Opening Remarks

by

Abdoulie Janneh
UN Under-Secretary-General and
Executive Secretary

9 October 2006
United Nations Conference Centre
Addis Ababa, Ethiopia

Honorable Ministers,
Representatives of the African Union, NEPAD, and the African Development Bank,
Permanent Secretaries and Directors of Departments,
Prof. Lyakurwa, Executive Director of AERC,
Distinguished Participants,
Ladies and Gentlemen:

Welcome to the ECA and to Addis Ababa.

It is a pleasure for me to make these opening remarks at this Workshop on “The Impact of China and India on Africa” jointly organized by the Economic Commission for Africa (ECA) and the African Economic Research Consortium (AERC). The Economic Commission for Africa feels honored to be co-sponsoring this Workshop with the AERC, an institution that has since its creation in the 1980s been playing a very active and important role in improving and advancing economic knowledge in our continent. We applaud the presence of leading experts from Africa’s research institutions on whose shoulders the heavy burden of implementing the research agenda that will be agreed at this workshop lies.

This workshop, whose focus is of critical importance for our region, comes at a very opportune moment. First, as some of you know, the African Union (AU) at its last Summit in Banjul, the Gambia, requested that key regional research institutions, including ECA, should undertake research on the opportunities and challenges that China and India – Asia’s two emerging global giants - present to Africa. Much of the debate on China, India and Africa has been carried out elsewhere and the AU rightly believes that it is time that Africa, the affected, engages fully with this issue. The AU hopes that the outcomes of this research could help guide the continent’s response to these new global actors. Second, the next Sino-Africa Summit is scheduled to take place in China in November so the outcomes of this workshop can help organize Africa’s strategic preparations for the Summit. This workshop thus responds to an identified need of our constituency.

I am therefore very pleased to welcome this distinguished group of researchers, renowned academics, senior officials of African governments and many others from across the continent who accepted the invitation to come to Addis Ababa to brainstorm with colleagues on a future research agenda whose outcome we hope will inform and guide our region’s engagement with our Asian partners.

Ladies and Gentlemen:

The growing presence in Africa of Asia’s new global economic giants – China and India - is now difficult to ignore, not just by policymakers but by researchers as well. Admittedly, a lot of the attention has been focused on China – for obvious reasons but India is also an important actor as a forthcoming book – “Africa’s Silk Road: China and India’s New Economic Frontier” – from the World Bank amply illustrates. India’s economic engagement with Africa has also risen very impressively in recent times. Evidence of this abounds from bilateral trade to aid or soft loans, from debt relief to arms sales. Although Africa’s business community (especially the merchant sector) was quick to react to this new development, policymakers and the research community both in Africa itself and in the broader international community were slow to react although that is fast changing.

India has had a policy of economic relations with Africa – built on a common colonial heritage - that dates back several decades. India has recently been partnering with African countries primarily in the areas of ICT and pharmaceuticals. For example, India recently provided substantial support to West African countries through their regional organization, ECOWAS. It is thus not surprising that just as we are meeting here today, there is another meeting on Africa-India Partnership going on. Although the emphasis of this other meeting is the private sector that it is holding signifies the importance that both Africa and India attach to their emerging scaled-up partnership. India has built up tremendous experience in producing anti-retroviral drugs (ARV), an experience we hope it will use to assist Africa to develop credible internal capacity to produce affordable ARVs for the large number of Africans suffering with HIV/AIDS.

I will in the remainder of these remarks concentrate on China. I do so not because India’s economic engagement with the continent is not as important as China’s but because China provokes the most interest and has become the metaphor for this new wind blowing out of Asia.

Unlike India however, China's policy towards Africa has evolved quite rapidly over the last decade or so, especially since 1992. Driven, according to most analysts, by both economic and political imperatives, it is creating new opportunities for African development as well as posing some serious challenges. In addition, China’s January 2006 Africa Policy Paper, which states that China “will develop a new strategic partnership with Africa based on political equality, mutual trust, economic win-win cooperation, and cultural exchange”, provides an appropriate reference point for analysis.

China’s increased focus on Africa found institutional expression in the first China-Africa Co-operation Forum - a platform to promote diplomatic relations, trade and investment between China and African countries - held in Beijing in 2000. In that year, China-Africa trade exceeded $10 billion for the first time. Since then, the growth in bilateral trading relations and investment has been exponential. According to recent Chinese estimates for 2006, bilateral trade is now worth about $40 billion. As if to underscore this, China’s Prime Minister, Wen Jiabao, announced in December 2005 that the short-term goal of his country is to increase trade with Africa to $100 billion within five years. This is likely to materialize as China is the world's second largest consumer of oil after the US and more than a quarter of its oil imports currently come from Sudan and West Africa.

