Prospects and Challenges for Africa-Asia Trade and Investment
World Bank Group Flagship Study for Singapore 2006 Bank-IMF Annual Meetings
Abstract
The rapid growth of South-South trade and investment is one of the most significant features of
recent developments in the global economy. One of the hallmarks of this trend is the rapid increase in
trade and investment flows between Africa and Asia. While Europe remains the traditional trading partner
of Africa, the flows of trade between Asia and Africa, although still at a relatively low level (of Africa’s
total exports, 15 percent goes to Asia), are rising rapidly. Indeed, Africa’s exports to Asia have been
growing at an annual rate of 10 percent, higher than African exports to other areas of the world. Perhaps
the most notable feature of the recent increase in African-Asian trade is Africa’s increasing trade with
China and India relative to the rest of Asia.
Flows of foreign direct investment between Asia and Africa are more modest. This is especially
true for African FDI in Asia. On the other hand, Asian FDI in Africa is becoming significant, especially
investment from China and India. Chinese FDI in Africa actually dates back decades, with most of the
early investments made in infrastructure sectors, such as railways. India, too, has a long history of FDI in
Africa, particularly in East Africa, where there are significant expatriate Indian communities.
Against this backdrop, there is significant—and rapidly growing—interest among policy makers,
development partners and businesses in Africa-Asian trade and investment relations. This monograph will
identify: not only what are the patterns of trade and investment relations between Africa and Asia, but
also why such patterns are evident and how to strengthen Asian-African trade and investment flows so as
to enhance Africa’s economic development prospects. In focusing on these questions the study will
examine three categories of factors that affect trade and investment between Africa and Asia:

Role of formal trade and investment policies both in Asian and African countries, e.g., trade and
market access policies including tariff and non-tariff barriers; FDI policies; and bilateral-regional
trade and investment agreements.

‘Between-the-border’ logistical and informational factors that affect Africa-Asia trade and
investment flows, e.g., trade facilitation infrastructure and institutions (whether publicly or
privately provided); the level and quality of information about market opportunities (including
through expatriates and the diaspora), the state of transportation services, the availability of trade
finance, and migration/remittances.

‘Behind-the-border’ conditions in both Asian and African countries, e.g., domestic supply
constraints (such as infrastructure development); quality of domestic business environment;
competitiveness of market structures; stringency of business regulations; quality of governance
conditions.
While the first set of factors is often perceived as the major bottleneck affecting trade and
investment flows for Africa, the study explores the notion that the effects of formal trade and investment
policies are likely to be of secondary importance compared to the latter two sets of factors. Thus the
research posits that between-the-border and behind-the-border conditions in both African and Asian
countries significantly affect trade and investment patterns and performance between the two regions and
that these are the areas where the priority for policy reforms should be.
The methodological approach of the study consists of analysis of trade and investment aspects of
existing firm-level micro data from Investment Climate Assessments (ICA) in African and Asian
countries, with special emphasis given to China and India. There also are new firm-level survey data
being collected from a select group of African countries (South Africa, Tanzania, Senegal and Ghana)
where Asian trade and investment activity (again, especially involving China and India) is relatively
significant. To complement these survey data, a number of qualitative business case studies are being
carried out in the same group of African countries involving Chinese and Indian investors.
Draft Table of Contents
1. Trade and Investment Flows between Africa and Asia: Patterns and Performance
2. What Challenges Lie at “The Border”? Role of Formal Trade and FDI Policies
3. Challenges “Between the Border”: Logistical and Informational Impediments to Africa-Asia Trade
and Investment; Reduce Them and They Will Come?
4. Behind-the-Border Factors in Africa-Asia Trade and Investment
5. Inter-Linkages between Trade and Investment
6. Policy Recommendations
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