agricultural commodity invest- Market orientation or identification of targeted ment are found among such Japanese agricultural markets for the products and services. firms as Maruha and Kenya Nut. Maruha has estab- lished joint enterprises in Madagascar and Local characteristics in terms of resource avail- Mozambique for shrimp cultivation, catering to the ability. demand in Japan, where traditionally popular sea- food has become more expensive to be sourced do- Local investment climate and the presence of business networks. mestically. Shrimp exports account for 3 and 6 per- cent of total trade in Madagascar and Mozambique, Local support mechanisms to facilitate investment. respectively. Since 1974, Kenya Nut has been oper- ating in Kenya to collect and process macadamia nuts. Strong market orientation: targeted market In both cases, the firms have gradually expanded their and market linkages markets to include the EU and United States in addi- Many Asian firms investing in Africa seem to have a tion to their home market in Japan and other Asian clear market orientation in their business strategies, countries. targeting specific markets in which they seek to sell Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 65 Korean investment in Angola is a typical example of Type 2 (African market) Asian investment in oil resources; such undertakings This type of investment is usually motivated by the require a substantial amount of investment for pro- high tariffs imposed by countries against foreign prod- cessing plants. Samsung is actively involved in oil ucts; to avoid these tariffs, foreign investors try to set exploration and processing in Angola (box 7.1). Mozal up a local production and distribution basis. As noted, is another example of this type of investment; here recent import liberalization by African governments an aluminum smelter has been established by an in- have made this form of investment less attractive than ternational consortium of Japanese, British, and South it was previously. For example, some Japanese elec- African firms (box 7.4). Other examples include tronic firms such as Matsushita Electric, Cote d'Ivoire, Petronas (Malaysia), which has acquired Engen, a and Sanyo Electric in Kenya were forced out of the major South African oil refining company; its oil re- market by a growing wave of cheaper imported prod- fineries have a production capacity of 5,250 kilotons ucts--some of which were imported through a black per year, and the venture has offices in 25 African market. countries. Many foreign investors see relatively less profit-mak- Chinese investment in the natural resources sector ing opportunities to penetrate African markets; their reflects government-led activities operated by state- limited size makes it difficult for investors to recover owned enterprises. Such investments include oil de- their initial setup cost. This is particularly true for veloping and mining in Cote d'Ivoire and Sudan, and manufacturers of consumer goods. However, some fisheries in Gabon, Ghana, and Morocco. Asian firms have taken advantage of regional inte- gration to expand marketing opportunities within Af- rica. Matsushita Electric, Tanzania, is an example of Box 7.4 a company's successfully strengthening competitive- Mozal's Contribution to the Mozambican Economy ness and utilizing regional economic integration to expand its market. As a project to establish one of the largest aluminum smelters in the world,the foreign investments in Mozal Strong local networks give firms an advantage for have led to improved economic and social benefits in this type of investment. MK International (Korea), a Mozambique, due to linkages with various resources medium-sized engineering and trading firm, has six and environments.The factors that led to Mozal's suc- subsidiary companies in six African countries (Senegal, cess include a competitive and inexpensive power Ghana, Nigeria, Malawi, Namibia, and Madagascar); supply based on the intraregional power grid connect- all are backed by top management's wide acquain- ing Mozambique with its neighboring countries in sup- tances within African diplomatic circles. ply of electricity, efficient labor, a good supply of raw materials, and investment incentives. The project fit Local licensing and franchising in retailing and other well within the framework of Mozambique's economic service-related industries can be considered another transition which it undertook in the early 1990s.Mozal form of investment targeting the African domestic has doubled Mozambique's exports, providing for in and regional markets. One illustrative example is the excess of $400 million in foreign exchange earnings local production licensing of mosquito nets granted per annum and adding more than 7 percent to the by Sumitomo Chemical of Japan (box 7.2). Another gross domestic product. Moreover, a goal of Mozal is example is Korean-run photographic studios licensed to recruit staff directly from the local community.At to use Korean photo development machinery; these its peak,it is anticipated that 65 percent of the Mozal are considered one of the most successful types of labor force will be Mozambican. business for self-employed Koreans in Africa. Related 66 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia type 2 investment includes merger and acquisition, products are sold domestically and will be sold to Tex- such as that practiced by UB Group of India; this Ray's factory in South Africa. largest Indian investor in South Africa initially invested $20 million in a local-owned brewery. Other Asian countries are making significant invest- ments in Africa's apparel industries. Recent Chinese Indian and Chinese firms are also major contractors investment in Cote d'Ivoire, Mauritius, Rwanda, and in African public sector works commissioned by both Swaziland are recognized as major AGOA-related national governments of African countries as well as investments. Several Singapore-based companies international organizations. with textile manufacturing capabilities have invested in South Africa, Lesotho, and Cambodia. Their manu- facturing facilities in Africa are purely export-driven, Type 3 (global market) targeting the U.S. and EU markets. This type of investment, which uses Africa as an in- termediate production point or gateway to the third Although limited to a small number of firms in South countries or the global market, has been increasing Africa, automobile assembly is emerging as another rapidly in recent years. The preferential market ac- example of type 3 investment. Toyota of Japan, for cess provided by some industrialized countries to Af- example, established its subsidiary plants in South rican countries through such mechanisms as AGOA, Africa in 1962 (box 7.1). While these plants have the Everything But Arms initiative, country General- been producing automobiles for South Africa and ized System of Preference schemes, and free trade neighboring countries, Toyota has announced its plan agreements are some of the strongest factors that to use its South African production hub to expand its propel this type of investment. While textile and ap- sales to the European market as well as to the Afri- parel industries dominate this investment category, a can market--thereby taking advantage of the EU- similar pattern is observed in automobile assembly. Southern African Customs Union (SACU) free trade agreement and a possible future U.S.-SACU trade The main business focus of Taiwanese firms in Africa agreement, as well as growing industrial clusters in are the apparel and textile industries, which can be South Africa. classified as labor intensive. Because they receive pref- erential treatment under AGOA and from some coun- The auto assembly industry can include some dynamic tries in the EU, these firms are mainly exporting their features at the subregional level. Hyundai, for ex- products to the United States and EU, and are im- ample, once benefited from the cost-saving combi- porting raw materials from Taiwan or a third country nation of certain institutional features of trade regimes instead of procuring them locally. in Southern Africa. When the Korean firm entered the market in 1993, it adopted semi-knocked down The case of the Tex-Ray Industrial Company, briefly (SKD) assembly in Botswana, by virtue of which the described in box 7.3, is one example of Taiwanese company was paying only 21 percent import duty. investment in Africa made in response to AGOA (box SKD covers the fitting of items such as engines, tires, 7.5). The firm established three factories in Swaziland and headlights to an already built car, thus cutting to produce its award-winning ultra mercerized cotton assembly costs. The vehicles were imported through color yarn. The main reason for investing in Swaziland Maputo, Mozambique, as a complete car, stripped was to obtain benefits under AGOA. Since increased down to comply with the then-existing SKD require- local procurement of raw materials is required under ments and exported to Botswana for reassembly. The AGOA after October 2004, Tex-Ray decided to es- vehicles were then exported to South Africa with no tablish a spinning factory in Swaziland as well. Its further duties through SACU. Financial problems Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 67 Box 7.5 Another notable trend for type Tex-Ray Industrial (Taiwan) and AGOA 3 investments, which may need In recent years,Tex-Ray Industrial has founded three factories in Swaziland--two more attention, is the recent ten- garment factories and a spinning factory--to obtain benefits under AGOA. dency for of type 1 investment Proton Investment Swaziland,Ltd.,andTex-Ray Investment Swaziland,Ltd., companies, such as Kenya Nuts were founded in 2001 and 2002,respectively.Among the employees,there and Mozal, to broaden their ex- 6 sixTaiwanese executive officers and 56 employees from China.The gar- port markets to include third ments produced by these factories are exported to the United States. country markets such as the EU The spinning factory Taitex Investment Swaziland, Ltd., was established in and United States. 2002. It employs 3 Taiwanese executive officers and 19 employees from China. Its products are sold domestically and will be sold to Tex-Ray's Local availability of factory in South Africa as well. production resources As of 2002,there were 60Taiwanese companies operating in Swaziland.Most In general, local resource avail- of these are in the textile industry and have organized a union,with the president ability always plays a critical role ofTex-Ray as chairman.The union can negotiate with the government of Swaziland in firms' investment decision- on behalf of the country's textile industry. making, regardless of whether With an average monthly salary of $120, labor unions are requesting annual the investment is domestic or wage increases.This may result in a loss of cost competitiveness.The local ex- overseas. This certainly applies change rate is unstable,which has a serious impact on the export competitiveness in the case of Asian firms' invest- of Swaziland's products. For example, in 2002, an exchange rate appreciation oc- ments in Africa. curred where US$1 was initially equivalent to 12.0 Lilangeni, but increased to 7.5 Lilangeni.Swaziland also has a severe lack of middle management and skilled labor. Investments in natural resource­ According to aTex-Ray officer,it takes three months to train new workers,which related ventures certainly reflect has a negative effect on production efficiency and cost effectiveness.More signifi- a direct linkage between re- cantly,despite the existence of its spinning factory,most ofTex-Ray's raw materials sources and investment. Many must be imported from other countries and Tex-Ray's local companies will no Asian companies, attracted by longer be favored by AGOA after 2004. African countries' rich natural Tex-Ray has indicated that the government needs to increase its leadership resources, invest in the with regard to labor unions and that an intervention by government may be nec- continent's mining and mineral essary to bring things under control. It has used the example of Mexico and its sectors as well as agricultural and subsidizing scheme for labor training as a possible model for the Swaziland gov- fishery sectors to obtain the raw ernment. materials demanded by manufac- The textile industry of Swaziland is strongly influenced by American prefer- turers and consumers in their ential treatment.Tex-Ray's factories in Swaziland must continue to undertake raw home countries. material production so that they can be favored by AGOA in the future.Tex-Ray has established its own labor union in each factory and has forbidden its employ- While endowment of natural re- ees to participate in national unions in order to avoid conflicts and time-consum- sources is an attractive factor ing negotiations. which is primarily associated with type 1 investment, other produc- tion factors, such as labor re- forced Hyundai to close its Botswana plant in 2000, sources, have significance for all three types of in- with significant effects on that country's economy, vestment. Many Asian firms are attracted to Africa which relies on the automobile as its second largest for its low-cost labor resources. For example, while export after diamonds. Asian firms in textile and apparel industries are gen- 68 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia erally attracted to Africa due to the preferential mar- Several Asian firms that have been hosted by African ket access African countries have to the U.S. or EU countries have been provided with already-established market, many also view the low labor costs in Af- factory shells. The experiences of Asian firms housed rica--as compared to the rising labor costs in Asia-- in industrial estates in Lesotho, however, reveal prob- as another aspect of their preference for operating lems in stable supply and access to utilities (water, in Africa. According to a questionnaire survey con- electricity) and telecommunication--a major disincen- ducted by the Overseas Chinese Affairs Commission tive to potential investors. Some firms reported that targeted