Evidence on FDI-Trade Linkages of

INVESTMENT
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TRADE LINKAGES IN AFRICAN
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ASIAN COMMERCE
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merchandise exports as a percentage of GDP and FDI as a percentage of
GDP, there is a much stronger positive association for the oil-producing countries than for the non-oil-producing countries. Of course, other variables beyond the growth of FDI and FDI as a percentage of GDP affect export growth and exports as a percentage of GDP.
Fortunately, there are new firm-level data from the WBAATI survey of
Chinese and Indian firms operating in Africa that permit a more disaggre-
BOX 6.4
Barriers to Regional Integration Are Barriers to Africa’s
Export Prospects Evidence from Chinese and Indian
Business Case Studies
The WBAATI business case studies of Chinese-owned and Indian-owned firms in Africa point to a number of difficulties enterprises face in realizing the benefits that regional integration can bring to the continent. Without regional integration, the many small, landlocked countries of Africa will not be able to create unified economic spaces sufficiently large to achieve economies of scale. Without economies of scale, unit production costs will unlikely below enough to allow for the successful penetration of export markets. Every Chinese and Indian business study noted the poor quality and high cost of transport services, the long shipping times, and the lack of effective logistics services such as insurance and transport intermediaries,
all of which limited the commercial viability of intra-African trade. One Chinese firm operating in South Africa indicated that sending a product from
South Africa to Angola costs as much as sending the product from China to
Angola. An Indian firm in Tanzania noted that intra-African maritime shipping costs are three times because high as road shipping costs, in part due to the lack of competition. Another Indian firm, in Ghana, stated flatly that “ECOW-
AS does notwork as there are still high tariffs among ECOWAS countries.
The firm reported that it costs about $1,000/TEU to send a container from
Accra to Lagos, a distance of just over 200 miles. In fact, the high tariffs on trade induced this firm to make cross-border investments instead, an example where intraregional trade barriers gave rise to intraregional investment.
Source: World Bank staff.
Note: TEU = twenty-foot equivalent unit, a measure of container capacity.
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AFRICA
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S SILK ROAD
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CHINA AND INDIA
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S NEW ECONOMIC FRONTIER
FIGURE 6.4

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