As
South-South
Trade Gains
Momentum…
India
Further Intensifies
Africa Focus
Today global
attention is
riveted on Africa,
The reasons
for this are
the African
region's growing
appetite for
industrial investment
and its thirst
for expanding
trade. Africa
has now emerged
as one of the
world's hottest
growth regions.
T.C. Venkat
Subramanian,
Chairman and
Managing Director
Export-Import
Bank of India,
in a detailed
and lucid write-up,
throws light
on Africa's
immense potential
for investment
and India's
increasing commitment
to expanding
its trade ties
with that region.
For decades,
world trade
had been dominated
by flows amongst
developed countries
- the North
- and between
the North and
the developing
countries -
the South. Of
late, there
has been a growing
importance of
developing countries
in world trade,
with South-South
trade getting
increasingly
an important
role. South-South
trade has been
expanding since
the last 20
years, albeit
from a small
base. The growth
in South-South
trade has been
over 12% during
this period,
as compared
to around 7%
growth of North-North
trade, and around
10% of North-South
trade.
Prominence
of Africa Region
Many countries
in the world
are increasingly
paying attention
towards Africa
region, which
is developing
into a region
with high business
potential. Though
the size of
the economy
and its share
(3% in 2006)
in world trade
is relatively
small, at present,
the Africa region
is increasingly
in the limelight.
The region has
witnessed a
cumulative annual
growth of 16%
in exports and
15% in imports
of merchandise
trade, and 13%
in exports and
14% in imports
of commercial
services trade,
during the period
2000-2006.
Economic growth
in Africa has
been driven
not just because
of oil or mineral
wealth. Asia's
thirst for competitive
exports has
spread to African
continent too.
At the same
time, the national
Governments
are also modifying
their policies
and encouraging
private investment
in viable and
profitable projects
with a lasting
impact on development.
African exports
have been increasing
over the past
few years, not
only for the
oil exporting
countries but
also for the
non-oil-producers.
Exports from
the region rose
from US $ 190
billion in 2004
to US $ 287
billion in 2006,
while imports
increased from
US $ 195 billion
to US $ 281
billion during
the same period.
The sectoral
structure of
exports by Africa
region shows
that fuel and
mining sector
accounted for
about 71% of
total exports
in 2006, followed
by Agriculture
sector (9%)
and manufactures
(20%). Direction-wise,
Africa's trade
was dominated
by Europe (41%),
North America
(22%) and Asia
(20%). Within
Asia, China
and India have
been showing
increasing business
relations with
Africa.
Foreign Direct
Investment (FDI)
flows to Africa
amounted to
US $ 36 billion
in 2006 a new
record level
and twice that
of 2004. The
surge was in
large part related
to investments
in extractive
industries,
but FDI also
rose in various
service industries
like transport,
storage and
communications.
During the period
1995 2006, Africa
region witnessed
a cumulative
growth of 18%
in FDI inflows.
Such FDI inflows
have also increased
their share
in Gross Fixed
Capital Formation
of the Africa
region, from
9% in 1995 to
around 20% in
2006. The value
of cross-border
acquisitions
of African enterprises
has also reached
a record level
(US $ 18 billion)
in 2006; most
of which have
been in the
form of mergers
and acquisitions
by Asian firms.
Similarly, FDI
outflows from
Africa have
also reached
a record US
$ 8 billion
in 2006, up
from US $ 2
billion in 2005.
It may be said
that the growing
attention, paid
by many countries,
towards Africa
is due to increased
interest in
natural resources,
more favourable
business climate,
and conscious
strategy to
partner Africa
in its economic
development.
According to
United Nations
Conference on
Trade and Development
(UNCTAD), extractive
industries accounted
for most of
the FDI inflows
received by
Africa. Most
of the mergers
and acquisitions
undertaken by
the Asian multinational
corporations
in Africa have
been in oil,
gas and mining
industries.
India's Contribution
to South-South
Trade
India's directions
of trade have
also been changing
significantly.
Concentration
of developing
countries in
India's exports
and imports
has been increasing.
The share of
developing countries
in India's exports,
which stood
at around 25%
in 1980's have
increased to
around 43% now.
Similarly, the
share of developing
countries in
India's imports
has increased
from around
45% in 1980's
to over 65%
now.
India's Growing
Business Relationship
with Africa
Region
An important
development
that has characterised
India's trade
and investment
relations with
developing countries
of the world
has been India's
growing trade
and investment
relations with
Africa region.
The symbiotic
commercial relations
that have developed
between countries
from Africa
region and India
can be assessed
from the enhanced
two-way trade
and investment
flows.