at 50 Taiwanese firms operating in Africa, they often had to attend to these problems by them- the availability of low-cost labor is one of the main selves. Additionally, the government's minimum factors compelling firms to either initiate or expand wage-setting process, which does not follow any par- their operations in some African countries. ticular structure, made it difficult to set operational plans. The availability of ready-to-move-into factory space, Local business conditions which can be obtained by lease, is often attractive to A Singapore-based textile manufacturer operating in small- and medium-scale investors. However, the in- both South Africa and Lesotho selected South Africa vestors' lack of commitment in terms of a capital in- as an investment site due to its comparatively better vestment for plant facilities makes the host countries infrastructure, similar legal system (both are former very vulnerable to the potential withdrawal of these British colonies), and English language capability. The investors due to problems in infrastructure and regu- firm, however, withdrew from its investment in latory conditions, and necessitates that these govern- Lesotho due to labor-related disputes. As this example ments make stronger efforts to improve conditions. shows, there are two aspects to local business condi- tions that are critical for Asian investors, in particular Larger scale investment cases show that there are small- and medium-scale investors. One aspect is a some ways to overcome infrastructure issues. For sound investment climate, which includes the avail- example, with regional economic integration with ability of proper infrastructure, and stability and pre- neighboring countries, energy supplies can be sourced dictability in government regulations. Another aspect beyond the border. The example of Mozal (box 7.4) is the presence of network externalities such as a reveals the fact that some resources, traditionally con- common language and legal system or the presence sidered to be sourced locally, can be brought in from of effective business networks. neighboring countries. Specifically, Mozal receives a supply of low-cost electricity from South Africa's Elec- trical Supply Commission. Infrastructure and regulations Most African countries do not have a high profile with regard to the availability of proper infrastructure Business network and stability, and predictability of government regu- While common languages and similar legal systems lations--conditions on which foreign investment flows play some role in linking Asian and African businesses, to their countries depend. According to a survey con- the presence of business and human networks work ducted by the Federation of Malaysian Manufactur- very effectively in attracting some Asian entrepreneurs ers, the key problems faced by Malaysian firms hav- to Africa. Local networks also play a significant role, ing business transactions with African countries are a particularly in the case of small- and medium-scale weak financial system, a lack of legislature and infra- investment. The success of MK International is largely structure, a lack of security, high logistics costs, and dependent on human networks within Africa. The difficulty in identifying potential buyers. existence of a local business network seems to allevi- ate the high setup costs associated with FDI. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 69 In addition, ethnic networks have proven to be highly sortia to share risk, information, and know-how in effective in mobilizing investment and building busi- making investments. Mitsubishi Corporation's invest- ness relations across the world. For example, among ment decision in Mozal was partly due to an interna- selected Asian countries, India has the largest num- tional alliance and the intensive support of various ber of residents in Africa; these are particularly con- financial institutions. UTAS Asia is a small-scale con- centrated in Eastern and Southern Africa, reflecting sortium, organized with at the initiative of the Asia- the British colonial network. South Africa, for ex- Africa Investment and Technology Promotion Cen- ample, has about 1.2 million Indian residents. India's tre and the joint contributions of some 20 companies major export destinations in Africa--South Africa, and investors in Malaysia. The consortium has been Mauritius, Kenya, and Nigeria--are all countries with involved in a project to establish an information tech- large Indian populations. nology college at Zimbabwe University, the assembly of TVs and DVDs, and the establishment of a cotton Similarly, overseas Chinese and Taiwanese popula- ginning factory also in Zimbabwe. tions have a substantial presence in the African economy, though to a lesser extent than the Indian Various types of government policies affect patterns population. They are predominantly located in South of foreign investment. This discussion is limited to Africa, Mauritius, and Madagascar. First-generation government provision of support and incentive Taiwanese living in South Africa mostly operated gro- mechanisms, on the part of both the home and host cery stores, restaurants, and laundries; the second country governments. and later generations, which have acquired a higher level of education, have entered more professional Many firms cite the presence of preferential fiscal practices such as medicine, accountancy, and archi- incentives given by host countries as one of the posi- tecture. The Taiwanese immigrant population in tive factors affecting their investment in Africa. How- Lesotho is a key player in that country's foreign busi- ever, many firms are instead motivated by the prefer- ness communities and has made a significant contri- ential policy schemes provided by the third countries, bution to the overall economy. such as those the United States and EU grant to Af- rican countries. In the case of Japan, trade and investment activities have been mostly driven by private firms. Although Home country incentives are unusual. But in some the country does not have an ethnic business net- cases, the government does provide such assistance. work as strong as other groups', Japanese business For example, in one case of a large-scale investment relations are unique in the sense that general trading in natural resources, the investor's government backed companies (Sogo Shosha) play a catalytic role. Al- the investment from an energy security perspective. though the networking function among Japanese Sometimes, too, the government itself invests, which subsidiaries and residents in Africa (116 subsidiaries is the case with Chinese investment. and 5,770 residents in 2002) is not explicitly recog- nized, a large array of Sogo Shosha subsidiary com- 7.4 Effective Development panies across the world function as catalysts for in- Assistance for Asian Investment vestment activities by coordinating worldwide supply in Africa of goods, services, and information. Although the primary player in trade and investment is obviously the private sector, the government and Investment facilitation mechanism donors in general have roles to fulfill in establishing In some cases, the formation of consortia facilitates an appropriate environment within which the private investment in Africa. Several companies organize con- 70 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia sector can enhance its viable activities. Creating an ODA programs are considered to be effective instru- effective synergy between private business activities ments in generating incentives and attentions among and donors' development assistance is critically im- domestic firms for opportunities in trading with and portant in working to further trade and investment investing in African countries. Table 7.9 exhibits ODA relations between Africa and Asia. programs that have been conducted by Asian gov- ernments. It is clear from the table how technical Asian governments have made various types of pub- cooperation, in general, has played a central role in lic support available to their domestic firms in invest- Asian ODA to Africa. ing in Africa. Table 7.8 lists various trade and invest- ment promotion programs in Asian countries as they With regard to Africa-Asia trade and investment rela- relate to promoting trade and investment activities tions, strategic use of ODA and other governmental with African countries. Most countries have used fis- support and facilitation mechanisms could be particu- cal instruments or financial support such as double larly effective where private-based activities are not tax deductions and export credits to promote incen- yet forthcoming. Public entities such as Asian and tives for trade and investment. African governments as well as international organi- zations have important roles to play in this regard. Table 7.8 Primary Trade and Investment Promotion Policies of Asian Countries Table 7.9 Primary ODA Programs of Asian Countries Country Trade/investment promotion policy Country ODA program Japan Duty- and quota-free access to lesser developed country products, export credit Japan ODA to Africa accounts for 10 percent of all and insurance, trade fair, missions Japanese ODA; grants, technical assistance, and loans Korea Duty drawback, tax incentives, export credit and insurance, trade fair, missions Korea Technical assistance training and experts; ODA loans are tied to Korean enterprises, China Chinese Trade and Investment Development which share 11 percent of the entire loan Centers in 11 African countries; credit facility for private corporations and special fund China Agreements for economic and technical scheme for joint ventures cooperation with 53 African countries; nearly 800 projects, including various construction Taiwan Financial support for Taiwanese enterprises' projects, were completed by 2000 investment in African countries with diplomatic relations Taiwan Agricultural technical assistance and grants for countries with or likely to have diplomatic Singapore Double tax deduction for costs for expanding relations; finance and investment for specific overseas market and investment, international projects exhibition program, various tax incentive schemes Singapore Technical assistance development training program, particularly for export development Malaysia Double tax deduction for export promotion, (Singapore Cooperation Program) export credit refinancing, market develop- ment grant Malaysia Economic, technical, scientific, and cultural cooperation agreement with 20 African India "Focus Africa Program" to increase interac- countries tions with seven major African partners for joint trade committee, joint business councils, India Special Commonwealth African Assistance and export promotion; Export-Import Bank Plan provides technical assistance to 34 provides equity, loans, and guarantees to African countries support Indian direct investment abroad Source: Interviews by PADECO-UFJ. Source: Interviews by PADECO-UFJ. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 71 Donors' support of technology transfer programs range from general business management, Technology transfer has had vast implications in mak- such as productivity management, to highly special- ing international business relations more sustainable ized skill training such as the maintenance of sewing and conducive to the long-term development of the machines (box 7.6). private sector in developing countries. A significant amount of technology transfer has taken place purely The contents of the various AOTS training programs at the individual firm level through companies' FDI reveal their relevance to the evolving pattern and struc- activities. It is well known that the numerous Japa- ture of international trade. For example, a number nese electrical and electronic manufacturers that set of training activities have been organized on the main- up local plants in Southeast Asian countries such as tenance of sewing machines (in Bangladesh, China, Singapore, Malaysia, and Thailand in the 1970s have Pakistan, and Vietnam), reflecting the growth of tex- greatly contributed to building the industrial and tech- tile and apparel industries in other Asian countries nical skills and knowledge of local employees. And from which Japan import products. A training pro- the Malaysian auto manufacturer Proton developed gram on Buddhist religious products perhaps reflects its models through technical cooperation with rising production costs in Japan and the need for Mitsubishi Motors. imported products. A large number of automobile- related training programs have been organized in Despite the intuitive recognition of a high magnitude various countries, reflecting strong interest in Japa- of technology transfer taking place, actual flow is dif- nese automobile technologies and the need of Japa- ficult to measure beyond anecdotal evidence. It is also nese manufacturers to secure trained human resources true that private investment is motivated by profit- in maintenance and repair in order to expand their making interests and strategies, while donor govern- markets abroad. In terms of programs given for Afri- ments' technical assistance programs are more tar- can trainees specifically, over one-third of 4,000 train- geted toward the needs of developing countries in ees since 1959 have been trained in the automobile- growing their industries. Some governments spon- related area. In contrast, only a few African trainees sor public technical training programs to build entre- (165) and countries have participated in the textile preneurial and technical skills in the private sector of area. developing countries. Strategic use of such technical training programs is an effective way to foster busi- While AOTS provides technical training in industrial ness exchanges between Asia and Africa. To such skills and knowledge, Japan International Coopera- ends, a few governmental agencies in donor coun- tion Agency provides more policy-related skills and tries have been organizing technical training programs knowledge. The Korean International Cooperation for industrial skills and knowledge building for engi- Agency provides similar programs to a