Press "Enter" to skip to content

India turns to Africa to make up for RCEP losses

Why does India not join the RCEP (Regional Comprehensive Economic Partnership Agreement)? In November this year, after the signing of the RCEP, which lasted for eight years, this huge question mark has not disappeared. From the prime minister, foreign ministers and other politicians to major trade and industry associations, India almost unanimously emphasized that joining RCEP at this time is “harmful and unprofitable” for India. An article in the “India Express” even referred to China, arguing that in the context of current tensions in India-China relations, “India should not join a multilateral trade agreement dominated by China.” However, the “Nihon Keizai Shimbun” recently provided another perspective. According to the report, India believes that even if it signs RCEP, it will be difficult to compete with China, Japan, South Korea, ASEAN and other Asian countries. It is better to rely on its geographical advantages to increase exports to Africa to offset the “lost” markets in East and Southeast Asia. So, is this idea of ​​India realistic?

“Huge potential and broad prospects”

According to India’s direct investment data from the Central Bank of India, from 2008 to 2016, India’s direct investment in Africa accounted for 21% of its total global investment. But in fact, the vast majority of this “21%” went to Mauritius in Africa-Mauritius alone accounts for 19% of India’s foreign direct investment. In other words, other African countries account for only 2% of India’s share of global outbound investment. Of course, this has also been interpreted by many Indian experts as “huge potential and broad prospects.”

According to Bloomberg News, during the epidemic, the African economy may outperform the rest of the world. Africa’s 54 countries now include 7 of the world’s 10 fastest-growing economies, partly because the new crown epidemic may have accelerated Africa’s decade-long transition from natural resource exports to wireless remote trading hubs.

The Indian government’s calculation is that by 2030, India will surpass China with a population of 1.5 billion and become the world’s largest market. All industries can be supported through domestic demand, and it will naturally be export-competitive. From the perspective of geographical location and shipping convenience, Africa is not only close to India, but also has a huge market with a population of over 1.2 billion, which is enough to become a new destination for Indian commodity exports. Many companies, including the Indian car giant Mahindra, have begun to deploy in Africa in advance. They are mainly concentrated in the fields of agriculture, education, healthcare, information technology, mining, and energy. It is not difficult to see from this that the companies currently involved in African business in India are still dominated by large multinational groups, and their investment destinations are relatively single.

Indian venture capitalists say so

Indian venture capitalist Vivek led the investment in a private company energy cooperation project in East Africa in 2018. Due to multiple reasons such as the temporary change of the investment policy by the local government, he finally returned. This is his first and last African project to date. He told the “Global Times” reporter that China has been deeply involved in the African market earlier than India, and cooperation in various fields is basically mature. He knows all the local written and “unwritten” regulations. If India aggressively enters the African market, It may not be easy to achieve an equal share with China. “There is still a long way to go, and the most difficult part is to establish true mutual trust with local African governments and enterprises.”

Vivek said, “Frankly speaking, similar products in India are inferior to China in terms of cost performance, and inferior to Japan and South Korea in terms of performance and quality. How can we expect India to use such product advantages to defeat China in the African market?”

Vivek also mentioned that African countries such as Egypt, Morocco, and Algeria are all Islamic countries, while India’s domestic policies towards Muslims and other religious minorities tend to be tough. In this context, India may have to face a greater risk of religious opposition than China in the process of opening up markets in Africa.

source: Trade