- Observing the evolution of the theory of evolution
- Via Marginal Revolution, a video on wine and cereal pairings. I can't quite decide whether to be intrigued or absolutely mortified, or whether to simply laugh it off given that all food and wine pairings are allegedly a scam, anyway
- Sub-Saharan African states are falling behind other regions in terms of competitiveness. While there have been some improvements in the past year (with Uganda registering as most improved), sub-Saharan states as a whole have slipped down the global rankings since they were first listed in 2000
- Freakanomics has a great piece on African entrepreneurship, which highlights the creative ingenuity present across the continent
- Bilateral relations between China and Cuba are at their best time in history, according to Chinese top legislator Wu Bangguo. Oh, and the U.N. has declared Castro a "World Hero of Solidarity." Makes you stop and think, doesn' it?
- Think your DSL is faster than a pigeon? Think again
- On this September 11, 2009 please take a moment to remember all those who sacrificed their lives eight years ago today. We will never forget
Doing Business 2010
Doing Business 2010 has been released today, and the oft-cited rankings are now publicly available.
The report contains several interesting findings, perhaps the most important of which is that Rwanda has been ranked as the top business reformer - a first for a sub-Saharan African economy (Mauritius retained its top ranking as the African country in which it is easiest to do business). This ranking is based on the number and impact of reforms introduced in the year - through May 2009 - a summary of which may be found here (scroll down for table). The report also finds that:
Two regions were particularly active this year: Eastern Europe and Central Asia and the Middle East and North Africa. In Eastern Europe and Central Asia, 26 of the region’s 27 economies reformed business regulation in at least one area covered by Doing Business. Governments in the Middle East and North Africa are reforming at a similar rate, with 17 of 19 reforming in 2008/09. In both cases, competition among neighbors helped inspire widespread reform.
An overview of the report may be found here; report highlights here; and the complete ranking of all 183 economies here.
Doing business in China
Beginning this month and continuing through November, The Atlantic will be running a series of clips from the DVD series "Doing Business in China" - a three year project headed in part by James Fallows. The clips will offer footage from factory floors, peasant villages, CCP headquarters, and the offices of foreign firms which have learned to be financially successful in the Middle Kingdom. The idea is to present the "real China," beyond the hype and the noise. It appears to be a most interesting project, and certainly worthy of your attention.
The following is the project's introductory video:
Why has China grown faster than India? And what (if anything) does this mean for Africa?
Chris Blattman and Bill Easterly address the issue. See here, here and here for a great discussion.
While I find myself nodding in agreement with much of what both experts have to say, I hesitate slightly when discussion turns to a near-comparison between growth in China and Africa. While neither scholar seems to be suggesting that China's path to growth can inform a similar phenomenon in Africa - or otherwise delving into very nuanced discussion of the similarities and differences between the process in both regions - I nevertheless feel inclined to caution against any such analogies. There are, of course, lessons which various African countries can learn from China - particularly as regards agricultural policies - but there are many constraints which hinder a direct, general analysis.
Martin Ravallion of the World Bank's Development Research Group has compiled a brilliant presentation highlighting precisely these constraints. Foremost among them:
- Africa's higher levels of income inequality. At the time of China's economic reform, inequality was lower in China (a Gini index well under 30%) than found in all but a couple countries in sub-Saharan Africa today
- The continent's high dependency rates
- Africa's low population density, which impacts on matters such as technological innovation and the cost of supplying certain forms of basic infrastructure
- Africa's weaker state institutions (Blattman's point about differing political climes, etc.)
Of course drawing any comparisons between China and Africa is also somewhat ridiculous, as we're dealing with one country and an entire continent. While this is quite an obvious point to make, you would be surprised at how many people conflate the two.
In short, there are many factors which preclude one from deducing too much about growth in Africa based on how it was played out in China. From my reading, both Easterly and Blattman appear on the brink of such an analysis, but quite wisely never take the plunge. It is precisely for this reason that theirs proves a truly worthwhile debate. Do read it.
Decoupling? No, a new coupling
Over the weekend The NYTimes had a rather cliched though nevertheless worthwhile article on declining foreign investments in Africa. This, as a consequence of the global financial crisis:
When the credit crisis erupted in September, many experts thought that Africa would be spared the financial turmoil of the American and European financial systems, because African banks had almost none of their assets tied up in the global subprime market.
But it has recently become clear that Africa is being hit hard. The World Bank estimates that its economies will grow an average of 3 percent this year, compared with an annual average of 6 percent from 2004 to 2008.