number of neers and entrepreneurs from developing countries. developing countries. In Japan, agencies such as the Japan International South-South technology transfer between Cooperation Agency, the Japan External Trade Or- Asia and Africa ganization, the Japan Overseas Development Cor- A significant amount of Japanese technology trans- poration, and the Association for Overseas Techni- fer has occurred between Japan to other Asian in- cal Scholarship (AOTS) are actively engaged in such dustries either through publicly provided technical activities. AOTS has conducted a large number of assistance or direct business transactions via FDI. Simi- industrial technical and management training pro- larly, the technical knowledge and skills that have been grams both in Japan and overseas for private busi- acquired by Asian countries could be imparted to nesses in developing countries. The contents of these 72 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia Box 7.6 The AOTS Regular Training Programs The AOTS Regular Training Programs involve two types of AOTS Trainees, by Region/Country: 1959­2001 training.One is technical training,in which participants attend No. of No. of Region/country trainees Region/country trainees a general orientation course and move on to specialized tech- Asia 74,871 Madagascar 26 nical training to acquire specific skills in host companies.The Middle East 2,981 Malawi 36 second type of training is management training, which aims to Africa 3,957 Mali 6 provide the knowledge and skills in business management, Algeria 147 Mauritania 12 production management, etc., needed by managers in devel- Angola 12 Mauritius 85 oping countries.The strength ofAOTS training lies in the fact Benin 3 Morocco 27 Burkina Faso 4 Mozambique 13 that both the host and developing country companies are Burundi 6 Niger 22 able to articulate and share common, clear goals; and partici- Cameroon 91 Nigeria 476 pants,while learning Japanese technology and managerial skills, Canary Islands 8 Réunion* 11 can observe how they are actually practiced within Japanese Central Africa 5 Rwanda 17 society. Comoros 2 Senegal 28 Rep. of Congo 5 Seychelles 5 D.R. of Congo 22 Sierra Leone 7 AOTS Trainees, by Industry: 1959­2001 Cote d'Ivoire 22 Somalia 14 No. of Djibouti 6 South Africa 100 Industry trainees Share (%) Egypt 1,140 Sudan 122 Manufacturing Eritrea 2 Tanzania 315 Electric & electronic 19,173 20.8 Ethiopia 162 Togo 17 Transportation equipment 19,210 20.8 Gabon 5 Tunisia 28 Machinery 11,498 12.5 Gambia 2 Uganda 55 Chemical 5,474 5.9 Ghana 355 Zambia 108 Metallurgical 4,158 4.5 Guinea 15 Zimbabwe 59 Textile 3,112 3.4 Kenya 217 Latin America 7,722 Food 1,062 1.2 Liberia 38 Oceania 520 Other manufacturing 1,140 1.2 Libya* 99 Europe 2,249 Agriculture, fisheries & mining 969 1.0 *Trainees no longer accepted from this country. Construction 3,700 4.0 Other 22,804 24.7 African countries as well. This South-South aspect of also organizes its own fact-finding missions to a few technology transfer has been considered very effective. countries. Once a potential investment area is identi- fied as viable, MASSCORP carries out the project-- The Malaysian government has actively promoted sometimes with equity participation--in conjunction South-South cooperation in the 1990s as part of an with a delegation of its shareholders with relevant effort to enhance trade and joint ventures between technical and management expertise. Malaysia and developing countries in Africa and other regions in the world. The implementing arm is the In this way, some Malaysian firms have formed part- Malaysian South-South Corporation Berhad nerships for investing in Africa in order to share risks (MASSCORP), established in 1992 as a consortium as well as information and know-how. Although on a comprised of 85 Malaysian shareholders. smaller scale than the MASSCORP consortium, UTAS MASSCORP participates in business missions to other Asia was actively organized at the initiative of the countries together with the Malaysian government. It Asia-Africa Investment and Technology Promotion Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 73 Centre under the United Nations Industrial Develop- Box 7.7 Thai and Chinese Investment in Cassava and Rice ment Organization and a joint contribution of about Processing in Nigeria 20 firms and investors in Malaysia. This consortium The Government of Ondo State has signed a memo- has been involved, as mentioned earlier, in a project randum of understanding withThailand and China for to establish an information technology college jointly the establishment of rice processing and cassava fac- with the University of Zimbabwe and to promote trans- tories.The projects are estimated to cost over $60 fer of Asian technology to Africa, functioning as a million... The chief of staff to the governor said that "one-stop center" for Africa-Asia business. the state government had initiated a partnership ar- A few initiatives have been taken in the context of rangement with S.W.Multi-Tech Starch Company Lim- improving agricultural productivity in Africa. Dissemi- ited,Thailand,and that the company will visit the state nation of New Rice for Africa, a hybrid type of rice in August this year. Also, another company, Bayoke that combines the strong characteristics of both Asian Group of Companies,Thailand has agreed to visit the and African rice types to yield high productivity, is a state for on-the-spot assessment before August this prime example of such initiatives. There are also a year for the cassava processing factory. On the rice number of private-led projects. In Nigeria, a local state processing factory, Pathum Rice Mill and Granary government has initiated a partnership arrangement Pathum-Thani, Thailand, had indicated interest in with Thai and Chinese firms for cassava and rice pro- partnering with the state while Burshood Limited, cessing factories (box 7.7). China,had agreed in principle to partner with the state in the establishment of the rice plantation and rice Roles of international organizations mills.Approval to the agreement will be obtained by the end of this month. The delegation equally suc- International organizations have a significant role to ceeded in initiating a partnership arrangement with play in strengthening the host country governments Nanning Heavy Machinery plant in China (the manu- in Africa as they improve the investment climate. For facturer of equipment for rice milling, sugar refining, example, the Lesotho National Development Corpo- starch manufacturing) for the establishment of a sugar ration, assisted by the World Bank, contributed sig- factory and sugar cane plantation in the state. The nificantly to the success of Lesotho's FDI program. approval of the regional government for this, accord- One Taiwanese firm benefited from its worker train- ing to the chief of staff, is expected by the end of this ing grant fund. Most of these grants were used to month. train locally recruited employees for managerial and supervisory positions. Source: Excerpt from Vanguard (Lagos) July 13, 2004. Many large-scale investment projects by Asian com- panies, often in extractive industries, are accompa- tive, only a small portion of ODA disbursements are nied by the involvement of international organizations, directed toward the trade sector. And, as shown in such as the World Bank and International Monetary figure 7.4, even that small proportion has declined Fund, in the expectation that these organizations will significantly. ODA to Africa has shifted from economic bring stability and accountability to the host country programs to social programs and to policies support- governments as well as the business environment. ing poverty reduction strategies. Beginning in 1999, Further integration of ODA with trade and international development institutions shifted their investment focus from corrective macroeconomic policies and market distortion remedies to poverty reduction poli- Although various development assistance and other cies and strategies for low-income countries. In Af- public support schemes are considered to be effec- 74 Chapter 7 ­ Integration of Trade and Investment Relations between Africa and Asia Figure 7.4 technical assistance for industrial development is of Share of African ODA from DAC Donors Directed at Trade and Tourism particular importance in building a stronger supply capacity in Africa and fostering stronger business re- Share of ODA (%) 0.6 lations between Africa and Asia. Private investment alone does not and cannot address all the needs of 0.5 developing countries. ODA can leverage private in- 0.4 vestment, just as private investment, through its eco- 0.3 nomic growth effects, substantiates the goals of ODA. 0.2 Under the existing conditions of trade and investment, 0.1 it is difficult for Africa to receive full benefits from economic globalization and the multilateral trade sys- 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 tem. All sectors face serious challenges in Africa, and poverty reduction is a fundamental goal that cannot Source: OECD database. be bypassed in any sector. Thus, Africa's trade and investment must be integrated with a comprehensive approach based on a common strategy aimed at eco- rica, there has been a clear shift from the allocation nomic growth and poverty reduction. Some examples of ODA directed at economic sectors to social sec- of specific assistance programs needed in the short tors (figure 7.5). run include technical assistance and policy support to strengthen competitiveness and promote exports of While the significance of social development cannot the agricultural products that are the main export be overstated, economic development must not be products of the region. In the long run, crucial assis- neglected either. Development assistance, regardless tance must be focused on initiatives in the region to of whether it is provided by traditional bilateral do- solve fundamental problems in promoting trade and nors, South-South partners, or international organi- investment. Such long-term perspectives include as- zations, has a significant role to play in piloting and sistance in developing domestic industry development complementing private investment flows to Africa. policies for building viable industries engaged in trade And in this context, the role of donors in providing and investment, along with assistance for basic hu- man resources development through production tech- nology development. Figure 7.5 Africa: Social versus Economic Allocation of ODA: 1990 and 2001 Recent development: The Integrated 1990 2001 Framework for Trade-Related Technical Assistance In the context of these downturns in trade-related assistance to Africa, it must be noted that interna- tional donors have increased their efforts in provid- ing trade-related technical cooperation to least devel- oped countries (LDCs); specifically, several African countries are included under the auspices of the Inte- Economic allocation Social allocation grated Framework (IF) for Trade-Related Technical Assistance to LDCs. Under this framework, six mul- Source: OECD database. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 75 tilateral institutions--the International Monetary Fund, To date, DTISs have been completed in seven Afri- International Trade Centre, United Nations Confer- can countries. Based on the findings of the DTISs, an ence on Trade and Development, United Nations action matrix is developed in consultation with all Development Programme, World Bank, and World stakeholders. The action matrix, which spells out a Trade Organization--lend their distinct competencies set of policy recommendations and priority technical to deliver greater development dividends to LDCs in assistance needs, is discussed by all stakeholders dur- the multilateral trading system. ing a national workshop. Following validation of the action matrix, trade policy priorities are incorporated Building on the principles of country ownership and into the country's Poverty Reduction Strategy Paper, partnership, the IF has two objectives: (1) to "main- and the priority technical assistance needs are fed stream" (integrate) trade into national development into donors' financing fora, notably through imple- plans such as the Poverty Reduction Strategy Papers mentation meetings. of LDCs, and (2) to assist in the coordinated delivery of trade-related technical assistance in response to The DTIS provides a solid comprehensive framework needs identified by LDCs. IF implementation com- for assessing potentials, needs, and constraints of prises three broad stages: African countries in strengthening their trade-related capacity. The studies conducted thus far for African Preparatory activities, which typically include an countries, however, tend to fall short of incorporat- official request from the country to participate in ing consideration of the growing trend toward inter- the IF process; a technical review of the request; regional trade between Africa and Asia or in assess- establishment of a national IF steering commit- ing future potential as well as needs and constraints tee; and, to the extent possible, identification of of African countries in accessing markets in Asia. a lead donor. Future studies could incorporate more rigorous as- sessment of the aspects entailed in facilitating Africa's Diagnostic phase, which results in the elabora- trade relations with nontraditional markets such as tion of a diagnostic trade integration study (DTIS). Asian countries. Such aspects include weaknesses in the African transportation network with Asian coun- Follow-up activities, which begin with the trans- tries, as well as technical standards and sanitary and lation of the diagnostic phase's findings into the phytosanitary standards of Asian countries affecting elaboration and validation of an action plan to African producers. serve as the basis for trade-related technical as- sistance delivery. CHAPTER 8 Key Findings, Future Directions, and Next Steps This chapter summarizes key findings from the analy- Key characteristics of Africa's import structure include ses presented in this report. It then sets forth a series the following: of policy recommendations for promoting more trade and investment between Africa and Asia. In contrast to its export structure, Africa's im- port structure is less concentrated in terms of the countries to which it imports. 