Foreign direct investment is also on the upswing. China reportedly is now the third most important foreign investor in Africa after the US and Europe in that order. In 2004, nearly 700 Chinese companies were operating in 49 African countries. Such is China’s interest in Africa that the December 2003 Forum here in Addis Ababa, attended by Chinese Premier Wen Jiabao and UN Secretary General Kofi Annan, attracted 150 and 250 businessmen from China and Africa respectively. Overall, Chinese investment in Africa as well as its trade with and aid to Africa, are at levels that would have been unimaginable only ten years ago.

Ladies and Gentlemen:

It has been argued that economics is the main driver of this phenomenon and that China's need for energy and raw materials is to a large extent fuelling this booming trade and investment. As the Chinese economy rapidly expands, so too is its demand for energy. Africa's impressive endowment of natural resources has therefore exercised a strong pull. China also sees Africa as a potential market for its own products, particularly textiles, clothing, furniture, footwear, and electronics. This brings some benefits to African consumers but creates challenges for others.

China also represents a large and growing market for Africa’s natural resources, and in the near future could be the destination for considerable African agricultural produce. The role of Africa’s natural resources in driving this new focus on Africa is not lost on us. The next Big Table which is being jointly organized by ECA and the African Development Bank (ADB) in the first quarter of next year will examine the critical issue of natural resources management in great detail and depth. It is our intention to rise from the Big Table with a set of actionable ideas to assist African countries better harness and manage their natural resources wealth for growth and poverty reduction.

There is also a political angle to China’s relationship with Africa. China clearly sees Africa as a major foreign policy priority. Its President, Hu Jintao, and Premier have visited several African countries this year and it is official Chinese policy that the first overseas trip of its foreign Minister each year must be to Africa.

The main factor driving the political side of this engagement is the one-China policy. As the Africa Policy Paper makes clear, "the one China principle is the political foundation for the establishment and development of China's relations with African countries". China has thus carefully used its ties to African countries to encourage them not to recognise Taiwan. Today only about two African countries maintain diplomatic ties with Taiwan.

These political ties have been cemented by soft loans, and increased Chinese investment in African infrastructure. China has undertaken the construction of large and important projects in many African countries. In Nigeria, a $2.5 billion soft loan from China is assisting that country to modernize and expand its rail infrastructure. In Angola, a $2 billion soft loan from China enabled the government to address important national priorities. It is not coincidental these two countries are major oil producers. Although these bilateral loans are laudable, China’s contribution to the physical integration of Africa will make much greater impact on Africa’s development if such loans are similarly extended to NEPAD to implement the NEPAD infrastructure programme, Africa’s common vision for infrastructure development. In this regard, we salute the $5.6 billion fund recently established by the European Union to support the NEPAD infrastructure program and hope that China and India will do likewise.

It would be inaccurate, Ladies and Gentlemen, to view China’s presence in the continent as a totally new phenomenon. It is not because according to some writers - many of you may have read Gavin Menzies’s book, “1421- The Year China Discovered the World” - it was the Chinese, not the Portuguese or the Arabs, who first passed the Cape of Good Hope and thus found the sea route connecting east and west. China’s relationship with Africa thus goes way back in history.

In modern times, China has had a longstanding historical relationship with a large part of Africa, a formal relationship that began about 50 years ago when it established diplomatic relations with some African countries. In the 1960-70s, China was deeply involved in the development of Africa. This period saw Chinese doctors and other experts serving all over the continent. China offered scholarships to African students to study in China and undertook ambitious infrastructure projects such as the Tanzam railway connecting landlocked Zambia to the coast through Tanzania.

Our partnership with China has come a long way since then. Indeed, with the launching of the first Nigerian satellite by China a few years ago, this partnership can be said to even reach out into space! The support that China has offered to the African aspiration for a permanent seat on the UN Security Council is an important and visible manifestation of this partnership.

Ladies and Gentlemen:

For historical reasons, African exports have traditionally been tied to the economies of Europe. But the ‘old continent’ is at the moment a relatively slow growing one – for African economies, it is thus important to diversify their options through strategic exploitation of the opportunities presented by the dynamic markets of Eastern Asia and in particular, Asia’s two emerging global giants. China and India both offer an additional option to Africa’s traditional political and financial partnerships. As the journal African Business recently noted, “China’s financial and humanitarian aid is nowhere near to that from the West, but it gives Africa welcome room to negotiate terms.” Indeed, other regions of the world, notably Latin America, are exploring new strategic partnerships with Africa. Venezuela, for instance, now has 14 embassies in the continent and the first Africa-Latin America Summit will be held in Abuja, Nigeria, at the end of November.

China’s rising profile in Africa has raised concerns on the part of Africa’s traditional partners, particularly from the West. This is in part because (and in addition to competition for natural resources) China’s policy towards Africa, as stated in its 2006 Africa Policy paper, is anchored inter-alia on "the principles …. mutual respect and non-interference in each other's internal affairs". The last part of this – non-interference in each other’s internal affairs – has led many analysts, especially in the West - to assert that China does not care about human rights abuses, transparency, and accountability in Africa. It is for your research to determine the accuracy of this view.

