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Africa's Silk Road


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422 Pages


China and India's new-found interest in trade and investment with Africa - home to 300 million of the globe's poorest people and the world's most formidable development challenge - presents a significant opportunity for growth and integration of theSub-Saharan continent into the global economy. Africa's Silk Road finds that China and India's South-South commerce with Africa isabout far more than natural resources, opening the way for Africato become a processor of commodities and a competitive supplier of goods and services to these countries - a major departure from its long established relations with the North. A growing number of Chinese and Indian businesses active in Africa operate on a global scale, work with world-class technologies, produce products and services according to the most demanding standards, and foster the integration of African businesses into advanced markets.There are significant imbalances, however, in these emerging commercial relationships. These can be addressed through a series of reforms in all countries:
  • 'At-the-border' reforms, such as elimination of China and India's escalating tariffs on Africa's leading exports, and elimination ofAfrica's tariffs on certain inputs that make exports uncompetitive
  • 'Behind-the-border' reforms in Africa, to unleash competitive market forces and strengthen its basic market institutions
  • 'Between-the-border' improvements in trade facilitation mechanisms to decrease transactions costs
  • Reforms that leverage linkages between investment and trade, toallow African businesses to participate in global productionnetworks that investments by Chinese and Indian firms can generate.



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Published 08 November 2006
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EAN13 9780821368367
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Africa’s Silk Road
China and India’s New
Economic Frontier
Harry G. Broadman
with contributions from
Gozde Isik
Sonia Plaza
Xiao Ye
Yutaka Yoshino©2007 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
All rights reserved
1 2 3 4 5 09 08 07 06
This volume is a product of the staff of the International Bank for Reconstruction and Devel-
opment / The World Bank. The findings, interpretations, and conclusions expressed in this
volume do not necessarily reflect the views of the Executive Directors of The World Bank or
the governments they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The
boundaries, colors, denominations, and other information shown on any map in this work do
not imply any judgment on the part of The World Bank concerning the legal status of any ter-
ritory or the endorsement or acceptance of such boundaries.
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to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433,
USA; fax: 202-522-2422; e-mail:
ISBN-10: 0-8213-6835-4
ISBN-13: 978-0-8213-6835-0
e-ISBN: 0-8213-6836-2
e-ISBN-13: 978-0-8213-6836-7
DOI: 10.1596/978-0-8213-6835-0
Cover credit: Harry G. Broadman
Library of Congress Cataloging-in-Publication Data
Boardman, Harry G.
Africa’s silk road : China and India’s new economic frontier / Harry G. Broadman, with
contributions from Godze Isik . . . [et al.].
p. cm.
ISBN-13: 978-0-8213-6835-0
ISBN-10: 0-8213-6835-4
ISBN-10: 0-8213-6836-2 (electronic)
1. Africa—Commerce—China. 2. China—Commerce—Africa. 3. Africa—Commerce—
India. 4. India—Commerce—Africa. 5. Africa—Foreign economic relations—China.
6. China—Foreign economic relations—Africa. 7. Africa—Foreign economic relations—
India. 8. India—Foreign economic relations—Africa. I. Broadman, Harry G. II. Title.
HF1611.Z4C62 2006
Foreword xix
Acknowledgments xxi
Acronyms and Abbreviations xxiii
Overview 1
Connecting Two Continents 1
Conclusions and Policy Implications 33
Endnotes 40
1 Connecting Two Continents 41
Historical Context 41
Scope and Methodology of the Study 43