8.1 Summary of Africa's Export/ Import Structure Among African countries' major imports, prod- Africa's export structure can be characterized as fol- ucts that support the manufacturing and mining lows: industries--such as transportation and commu- nication equipment--tend to dominate. These High dependency on the European Union (EU) products serve as an indispensable means of link- market, which was the destination of 52 percent ing African countries with the rest of the world. of total African exports in 2000; exports to Asia have been increasing in recent years. Clear supply linkages have emerged in both the textile-apparel sector and the automobile sector, Primary commodities dominate Africa's exports, where African countries' production of exported accounting for roughly more than two-thirds of products is based on intermediate inputs and parts the area's total world exports. Although crude imported from abroad. oil makes up the largest share of African exports, other mineral and mining products, as well as agri- Food items are significant imports of African cultural and fishery products, are also prominent. countries. Some African countries have become more domi- 8.2 Summary of Key Findings nant in recent years as exporters of manufac- Key findings that provide useful information in devel- tured products, most notably in textiles and ap- oping Africa-Asia trade and investment relations are parel. summarized below. Africa's Southern and Northern subregions have growing industrial sectors, whose products range Finding 1 beyond textiles and apparel. South Africa, in Africa's exports to Asia grew both in relative and ab- particular, has become an important regional in- solute terms during the 1990s. Currently, 16 per- dustrial hub, with increased exports of automo- cent of Africa's export earnings are derived from sales biles to the rest of the world. to Asia. Moreover, the rate of increase in export val- 77 78 Chapter 8 ­ Key Findings, Future Directions, and Next Steps ues to Asia (10 percent per year) has been higher Sub-Saharan Africa's share of exports, exclud- than comparable rates of export value to the EU and ing exports from South Africa and exports of oil, United States. Asia has therefore emerged as an im- is around 17 percent of total African exports to portant partner in Africa's trade and development. Asia. Albeit at a smaller scale, this segment of Africa's exports--which is mostly agricultural commodities--has shown a similar growth pat- Finding 2 tern to that of minerals and mining products. Asia's developing economies import more from Af- These agricultural commodities tend to have rica than they did in past decades. In Asia, imports dominant shares in each non-oil-exporting coun- from Africa outpaced imports from other regions. try. Thus, the significance of commodity demands Countries such as India, China, and Taiwan have sig- in Asia is also relevant to Sub-Saharan Africa nificantly increased their overall African imports. countries which are not necessarily strong in oil and other mineral exports. Finding 3 Africa's exports to Asia are mainly driven by primary Finding 4 commodities and related products linked to either in- Asia could become a strategic target in diversifying dustrial growth or emerging consumer populations the markets of African products. Demand from Asian in Asia. Oil and oil-related products account for a markets has a potentially good fit with the existing large share of these exports, but other primary com- supply base of traditional primary commodities in modities such as agricultural and fishery products and Africa. The scope of value-added processing in Af- minerals and crude materials are also increasingly rica is still limited, but by recognizing this linkage and exported to Asia. developing consumer relations with Asian countries, African producers/exporters could significantly ben- African exports to Asia of mineral fuels and other efit from expansion of traditional primary commodi- raw materials have experienced strong growth ties, which are Africa's stagnated core business. as a result of the rising manufacturing sectors in Asia, particularly in China, India, Korea, Taiwan, and among members of the Association of South- Finding 5 east Asian Nations. Although only a limited num- Asia can contribute to Africa's quest for product di- ber of countries are endowed with mineral and versification in its export structure. South Africa has mining resources, a wide range of non-oil-pro- recently shown strong growth in manufacturing ex- ducing countries also benefit from the export of ports to Asian countries. While only a few African other raw materials and their processing (e.g., countries export manufactured goods to Asia, a wider cotton, wood, and leather). range of countries have benefited from manufactur- ing-related imports from Asia. Asian countries are The growth in African exports of food and agri- providing essential inputs to Africa's growing manu- cultural commodities to Asia can be explained by facturing sector, most notably its textile and apparel the large populations with rising income levels in sectors. There is a positive relationship between Asian countries. Nonessential foods such as cof- Africa's growth in manufacturing exports to the EU fee, cocoa, tea, and nuts will find stronger growth and United States and growth in imports from Asia. markets in Asia than in the saturated markets of developed countries. Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 79 Finding 6 Asian investors and host countries in Africa are deeply Some developed countries have pursued various pref- motivated by trade relations between the two regions. erential trade initiatives with Africa, such as tariff- Asian investment in Africa takes three forms: free and quota-free access. Notably, the textile ben- efits provided under the African Growth and Investment targeted to products to be sold in Opportunities Act (AGOA), combined with the quota Asia. This typically involves natural resources and system of the Multifiber Arrangement (MFA), have processed raw materials (e.g., food), both of which triggered visible changes in the apparel exports of are in high demand by Asian manufacturers and some African countries. Still, it should be noted that consumers. Macro-instabilities in African host these preferential measures are often time-bound and countries have often hampered this kind of in- redundant with existing Generalized Systems of Pref- vestment in the past, but, driven by growing de- erence. While continuation and expansion of well- mand from Asia, there are signs that such invest- targeted preferential treatment is desirable for many ment may gain momentum. African countries, these measures alone do not guar- Investment targeted to Africa's domestic mar- antee the full benefits of sustainable export expan- kets. Such investment has been constrained by sion: The response of African countries is critical. the small size of local markets and the high trans- Successful African exporters must work proactively action costs resulting from a lack of efficient in- to improve their business environment both in terms frastructure. In the absence of effective regional of governance and infrastructure, and strengthen their integration and infrastructure services, the pros- supply-response capacity to seize on just such oppor- pects of such investment are limited. tunities arising from the external environment as pref- erential trade agreements. Successful countries tend Investment targeted to the global market, typi- to have consolidated and carefully targeted initiatives cally the third countries. This type of invest- for providing an enabling environment for potential ment effectively integrates production activities industries. in Africa with global supply chains. Investment in less developed countries tends to focus on the Finding 7 textile and apparel sectors or the service sector, Tariff rates for processed commodities tend to stay motivated largely by the low labor costs and/or higher than rates for raw materials, which typically is favorable trade regimes provided by the host a discouraging factor for the value-added activities in country. The notable development in countries raw material­producing countries. In Asia, this issue such as South Africa has attracted more sophis- of tariff escalation on resource-based products is gen- ticated manufacturing and service investment; erally more visible within low- and middle-income such investment is genuinely attracted to the po- countries where higher growth of raw material de- tential productivity increase in these countries. mand has been observed. With the expansion of glo- bal trade, and with more layers in supply chains, tar- Finding 9 iff escalation has become an issue not only in Compared with the synergies that emerged among North-South trade but in South-South trade as well. Asian countries in the course of trade expansion, intraregional dynamism in Africa is still weak. Afri- Finding 8 can countries could better benefit from export op- Foreign direct investment by several Asian countries portunities by improving the intraregional mobility of in Africa has demonstrated that relations between goods and services. Improvement of the regional 80 Chapter 8 ­ Key Findings, Future Directions, and Next Steps transportation and telecommunication systems must in these areas in cooperation with other organiza- be addressed to enhance the supply-response capac- tions. ity of African countries. Direction 2 8.3 Future Directions for Africa- An institutional arrangement will be needed to en- Asia Trade and Investment hance the strategic dialogue between African and Based on these findings, it is clear that there is a Asian countries and to raise awareness about emerg- significant potential for expanding trade relations be- ing business opportunities among businesses in the tween Africa and Asia. To realize the full benefits of two regions. Building on the current Tokyo Interna- such trade expansion, initiatives must be promoted tional Conference on Africa Development (TICAD) strengthened in the following three directions: framework, such an arrangement should enable broad-based, consolidated policy dialogues to take Strengthen the knowledge base on Africa-Asia place among African and Asian countries--by both trade and investment relations. their governments and their businesses. Ensure the existence of an appropriate institu- There are many countries and economies in the two tional framework for strategic dialogue between regions. Fragmented and spontaneous talks between the two regions. individual African and Asian countries are often com- plicated and inefficient in promoting effective policy Promote an understanding of the critical elements dialogues. Continuous and ongoing dialogues must of an enabling environment for business activi- be maintained in order to exchange market views ties and refocus development assistance to foster and information, and overcome any existing nega- economic growth. tive perceptions. Such dialogues will better enable individual African and Asian countries to take new Direction 1 high-level policy actions to promote trade and invest- ment relations on an individual basis. The knowledge base on Africa-Asia trade and invest- ment relations needs to be strengthened to facilitate An institutional arrangement for such dialogues is an the discovery of market opportunities between Af- effective channel for allowing African countries to rica and Asia and to better understand how the mar- improve their external relations with their economic ket works between the two regions. partners in Asia and sow the seeds for more proac- tive policy interactions in actual trade relations. Such Such a knowledge base can be strengthened by en- a forum can also identify necessary support mecha- suring relevant data reporting and gathering and by nisms for African industries to develop a stronger accumulating a series of in-depth analytical studies supply-response capacity. based on such data. The studies are expected (1) to identify existing potentials to expand trade and in- We are convinced that Asia could be a substantial vestment relations between the two regions, (2) to source of opportunity for African countries. However, identify the geographical and manmade constraints the relative weight of African countries in the Asian and other impediments to promoting trade and in- market is still limited. While exports to Asia account vestment activities, and (3) to promote better under- for 16 percent of total African exports, they are less standing of global supply chains and the way to im- than 2 percent of total imports by Asian countries. prove connection to them. The World Bank should This imbalance between Africa and Asia in terms of continue its efforts to contribute to the analytical work Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 81 relative size in each market may lead to asymmetri- 8.4 Next Steps cal mutual expectations. For this reason, an institu- Conventionally, Africa's trade and investment pro- tional arrangement is critical for drawing sufficient motion policies have been discussed in terms of the attention from the Asian business side to opportuni- necessity for a development agenda for Africa's coun- ties in African countries which would be underesti- tries, focusing on measures to enable development mated otherwise. of certain types of production/export capacity (prod- uct out approach). This study, however, bases its rec- Direction 3 ommendations in terms of product types, in recogni- tion of the fact that business interests increasingly African countries and international donors should develop from the identification of products and tar- renew their commitment to an enabling environment geted markets, which often exist only outside the for cross-border business activities, which are essen- African countries (market in approach). Sourcing of tial engines for economic growth. At the same time, such products and selection of investment locations coordination and consolidation of efforts dedicated can take place only after businesses are convinced of to production capacity building within Africa is criti- demand potential. cally important for African countries to be able to respond to international business opportunities. Such In this context, the report outlines the following next domestic conditions, as well as this cross-border en- steps for public and private players according to three vironment, are essential for ensuring the economic groups of products, each categorized by its main tar- growth that is critical to African countries' ability to geted markets as explained in the key findings: achieve the Millennium Development Goals. 