“The crisis could not have come at a worse time,” said Jose Gijon, chief Africa economist at the Organization of Economic Cooperation and Development, based in Paris. “Before the meltdown, many African countries had made significant progress in attracting foreign investment and private capital, and this could derail those efforts.”
But one must not forget about the Chinese, who show no intention of curtailing their African investments. Quite the contrary, really:
China which has become a major investor and trading partner for Africa, continues to invest. The China-Africa Development Fund, which has invested nearly $400 million in projects in Africa, said it planned to raise an additional $2 billion by November. African groups are also continuing to pump money into projects ranging from telecommunications to new oil fields.
Indeed, many in Africa believe that it is China - and China alone - that will spur and sustain the continent's growth. In the words of Martyn Davies, the relationship between China and the African continent is not decoupling - as is the case now between many emerging economies and America, for instance - but rather a "New Coupling." Africa is still open for business, and the Chinese are the continent's main customers.
Has China de-industrialized other developing countries?
Via VoxEU Jorg Mayer and Adrian Wood say 'yes':
A common concern is that China’s opening to trade has de-industrialised other developing countries. Their labour-intensive manufacturing has been hit by Chinese competition in their home markets – a complaint often heard in Africa and Latin America – and in export markets, while their primary exports have been pulled up by Chinese demand. This mixture of effects is worrying because industrialisation is vital for development, manufacturing provides jobs, and the ownership of natural resources is often highly unequal – so the net impact of China could be both slower growth and greater inequality in the rest of the developing world.
Standard trade theory is consistent with these concerns. The impact of China on other countries can be interpreted in a Heckscher-Ohlin model as occurring through a shift in world average factor endowments. The comparative advantage of a country depends on its endowments not in isolation but relative to the endowments of all other countries involved in trade. This comparator group was altered by China’s emergence from near-autarky, because of its size and distinctive endowment structure, and hence so was the comparative advantage of other countries.
More specifically, China’s opening to trade effectively lowered the world average land/labour ratio and increased the share of workers with a basic education in the world labour force. The relative endowments of other countries were thus shifted in the opposite directions, which tended to move their comparative advantage away from labour-intensive manufacturing, which requires many workers with a basic education but little land. The corresponding increase in comparative advantage for developing countries was in primary production, which uses a lot of land relative to labour.
Mayer and Wood present data depicting average changes in ratios of labor-intensive manufacturing in primary production in the 1980s and 1990s, and the differences between these decades, for output and two sets of export data. From this data it appears that the bulk of China's impact was concentrated in the 1990s. Figures from Kenya, Mauritius and South Africa further show negative differences between output and export ratios, which is consistent with the expected impact of China proffered by standard trade theory.
Finance in Africa: Looking backwards to move forward
Via VoxEU, Thorsten Beck, Michael Fuchs and Marilou Uy argue that Africa's financial stakeholders - bankers, donors and policymakers - must take the lead in implementing financial sector reforms in a way that maximizes Africa's opportunities:
Although the direct impact of the current crisis in the US and Europe on African financial systems is relatively contained – given that African banks are not as closely integrated in the global financial system as other regions of the developing world and hold most of their assets and commitments on rather than off the balance sheet – indirect effects through reduced real economic activity and reduced private capital inflows caused by reduced risk appetite might very well have negative repercussions for the real and financial sectors in Africa. Critically, the current crisis has put the debate on the appropriate role of government in the financial sector and the benefits and pitfalls of globalisation on policymakers’ agenda again. We will argue that it is important to study carefully past experience both in the region and other parts of the developing and developed world.
Beck et. al briefly expound on various approaches to the role of government in Africa's financial sectors - from activist to modernist, market-developing and market-enabling - and further explore the challenges and opportunities brought with the integration of African banks into international financial markets. Little is offered in the way of policy advice, other than to say that the strains placed on African markets as a consequence of the global market call for "further institution building as well as cautious and context-specific government intervention to help financial market participants expand financial services to the frontier of commercially sustainable possibilities." Yes: Quite right.
When China rules the world...
Macleans - Canada's national weekly current affairs magazine - has a truly fascinating interview with academic and journalist Martin Jacques on the consequences of the coming global shift in power. The dialogue is particularly interesting because it discusses not only the ways in which China's political ideology will inform its (potential) hegemonic role, but it also does well to emphasize the particular tenets of Chinese culture which permeate its society and governance.
An excerpt:
If we want to try and understand what China’s going to be like, then the best place to start looking is East Asia, because that is China’s own region. China’s culture has had a major influence on the whole region in varying degrees for thousands of years—most obviously in the case of Japan, Korea and Vietnam. It’s a very sophisticated culture from its language to its literature to its food. These are elements of what we’ve termed soft power, and Chinese soft power is going to be hugely influential in East Asia in the future.