Ladies and Gentlemen:

China has achieved a really phenomenal growth performance and provides lessons in policy design, sequencing and implementation that Africa can learn from. An economy as large as China’s that is growing at a rate in excess of 10 percent per year is unprecedented in human history. Let me make a few personal observations on these lessons.

First, China has enjoyed a degree of autonomy in its policy-making. The reasons for this autonomy are debatable but the result is evident. One only has to compare the economic fortunes over the last decade and a half of the successor States to the Soviet Union, where external advice and involvement were abundant, and those of China to argue that the ‘policy space’ that China has enjoyed probably made an enormous difference since the country had the space to determine its national priorities.

Second, Chinese experience in poverty reduction. In the last 20 years, China has lifted an estimated 400 million - more than half the population of sub-Saharan Africa - of its own people out of extreme poverty. Over the same period, poverty levels in most African countries have remained consistently high. Of course, the challenges facing China in this area remain considerable, nonetheless, its achievement in reducing poverty should be recognized and applauded.

Third, is Chinese pragmatism. Some analysts have argued that the problems China faced when it began its economic reforms are not dissimilar from those confronting African nations today but that China worked out its own solutions to them on its own. These solutions included a strong central government, limited democracy, powerful state-owned enterprises and long-term development plans. Without meaning to endorse the range policies that China adopted, one can suggest that it could profit some African countries to study the Chinese path to growth and poverty reduction very closely and to see what lessons can be distilled from them.

I have in these remarks stressed mostly the positive, the synergies, the lessons that Africa can learn from China. I do not, however, want to sound Polyanna, to sound as though on some levels the emergence of China and India does not pose significant challenges and threats for some African economies. Chief among these is the impact of these two countries on global labour markets and the competitiveness of Africa’s manufactured exports. In the past 20 years, the world economy has had to cope with the integration of an enormous number of people into a world labour market. China is the principal source of this change, although India and the former Soviet Union have also been important contributors to the altering labour market parameters.

A recent DFID report – “The Effect of China and India’s Growth and Trade Liberalization on Poverty in Africa” – is relevant here. The report states that some countries, like Uganda, Ghana and Tanzania (to name a few) would benefit from the low priced imports from China but others might suffer from import competition and the destruction of domestic industry. The impact on jobs could be quite disastrous. Indeed, in Nigeria, one of the countries spotlighted in the DFID report, the Textile and Clothing Workers Union has estimated that some 350,000 jobs have been lost directly and 1.5 million jobs indirectly because of Chinese competition over the last five years.

But as clearly highlighted in the Outcome Document of the AU Extraordinary Summit on Employment in Burkina Faso and at the 2006 ECA Conference of Ministers of Finance, also in Burkina Faso, one of the major developmental challenges facing Africa is unemployment. This issue is extensively explored in ECA’s 2005 Economic Report on Africa (ERA) – “Meeting the Challenges of Unemployment and Poverty in Africa.” To take just one example, it has been estimated that 1.7 million new entrants into labour force in Ethiopia each year. What can African governments do in regard to employment creation in these circumstances where China and India are offering low-cost alternatives?

This has led some economists, like Oxford’s Paul Collier, to argue that, despite its benefits, African countries may resort to some protectionist measures in order to protect their manufacturing sector from the influx of low-cost Chinese manufactured imports. However, this has to be juxtaposed against the tremendously positive impact of rising Chinese and Indian demand on commodity prices.

For many years now, African countries have been calling for a better deal on trade especially on commodities, removal of subsidies and improvement of market access for African exports at various fora, particularly at the World Trade Organization (WTO), but have met with little success. We appeal for a rapid resuscitation of the Doha Round, especially its Development Round and hope that China and India will both bring their enormous influence to reignite the negotiations.

Ladies and Gentlemen:

I would like to conclude this address by restating what is perhaps by now the obvious: the Asian Drivers present our continent with opportunities as well as challenges. They present an opportunity for diversifying our options, deepening South-South Cooperation and regional integration. There is now a multi-sided dynamic to Africa’s development with key actors in the US, Western Europe, Asia and South America. This gives Africa some newfound leverage. I am sure that your Workshop will discuss all of these issues and agree a research agenda whose findings will contribute to and improve our understanding of this new dynamic.

The issues that you will be discussing are vital to the realization of the full economic potential of Africa. For this reason, ECA is strongly committed to collaborating with you and the AERC to implement the research agenda that will come out of this workshop. We believe that if well managed, exploitation of the additional options and new possibilities presented by the Asian drivers could make a demonstrable contribution to Africa’s progress towards the targets of the Millennium Development Goals.

I thank you for your attention.