1. Goods and services for Asian markets (e.g., natu- International donors have various policy instruments ral resources, agricultural, and other primary com- available to help African countries foster an enabling modities). environment for business activities and facilitate ac- tive business exchanges among countries through 2. Goods and services for the global market (e.g., trade and investment (see box 6.1). Bilateral as well textile and apparel products, automobiles and as multilateral official development assistance plays a their parts, exported to the EU, United States, critical role in fostering an enabling environment, Asia, and elsewhere). particularly with regard to such areas as infrastruc- ture services in transportation and telecommunica- 3. Goods and services for African markets (e.g., food tion. Export credit and insurance schemes, and in- and agricultural products, goods and services in vestment guarantee systems, are all effective tools relation to privatization projects in Africa, fran- for international donors to use in supporting the pri- chising and licensing opportunities). vate sector in building trade and investment channels between African countries and other regions. In this Asian market group regard, an international forum such as TICAD helps As summarized in the key findings, Africa's exports focus the international community on the need to to Asia are driven by primary commodities and re- support African countries in building an enabling busi- lated products linked to either industrial growth or ness environment in their domestic economies, and emerging consumer populations in Asia. The poten- in designing and coordinating effective public sup- tial products in this market are natural resources and port schemes to facilitate improved business transac- agricultural and other commodities. The scope for tions between African countries and other regions. nontraditional exports, especially of manufactured 82 Chapter 8 ­ Key Findings, Future Directions, and Next Steps products, is limited in the immediate future except Commodity processing from South Africa. Not much has been accomplished in processing ca- pacity development. Due to its bulky nature, com- African countries already have a solid supply basis modity processing requires a significant investment for these commodities. By building on this existing and economies of scale. In addition, high standards capacity, trade and investment relations in these prod- of quality are imposed by importing partners. This is ucts have growth potential in terms of both quantity an area where foreign investment could alleviate a and quality. With revealed demand and revenue po- lack of financial and technical resources. A stable tential in Asian currencies, it is relatively easy for Asian business environment is of paramount importance in companies to develop businesses in these commodi- convincing foreign partners to invest. Also, Asian ties in African countries. Four measures can be taken businesses would have more motivation to invest in to further this goal: lowered transaction costs, par- Africa if the tariff escalation that exists in many Asian ticipation in trading and marketing, value-added from countries were reviewed. Donors can also help moti- processing, and good governance in commodity vate potential investors through guarantee programs trades. and capacity-building support. The effectiveness of international consortia in involving Asian partners, as observed in Africa's mining and extractive sectors, Lowered transaction costs can be replicated and expanded to other commodi- African commodity exports to Asia could accelerate ties including agriculture and fisheries. on their current trends if transaction costs can be re- duced. Since commodity trading has a relatively small margin, improving logistics entailed in quality and Good governance costs is critical. Desirable actions include improving Good governance in the extractive commodity busi- the physical infrastructure, but of no less importance ness is increasingly important. Traditionally, high eco- is the institutional arrangement of African countries nomic rents associated with the extractive sector have to realize higher efficiencies in business facilitation been a source of conflicts and political instability. services. Also, one reason for high transaction costs Governments should have a stronger capacity in trans- is a lack of investment/trade finance accessible by parent extractive commodity management. At the Asians. This could be improved with support from same time, private investors should honor certain international donors. codes of conduct to maintain good corporate citizen- ship in African countries. Several very large-scale extractive projects in Africa, operating within an in- Participation in trading and marketing ternational framework and involving Asian partners, Africans have been producing commodities but have promote good practices and transparency. Again, a not been actively involved in the trading of these prod- similar approach can be taken with agricultural and ucts. For Africans to claim a larger margin in com- fishery commodities. modity chains, African sellers need to participate more actively in trading and marketing their products to new markets. Credible African private merchants are Global market group not well known to their Asian counterparts. African Asian firms are, as noted in this report, expanding governments and international donors could help their manufacturing production in the apparel and narrow the business information gap between Africa textile sectors. Revenue from this type of investment and Asia at this early development stage. Strength- ultimately relies upon market demand in developed ening of business networks and of mechanisms for countries such as the EU and United States. From an credit enhancement are desirable. Asian perspective, these investments seek to neutral- Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 83 ize trade-related frictions with the U.S. and EU mar- and intraregional contexts. Along the chain of pro- kets and to circumvent the trade restrictions imposed duction from raw cotton, to textile, to garment, Afri- by these countries. From an African perspective, the can countries already have some experience in cre- favorable access granted by the U.S. and EU mar- ating an intraregional supply chain network. As more kets under preferential treatments is a an incentive stringent rules of origin may be applied in the future, to develop a nontraditional manufacturing sector industries must be able to source their inputs locally within a trade environment which is intentionally cre- or intraregionally. Although Asian firms have been a ated by policies with certain time limitation. In gen- driving force in the rapidly growing garment industry eral, production costs are higher in Africa for most in some African countries, harnessing stable local Asian investors because of higher labor and logistics sources of supply is one of the most essential condi- expenses. Strong concerns have been raised about tions for rooting their investments more firmly in Af- the impact of the MFA's expiration in 2005, which rican countries. has established a quota on Asian textile exports, thereby motivating them to shift their production lo- Improve logistics cation. Improvement of local and intraregional logistics sys- tems is an integral part of creating an enabling envi- The apparel and textile sectors highlight a challenge ronment for developing the linkages cited above, as both African and Asian players face--a challenge that source origins and product destinations have become could be turned into an opportunity for many Afri- more diversified in the textile and apparel industries. can countries, if efficient production capacity could To respond quickly and efficiently to the continuous be reached before the sunset of the various special market development of both inputs and outputs at incentive schemes. What is critical at this juncture is the global level, effective systems of connectivity with a time-sensitive response by each player in Africa markets outside the region--and, more importantly, and Asia. The private sector continues to shift its within the region--are vital. Exploiting emerging re- position in the absence of a generalized reform that gional hubs could be an effective strategy in building takes a long-term perspective. Therefore, it is neces- such systems. The African government, in coopera- sary to thoroughly examine the potential scope of tion with the private sector and international donors, African countries' development in the apparel and needs to place a high priority on improving local and textile sectors in the context of their global supply intraregional logistics systems--including infrastruc- chains, and establish the necessary conditions to re- ture--making this Africa's primary public-private ini- alize such development--particularly in terms of cre- tiative. ating an enabling business environment and strength- ening efficient logistics systems. Specifically, measures need to be taken to; (1) develop industrial linkages Build capacity both locally and intraregionally, (2) improve local and Asian businesses have largely been attracted to Afri- intraregional logistics, (3) build capacity and improve can countries for the preferential market access op- productivity, and (4) provide a favorable market ac- portunities these afford their products' final destina- cess environment. tions. While Africa's labor costs are low compared to those in Asia, labor productivity also remains low in Africa. To make for more sustainable, value-adding Develop industrial linkages employment locally over the long run, the industrial The private sector in Africa needs to identify oppor- capacity of Africa's labor force in the various sectors tunities to develop backward and forward linkages in must be rigorously strengthened, both in terms of tech- the apparel and textile industries, both in the local 84 Chapter 8 ­ Key Findings, Future Directions, and Next Steps nical and managerial skills, through effective programs can countries to maintain local manufacturing of con- of the African government and initiatives by the Afri- sumer products, their production scale needs to be can private sector. Indigenous knowledge should be expanded, which in turn requires a more integrated harnessed with, and strongly complemented by, ex- market at the regional level. Even though their com- ternal knowledge. There is a significant opportunity petitiveness will not increase overnight, African busi- in this regard to promote the sharing of Asian expe- nesses may be able to identify opportunities as licensed riences with African countries. International donors, agent distributors of imported products. At the same including Asian governments, could extend match- time, capital-intensive service industries, typically in ing grants to the private sector to develop and imple- infrastructure, represent another industrial category ment programs to promote such capacity building for which the local markets of African countries could within the sectors. attract foreign investment. The product and trading opportunities that can be Enhance market access fostered--and the measures that can be taken to re- Continued international support is needed to enhance alize such opportunities--must be realistically identi- market access opportunities for African countries in fied and assessed. Potential locations for non-resource- overseas markets. Moreover, this support must be ap- based manufacturing in Africa are rather limited now plied during the transition period before AGOA imple- and in the immediate future. Assuming the availabil- ments more rigid rules of origin and during the MFA ity of a more integrated market, products that use phaseout. Countries could consider providing tenta- local resources and have growth potential include tive preferential market access measures to African food, agriculture, agricultural supplies, and construc- textile and apparel products to mitigate the poten- tion materials. Another source of potential could be tially serious after-effects of the MFA phaseout for found in local services, which range from the fran- African countries. chise and licensing of existing industries and distribu- tion networks to infrastructure services such as port African market group operation, land and air transportation, power and tele- Prior to World Trade Organization (WTO) accession, communication systems, and trading and finance. It African countries instituted high tariffs to protect their must be noted in this context that, traditionally, domestic industries and thereby foster their domestic parastatals have been the main player in these do- production capacity--a strategy commonly known as mestic market-oriented products and services. Both import substitution industrialization. During this pe- the local and international private sector must be more riod, several Japanese firms invested in Africa to pro- actively involved if the efficiency and profitability of duce consumer goods, such as electrical appliances, these markets are to be improved. tires, batteries, and local textile materials including Revenues from the above-described products rely on synthetic fiber, to avoid high tariff barriers. As Afri- demand from African consumers; this makes these can countries have implemented