In East Asia, and in Africa, and in Latin America....
Noteworthy….
Bansky, the British street artist, has left his mark on the African continent. This Flickr page has a wonderful collection of his images which highlight Western perceptions of Africa
China is now an empire in denial, according to the FT's Gideon Rachman
Kindles, iPods and the end of cultural snobbery? Oh dear, this can't possibly be good.
Starbucks has opened an office in Kigali, Rwanda, and is set to partner with local coffee farmers. I wonder if this means that I can get my sugar-free vanilla soy latté fix next time I'm in Rwanda?
According to this projection, China will be the second most populous country in the world by 2050 (it is currently first), followed by the U.S. and Nigeria. India will be the foremost populous, while the Congo will be ninth-most.
IMF finds Asia's growth projections better than anywhere else
The IMF has recently revised April's World Economic Outlook growth projections for 2009 and 2010. The revised summaries for emerging and developing economies are as follows:
- Growth projections in emerging Asia have been revised upward to 5.5 percent in 2009 and 7.0 percent in 2010. The upgrade owes to improved prospects in China and India, in part reflecting substantial macroeconomic stimulus; and a faster-than-expected turnaround in capital flows. However, the recent acceleration in growth is likely to peter out unless there is a recovery in advanced economies.
- Growth projections for Latin America have been lowered by 1.1 percentage points in 2009, primarily because production has been hit much harder by the global trade slowdown than initially expected. However, the region is benefiting from rising commodity prices, and growth projections have been revised up by 0.7 percentage points in 2010.
- The growth projections for central and eastern Europe and the Commonwealth of Independent States (CIS) have been revised downward by 1.3 and 0.7 percentage points in 2009 and upward by 0.2 and 0.8 percentage points in 2010, respectively. Developments differ appreciably across countries but many have been badly affected by the global financial crisis, with capital flows reversed and commodity exports sharply contracted, although the recent recovery of commodity prices is forecast to raise demand in key CIS economies.
- Growth projections for emerging Africa and the Middle East have been revised downward by 0.3 and 0.5 percentage points in 2009, respectively, while those for 2010 are broadly unchanged. Both regions have been more negatively affected by the drop in global trade than previously expected, with Middle Eastern oil exporters using their financial reserves to prop up domestic demand.
China's growth projection has been revised upwards by 1%, with the country expected to register 8.5% growth in 2010.
Noteworthy….
"The continent must not be like a beautiful fruit tree by the wayside. Every passer-by plucks a share and the fruit tree seems to forget that it could one day grow old.." Words of caution to Africans as both Russian and American leaders make trips to the continent
African leaders have denounced the ICC and refuse to extradite Sudan's president Omar al-Bashir, while others attempt to decipher what, exactly, this means
Niall Ferguson and James Fallows discuss the influence of China on the U.S. economy at the Aspen Ideas Festival
Win in China: a great documentary on the rise of entrepreneurship in China
Debunking the 'China retreat' theory
Recent speculation over China's alleged disengagement from Africa (see earlier posts here and here, for instance) could not be further from the truth. While pundits continue to tout China's withdrawal from the continent in light of growing (global) economic troubles, the data seemingly suggests quite a different reality.
A report released yesterday by South Africa's Standard Bank (download pdf here) lends much credence to this claim. Among the report's key findings:
- Premature conclusions regarding China’s perceived reduction of interest in Africa due to a realignment of its global priorities in light of cyclical economic uncertainties should be guarded against.
- In stark contrast to Africa’s traditional partners, China’s diplomatic engagements of Africa have been escalated in H01 2009 in anticipation of the Forum on China Africa Cooperation Summit (FOCAC) in Egypt in November. Following this, bilateral assistance from China to Africa has remained steady in 2009.
- The large infrastructure-based component of China’s ambitious stimulus plan has bolstered demand for African commodities in 2009, averting potentially greater declines in Sino-Africa trade volumes. Meanwhile, African demand for low-cost consumer goods from China has remained relatively resilient. '
With respect to the DRC deal which initially lead some to raise red flags over China's withdrawal, the report notes the following:
Chinese firms are also taking the opportunity to re-price several of their commodity-based investments in Africa in order to ensure that valuations reflect current realities rather than those in place during the height of the commodities boom in 2007, when many of the investments were initiated. This prudent recalculation has been perceived in the DRC and Gabon as a cooling off of interest from relevant Chinese investors, where in truth it is a calculated strategy by Beijing to leverage its competitive advantage in still being able to engage commercially to negotiate more favourable terms.
