Chinese Investment Forum for Sustainable Trade and Economic Growth in Africa

The "Forum on Chinese Investment for Sustainable Trade and Growth in Africa" was held in Beijing, China, from May 31 – June 1, 2016, with the principal aim of exploring business opportunities and deliberating on the needs for catalyzing suitable investment, especially from China, in productive sectors in Africa, as a means to drive export development, economic growth and job creation. The Forum was held within the framework of Partnership for Investment and Growth in Africa (PIGA), a joint United Kingdom-China effort to increase exports and sustainable economic growth in Africa. The Partnership for Investment and Growth in Africa initiative was officially launched in October last year in London on the sidelines of Chinese President Xi Jinping's state visit to the UK.  It seeks to increase exports and sustainable incomes of people living in poverty in Africa through increased investment and greater integration of Small and Medium Enterprises (SMEs) into global value chains in manufacturing and agro-processing. PIGA partners and pilot countries identify exporting enterprises in Africa and foreign investors including those from China, and increase quality investment in key sectors, as well as increase participation of local business in the regional and global value chains. PIGA, currently in a scoping and design phase, is part of a broader range of UK-China-Africa Collaboration for Investment and Growth. It was supported by Justine Greening, UK Secretary of State for DfID; Hu Huaibang, Chairman of the China Development Bank; Nkosazana Dlamini-Zuma, Chairperson of the African Union Commission; and Ethiopia's Foreign Minister, Dr. Tedros Adhanom.

Last week's two-day Forum was co-organized by the UK's Department for International Development (DFID), the China Council for the Promotion of International Trade (CCPIT), the China-Africa Development Fund (CAD-Fund) and the International Trade Center. These have forged a collaborative arrangement to work together towards increasing sustainable investment for the greater integration of Small and Medium Enterprises in Africa into global value chains in the manufacturing and agro-processing sectors. Discussions focused particularly on the four pilot PIGA countries, Ethiopia, Kenya, Mozambique and Zambia, and at the way these countries have aspired to get the most out of local development, including the creation of more jobs, adhering to principles of solidarity and mutually beneficial cooperation. The Forum also explored opportunities for Chinese companies to invest in Africa's productive sectors, aiming to drive export development, economic growth and job creation. It provided a business-networking platform for interested businesses with African investment and trade promotion institutions. The large attendance in Beijing showed the growing interest of Chinese businesses and investment-supporting institutions to do business in Africa.

Speakers at the Forum included Ethiopia's Ambassador to China, Ambassador Seyoum Mesfin; ITC Executive Director, Arancha González; the Chairwoman of the Beijing Sub-Council of the CCPIT, Ms. Xiong Jiuling; the Chief Executive Officer of CAD-Fund, Mr. Shi Jiyang; and the Director-General of Economic Development of DFID, Mr. David Kennedy. It brought together more than 300 representatives from Chinese businesses, government, and trade and investment support institutions in the four pilot African countries, as well as from China and the UK.

 Ambassador Seyoum emphatically underlined the importance of partnership, pointing out that successful implementation of the Sustainable Development Goals, and especially the goal to "end poverty in all its forms everywhere", required governments, private investors, civil society organizations, trade and investment-support institutions to enhance synergies to turn such opportunities into concrete and tangible development impact. This could be done through inclusive employment creation, integration of global value chains, expanded production capacities of African countries, and technology transfer. He referred to the greater role a facilitative state could play in terms of spearheading the creation of economic infrastructures to provide a foundation for the desired structural transformation in African economies. This would allow for the creation of an enabling atmosphere for agricultural modernization, export diversification, sustainable industrialization and inclusive development endeavors. Ethiopia, he noted, was providing a favorable investment climate for manufacturing and agro-processing sub-sectors, allowing foreign companies to create a linkage with small and medium scale enterprises of Ethiopia in order to help them take full advantage of developing production capacity and value-creating ventures for job creation and poverty reduction.