their structural ad- products particularly vulnerable to the size constraints justment programs have joined the WTO, they have of Africa's individual domestic markets. Where for- lowered their protective industrial tariffs and made eign investment is involved, it is also subject to for- other structural adjustments to their production pro- eign exchange risks. Therefore, this area is the one cesses; consequently, locally produced products have in which it is most difficult for Asian businesses to lost market share due to a lack of competitiveness commit their investment resources and take invest- against mass-produced imports from rising industri- ment risks. alizing nations in other parts of the world. For Afri- Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership 85 A general strategy to enhance investment activities initially led by private industry, with official free trade in such products and services must therefore be an- measures following. Regional integration may entail chored on three foundations: (1) seeking alternative some adversity for local vested interests, but it is none- credible and mutually beneficial business arrangements theless important to realize that protection of vested such as licensing and franchising, (2) building an inte- interests could be still more costly in the long run. grated regional market, and (3) building intraregional Regional integration in Africa needs to place a high networks for logistics and business. priority on building efficient intraregional transporta- tion and other logistics systems for promoting more dynamic commercial flows both at the subregional Alternative business arrangements and regional levels. International donors, particularly As mentioned earlier, Asian investors do not have a international organizations, should strengthen their strong incentive to invest hard currency for vulner- support of the efforts made by African countries in able African revenues. If African businesses secure this regard. Regional integration in Africa must be some investment capital, they could negotiate with trade-creating rather than trade-diverting. Particularly Asian businesses to obtain their products as well as relevant to foreign investment is that internal inte- industrial and managerial know-how from Asian busi- gration must be complemented by external openness nesses through alternative business arrangements such and connectivity in order to receive skills and knowl- as licensing and franchising. These opportunities could edge along with investment, and to channel products be a first step toward fostering credible and mutually and services to other regions. beneficial business relationships, along with trade in actual products. Such arrangements allay Asian busi- nesses' concerns about taking financial risks; they Intraregional networks enable African businesses a means of acquiring prod- Building intraregional networks for logistics and busi- uct knowledge and skills in exchange for marketing nesses is essential. Too limited intraregional trade and efforts. However, for this arrangement to be possible, high transportation costs have discouraged the growth African governments should pay particular attention of local businesses in Africa. Unless these issues are to securing a local system for protecting industrial adequately addressed, it will be difficult to scale up know-how and intellectual property rights. investment activities. Regional networks of businesses need to be enhanced through local business initia- tive. Inter-firm networking is a proven tool for foster- Regional integration ing the development of small- and medium-scale en- The, African market has to improve its attractiveness terprises--which are the most likely major players in in order to induce more investment. African coun- catering to local and regional markets. An effective tries should renew their commitments to implement- strategy for lowering the current high transaction costs ing realistic and substantive regional integration between African countries would be to foster trading schemes. Market integration should not necessarily companies within Africa; this would create more ac- undermine the political independence of African coun- tive intraregional commercial flows while presenting tries. In this regard, Asian countries could share their additional business opportunities to the African pri- experiences of a de facto regional integration that is vate sector. 86 Chapter 8 ­ Key Findings, Future Directions, and Next Steps Box 8.1 Suggestions for Future TICAD-NEPAD Initiatives Given these future directions forAfrica-Asia trade and investment,the following set of concrete initiatives are proposed to foster trade and investment relations between the two regions; these could easily be implemented within the TICAD-NEPAD (New Partnership forAfrica's Development) framework.These initiatives must be consistent with,and supportive of,the trade and investment development efforts and policies of such global framework entities as theWorld Trade Organization. TICAD-NEPAD Business Council. Establish a TICAD-NEPAD Business Council to meet periodically to facilitate information exchange and policy dialogue between African and Asian policymakers and business leaders,and to coordinate individual countries' efforts in engaging in active business relations between the two regions. Africa-Asia Business Development Benchmarks. TICAD and NEPAD could establish Africa-Asia business bench- marks that TICAD countries could use to assess and monitor their levels of participation in fostering private sector business relations between Africa and Asia. Development and periodic monitoring of this set of indices would also help in strengthening the statistical databases of African economies and industries. Africa Business Directory.A directory/database ofAfrican businesses and domestic,bilateral,and multilateral insti- tutions supporting business activities in Africa could be published and maintained under TICAD-NEPAD aus- pices. Such a directory would provide Asian businesses with more comprehensive information regarding the actual business people and corporations in Africa who already have been or potentially will become successful business partners for Asian businesses. Industry Capacity Building. TheTICAD-NEPAD framework could launch a partnership policy initiative to coordi- nate and consolidate existing and future efforts at providing support to foster capacity building in Africa's busi- ness development.This initiative could focus on certain promising sectors that play a key role inAfrica-Asia trade and investment, such as textiles and apparel, natural resource-based industries, and food products. 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Appendices 89 APPENDIX A Africa's Subregions and Trade Partners Subregions Northern Africa Algeria, Egypt, Libya, Morocco and Tunisia Eastern Africa Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Rwanda, Seychelles, Somalia, Sudan,Tanzania, and Uganda Western Africa Benin, Burkina Faso, CapeVerde, Cote d'Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo Central Africa Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Republic of Congo, Equatorial Guinea, Gabon, and Sao Tome and Principe Southern Africa Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia, and Zimbabwe Trade Partners Africa Algeria, Benin, Cameroon, Egypt, Ghana, Kenya, Madagascar, Malawi, Mauritius, Morocco, Nigeria, Senegal, South Africa,Togo,Tunisia, and Zimbabwe European Union Austria, Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Greece, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom United States United States Asia China, Hong Kong, Malaysia, India, Indonesia, Japan, Korea, Pakistan, Philippines, Singapore,Taiwan, andThailand Others Argentina,Australia, Barbados, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cyprus, Ecuador, El Salvador, Guatemala, Honduras, Iceland, Jordan, Malta, Mexico, New Zealand, Nicaragua, Norway, Oman, Panama, Paraguay, Peru, Poland, Romania, Saudi Arabia, St. Lucia,Trinidad and Tobago,Turkey, Uruguay, andVenezuela World All of the above Note: Countries were selected for inclusion here based on their data availability in the UN Comtrade for the entire period from 1989 to 2001 in the SITC Rev. 2 classification. 91 1.03 Senegal 1.18 Zambia R. Af. 1.20 Cen. Togo 1.03 a Leone 1.01 Afric 1.20 1.98 1.48 S. Sierra Mozambique Zimbab. 1.01 Tanzania d'Iv. Africa 1.30 2.70 Cote Ghana 1.26 1.69 1.22 S. Guinea Mozambique Gabon 1.03 R. Af. Sudan 1.30 1.44 1.94 2.91 2.14 1.32 Gambia Cameroon Tanzania Rwanda Cen. R. D.R. Ghana 1.27 D.R. d'Iv. 4 Guinea 1.58 2.05 2.32 Sudan 3.07 2.7 1.68 product) Eq. Congo, Cote Congo, Congo, exporters 1.85 Angola each 2.08 Ghana 3.51 2.40 1.07 Togo .555 3.24 Africa 1.77 Tunisia Cameroon Lesotho Burundi S. in 4.23 Nigeria Chad 5.71 African d'Iv. Egypt 3.83 3.54 3.45 1.50 3.27 Guinea Morocco Zimbab. Kenya 1.31 3.19 6.16 share Madagascar Tunisia Cote R. R. 5.76 Major (% Af. Cameroon 4.39 3.99 Africa 1.76 Egypt 4.49 2.96 6.27 Africa 2.36 mbique 4.03 3.00 Congo, Cen. S. Tanzania S. 6.72 Nigeria Madagascar Madagascar Faso Moza 7.59 Gabon 5.41 4.07 3.29 4.68 Africa 4.01 6.67 2.41 4.87 1.29 Africa 3.27 Botswana Morocco Angola S. Burkina Cameroon 8.24 Liberia Nigeria World S. Madagascar Senegal R. R. nea 7.92 1.44 5.54 3.31 5.40 4.82 6.13 6.36 Africa Gui Algeria 10.57 Liberia Nigeria Egypt Zimbab. Kenya 13.39 8.30 Egypt 1.32 7.62 Egypt 7.54 Egypt 18.53 Congo, Cameroon Congo, Mauritius S. Eq. R. Benin 10.11 the Guinea Angola 12.69 Libya 4.28 Angola 12.65 Libya 11.28 8.56 8.68 9.63 1.02 7.49 8.58 2.05 7.63 8.92 Africa Nigeria Nigeria Mauritius Uganda 15.43 Egypt Egypt Tunisia 21.12 11.26 S. Egypt 11.67 Madagascar Eq. Congo, Cameroon D.R. d'Iv. to d'Iv. Libya 19.77 7.72 Nigeria 18.44 1.45 Zimbab. Egypt 15.73 Ghana 20.07 Libya 27.15 27.59 18.20 Morocco Cote Zimbab. 11.55 34.56 10.97 13.25 25.61 24.03 Morocco Nigeria 13.63 25.43 Ghana Morocco Tunisia Congo, 12.54 Mauritania Cameroon Cote exports d'Iv. ali opia product, Africa Africa Africa Africa Africa Africa Nigeria 36.16 Algeria 84.74 39.92 95.97 99.98 M S. S. S. Algeria 61.71 63.66 Cote Algeria 36.58 99.47 S. Tunisia 45.18 14.33 Ethi 19.98 86.86 S. Tunisia 44.25 36.14 Morocco Algeria 80.75 Gabon 39.11 67.86 25.71 59.36 S. Mauritius Morocco B SITC African oils by all oils beans coal mollusks gases spirits oils acids & 1.12 Total 100% 32.06 3.51 0.84 3.38 2.15 1.80 1.12 1.56 1.54 1.18 1.15 petr. 0.97 0.94 0.81 Gold 2.86 2.39 1.31 1.29 1.26 of Coffee 93 Petr. Petr. Diamonds Platinum Fuel Cotton Motor Cocao Other Trousers Sawlogs Ferro-alloys $2,569,737,896 $2,154,283,451 $1,338,879,180 Aluminum Inorg. $119,774,957,368 $38,397,597,481 $4,199,469,681 $1,415,439,538 Lub. $966,295,378 $4,049,828,846 $1,336,630,009 Undergarments $1,009,128,121 $3,428,278,103 $2,865,435,296 Outergarments $1,372,552,954 $1,869,255,697 $1,849,265,787 $1,564,099,372 $1,548,582.049 $1,507,794,048 Crust. $1,164,663,597 $1,129,541,742 APPENDIX Exports exports share U.S. 29.68 France 25.05 Belgium 58.29 Italy 42.79 U.S. 41.42 Brazil 39.43 Netherl. 24.88 U.S. 56.73 Spain 12.67 France 31.54 11.02 20.97 Thailand Japan 19.39 U.S. Germany France 27.84 Japan 32.43 95.41 China 25.47 Korea 18.22 France 32.06 India % 65.83 20 Major Italy 12.29 Spain 17.60 U.K. 25.73 India 28.92 Japan 32.81 U.S. 10.70 U.S. 15.03 Italy 24.75 10.50 U.S. 16.29 Italy U.S. U.S. U.K. U.K. 5.92 Germany Taiwan 10.63 11.71 18.66 18.25 Spain 29.59 France 16.74 Japan 17.97 18.84 value, Arabia Spain 8.93 Turkey 10.85 U.S. 9.26 Korea 8.60 12.19 9.04 U.K. 8.59 8.32 Italy 9.95 Italy 9.63 U.S. 5.26 Germany France 14.83 Germany Netherl. 12.32 10.30 Germany France Taiwan 10.99 15.75 12.31 Germany Portug. France 11.98 10.94 Saudi Ar. Top 8.87 Italy 10.26 China 2.46 7.75 U.K. 6.42 Italy 7.58 U.K. 3.24 Italy 6.99 U.K. 7.57 India 9.03 8.95 4.44 Germany Saud. 11.30 France 10.46 Portug. 10.20 Algeria 10.39 Germany Belgium 11.41 France 10.06 Netherl. 10.36 Brazil Germany Kong 5.49 9.82 2.40 France 3.47 1.76 6.34 7.59 2.84 6.62 Italy 9.50 8.83 6.78 7.31 U.K. 9.59 3.28 Italy 8.58 7.63 Italy 3.39 Belgium Thailand France Belgium France Greece Belgium Brazil Japan France Portug. Taiwan 10.21 Turkey Hong Kong Kong China 4.15 U.S. 8.59 1.34 China 2.88 Korea 1.66 Spain 5.62 4.69 1.59 6.55 7.51 7.08 U.S. 6.43 6.96 Italy 8.05 2.56 4.78 5.00 6.46 3.12 Belgium France Singapore Belgium Korea Spain Indonesia Hong Germany Belgium Germany product) Hong Kong importers Korea 3.97 Brazil 4.34 1.13 1.05 5.45 Italy 3.95 6.48 5.91 India 7.05 6.18 Italy 6.45 3.18 1.84 4.64 4.95 3.99 2.45 Germany Canada Japan Korea Netherl. Spain Netherl. Spain Thailand Hong Malaysia France Africa's each in world India 3.95 3.64 U.S. 1.06 3.31 Mexico Netherl. Spain 3.11 6.47 Taiwan Spain 2.79 4.24 5.97 U.K. 4.89 2.59 1.68 3.91 Italy 4.56 2.90 Italy 1.88 Malaysia Belgium Spain Netherl. Germany Netherl. share 3.75 2.37 3.23 Taiwan Morocco Japan 2.42 Japan 6.43 4.09 3.96 4.40 1.58 2.75 3.40 1.74 Germany Germany Poland Spain Major Greece Turkey China Thailand (% 2.25 Africa Netherl. Korea 2.63 2.22 3.01 3.14 2.57 U.S. 1.53 2.20 U.S. 2.55 1.18 Poland India 6.33 S. Netherl. Canada Japan Indonesia 2.03 U.K. 1.22 1.91 U.K. 5.51 Turkey 2.43 U.K. 2.63 Canada Turkey 1.67 2.08 2.28 1.03 Belgium Morocco Algeria Indonesia Arabia Brazil 1.87 1.09 1.84 Canada Canada Turkey 3.72 Korea 2.05 2.42 1.78 2.14 Greece Belgium Saudi Turkey 1.80 1.03 Brazil 1.32 3.64 2.01 1.86 1.59 1.52 Singapore Morocco Morocco Portug. Taiwan Austria 1.64 1.67 1.43 1.24 2.63 Portug. Austria Portug. Colombia Sweden 1.50 1.43 Netherl. Greece Japan 1.61 1.65 1.23 Morocco Austria Brazil 2.29 U.K. 1.17 Spain 1.24 Kong Spain 1.41 1.38 Finland U.K. 1.12 1.06 1.07 Greece Hong China 1.27 1.07 Austria 1.25 1.04 Mauritius Denmark 94 Appendix B ­ Africa's Top 20 Exports to the World Rank SITC product code and description 1 3330: Petroleum oils & crude oils obtained from bituminous minerals 2 3413: Petroleum gases and other gaseous hydrocarbons 3 6672: Diamonds, unworked cut/otherwise worked not mounted/set 4 9710: Gold, nonmonetary 5 6812: Platinum and other metals of the platinum group 6 3341: Motor spirit and other light oils 7 0721: Cocoa beans, whole or broken, raw or roasted 8 3344: Fuel oils, n.e.s. 9 3222: Other coal, whether/not pulverized, not agglomerated 10 8423:Trousers, breeches etc. of textile fabrics 11 2631: Cotton (other than linters), not carded or combed 12 0711: Coffee, whether or not roasted or freed of caffeine 13 6716: Ferro-alloys 14 8439: Other outer garments of textile fabrics 15 0360: Crustaceans and mollusks, fresh, chilled, frozen etc. 16 3345: Lubricating petroleum oils & other heavy petroleum oils 17 2472: Sawlogs and veneer logs, of non coniferous species 18 6841:Aluminum and aluminum alloys, unwrought 19 8462: Under garments, knitted of cotton 20 5222: Inorganic acids and oxygen compounds of nonmetals 1.10 Gabon Mali 1.03 1.29 Sudan 1.08 Tanzania 1.35 Malawi 1.04 Algeria 1.18 Gabon 1.40 1.01 1.25 1.12 1.05 1.08 Mali .381 1.32 1.69 Benin Zambia Ghana Kenya Angola Zambia Cameroon Cameroon 1.28 R. d'Iv. 76 1.04 1.68 1.12 1.08 1.12 1.12 1.39 1.36 1. Zimbab. Niger Angola Gambia Tanzania Cote Tanzania Congo, Morocco Tanzania Faso 1.09 1.36 Mali 1.76 1.18 1.09 1.31 1.16 1.43 1.39 1.81 Benin Zimbab. Burkina 1.03 Senegal Cameroon Tanzania Cameroon Madagascar Cameroon Mozamb. 