I hate to say 'I told you so,' but I told you so. Rather than retreating, China is merely shifting its strategy in the continent in response to ever-changing economic realities. If nothing else, the Chinese are exceptionally quick on their feet. With that said:
Any discussion on the sustainability of bilateral ties is deficient without a realisation that a withdrawal of China from Africa presents only one side of a complex picture. It is not in Africa's interests, particularly in today's liquidity starved international environment, to see China withdraw from Africa. Neither [...] is it in China's interests to do so.
China extends $950 million loan to Zimbabwe
Well, the post title says it all. Not to be outdone by recent American and U.K. offers of foreign aid, China has today agreed to a huge loan for Zimbabwe. The figure is nearly double what Prime Minister Tsvangirai received on his visits to the US and Europe earlier this month, and is meant to help the country revive its economy.
China has also promised increased investments in Zimbabwe, with more companies moving in to set up shop. While the obvious concerns over propping up rogue regimes persist, few appear interested in articulating them. What's more, where before Western nations were lambasting China for its assistance to questionable regimes, they now appear to be following suit (to an extent, mind you). It would seem that China is perhaps reshaping the international aid architecture after all.
China's place in the international aid architecture
Deborah Brautigam has a truly great and thought-provoking article on the ways in which China is challenging the international aid architecture (with significant focus on sub-Saharan Africa). According to Brautigam, it's not as doom and gloom as one might be inclined think:
... unlike the West, which buys oil in places like Angola without much caring how the government uses the revenue generated, Beijing buys Angola's oil while ensuring that the purchase price goes to pay its companies to build infrastructure. This is the essence of "win-win," as proposed by the Chinese in their African engagement.
While China's development program is indubitably flawed in many ways, it appears to be quite right in many others. What's more, Chinese foreign aid - largely in the form of oil-for-infrastructure contracts - is an attractive alternative for recipient states which are in dire need of infrastructure (and likewise tired of the Western ways of doing things). As Brautigam aptly observes, China's development aid reflects, among other things, its understanding and assumptions about the road out of poverty. As such, it stands as a challenge to the traditional aid architecture.
New research on Sino-Timorese relations
A new report on China's relations with East Timor by Loro Horta has recently been published by France's Institut de Recherche sur l'Asie du Sud-Est Contemporaine (Research Institute on Contemporary Southeast Asia). The report traces the alleged successes and limitations of China's strategy in East Timor and hopes to:
[...] shed some light not only on the intricacies of relations between the two countries, but also on China’s relations with other small, poor but resource rich countries like Timor-Leste. Finally it is the hoped by the author that the current article may give a modest contribution to the study of China’s foreign relations and its diplomacy in the developing world.
The report is written from quite an IR realist perspective, though does well to highlight several consistencies in China's "go out" policy and the nature of its bilateral relations with developing states, particularly insofar as its oil and energy, infrastructure, and technology investments are concerned.
Free trade as a tool for development
Via VoxEU Kimberly Elliott suggests the United States should lower tariffs on imports from small, poor economies:
... the Doha Round, under the best of circumstances, will take some time to conclude, and the US and other rich countries should move as quickly as possible to further open their markets to the world’s poorest countries. The eighth of the Millennium Development Goals adopted at a UN summit in 2000 calls on the rich countries to provide duty-free-quota-free market access for the least-developed countries (LDCs). This goal was reiterated at the WTO’s 2005 Hong Kong ministerial meeting, but US negotiators would only commit to provide access for 97% of products and only in conjunction with the conclusion of the Doha Round.Importantly, the pledge to provide duty-free-quota-free access is not part of the round’s “single undertaking,” and the LDCs are not being asked to undertake liberalisation commitments. So President Obama would lose nothing and could gain a great deal of good will, as well as providing an economic boost to struggling developing countries, by asking Congress to act now and provide access on 100%of products, as the European Union already does, rather than just 97% as promised in Hong Kong. Three percent may not sound like much, but such liberalisation would unblock a number of items that that are of the most interest to poor countries.Providing full market access will not reverse the decline in trade flows, but it would open opportunities for some of the poorest countries in the world. It would also address a fundamental unfairness created by the fact that US trade policy, like that of other rich countries, discriminates against poor countries and poor people. The highest US tariffs fall on agricultural products and labour-intensive light manufactures, where many developing countries have a comparative advantage.
I have generally found such an argument to be quite compelling, and tend to agree with Ms. Elliott's assessment of the matter.