Ambassador Seyoum stressed that it was an imperative necessity for African countries to move fast to unlock and utilize the transformative power of the multi-billion dollar funding package pledged by the Government of China to implement practical projects within the framework of Johannesburg Declaration and Action Plans of the Forum for China-Africa Cooperation (FOCAC). He said Ethiopia was strictly committed to translate the new blueprints into action to realize opportunities for future mutual development and continue the trend of prosperous growth through agricultural modernization, infrastructure development and the harnessing of industrial production capacity through partnership. Effective industrial relocation would, he said, mean igniting local industrialization in Africa. There was agreement that China and Africa's development strategies were complementary and characterized by mutual gain. He also emphasized the importance of encouraging best practices and progress of technical and institutional capacities. This would help overcome constraints preventing implementation of these initiatives and realizing the common dream. Ambassador Seyoum said it was the responsibility of Africa, China and other partners, to pursue cooperation actively between industries and encourage promotion of the processes of industrialization and agricultural modernization to achieve win-win results. Addressing hurdles would foster the interest of economic actors on all sides and be a force to bring productive Africa to the global market.

Ms. Xiong Jiuling, representative of CCPIT said that China-Africa cooperation had embraced development needs, aligning the complementarities of both sides, and was in line with the African Union Agenda 2063. In addition, the international capacity cooperation agenda was on track to bring tangible results. She noted that countries like Ethiopia had comparative advantages for localizing value-creating manufacturing and agro-processing industries. Mr. Shi Jiyang, CEO of the CAD-Fund said cooperation in leveraging the economic and trade structures of Africa could move the continent away from being at the wrong end of the global value chain. China, he said, was best positioned to help lift Africa's production capacity sharply. He mentioned that the CAD-Fund had been participating with Chinese enterprises in productive investment ventures in Africa. It had jointly invested in 36 African countries with an investment outlay of US$3.4 billion so far, and this had been of assistance in boosting export earnings and fiscal revenue. He said the Fund was willing to promote the tripartite cooperation envisaged in PIGA.

On the issue of integrating African SMEs into the global trade value chain, Ms. González of the ITC, pointed out that Chinese investment support should be anchored in productive sectors such as light manufacturing and agro-processing where SMEs were the growth levers to ensure local value addition, export earnings and job creation. Mr. Kennedy of DFID welcomed the level of interest and energy generated by the Forum. He said this showed the "great potential of this kind of triangular cooperation to make a real difference in terms of investment and jobs in Africa." He said manufacturing and agricultural investments anchored in export markets would offer enormous opportunities for economic transformation in Africa. Professor Justin Yifu Lin, a former chief economist and senior vice president at the World Bank, and Honorary Dean of the National School of Development, Peking University, said that African countries had the potential for dynamic economic growth. They should focus on their comparative advantages and place themselves ready to capture the window of opportunity for industrialization arising from the relocation of labor-intensive light manufacturing from higher-income countries, such as China. In this regard, he said, the role of the facilitative and developmental state was irreplaceable.

Diplomats from the Ethiopian Embassy in Beijing and representatives of the Ethiopian Investment Commission gave details of the investment potential of Ethiopian agriculture, agro-processing and light manufacturing. They noted Ethiopia was endowed with different agro-ecologies suitable for the production of a wide range of commodities, making commercialization of agriculture an attractive proposition to foreign companies. The sector is indeed well placed to drive agro-industrial development. The demand for the export of processed food products is increasing globally, and Chinese investors were encouraged to participate in the agro-processing industry in Ethiopia. The Ethiopian government had recently launched its Integrated Agro-Industrial Park (IAIP) development program as a core component in the current Growth and Transformation Plan to help integrate small-scale farming into commercial agricultural value chains. There is great potential for Chinese investors in these proposed parks.

The opportunities in the manufacturing sub-sector, such as textile and apparel, leather products, chemical and pharmaceutical production, construction materials and other similar products, attracted a lot of attention from the audience, who were impressed by the low production costs and resource advantages Ethiopia could offer investors. Ethiopia is a good candidate to host Chinese labor-intensive and export-oriented factories when labor-intensive production begins to relocate overseas. The government has been building special economic zones, equipped with necessary economic infrastructure to attract foreign export-focused investments as a deliberate boost to jump-start industrialization. Localizing industries in Ethiopia would help Chinese investors capitalize on preferential trade programs that allow African countries to export duty-free to US and EU markets, as well as satisfy growing domestic and regional demands. 

The giant Chinese shoe manufacturing company, Huajian, currently producing 2,000 pairs of shoes daily in Ethiopia, was showcased as a success story. The Chairman of the Huajian Group said his company has recently secured close to 138 hectares of land in Ethiopia in order to build a light industry city at a cost of about US$2 billion. This planned industrial zone would create employment opportunities for 30 to 50 thousand people and significantly boost Ethiopia's foreign currency earning capacity. The Chairman urged developed countries to buy products originating from Africa, pointing out the quality of production had steadily improved.