1.26 Sudan 1.38 1.80 1.20 1.14 1.01 1.46 1.22 1.63 1.40 1.05 2.03 Ghana Guinea Sudan 1.41 Mauritius 1.45 Mauritius Tanzania Tanzania Zimbab. Mozamb. Tanzania Tunisia Zimbab. R. Cameroon 1.46 1.30 1.01 1.99 1.48 1.28 1.29 1.20 1.70 1.88 1.74 1.40 1.10 2.13 Benin Congo, Ghana Kenya Nigeria Sudan 1.53 1.50 Tanzania Ghana Guinea Tunisia Ghana 1.18 Zimbab. Sudan Angola Tanzania Sudan Zambia 47 2.11 s 1. 8 d'Iv. 1.70 Uganda 1.73 Angola 1.83 1.29 2.46 1.15 .271 1.79 1.97 2.17 1.80 oon Africa Libya 1.1 1.81 2.34 Angola Sudan Zimbab. 1.65 Gambia 1.37 Mozamb. Ethiopia Angola Mauritius S. Ghana Cote Mauritiu Morocco Malawi 2.23 Camer 1.48 1.74 Ghana 1.74 l d'Iv. Mozamb. 1.85 1.30 1.17 1.58 1.84 2.07 2.41 1.84 1.41 2.67 Kenya Zambia Ghana 2.50 Kenya Angola Ghana 2.47 1.77 Senegal Ghana 1.41 Cote Tanzania Zimbab. Somalia Ethiopia Angola 1.83 Senega Libya 2.65 Madagascar R. d'Iv. Senegal D. R. d'Iv. 1.81 2.43 Kenya Togo 2.03 1.41 3.01 1.74 2.16 2.40 2.53 2.12 1.77 2.70 d'Iv. Sudan 1.33 Kenya Benin Angola Kenya 3.25 Angola 1.59 Cote 2.17 2.65 Mauritius Zimbab. Cote product) Ghana Congo, Congo, Tanzania World 2.27 Cote importers d'Iv. d'Iv. d'Iv. 1.87 2.77 1.76 4.77 1.71 1.83 2.29 3.78 2.81 Mali 2.20 1.93 2.88 Ghana Cameroon 2.16 Kenya Kenya Sudan Kenya Libya 3.31 Libya 2.71 each Tanzania 2.41 2.93 Somalia Libya Kenya Madagascar Cote Cote Cote Ethiopia in 2.61 Faso ria Kenya d'Iv. d'Iv. African 5.01 Libya 3.34 geria 2.91 1.01 4.35 5.06 1.97 Libya 1.96 Libya 4.88 Libya 3.93 3.25 2.66 1.98 3.62 Nige 3.12 Ni Nigeria uritania Kenya 3.45 Ghana 4.04 3.05 Africa imbab. Burkina Gabon Africa the Cote Cote Mauritius Libya 3.42 Z share Ma S. S. Major (% Libya 5.49 4.40 3.37 4.35 1.51 Egypt Libya 5.37 5.61 2.10 3.89 6.67 Togo 4.02 3.98 3.23 2.25 4.50 3.63 Tunisia Kenya Algeria Algeria Nigeria Tunisia Ghana Guinea 4.01 Morocco Senegal Tunisia 8.42 Algeria 4.06 Kenya Morocco Eq. Ethiopia 4.86 ria d'Iv. 6.09 d'Iv. 5.27 Nigeria 4.59 9.70 6.63 5.97 2.28 4.47 6.97 4.40 4.24 4.29 4.96 occo 4.76 Egypt 3.79 Nigeria Alge Nigeria Tunisia Nigeria Ghana 8.64 Morocco 4.98 Senegal Tunisia Algeria Africa 4.30 Mauritius Cote S. Mor Cote Tunisia Zimbab. from 8.43 occo 5.70 5.54 5.62 8.45 2.35 6.45 8.56 8.39 6.01 Africa 11.53 11.19 Libya 5.25 Libya 5.42 5.24 5.18 Tunisia 12.36 6.31 Tunisia Mor 9.31 Morocco Tunisia S. Morocco Morocco Morocco Morocco Senegal Nigeria Angola Nigeria Nigeria Cameroon Tunisia pt 8.48 6.08 Egy d'Iv. 6.55 Egypt 11.40 Tunisia 5.83 7.36 Benin 16.45 17.55 11.94 11.22 geria 9.15 7.24 8.41 7.37 Algeria Ghana Tunisia Ghana 12.38 Egypt 14.74 C Algeria Al Nigeria Egypt 14.07 Tunisia 8.90 13.09 Morocco Cote Morocco 9.11 Morocco Morocco 10.87 Nigeria Algeria t ypt 8.03 1.94 13.56 Egypt 10.05 22.52 Africa 18.32 Egypt 18.04 15.20 Egypt 15.83 Egyp 20.81 Africa 18.21 19.40 17.57 Egypt Eg 21.78 95 Algeria Tunisia Nigeria Nigeria 15.23 Egypt 17.12 exports Tunisia 13.46 Egypt 14.39 Morocco S. S. Nigeria 12.15 Algeria Africa 17.37 Algeria product, S. d'Iv. APPENDIX 92.87 Africa Africa 44.87 32.00 38.39 Africa 18.44 Africa 30.38 Africa 45.76 Africa 34.94 Egypt 22.28 Africa 19.97 18.97 38.71 Africa 34.34 25.61 Tunisia Algeria Algeria 16.12 Africa 23.65 Liberia S. 18.08 S. Africa Egypt 47.63 SITC African S. S. S. S. S. S. Algeria S. Algeria Egypt 32.76 16.52 Imports S. Cote by all cars parts of veh. boats wheat fabrics oils app. mach. cream parts mach. 3.59 2.98 2.25 veh. sugars 2.25 1.73 1.61 1.54 1.42 1.26 1.20 1.18 1.14 1.05 Rice 0.90 0.88 & 0.85 0.83 0.74 0.72 0.71 Total Maize 20 100.00% Petr. Aircraft Radiotel. Ships, Medicaments Other Motor Elect. Apparatus Spec. Ref. Telephonic Mach. $3,869,980,771 Passenger $3,210,137.806 $2,421,067,498 $2,417,155,725 $1,858,123,385 $1,729,284,060 Cotton $1,660,097,164 $1,529,296,761 $1,357,378,353 $1,288,935,665 $1,270,771,493 $1,223,686,136 $1,126,884,520 $964,215,825 $944,442,444 Milk $910,658,483 $895,577,370 imports share $791,415,614 Constr. $774,473,322 $764,308,124 Motor $107,654,750,978 % U.S. 44.45 Japan 37.48 19.90 90.75 U.S. 34.32 62.65 Italy 29.84 France 27.58 Brazil 38.55 U.S. 27.51 26.34 68.24 U.S. 65.14 Korea 20.79 44.01 21.96 France France France Nigeria 17.66 France 16.33 France 46.00 France France France 13.60 Major Germany Thailand value, 26.00 13.63 12.85 U.K. 8.61 France France China Top U.K. 2.86 Japan 18.07 U.K. 13.27 U.K. U.K. 8.35 20.73 19.37 Japan 16.33 19.44 France 16.09 15.66 India Germany 15.61 France 22.29 10.71 21.70 Japan 13.35 20.48 Germany Germany Germany Netherl. Argentina 6.93 8.41 8.67 Italy 11.88 9.39 Japan 17.09 Belgium 1.81 Italy 9.96 Italy 11.33 14.09 U.S. 8.85 France 12.81 12.14 8.31 U.S. Africa France 15.50 12.71 France Germany Germany France 11.04 9.31 Venezuela Finland China 14.74 Belgium 8.14 Germany Belgium S. 6.81 7.89 6.45 8.48 7.18 Korea 12.75 India U.K. Africa India 1.58 U.S. 8.95 8.89 Italy 11.03 Italy 5.77 8.80 9.49 Africa S. 6.59 2.05 Argentina Mexico 13.94 Sweden 8.65 Sweden 9.82 S. 1.22 Germany Sweden Pakistan 7.29 Germany Germany Zimbab. Germany 5.35 6.64 U.K. 6.33 7.50 U.S. 5.87 8.45 4.42 Japan 7.28 U.S. 7.79 Canada U.K. 8.05 U.K. 7.81 Belgium Germany Germany 11.46 U.S. 6.71 Spain 3.30 Italy 2.01 U.K. 7.52 1.21 U.K. 6.88 France Germany Germany product) Spain 4.39 Italy 3.68 U.S. 5.28 1.67 U.K 3.91 Spain 7.20 U.S. 3.60 8.01 Spain 3.00 Italy 7.70 Africa's Spain 3.11 Belgium Italy Egypt 1.94 Italy 3.22 4.91 1.82 7.36 exporters Poland Netherl. Belgium each U.K 3.64 3.43 4.72 1.56 4.15 Oman Spain 3.36 5.57 2.25 5.24 2.85 China Spain Taiwan Finland in 3.01 Netherl. Turkey Belgium 1.64 3.21 Zealand 1.42 Italy 7.33 Norway Taiwan Germany 3.75 world Singapore 3.48 U.S. 2.58 2.94 Spain 4.01 3.35 5.32 2.25 4.30 New Japan Korea Africa Korea Korea 2.57 share 2.41 Denmark Netherl. S. Italy 1.45 1.95 1.27 Africa 3.63 Netherl. Sweden S. Major Singapore 3.58 (% 2.03 2.01 3.88 2.95 3.82 2.14 3.30 Japan 2.48 Australia 3.18 Belgium Africa Korea Belgium 1.42 Netherl. S. Belgium Pakistan Sweden 1.65 Poland Spain 1.11 U.K. China 1.01 3.49 Austria Africa 2.57 2.15 Spain 3.02 Italy 2.00 U.S. 1.99 3.29 Italy India 2.87 U.K. 2.38 Spain 2.08 Japan 3.15 S. China 1.16 Taiwan 1.50 Zimbab. China 3.47 Africa U.S. 1.81 2.32 2.41 1.95 1.60 2.26 2.66 Kong 2.37 1.42 China 2.14 S. Africa China Malta Finland 1.04 S. Belgium Netherl. 1.27 2.78 Taiwan Mexico Brazil Hong 1.64 2.18 1.88 China 1.62 1.49 2.25 1.17 1.75 1.35 China Austria 2.10 Canada Turkey Jordan Africa China S. Taiwan Belgium 1.11 Thailand Korea 2.69 1.59 Africa 2.02 Africa 1.80 Netherl. 1.46 1.12 1.58 1.65 1.31 S. S. 2.01 Brazil Ireland Austria Sweden Thailand Portugal 1.83 1.54 Finland 1.91 1.61 Norway Belgium 1.22 Spain 1.06 1.37 1.35 1.07 Singapore 1.77 Austria Denmark Thailand Mauritius Netherl. 1.80 1.49 Netherl. 1.71 1.24 Ireland Ireland Canada 1.03 1.31 Spain 1.21 Kenya Turkey 1.35 1.49 Sweden 1.70 1.17 Taiwan Taiwan Netherl. 1.26 Spain 1.39 1.15 1.07 Singapore Netherl. Sweden PB Appendix C ­ Africa's Top 20 Imports from the World Rank SITC product code and description 1 7932: Ships, boats and other vessels 2 7810: Passenger motor cars, for transport of passengers & goods 3 5417: Medicaments (including veterinary medicaments) 4 7849: Other parts & accessories of motor vehicles 5 0412: Other wheat (including spelt) and meslin, unmilled 6 7821: Motor vehicles for transport of goods/materials 7 6522: Cotton fabrics, woven, bleached, mercerized, dyed, printed 8 3330: Petroleum oils & crude oils obtained from bituminous minerals 9 7721: Electrical appliances such as switches, relays, fuses, plugs, etc. 10 7924:Aircraft exceeding an unladen weight of 15000 kg 11 7643: Radiotelegraphic & radiotelephonic transmitters 12 7649: Parts of apparatus of division 76-- 13 7284: Machinery & appliances for specialized particular industries 14 0422: Rice semi-milled or wholly milled, broken rice 15 0612: Refined sugars and other products of refined beet/cane 16 0224: Milk & cream, preserved, concentrated or sweetened 17 7641: Electric line telephonic & telegraphic apparatus 18 7239: Parts of the machinery of 723.41 to 723.46 19 7234: Construction and mining machinery, n.e.s. 20 0440: Maize (corn), unmilled APPENDIX D Trade Complementarity Score Trade complementarity between a pair of countries This alternative measure captures how a country's is traditionally measured by the Trade export structure is measured against the world aver- Complementarity Index. Using this index, trade age, using the traditional concept of revealed com- complementarity between country i's exports and parative advantage (RCA) ŕ la Bela Belassa. The country j's imports is defined as: measure is weighted by the product's share in the country's total exports (Xik). In this way, it effectively Cij = 100 ( Mjk Xik ˝) * highlights those products on which a country is sig- k nificantly dependent for its exports (relative to the where Xik is country i's total exports of product k, world average) and which account for a large share and Mjk is country j's total imports of product k. The of the country's total exports. On the other hand, if a index is zero when no product exported by one coun- try is imported by the other; the index is 100 when country has a below-average dependence on a prod- the export-import shares match exactly. uct or if a product does not represent a large share of that country's total exports, the product does not This report uses a different measure--a trade contribute much to this measurement. An analogous complementarity score--to capture a similar aspect feature is embedded in the measurement of the im- of trade relations between pairs of countries. We de- porting country, using RCAM (the import analogue fine a trade complementarity score between an ex- of RCA) and Mjk (import share) as the weighting fac- porter country i and an importer country j ( ) as: tor. Log transformation is used to smooth out ex- ij treme figures. Xik Mjk ij log(RCAik * RCAMjk ) k The alternative measure used in this report thus takes where into account the import-export complementarity in Xik/ Xik the trade structures of two countries relative to the RCAik k rest of the world. In addition, the complementarity is Xik/ Xik k i k weighted by product shares in each country's exports/ and imports. M M jk/ jk k RCAMjk Mjk / Mjk k j k 97 AEMU W AS W ECO CMA C CEMA S A C Africa CE Countries C AE U C AS African for COMESA E SADC . 99 tar APPENDIX nap Ja LDC ef. Regimes pr ATF Union Trade A EB opeanruE nou Coto- A GO States A benef. A O International United G A LDC OT W . Prin. y so .peR .R. & oon Af. a occo ea ypt ayn D,o Rep,o Guinea ychelles Countr Algeria Eg Liby Mor unisiaT Comor Djibouti Eritr Ethiopia Ke Madagascar Mauritius Rwanda Se Somalia Sudan anzaniaT Uganda Burundi Camer Cent. Chad Cong Cong Eq. Gabon omeT.S acirfA nrehtroN acirfA nretsaE acirfA lartneC = est African W AEMU = under W AS Central COMESA W of AEMU Benefits W ECO = unity; unity States; benef: CMA Comm A Comm O C G African A est Act; CEMA elopmentv W Economic ity of S De = A tun AS C unity Africa CE African ECC Oppor ern Comm C AE and unity; South wtho = Comm U Gr Economic C = AS SADC AS African African W = tariffs; East A = ECO O COMESA G C ea; A entialre AE Ary ef UN; pr SADC the Union; . 