Africa is the new economic frontier. China, always quick to spot opportunities, has lost no time to move in with investment and political support. It has walked away with precious resources such as oil and minerals while India watches with dismay. It’s a zero-sum game in which India seems, at the moment, to be the losing side.
In a world with “vanishing investment opportunities”, Africa remains the last unexplored area of the world production and opportunities frontier. In terms of growth potential, it is likely to be the next big story, something that India and Indian companies need to latch on to, if they are to expand beyond the usual.
If commerce underpins this new relationship, other considerations are not far behind. The resources that China seeks—oil, minerals and other raw materials—are found abundantly in Africa. These items are at a remove from demand and supply alone. As the world comes close toward peak oil, strategic considerations may soon determine their supply.
Here China has stolen a march over India. China (which sources 25% of its crude oil supplies from Africa) and Africa had a two-way trade of $42 billion in 2005. The Chinese expect it to cross the $100 billion mark by 2010.
India, too, has a growing trade relationship with Africa, but is a poor second to China. In 2004, for example, African merchandise imports from China and India stood at$10 billion and $4 billion, respectively.
In addition, African imports to India, items such as unroasted coffee, cocoa beans and refined petroleum to cite a few examples, face much higher tariffs in India as compared with China. Significantly, and much to the annoyance of African observers, crude oil imports face no tariffs in either country. This leads to a suspicion that trade between Africa and the two emerging Asian economies is all about extractive resources.
It is here that Chinese and Indian approaches to Africa differ. China has forged a link between its economic interests and foreign policy. India has not only frittered away its goodwill in Africa, built patiently during the Non-Aligned Movement (Nam) years, but is also rudderless in articulating a link a la China. There are individual pockets of such successes based on sound commerce, pharmaceutical exports, for example. This lack of coordination is not unique to Africa; the recent loss of opportunity in Myanmar due to wrangling between the ministry of external affairs and the petroleum ministry is another example.
China, on the other hand, is going from strength to strength. From active, strategic support to African countries in multilateral fora to hosting a summit for African countries in Beijing last year, China has demonstrated the success of its diplomacy in Africa. China has supported pariahs such as Sudan, which received $150 million in Chinese FDI in 2004, when not even a dollar of western aid came in. Not criticizing Zimbabwe’s Robert Mugabe has helped it gain currency there, much to western consternation.
This success owes a lot to a vacuum created by the West. Multilateral agencies such as the World Bank focused their energy on privatization in Africa without doing much to create infrastructure that is a must for private sector take-off. In addition, the niggardly amounts of assistance, far below the 0.7% of advanced country gross national income promised for Africa, have helped China walk in easily. Chinese advice has been practical and does not touch on contentious issues such as corruption and governance. From high-yielding rice varieties to roads, railways and no-strings attached aid (China has promised $5 billion over the next three years), it’s extending all possible help. It’s time that India gets its act together before there is nothing left for it in Africa, goodwill or economic opportunity.
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