The Yale University School of Forestry and Environmental Studies hosted a conference on 4 April 2015 on Chinese Overseas Investment and Its Environmental and Social Impacts. I was asked to give a presentation on "The Environmental Impact of China's Investment in Africa." The remarks are a summary of a much longer paper still under revision that will be published early in 2016 in the Cornell International Law Journal.
On 8 April 2015 the International Policy Digest published a shortened version of my remarks at Yale.
Showing posts with label foreign direct investment. Show all posts
Showing posts with label foreign direct investment. Show all posts
Sunday, April 5, 2015
Wednesday, March 27, 2013
Russia-South Africa Relations
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| Natalya Volchkova |
The paper investigates the features of Russia-South Africa relations in light of their membership in BRICS and the G-20. Though historically Russia has had a long-lasting political relationship with South Africa, to date economic collaboration between the countries continues to be limited, and Russia places more weight on cooperation in international relations rather than on economic opportunities within the BRICS forum.
Foreign Direct Investment in Africa
The UN Conference on Trade and Development (UNCTAD) published on 25 March 2013 a 10-page summary titled "The Rise of BRICS FDI and Africa." It has attracted some attention because it states that both Malaysia and South Africa as of the end of 2011 had more cumulative FDI stock in Africa than did China. In fact, France headed the list with about $58 billion of cumulative FDI stock in Africa, followed by the United States with about $57 billion and the United Kingdom with about $48 billion.
There was a sharp drop to Malaysia with about $19 billion in FDI stock, followed by South Africa with $18 billion, China with $16 billion, and India with $14 billion. South Africa was the leading recipient of Chinese FDI followed by Sudan, Nigeria, Zambia, and Algeria. Indian FDI in Africa was concentrated in Mauritius in order to take advantage of the latter country's offshore financial facilities and favorable tax conditions. As a result, the final destinations of India's investments in Africa often went elsewhere. Some of the FDI coming from other countries also went to Mauritius with the same result. The relatively large FDI figure for Malaysia is, however, still surprising.
As I have commented before on this blog, the official FDI figure for China in Africa significantly understates the actual amount for a variety of reasons. It only represents FDI that it is officially reported to the government of China. Some private Chinese investors do not report FDI flows. China's official numbers miss FDI that passes through Hong Kong, the Cayman Islands and the British Virgin Islands and goes to many countries, including some in Africa. Chinese FDI statistics do not include investment in the financial sector. For example, China's $5.5 billion purchase of 20 percent of Standard Bank of South Africa is presumably not reflected in the cumulative figures for FDI to Africa. China has also made several large investments in companies located in countries outside Africa that have significant holdings in Africa. These investments would not appear in the cumulative figure for Africa.
This is a murky area. Nevertheless, I believe it is correct to conclude that as of the end of 2011 China had more cumulative FDI in Africa than either South Africa or Malaysia but not more than the UK, US, or France.
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| Malaysian Houses of Parliament. Flickr/Wojtek Gurak |
As I have commented before on this blog, the official FDI figure for China in Africa significantly understates the actual amount for a variety of reasons. It only represents FDI that it is officially reported to the government of China. Some private Chinese investors do not report FDI flows. China's official numbers miss FDI that passes through Hong Kong, the Cayman Islands and the British Virgin Islands and goes to many countries, including some in Africa. Chinese FDI statistics do not include investment in the financial sector. For example, China's $5.5 billion purchase of 20 percent of Standard Bank of South Africa is presumably not reflected in the cumulative figures for FDI to Africa. China has also made several large investments in companies located in countries outside Africa that have significant holdings in Africa. These investments would not appear in the cumulative figure for Africa.
This is a murky area. Nevertheless, I believe it is correct to conclude that as of the end of 2011 China had more cumulative FDI in Africa than either South Africa or Malaysia but not more than the UK, US, or France.
Thursday, February 28, 2013
China, Africa and Foreign Direct Investment
A number of us have struggled for years trying to determine the amount of China's foreign direct investment (FDI) in Africa. China's Ministry of Commerce regularly publishes a total cumulative figure for FDI in Africa. In 2012, Minister of Commerce, Chen Deming, stated that as of the end of 2011 China's cumulative FDI in Africa "exceeded $14.7 billion, up 60 percent from 2009." But the Ministry of Commerce (MOFCOM) also commented in 2012 that China's investment in Africa of "various kinds" exceeds $40 billion, among which $14.7 billion is direct investment. A number of Chinese academics use a variety of other numbers, a few exceeding $40 billion.
Some of the problem surrounds the issue of FDI definition. The OECD Benchmark Definition is the global standard. China specifically excludes investment in financial institutions. As a result, China's $5.5 billion investment in Standard Bank of South Africa, for example, is presumably not included in its FDI total, but presumably is included in the "various kinds" of investment. But the exclusion of investment in financial institutions does not come close to explaining the different totals.
I recently ran across a couple of detailed studies that shed some light on this dilemma. Both of them are somewhat dated, but still useful even if they do not end the confusion.
The first is OECD Investment Policy Review: China 2008. Chapter 2: China's FDI Statistics comments that China's FDI statistics do not provide information on direct investment income and do not show separately the main components of FDI, equity financing and inter-company loans. Regarding basic definitions used by China there is no information available. Chapter 3: China's Outward Direct Investment also sheds some light on its FDI in Africa.