Structure of the Study 47
Annex 1A: Data Sources 52
Annex 1B: Diagnostic Trade Integration Studies 57
Endnotes 58
2 Performance and Patterns of African-Asian Trade
and Investment Flows 59
Introduction 59
Patterns of Merchandise Trade Flows Between Africa
and Asia 69
Africa’s Pattern of Merchandise Trade with China and India 79
Trade in Services Between Africa and Asia 88
Foreign Direct Investment Between Africa and China
and India 91
Key Elements Shaping African-Asian Trade Flows 104
Conclusions and Policy Implications 112
Annex 2A 114
Endnotes 126
3 Challenges “At the Border”: Africa and Asia’s Trade and
Investment Policies 129
Introduction 129
Domestic Trade and Investment Policy Regimes 130
International Trade and Investment Agreements 165
Conclusions and Policy Implications 179
Endnotes 183
4 “Behind-the-Border” Constraints on African-Asian Trade
and Investment Flows 187
Introduction 187
Performance of Firms Behind-the-Border 188
Role of Domestic Competition in Promoting
International Integration 191
Role of Chinese and Indian Firms inAffecting Africa’s
Competition and International Integration 203
Sources of Competition in Africa’s Market 209
Conclusions and Policy Implications 226
Annex 4A 230
Endnotes 231
5 “Between-the-Border” Factors in African-Asian Trade
and Investment 235
Introduction 235
Remedies for Imperfections in the Market for
Information 237CONTENTS vii
Trade Facilitation in African-Asian Commerce:
Transport, Logistics, and Finance 256
Transfers of Technology and Skills 272
Conclusions and Policy Implications 282
Annex 5A 286
Endnotes 287
6 Investment-Trade Linkages in African-Asian Commerce:
Scale, Integration, and Production Networks 289
Introduction 289
Determinants of Linkages Between Trade and Foreign
Direct Investment 292
Evidence on FDI-Trade Linkages ofChinese and
Indian Firms in Africa 308
Meeting the Challenge of Network Trade:
What Are Africa’s Export Opportunities Presented
by Chinese and Indian Foreign Investment? 328
Conclusions and Policy Implications 349
Endnotes 357
Bibliography 361
Index 377
2.1 China and India’s Oil Imports from Africa 82
2.2 Increasing Chinese Trade in Services 90
2.3 Prospects of FDI Flows to Africa 94
2.4 Patterns of Chinese Investment in Africa
from Outward Chinese FDI Survey 98
2.5 Dynamic Sectors in Chinese Outward FDI 101
2.6 Summary of Characteristics of Africa’s Trade
and Investment Patterns with China and India 103
3.1 The South’s Escalating Tariffs Against African
Exports: The Case of an Indian Cashew
Processing Business in Tanzania Trying to Export
to India 141
3.3 Special Economic Zones in China 156
3.4 Four EPZs in Madagascar, Mauritius, Senegal,
and Tanzania 160
3.5 Presidential Investors’ Advisory Councils in Africa 164
3.6 China’s “Africa Policy” 171
4.1 Informal-Sector Competition and Chinese and
Indian Firms in Africa 211
4.2 Competition and Complementarities in the
Construction Industry in Africa: Chinese and
African Firms 212
4.3 Firms’ Perceptions of the Domestic
Investment Climate 214
4.4 Shortage of Skilled Labor in Africa 224
5.1 The Uganda Export Promotion Board and the
Role of Exporters’ Associations 240
5.2 Benchmarking FDI Competitiveness 242
5.3 Private Companies Promoting China-Africa Trade
and Investment 244
5.4 Local Standards in Africa and Chinese
Construction Firms 247
5.5 Using Chinese Ethnic Networks to Help African
Firms Find Suppliers in China 250
5.6 The General Agreement on Trade in
Services (GATS) 253
5.7 Trade Facilitation, Customs, and Logistics Barriers
in Africa 258
5.8 Logistics and Transport Issues in East African
Countries 261
5.9 Promoting Competition in Air Transport Services
in Mauritius 264
5.10 The Availability of Political Risk Insurance for
Trade and Investment with Africa 268
5.11 Access to Trade Finance in Africa: Experiences of
African, Chinese, and Indian Firms 270
5.12 Chinese Government-Sponsored Economic Support
to Africa 274
5.13 Foreign Firms in Africa Use International Standards
to Boost Higher-Value Exports from the Continent 277