India's total
exports to Africa
amounted to
US $ 8.4 billion
during 2006-07
registering
a significant
growth of 54%
over the previous
year. During
the period April
September 2007,
exports to Africa
aggregated US
$ 5.5 billion,
a rise of 33%
over the corresponding
period last
year. India's
export basket
to Africa is
well diversified
with no single
export tem exceeding
a share of 15%
in total exports.
India's imports
have been driven
largely by petroleum
products and
gold, which
together accounted
for three-fourths
share in India's
total imports
of US $ 11.4
billion from
Africa during
2006-07. During
the period April
September 2007,
imports from
Africa amounted
to US $ 7.4
billion, an
increase of
22% over the
corresponding
period of last
year.
As regards investment,
India has been
expanding its
contribution
to sustainable
development
through joint
ventures. India's
emergence as
an important
investor in
Africa is reflected
in its rise
in approved
cumulative investments
in the region.
This amounted
to US $ 3.7
billion during
April 1996 to
October 2006,
accounting for
around 17% of
India's global
overseas investments
(US$ 22.1 bn).
Mauritius and
Sudan are the
two largest
destinations
in Africa for
Indian investments,
followed by
Liberia, Libya,
South Africa,
Morocco, Nigeria
and Senegal.
Policy Initiatives
With a view
to facilitate
and further
enhance bilateral
trade and investment
relations with
countries in
Africa, the
Government of
India has set
in place various
policy measures
as also an enabling
institutional
framework. These
include, among
others, Focus
Africa Programme,
TEAM-9 Initiatives,
and India-Africa
Partnership
Conclaves.
• Focus
Africa Programme
As the countries
from the Africa
region are emerging
as important
business partners
for India, the
Government of
India put in
place the “Focus
Africa”
Programme from
the year 2002-03
to enhance India's
trade with Africa.
The main objective
of the programme
is to increase
interactions
between the
two regions
by identifying
the areas of
bilateral trade
and investment.
The “Focus
Africa”
programme when
first introduced,
focused on the
Sub-Saharan
African region
with added emphasis
on seven major
trading partners
of the region,
viz., Nigeria,
South Africa,
Mauritius, Kenya,
Ethiopia, Tanzania
and Ghana. Effective
April 1, 2003,
the “Focus
Africa”
programme has
been extended
to cover in
effect the entire
African continent.
Specific focus
products for
exports to these
countries have
been identified,
which in turn
can be broadly
classified into
the following
major product
groups: cotton
yarn, fabrics
and other textile
items; drugs
and pharmaceuticals;
machinery and
instruments;
transport equipments;
and telecom
and information
technology.
At the same
time the “Focus
Africa”
programme envisages
enhancing India's
exports to the
region through
integrated efforts
of the Government
of India and
its agencies
including the
Export-Import
Bank of India.
• TEAM
- 9 Initiative:
Focus on West
Africa
With a view
to provide a
special focus
to enhancing
commercial relations
with countries
in the West
African region,
the Government
of India has
put in place
the Techno-Economic
Approach for
Africa India
Movement (TEAM9
Initiative).
TEAM-9 Initiative
envisages a
special cooperation
model amongst
eight countries
of West Africa,
viz. Burkina
Faso, Chad,
Cote d'Ivoire,
Equatorial Guinea,
Ghana, Guinea-Bissau,
Mali, Senegal,
along with India.
Under the TEAM-9
Initiative,
a cooperation
mechanism is
envisaged which
will operate
at governmental,
institutional
and private
sector levels
sharing various
types of expertise,
intellectual
and physical
resources as
well as economic
opportunities
for promoting
welfare, growth
and prosperity
in these countries.
It would thus
involve, among
others,
• providing
opportunity
for education
and training
in crucial sectors;
• transfer
of critical
technologies
from India;
• undertaking
specific projects
in individual
TEAM-9 countries
which would
have region-wide
beneficial impact
in the sectors
critical for
employment and
growth, such
as agriculture,
small-scale
industries,
pharmaceuticals
and healthcare,
information
technology,
telecommunications,
transport, energy,
etc.
• putting
in place Lines
of Credit (LOCs),
and identifying
priority sectors
in the eight
countries which
would be financed
out of the LOCs.
The projects
financed will
increase bilateral
trade between
Indian and the
select countries
in West Africa.
India-Africa
Partnership
Conclaves
Recognising
the immense
potential to
enhance trade
and investment
relations between
India and Africa,
the Government
of India (Ministries
of Commerce
and Industry,
and External
Affairs), in
partnership
with Confederation
of Indian Industries,
Export-Import
Bank of India
and African
Development
Bank, initiated
the India-Africa
Partnership
Conclaves. The
Conclaves created
platforms for
firms from African
countries and
India to interact
and identify
potential projects
for cooperation.
