Asian and South American Countries have treaded cautiously in aligning their respective economies to the emerging global order, only after suffering the brunt of fast track globalisation.
By Ambuj Chaturvedi
Since the 1990s, development science is centred around a single word viz. “globalisation”. It has been a single pill prescribed by every economist worth his/her name save a few with Marxist orientation. An integrated world was supposed to open up wide development avenues for the human beings.
Asian and South American Countries have treaded cautiously in aligning their respective economies to the emerging global order, only after suffering the brunt of fast track globalisation. The last known country to embrace globalisation was India. Since 1990s, India’s economic growth has had a roller coaster ride. It is only during the past four years that the Indian economy is being labelled as the fastest growing economy in the world surpassing China’s growth. One can therefore safely conclude that globalisation is truly a long term affair.
The African continent has been a mere bystander to globalisation barring a few exceptions like Rwanda and to some extent Nigeria, Egypt, Ghana, Ethiopia and Kenya. There is no evidence to suggest that the African economies have been integrated with world trade and finance. Not a long time ago, Africa was touted as the last frontier of opportunities and riches by well-known think tanks. No day would pass without a conference on Africa being held in the prominent Africa capital cities and in the expensive cities like Geneva as well. Africa leaders were advised to embrace terms like PPP, tax holidays, open border policies etc., to create an Infrastructure boom. Unfortunately, nobody invested in Africa to create inclusive growth in terms of large scale mass employment. Successive African governments did not exercise judicious prudence in choosing the correct trade partners and landed up piling un-sustainable public debt to implement “globalisation remedies”.
For the IMF and the World Bank Group it is another round of debt restructuring and monitoring. Up to the year 1995, IMF had “successfully” restructured Africa Debt into categories like HIPC (highly Indebted Poor Countries), increased grant elements and limited borrowing against paper instruments like the sovereign guarantee. Currently they are busy using their past experience in administering another round of public debt restructuring. So, why is African globalisation moving in circles?
Globalization is a result of the expansion, diversification and deepening of trade and financial sectors. African trade is happening but not at sustainable levels to fuel economic expansion. Non-value added exports, falling prices of natural resources, lack of local manufacturing and low agricultural productivity has created huge inequalities. Majority of the African countries do not support opening up of financial sector consequently investment is just not coming into Africa. Social and political upheavals has aided economic stagflation. This situation has induced IMF and donor countries to restrict money flow into Africa.
The on-going Chapter 12 reviews and economic restructuring efforts by IMF provide hope to many African Countries as well as investors. Slowly and steadily, World Bank funds have started trickling in. Year 2019 may see a host of tenders being floated by small and medium African economies that were hitherto shut and according to the African Development Bank’s African Economic Outlook 2019 report, the GDP growth of the Africa is set accelerate to 4% in 2019 and 4.1% in 2020. The ambitious Continental Free Trade Agreement that was signed amongst 49 of 55 African Nations, to create a single market, on 21st March 2018 in Kigali, Rwanda is a step in the right direction. Public projects are expected to create private investment buzz as well. African leadership and the national authorities need to have a deeper commitment to Industrialize Africa through their macroeconomic policies and by creating a more stable environment for investment realising that investment capital seeks most efficient and un-biased markets. Recent trade and economic trends of Africa, of the last ten years, have landed up shunning major EU and Asian investors. Getting back such investors has to be a priority for all the African countries to attain globalisation in its true spirit.
African culture and social life is close to India and every African leader identifies himself/herself as a “friend of India”. Unfortunately, the World’s fastest growing economy is not contributing much in the globalisation of Africa despite a plethora of opportunities. Indian Business needs to recognize that globalization is not a zero-sum game. It is not necessary for Africa to lose and India to gain. Despite huge trade deficit with China, USA has always gained from US-China trade and President Trump’s protectionist policies are being opposed by prominent US economist as well as industry players. India has made a good start with investment in Chabahar Port and should replicate such examples in the African Continent as well. A tiny country like UAE is owning and operating strategically and commercially important ports in Africa. India with its vast intelligentsia, skilled workforce and investible kitty can do much more. India’s commercial diplomacy also needs to be focussed towards Africa. Dynamic changes in Indian Line of Credit mechanism to facilitate Indian MSME and SME’s to internationalise and competitive refinement in Buyer’s credit program may encourage Indian investment in Africa.
China may not move in the manufacturing sector as fast as it did in the infrastructure sector in Africa – as it has to provide employment opportunities to the huge local population in China. Hence China will create factories in mainland China. India on the other hand does not have such fixations as the Indian entrepreneur is free to venture out to chase opportunities on his own, take a risk and invest. They can create innovative products for Africa by creating locally based Indo-Africa joint ventures. Despite a few visible investment failures, Indian private sector seems to be fence-seating, relying on the Governments of both the regions to take the lead. Given consolidation in most sectors of the Indian economy, increased domestic competition and falling margins, branching out in Africa can be a good opportunity for Indian business in the near term. It can also create Indian multinationals.
The writer is Executive Director, Overseas Infrastructure Alliance which has focus on Africa.