Dear Africa, We would like to invest. Sincerely, the U.S.A. (P.S. Just fix some things, first...)
The U.S. Chamber of Commerce today launched the Africa Business Initiative (ABI) intended to help bridge the investment gap between the United States and Africa. Together with Baird's Communications Management Consultants, ABI today also released a report entitled The Conversation Behind the Boardroom: How Corporate America Really Views Africa. Driving the study is the ever-perplexing question of why Africa has not attracted more attention from the U.S. business community.
The answer, it seems, is that Africa is attracting the attention of U.S. businessmen - particularly in the technology sectors, and particularly now more than ever - but the costs of investment (political instability, a general lack of a business-conducive framework, and a poorly defined rule of law, among others) continue to outweigh the potential profits to be reaped.
What would it take for corporate America to fully take the African plunge? In short: a stable political environment; an educated (African) workforce; a fair business environment; and improved infrastructure. Goodness! If this is, indeed, the wish list then any such investment may be a lonnng way off! Given that the Chinese seem to have little trouble with the continent's current state of affairs, too, many African states now have little incentive to reform so as to accommodate U.S. desires. If nothing else, such U.S. demands may well result in more African leaders 'looking East,' much to the disadvantage of American corporations.
Regardless, the report itself is quite interesting and forms the first part of a two-party study. Part two, The Public Sector Conversation, will be conducted over the next several months and will focus on African government responses to the corporate American responses put forward in the currently available study. This may be quite telling, indeed!
Lula in Beijing to "defend a new economic order"
Brazilian President Luiz Inacio Lula da Silva arrived in Beijing today where it is expected that he and President Hu will strengthen bilateral relations between their two countries, promote oil contracts, strike deals on the sale of Embraer aircraft, and negotiate meat exports and biofuel for cars, among other top agenda items.
Already in March, China surpassed the U.S. as Brazil's biggest trade partner, and the trip seems to signal even further shifts in the global economic arena: namely, the U.S. out, China in. Or, perhaps more realistically - the U.S. down, but not (yet?) out; China up, and rising:
"I think the trip that I am about to embark on... is one of the most important I am going on to defend a new economic order and a new commercial policy in the world," Lula told reporters before leaving Brazil.Roberto Jaguaribe, a Brazilian foreign ministry official, said last week the trip represented a "reorganisation of the international scene" in which the top emerging economies were playing a bigger role in world affairs.
Among the more curious agenda items to be discussed between Lula and Hu is Lula's proposal that the countries conduct bilateral trade through each nation's currency, removing the U.S. dollar as an intermediary. Silva has been urging the end of the use of the American dollar in South American trade for some time now, suggesting such a move would reduce transaction costs for both exporters and importers, especially those operating on a smaller scale. Brazil and Argentina have agreed to trade with each other using their own currencies, and China and Argentina have likewise agreed to establish a 70 billion yuan ($10.24 billion) currency swap system that will enable trade between the two nations to be settled in Chinese currency. Might we be witnessing the gradual usurping of the U.S. dollar as the world's currency reserve by the Chinese yuan?
Such a reality may still be some way off, but the Chinese are slowly laying the ground for the yuan's ascendance, one bilateral negotiation at a time.
A sign of the times; dispatches from Ethiopia
Via Owen Abroad:
Here in Ethiopia it is common for little children to shout ferenj when they see a white face. I am told that this comes from the Amharic word for a French person, ፈረንሳዊ (pronounced färänsawi), because French people were among the first white people Ethiopians had seen.
Today G and I were running down a dirt track through a small village and a small girl, about 4 years old, saw us running past. She shouted,
China! China!
I heard the other day that there were two old men sitting on a hillside in north Wello, watching the Chinese labourers building a new road. They were old-timers, who had fought against the Italians in 1935, and then watched the Italians build the first roads across the Blue Nile gorge and up to Eritrea. (”What have the Romans ever done for us?”) As these men watched the Chinese roll out the tarmac, one of them said to the other:
The Italians are back. Only now they have narrower eyes.
Chris Blattman shared musings on this very shift in global influence - captured in the shouts of African children and casual conversations - in 2008.
Chinatown, Angola
A superb video from Current TV examining the growing presence of Chinese in Angola. While the video's focus remains largely on China's infrastructure projects across the country, it nevertheless does a great job touching upon the variety of sectors in which the Chinese have become quite active. The video itself is somewhat lengthy, but certainly worth a viewing for those seeking to gain a better sense of 'China in Africa' (or Angola, as the case may be):