With a view
to build upon
the achievements
of the Conclaves
held in India,
mini-conclaves
were also held
in Lusaka, Zambia;
and in Addis
Ababa, Ethiopia,
during April
2006; in Accra,
Ghana, during
May 2006; and
in Uganda, during
June 2007. In
light of the
success of these
Conclaves, as
also the need
to institutionalize
the endeavour
as key events
in bilateral
commercial relations,
another conclave
is scheduled
to be held in
India in March
2008.
India Partner
in Africa's
Growth
India is pursuing
commercial strategies
with Africa
that are about
far more than
seeking resources.
The diversified
nature of India's
investments
in Africa highlights
India's endeavours
to contribute
towards infrastructural
and manpower
development,
as also enhancing
capacity development
in Africa.
For India, with
countries in
the Africa region
emerging as
important trade
and investment
partners, and
the need of
African countries
for strategic
partners in
their developmental
and growth endeavours,
sharing of experiences
in capacity
building, investments
and endeavours
in growth-inducing
sectors in Africa
could prove
to be strategic
in fostering
and enhancing
long term commercial
relations as
also presence
in the African
region.
Measures to
enhance bilateral
commercial relations
between India
and countries
in Africa could
encompass an
integrated approach
comprising,
among others:
• Strategic
investments
and linkages
by Indian companies
for energy cooperation
and energy security;
• Increased
cooperation
with countries
in Africa for
developing /
exploring natural
and mineral
resources, and
help enhancing
economic value
creation;
• Enhanced
cooperation
in agriculture
sector development
in the African
region to foster
sustainable
and equitable
development;
• Enhancing
linkages with
banks and financial
institutions
in Africa to
foster increased
bilateral trade
and investment
flows;
• Broadening
linkages with
trade promotion
institutions
in the region
to enhance bilateral
trade flows;
• Strengthening
linkages with
investment promotion
agencies in
Africa to enhance
information
about potential
investment sectors
and holding
investment promotion
events and specialised
exhibitions
to showcase
Indian expertise;
• Contributing
towards entrepreneurship
and human capability
development
in Africa, particularly
in the SME and
agri-related
sectors.
Such endeavours
could be supplemented
by measures
such as: focus
on ICT sector
development;
increased participation
in multilateral
funded projects;
institutional
building; setting
up regional
business hub(s)
in line with
regional trading
arrangements
in Africa; cooperation
with chambers
of commerce
and industry
associations
in the region.
Role of Exim
Bank of India
Africa is a
focus region
for Exim Bank
of India. Exim
Bank through
its comprehensive
range of financing,
advisory and
support services,
seeks to create
an enabling
environment
for enhancing
two-way flow
of trade, investment
and technology
between India
and the African
region, in addition
to promoting
infrastructure
development,
facilitating
private sector
development,
as also in contributing
towards institutional
building in
the Africa region.
A case in point
is the Lines
of Credit extended
by Exim Bank
to enhance bilateral
trade and investment
relations. The
LOCs facilitate
import of project-related
equipments and
services from
India on deferred
credit terms
and many of
these LOCs are
earmarked for
infrastructure
and related
projects.
Further, Exim
Bank of India
supports Indian
companies in
their endeavour
to globalise
their operations,
through joint
ventures (JVs)
with local partners.
Such support
includes loans
and guarantees,
equity finance
and in select
cases direct
participation
in equity along
with Indian
promoter to
set up such
ventures overseas.
In the African
region, the
Bank has supported
several such
ventures in
countries such
as South Africa,
Kenya, Mauritius,
Nigeria, Zambia,
Morocco, Uganda
and Tanzania.
These ventures
serves to promote
value addition,
as also contribute
to capacity
building and
capacity creation
in host countries.
As a partner
institution
in promoting
economic development
in Africa, Exim
Bank of India
shares its experience
in the setting
up of institutional
infrastructure
for international
trade. In this
regard, the
Bank has taken
active participation
in the institutional
building process
in a number
of countries
in Africa.
Exim Bank of
India has representative
office in Johannesburg,
South Africa,
which plays
a key role in
facilitating
economic cooperation
with the Africa
Region. To give
greater emphasis
to the West
Africa region,
Exim Bank has
now opened a
representative
office in Dakar,
Senegal, which
would facilitate
economic cooperation
between India
and West African
countries.
In sum, Exim
Bank of India,
with its comprehensive
range of financing,
advisory and
support services,
seeks to create
an enabling
environment
for enhancing
two-way flow
of trade, investment
and technology
between India
and the African
region, while
also promoting
infrastructure
development,
facilitating
private sector
development
in host countries,
also in contributing
towards institutional
building in
the Africa region
