Monday, 22 April 2013

Asian rivals in Africa

Japan and China both pursue aid-for-trade strategy but in very different ways as they seek to build influence.

With its many growing economies, large market size and resource richness, Africa is attracting Asian powers that are linking aid to trade and investment, resulting in greater Asian economic influence over a continent long dominated by western players.

China is the main player in the “Rise of the South”, combining development and economic engagement with Africa. However, Japan has been the Asian pioneer in addressing inequality and poverty through the Tokyo International Conference on African Development (TICAD).

“Some countries see the growth potential of certain African countries and just boost their economic engagement. We in Japan have been working side by side with African partners for two decades already,” said Toshiya Hoshino of Osaka University’s School of International Public Policy.
Indeed, the pioneering role of TICAD is undisputed. It was launched in 1993, seven years before the first EU-Africa Summit. In 2006 the Forum on China-Africa Cooperation was launched, followed by the Korea-Africa Forum and the India-Africa Forum summit in the same year.
Most major countries have substantially increased trade and foreign direct investment (FDI) with Africa over the past decade. Cumulative FDI, led by France, has increased tremendously from 2006 to 2010 as the table shows. In terms of bilateral trade, China has vaulted to the top of the list at $138.6 billion in 2011, up from $60 billion in 2006, which was $40 billion lower than the US at the time.
The rising economic profiles of the Asian economic powers are linked to an increased foreign-policy focus on aid and development on the continent.
Announcements of new credit lines, development programmes and investments have followed visits to Africa by various leaders between 2010 and 2012. The visitors from China have included then-vice president Xi Jinping, now president, who visited Tanzania and Congo; Jia Qinglin of the Politburo Central Committee; and Foreign Minister Yang Jiachi.
Former South Korean president Lee Myung-bak, Prime Minister Kim Hwang-sik and Foreign Minister Kim Sung-hwan have also visited the continent in the past two years.
Indian Prime Minister Manmohan Singh, Vice President Hamid Ansari, and Foreign Minister S.M. Krishna have made trips, as have US President Barack Obama, Vice President Joe Biden and former secretary of state Hilary Clinton, French presidents Nicolas Sarkozy and Francois Hollande and German Chancellor Angela Merkel.
Africa has some of the world’s richest reserves of minerals and energy, so who would neglect it? The continent has 95.5% of the world’s platinum reserves, 58.3% of all diamonds, 49.2% of all cobalt, as well as chromium (45.8%), manganese (27.1%), bauxite (26.1%) and vanadium (25%).
There is also oil in Libya (ranked ninth in world reserves), Nigeria (10th) and Angola (16th), and natural gas in Nigeria (ranked eighth), Algeria (ninth), and Egypt (15th).
A Japanese academic has argued that Chinese investors’ greater involvement in Africa through development projects seems to benefit themselves more than the host countries. For one thing, the Chinese focus on the hardware side and tend to bring in their own workers rather than hiring local ones.
“Of course, integration and global interest in Africa have lifted up the continent from (one considered) dark, dangerous and poor. But there is still more to do in the quality and ‘software’ [human development] aspects and that is why Japan has been propelling the TICAD process with summits every five years,” said Mr Hoshino.
The fifth TICAD summit will be held in June in Yokohama under the theme “Transformation for Quality Growth”. The aim would be to remind the African partners about the importance of the software aspects of the growth, he said during a recent visit to Thailand and Vietnam.
Despite the many challenges and conflicts Africa faces, the continent’s gross domestic product is still as large as those of the BRICS economies with strong growth projected in the future.
Africa’s GDP is $1.83 trillion, compared with $1.85 trillion in India, $1.86 trillion in Russia and nearly $2.5 trillion in Brazil. The continent’s gross national income per capita is $1,570, compared with $1,410 for India. Its population is projected to increase to more than two billion by 2050.
“The [Shinzo] Abe government has tried to encourage Japanese businesses to invest more in Africa. Japan hopes the TICAD process will help build up a conducive environment and provide some financial incentives for the continent,” said Mr Hoshino.
Kitti Prasertsuk, director of Thammasat University’s Institute of East Asian Studies, said the aid-for-trade model used in Africa by Asian economies represented an exercise of soft power. Japan and China in particular are using the approach, not only in Africa but on other continents, as they contend for global influence.
As Japan is promoting human security — dealing with poverty alleviation, water and hygiene issues, and disaster management — it is also vying for a seat on the UN Security Council, he said.
Following the clash over the islands known as Diaoyu in China and Senkaku in Japan, China’s ban on rare earths exports has hurt Japan, which relies on the metals for the manufacturing of electronic equipment, hybrid car parts, and mobile phones, said Mr Kitti.
Japan has been forced to secure greater and sustainable supplies of the rare earths elsewhere in Australia — and in Africa.
But as it watches nervously while China builds a greater presence in Africa, Japan has pledged more aid to Africa as well. The average level of Japanese overseas development assistance (ODA) was $900 million from 2003-07, but the figure increased in 2008 to $1.75 billion, $1.68 billion in 2009, $2.05 billion in 2010, $1.75 billion in 2011, and $1.8 billion in 2012.
Chinese economic engagement, on the other hand, has brought a significant but different impact on Africa, Mr Kitti said. “They engage in general business, construction business and telecoms, and they bring in not only workers but families and traders. So hundreds of thousands of Chinese have already been resettled on the continent. It will be the next wave of semi-state-sponsored relocation from the mainland China.”
South Korea, meanwhile, focuses its attention on economies that are not under the influence of Japan or China. Korean investors focus on investing and bidding for turnkey telecoms and IT systems alongside selling the hardware, said Mr Kitti.

Source: Bangkok Post

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