100 nap tar by LDC Monetar y = Ja LDC ef. pr taf. Customs countr ef. pr Common ATF = African elopedv LDC CMA Union de A EB least eement; Southern opeanruE = Africa; a agr CU nou trade SA Central Coto- of ee Designated Fr A States; = = unity GO States A benef. LDC; ATF e; African Comm A y O United G A member initiativ Southern Monetar Union. y Arms and and LDC But OT Organization Eastern Monetar W radeT ythingre orf Economic and Ev et = e = C y Faso edreV oir e orld A Mark d'Iv Leone Africa W Economic ra ola wi = EB; CEMA pe og A Countr Benin Burkina Ca Cote Gambia Ghana Guinea Guinea-Bissau Liberia Mali Mauritania Niger Nigeria Senegal Sier To Ang Botswana Lesotho Mala Mozambique Namibia South Swaziland Zambia Zimbabw OT O G acirfA nretseW acirfA nrehtuoS W A Common States; African APPENDIX F African Countries' Exports to and Trade Arrangements with the European Union Avg annual change Everything Free (%) in total EU Cotonou But Arms Trade Rank Country export value Agreement initiative Agreement 1 Niger 113.19 2 Eritrea 39.61 3 Equatorial Guinea 33.73 4 Botswana 29.27 5 Seychelles 22.64 6 Tanzania 20.69 7 Rwanda 18.89 8 Burkina Faso 18.29 9 Zambia 14.73 10 Republic of Congo 14.00 11 SaoTome and Principe 11.86 12 Ghana 10.98 13 Ethiopia 9.14 14 Namibia 8.58 15 Morocco 8.05 16 South Africa 6.80 17 Tunisia 5.87 18 Sudan 5.40 19 Kenya 3.59 20 Mozambique 2.19 21 Mauritania 1.90 22 Algeria 1.57 23 Guinea 1.51 24 Mauritius 0.84 25 Madagascar 0.76 26 Angola 0.50 27 Egypt -0.01 28 CapeVerde -0.25 29 Cameroon -0.38 30 Benin -0.67 31 Zimbabwe -1.03 32 Chad -1.58 33 Central African Republic -1.92 34 Liberia -2.37 35 Dem. Republic of Congo -2.37 36 Senegal -3.62 37 Cote d'Ivoire -3.63 38 Malawi -3.83 (continued) 101 102 Appendix F ­ African Countries' Exports to and Trade Agreements with the European Union Avg annual change Everything Free in total EU Cotonou But Arms Trade Rank Country export value Agreement initiative Agreement 39 Nigeria -4.34 40 Uganda -4.75 41 Djibouti -7.42 42 Guinea-Bissau -7.52 43 Libya -7.88 44 Sierra Leone -8.70 45 Togo -10.27 46 Gambia -13.42 47 Comoros -14.49 48 Gabon -15.73 49 Burundi -20.49 50 Somalia -22.34 51 Mali -22.54 52 Lesotho -27.33 53 Swaziland -73.42 Notes: Share figures are based on 1999­2001 averages.All figures are based on partners' import data. Source: UN Comtrade. APPENDIX G Growth in African Apparel Exports to the United States, by Countries' AGOA Status Rank by Change as % of total apparel 2001­02 exports to United States change Country 2001­02 2000­01 1999­2000 1 Namibia 6664.5 -40.7 N/A 2 Burkina Faso 2402.1 -67.9 706.9 3 Tanzania 1921.5 -82.5 -98.5 4 Liberia 360.1 -36.2 -6.7 5 Ethiopia 197.6 7036.9 98.1 6 Mozambique 174.7 N/A N/A 7 Botswana 137.3 -70.2 N/A 8 Kenya 82.1 48.1 11.0 9 Swaziland 77.1 50.7 N/A 10 Mali 51.5 -1.8 -63.5 11 Lesotho 43.6 52.7 N/A 12 Cote d'Ivoire 34.1 75.0 -6.6 13 CapeVerde 29.7 32.2 13854.8 14 Tunisia 27.7 -1.8 34.7 15 Togo 11.9 -45.0 -72.5 16 Mauritius 0.8 -2.7 5.5 17 South Africa -1.9 22.3 -40.6 18 Malawi -1.9 52.3 417.5 19 Guinea -6.7 -78.1 847.5 20 Egypt -13.9 -5.2 23.0 21 Morocco -25.3 1.1 5.7 22 Ghana -39.7 -28.4 -88.8 23 Gambia -42.5 -48.6 175.1 24 Zimbabwe -48.4 -23.8 6.2 25 Madagascar -52.6 63.0 137.1 26 Senegal -64.4 -22.6 39.1 27 Sierra Leone -65.1 460.4 83.6 28 Niger -65.4 44.1 29.6 29 Cameroon -80.4 109.5 -70.9 30 Nigeria -90.5 134.6 6.6 31 Mauritania -94.1 147.3 -87.1 32 Somalia -94.9 673.6 -66.5 33 Uganda -97.8 N/A N/A Benin N/A 337.0 N/A Dem. Rep. of Congo N/A -10.1 N/A Zambia N/A -13.5 41674.9 Burundi N/A -94.8 N/A Eritrea N/A -99.2 9947.7 Central African Republic N/A N/A N/A Gabon N/A N/A N/A (continued) 103 104 Appendix G ­ Growth in African Apparel Exports to the United States, by Countries' AGOA Status Rank by Change as % of total apparel 2001­02 exports to United States change Country 2001­02 2000­01 1999­2000 Seychelles N/A N/A -86.4 Sudan N/A N/A N/A Algeria N/A N/A N/A Angola N/A N/A N/A Chad N/A N/A N/A Comoros N/A N/A N/A Republic of Congo N/A N/A N/A Djibouti N/A N/A N/A Equatorial Guinea N/A N/A N/A Guinea-Bissau N/A N/A N/A Libya N/A N/A N/A Rwanda N/A N/A N/A Sao Tome & Principe N/A N/A N/A N/A = not available Notes: Shaded rows represent countries eligible for AGOA's apparel and textile benefits. Apparel exports are here defined as SITC 842­846. Share figures are based on 1999­2001 averages.All figures are based on partners' import data. Source: UN Comtrade. 1.02 Uganda R. Af. 1.87 Cent. Chad 1.90 Sudan 2.90 Africa 4.85 S. 4.88 Asia) Ghana 1.10 Tanzania Guinea Asia to 2.07 1.71 Eq. Liberia 2.44 Gambia 3.24 to Senegal 5.06 Cameroon Niger 2.51 exports Ghana 1.76 3.38 Faso 2.57 Nigeria Mozambique exporters 1.98 Gabon 2.61 5.87 Senegal Libya 1.13 Kenya 4.78 African Burkina Africa Asia 3.09 S. Benin 8.13 African total 3.52 Africa 7.01 Angola 1.15 1.34 S. in Cameroon d'Ivoire 4.48 Zimbabwe to 6.30 Mozambique 1.95 Egypt 5.88 Cote 9.30 Leading Sudan 2.06 share Malawi 1.96 Zambia Benin 7.61 Mozambique (% Nigeria 8.83 5.24 Madagascar Africa Sudan 6.86 Togo 8.28 6.93 2.49 1.96 Senegal S. d'Ivoire 2.39 Burundi Tanzania R. 14.44 Guinea Africa 12.29 10.11 Cote Africa 17.32 Egypt 8.93 Africa 12.98 Eq. S. 2.99 Ghana 18.79 3.68 3.97 6.56 Congo, S. S. Tanzania Morocco Rwanda R. 1.77 20.74 16.80 H Angola 23.31 Mali Africa Africa Zimbabwe 13.28 5.10 25.61 Tunisia 25.99 8.19 13.74 Mauritania S. 38.10 19.32 Algeria 35.36 S. 26.11 Malawi Zimbabwe Cameroon Congo, Guinea-Bissau Exports Tanzania d'Iv. Africa Africa Africa Africa Africa Africa Africa Africa Africa Nigeria 33.92 105 S. 98.10 S. 100.00 19.86 53.88 Morocco S. 98.88 S. 91.25 Gabon 46.29 51.79 Morocco S. 99.70 Zambia 56.64 S. 99.93 S. 60.73 Egypt 52.77 36.46 Tanzania S. 99.98 Liberia 72.76 Kenya 83.78 S. 100.00 62.11 Cote Zimbabwe APPENDIX 20 share pulps % oils coal product, acids mollusks ore spirits boats 32.89 Gold 7.55 4.95 3.51 3.25 3.12 2.63 & 2.49 2.45 2.43 1.68 1.56 1.27 Nuts 1.16 1.11 1.02 Tea 0.94 wood 0.90 0.83 Cotton Petr. Platinum Sawlogs Copper Aluminum Iron Tobacco Inorg. Ferro-alloys Other Diamonds Pulpwood SITC value, $6,782,724,847 $1,556,057,361 $1,021,430,908 $723,484,704 $670,045,124 $643,089,933 $542,613,021 $514,067,975 $505,138,713 $501,251,791 $347,268,696 $322,227,903 $261,330,081 Motor $239,083,870 $228,263,293 $211,188,458 Ships, $194,430,765 $184,722,056 $171,782,231 $166,749,808 Crust. Top Chem. China 23.48 India 63.71 Japan 92.04 23.59 India 94.93 Thailand Korea 32.01 Japan 50.57 China 57.70 Japan 85.95 Korea 23.92 Taiwan 24.94 China 54.14 China 38.16 Japan 58.56 India 97.40 Japan 97.52 62.32 95.24 29.87 47.44 Singapore Pakistan Japan Indonesia Kong Korea 22.45 Korea 18.95 Korea 4.65 Taiwan 22.75 China 2.51 Japan 31.56 Taiwan 28.67 India 20.45 6.78 Taiwan 23.86 Japan 18.23 Japan 42.30 37.22 28.22 1.78 2.45 India 28.74 2.34 25.91 25.08 Hong Thailand Korea Japan Korea Taiwan China Singapore Kong Kong Kong Kong Africa) India 22.37 7.66 2.05 15.16 1.71 Indonesia Indonesia Taiwan 13.40 Korea 18.16 10.51 4.88 Japan 23.72 17.24 Korea 3.56 20.77 11.11 Korea 6.18 Japan 1.46 16.95 9.97 Africa Hong Hong Hong Thailand Thailand Hong Singapore Thailand Africa's Philippines from from Taiwan 21.25 China 6.35 China 1.18 India 15.08 8.70 Malaysia Japan 4.99 China 1.28 India 23.36 Korea 8.97 India 2.33 2.06 2.70 12.77 7.62 Indonesia Pakistan Japan Indonesia imports Kong Japan 4.19 1.53 9.08 5.98 Thailand Malaysia Thailand Taiwan 3.61 3.45 8.54 India 10.03 3.94 importers Asian Hong Malaysia Singapore Asian total 3.27 Japan 1.36 Korea 4.38 4.01 Korea 1.26 China 1.29 China 7.32 China 4.46 2.33 in Indonesia Indonesia Malaysia Kong Kong Leading share 1.86 Japan 3.45 1.87 India 6.67 2.19 Singapore Hong Hong (% China 2.71 China 1.40 2.87 1.08 Singapore Thailand Kong 1.53 2.38 Hong Indonesia 1.36 2.37 Philippines Pakistan 106 Appendix H ­ Africa's Top 20 Exports to Asia Rank SITC product code and description 1 3330: Petroleum oils & crude oils obtained from bituminous minerals 2 9710: Gold, nonmonetary 3 6812: Platinum and other metals of the platinum group 4 2631: Cotton (other than linters), not carded or combed 5 5222: Inorganic acids and oxygen compounds of nonmetals 6 6841:Aluminum and aluminum alloys, unwrought 7 6716: Ferro-alloys 8 2472: Sawlogs and veneer logs, of non coniferous species 9 0360: Crustaceans and mollusks, fresh, chilled, frozen etc. 10 3222: Other coal, whether/not pulverized, not agglomerated 11 6821: Copper and copper alloys, refined or not, unwrought 12 2815: Iron ore and concentrates, not agglomerated 13 6672: Diamonds, unworked cut/otherwise worked not mounted/set 14 3341: Motor spirit and other light oils 15 0577: Edible nuts, exluding nuts used for the extraction of oil 16 2460: Pulpwood, including chips and wood waste 17 7932: Ships, boats and other vessels 18 0741:Tea 19 2516: Chemical wood pulp, dissolving grades 20 1212:Tobacco, wholly or partly stripped Notes: Major exports were selected based on shares in Africa's total exports to Asia. Share figures are based on 1998­2000 averages.All figures are based on partners' import data. R. lawi Ma 1.07 go, 1.06 Con 1.01 1.02 1.16 Libya 1.20 1.14 Zimbab. Libya 1.12 Algeria Senegal Mozambique 1.10 1.05 1.22 1.04 1.23 1.18 1.35 Mali 1.21 1.29 Gabon Lesotho Algeria Senegal Eritrea Mauritius Mauritania Mozambique R. d'Iv. 1.19 1.40 1.18 1.29 d'Iv. 1.45 1.60 1.26 1.45 1.22 1.33 Ethiopia Senegal Guinea Algeria Angola Zambia Tunisia Cote Congo, Cote R. 1.48 1.13 1.28 1.42 Libya 1.19 1.55 1.24 1.62 Kenya Togo 1.42 1.53 Africa Libya 1.27 1.36 Uganda Djibouti Senegal Djibouti Congo, Mauritius Zimbab. S. 1.11 1.19 1.83 1.46 1.35 1.55 1.32 1.72 1.62 1.63 1.65 1.61 Tunisia Guinea Ghana 1.67 Gambia Zambia Kenya Liberia Zimbab. Tanzania Mozambique Mauritania Mozambique Madagasc. D.R. 1.33 1.25 2.02 2.24 2.01 1.71 1.57 2.01 1.74 1.73 1.84 1.63 Ghana Sudan Niger 1.86 Algeria Guinea Morocco Ethiopia Morocco Djibouti Nigeria Madagasc. Madagasc. Congo, 1.47 2.05 2.50 2.45 2.21 1.93 1.62 2.27 1.87 1.95 1.97 1.65 Niger Angola 1.77 Gambia Ghana Ghana Sudan Angola Tanzania Tanzania Morocco Zimbab. Tanzania Tanzania d'Iv. 1.52 2.25 2.93 2.70 2.24 2.07 1.81 1.69 2.29 2.04 2.05 2.04 1.38 Libya 1.26 1.67 Asia Zimbab. Nigeria Ghana Kenya Sudan Gambia Gabon Mauritius Tanzania Ethiopia Cote Tanzania Morocco Cameroon Asia) 1.65 2.36 3.03 3.39 Sudan Togo 2.30 1.10 2.25 2.03 2.72 2.35 2.20 2.89 1.73 1.35 1.79 1.93 Egypt Somalia Zimbab. Tunisia Egypt Lesotho Guinea Ghana Sudan Gabon Asia Tanzania Mozambique Zimbab. Morocco from 1.73 2.51 3.05 1.00 Togo 3.61 2.38 1.85 2.43 2.72 2.28 4.37 3.62 2.43 3.73 1.94 1.44 2.09 Ghana Benin Libya from Kenya Kenya Ghana Mauritius Ethiopia Tunisia Somalia Algeria Djibouti Tunisia Malawi Morocco Mauritius from imports d'Iv. 2.60 2.73 3.22 1.09 4.38 2.87 1.94 2.86 3.08 2.61 4.66 3.93 2.66 3.82 2.46 2.53 2.18 Benin Ghana Kenya Benin Tunisia Sudan Libya Egypt Angola Nigeria Zambia Tanzania Mauritius Cote Mauritius Morocco Lesotho importers African d'Iv. d'Iv. 3.11 Libya 2.93 Libya 3.76 1.09 4.59 3.35 2.75 3.13 3.81 2.72 4.69 4.81 2.69 4.17 2.52 3.46 2.43 Nigeria Kenya Morocco Zimbab. Djibouti Angola Algeria Cote Tanzania Mauritius Mauritius Tanzania Madagasc. Cote Morocco African total d'Iv. in 3.40 4.16 4.45 1.50 4.96 4.27 3.75 4.08 4.01 3.15 4.69 6.78 3.18 4.37 2.59 3.63 2.60 Kenya Kenya Algeria Kenya Tunisia Sudan Togo Gambia Uganda Algeria Gambia Ghana Ethiopia Tunisia Tunisia Algeria I Cote Leading share 4.55 Togo 4.48 5.31 1.52 5.70 4.40 6.37 4.14 4.53 3.75 Kenya Togo 6.16 6.95 4.06 5.23 Libya 3.29 5.56 3.11 (% Algeria Nigeria Kenya Ghana Ghana Tunisia Ghana Sudan Ghana Morocco Djibouti Imports Ethiopia Ethiopia R. d'Iv. 107 8.88 6.14 12.08 Libya 1.98 4.44 6.58 4.26 4.61 6.80 8.04 4.54 1.12 7.16 3.56 7.74 7.82 Egypt 11.28 Egypt 10.38 Egypt APPENDIX Algeria Senegal Tunisia Nigeria Nigeria Kenya Ghana Nigeria Ghana Tunisia Mauritius Cote Congo, Tanzania 20 d'Iv. d'Iv. Libya 7.44 5.10 8.55 8.90 6.12 1.24 7.29 8.44 1.78 9.97 8.36 7.84 12.24 13.86 11.29 10.72 Nigeria Nigeria Nigeria Kenya Egypt 11.69 Africa 15.09 Africa 16.01 S. Nigeria Nigeria Algeria Sudan Cote Morocco Mauritius Tanzania Morocco S. Cote Mauritius 1.10 6.66 5.78 4.49 Egypt Egypt 16.96 Africa 19.12 Africa 19.89 Egypt 14.09 Benin 13.40 Egypt 16.75 Africa 10.45 Egypt 11.40 Africa Africa 21.38 Africa 16.52 10.38 Egypt 19.71 Egypt 13.41 Africa 28.96 Benin 27.59 Egypt 23.73 Algeria S. S. S. S. Morocco S. S. Nigeria S. Top Africa Africa Africa Africa Africa Africa Africa Africa 97.85 Liberia S. 25.62 Nigeria 22.23 Egypt 21.46 S. 65.91 S. 13.41 S. 32.83 Egypt 49.27 S. 33.16 41.45 90.85 25.96 20.66 23.38 22.11 88.98 Egypt 22.91 Egypt 30.72 30.95 27.26 Nigeria Liberia Benin Benin Nigeria Algeria S. S. S. share % product, mach. parts cars veh. oil fiber veh. eng. boats fabrics textile oils 9.79 4.50 Rice 3.87 3.51 veh. 3.07 2.51 1.87 1.61 1.28 1.11 1.09 1.04 1.01 1.00 pas. 1.00 com. 0.96 fabrics Tires 0.92 (telecom) 0.83 0.81 SITC value, Palm Footwear Fuel receivers Batteries mining 0.77 Ships, Motor $279,577,686 & $983,279,981 $845,088,755 $765,927,512 $669,788,881 $547,874,542 $408,070,032 $352,155,874 Medicaments $242,152,950 $239,171,053 TV $227,932,155 Fabrics, $221,756,618 $219,386,391 Pub. $217,650,071 Int. Knit $2,139,335,692 Passenger Motor Cotton Fabrics, $209,582,022 $200,460,909 Parts $181,409,983 $176,248,515 $169,277,102 Cons. Africa's Korea 53.98 Japan 55.78 52.87 Japan 84.93 Japan 59.09 China 39.02 Korea 36.17 73.12 China 74.95 India 68.42 99.65 46.23 China 69.45 China 61.37 Japan 72.93 Japan 91.75 Japan 53.21 Korea 29.04 54.66 Japan 61.09 Taiwan Thailand Malaysia Singapore Singapore 7.49 8.73 7.41 6.74 Japan 37.50 Korea 41.89 India 17.75 Korea Korea 13.91 India 30.73 16.16 19.03 China 16.01 Korea 29.29 12.10 20.88 22.61 Japan 21.32 China 16.71 China 16.18 Pakistan Taiwan Korea Korea Korea Indonesia Indonesia Thailand Africa) 4.35 2.65 7.85 7.56 6.07 China 16.98 China 11.90 13.86 13.95 China 12.44 India 6.15 9.10 India 2.50 9.31 China 12.31 China 14.75 Taiwan Taiwan Korea 12.26 to Pakistan Africa Thailand Singapore Singapore Indonesia Indonesia Singapore to 2.11 9.89 2.25 4.96 Kong 8.61 China 13.84 India 3.02 6.01 3.63 4.63 4.82 2.00 Japan India 6.42 7.92 4.16 12.88 Korea Pakistan Thailand Thailand Pakistan exports Indonesia Singapore Singapore Indonesia Singapore Singapore Hong 1.88 1.89 1.13 India 3.45 6.36 2.97 1.25 3.36 4.05 3.36 3.27 3.53 China 10.37 11.49 3.21 exporters Taiwan Taiwan Taiwan Korea Asian Taiwan Indonesia Malaysia Singapore Indonesia Malaysia Thailand Malaysia Malaysia Asian total 2.67 6.00 China India 6.54 1.43 2.21 3.80 2.71 1.04 6.65 3.52 Korea Taiwan Korea 1.46 in Thailand Thailand Malaysia Pakistan Singapore Indonesia 2.04 2.72 1.32 1.40 3.30 2.52 1.35 1.63 Leading share Japan Japan 1.17 Singapore Indonesia Thailand Thailand Thailand Indonesia Thailand (% 2.03 1.13 1.13 2.07 Taiwan Malaysia Thailand Indonesia 1.39 India 1.56 Korea 108 Appendix I ­ Africa's Top 20 Imports from Asia Rank SITC product code and description 1 7932: Ships, boats and other vessels 2 7810: Passenger motor cars, for transport of passengers & goods 3 0422: Rice semi-milled or wholly milled, broken rice 4 7821: Motor vehicles for transport of goods/materials 5 7849: Other parts & accessories of motor vehicles 6 6522: Cotton fabrics, woven, bleached, mercerized, dyed, printed 7 6531: Fabrics, woven of continuous synthetic textile materials 8 4242: Palm oil 9 8510: Footwear 10 5417: Medicaments (including veterinary medicaments) 11 3344: Fuel oils, n.e.s. 12 7611:Television receivers, color 13 6534: Fabrics, woven, of discontinuous synthetic fibers 14 7781: Batteries and accumulators and parts 15 7831: Public service type passengermotor vehicles, etc. 16 7132: Internal combustion piston engines for propelling vehicles 17 6252:Tires, pneumatic, new, of a kind used on buses, lorries 18 7649: Parts of apparatus of division 76-- 19 6552: Knitted/crocheted fabrics of fibers other than synthetic 20 7234: Construction and mining machinery, n.e.s. Note: Major imports were selected based on shares in Africa's total imports from Asia. Share figures are based on 1998­2000 averages.All figures are based on partners' import data.