Chapter 14: China's Outward Foreign Direct Investment by Leonard K. Cheng, chair professor of economics and dean of business and management at the Hong Kong University of Science and Technology, and Zihui Ma, lecturer of international economics at Renmin University of China, contained in China's Growing Role in World Trade (2010) is also helpful. It notes that MOFCOM excluded investment projects not screened and approved by relevant government agencies and did not include investment after the projects' initial approval, such as the plough back of retained earnings. However, as part of China's policy of encouraging its firms to go overseas, from 2002 onward, MOFCOM's FDI statistics have been collected in accordance with OECD definitions (page 547).
Cheng and Zihui also note that during 2004-2006, between 78 and 87 percent of China's global FDI flows were made to three tax havens (Hong Kong, Cayman Islands and British Virgin Islands). Consequently, the true breakdown of the destination of China's FDI was largely unknown (page 559).
Let the confusion continue!
Some of the problem surrounds the issue of FDI definition. The OECD Benchmark Definition is the global standard. China specifically excludes investment in financial institutions. As a result, China's $5.5 billion investment in Standard Bank of South Africa, for example, is presumably not included in its FDI total, but presumably is included in the "various kinds" of investment. But the exclusion of investment in financial institutions does not come close to explaining the different totals.
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| Standard Bank South Africa. Flickr/keso |
The first is OECD Investment Policy Review: China 2008. Chapter 2: China's FDI Statistics comments that China's FDI statistics do not provide information on direct investment income and do not show separately the main components of FDI, equity financing and inter-company loans. Regarding basic definitions used by China there is no information available. Chapter 3: China's Outward Direct Investment also sheds some light on its FDI in Africa.
Chapter 14: China's Outward Foreign Direct Investment by Leonard K. Cheng, chair professor of economics and dean of business and management at the Hong Kong University of Science and Technology, and Zihui Ma, lecturer of international economics at Renmin University of China, contained in China's Growing Role in World Trade (2010) is also helpful. It notes that MOFCOM excluded investment projects not screened and approved by relevant government agencies and did not include investment after the projects' initial approval, such as the plough back of retained earnings. However, as part of China's policy of encouraging its firms to go overseas, from 2002 onward, MOFCOM's FDI statistics have been collected in accordance with OECD definitions (page 547).
Cheng and Zihui also note that during 2004-2006, between 78 and 87 percent of China's global FDI flows were made to three tax havens (Hong Kong, Cayman Islands and British Virgin Islands). Consequently, the true breakdown of the destination of China's FDI was largely unknown (page 559).
Let the confusion continue!
Sunday, September 30, 2012
Large Scale Land Acquisitions in South Sudan
The Land Deal Politics Initiative (LDPI) published a study in August 2012 titled "Drivers and Actors in Large-scale Farmland Acquisitions in Sudan." The author is Martin Keulertz, a researcher at King's College London.
The study focuses as much on water as land. The study concludes: "Whether or not a hidden agenda is behind 'land grabs', the paper has illustrated that water resources are at the heart of investors' minds."
Click here to read the study.
The study focuses as much on water as land. The study concludes: "Whether or not a hidden agenda is behind 'land grabs', the paper has illustrated that water resources are at the heart of investors' minds."
Click here to read the study.
Saturday, May 26, 2012
Doing Business in Djibouti 2012
The World Bank has assessed the climate for doing business in 183 countries. This post looks at Djibouti,whose overall score in 2012 was a poor 170, a drop of three points since 2011. Djibouti scored well in "trading across borders" and fairly high in "paying taxes." It scored poorly in all other categories.
Click here to see a summary of the scores and here to access a detailed economic profile of Djibouti.
Click here to see a summary of the scores and here to access a detailed economic profile of Djibouti.
Friday, May 25, 2012
Doing Business in Sudan 2012
As part of a global study of 183 countries, the World Bank has assessed the prospects for doing business in Sudan. Its rank in 2012 was 135, the same rank that it held in 2011. The low score is worse than the one for neighboring Ethiopia but considerably better than the scores for Eritrea and Djibouti. For a summary of Sudan's ranking in key categories, click here. For a detailed World Bank economic profile of Sudan, click here.
Thursday, March 1, 2012
China's Economy and Future Impact on Africa
Daouda Cisse, research fellow at Stellenbosch University's Centre for Chinese Studies, published on 1 March 2012 a brief piece titled Chinese Economic Reforms, the Next Round - Impacts on Sino-African Economic Cooperation?
He notes that China's strong economic growth over the past three decades has been of direct benefit to Africa in terms of FDI flowing to the continent and helping Africa to emerge from the 2008-2009 global economic crisis by purchasing African raw materials.
Looking to the future, he quotes a World Bank study that suggests China's growth will slow from its previous rate of 9 percent annually to between 5 percent and 6 percent. If reforms focusing on a consumption-driven economy occur in China, the volume of Chinese outward FDI to Africa will slump and export volumes might never be like before. Cisse adds that "China will undoubtedly issue policies to reduce Chinese State Owned Enterprises and bring them home to contribute to Inward Foreign Direct Investment. China's priorities will be directed towards other sectors in order to sustain its economy."
He notes that China's strong economic growth over the past three decades has been of direct benefit to Africa in terms of FDI flowing to the continent and helping Africa to emerge from the 2008-2009 global economic crisis by purchasing African raw materials.
Looking to the future, he quotes a World Bank study that suggests China's growth will slow from its previous rate of 9 percent annually to between 5 percent and 6 percent. If reforms focusing on a consumption-driven economy occur in China, the volume of Chinese outward FDI to Africa will slump and export volumes might never be like before. Cisse adds that "China will undoubtedly issue policies to reduce Chinese State Owned Enterprises and bring them home to contribute to Inward Foreign Direct Investment. China's priorities will be directed towards other sectors in order to sustain its economy."
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