“
BEHIND
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THE
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BORDER
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CONSTRAINTS ON AFRICAN-
ASIAN TRADE AND INVESTMENT FLOWS
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and Indian firms face more intense competition from imports from China and India than African firms face.
At the same time, such competition is more intense than or at least on par with what Chinese and Indian firms operating in Africa face from local rivals. Chinese construction firms that participated in the business case studies indicate that their pricing decisions are more dependent on the behavior of other Chinese construction firms in Africa than on the firms of other nationalities.
Competition between foreign
investors from
one country and foreignexporters from the same country serving the same overseas markets is quite plausible, given the fact that firms choose foreign investment as an alternative to serving the overseas markets through imports due to high transportation costs or tariff barriers against imports.
20
Firms choose to export rather than invest if the investment climate in the destination market is not favorable and transactions costs in the destination market are high. In turn, a more competitive environment in the destination market would encourage firms
to invest rather than export, because the more intensive domestic market competition would reduce local transactions costs relative to cross-border trade costs, which firms incur only when they export.
Chapter 6 presents a more detailed discussion on such choices between exports and foreign direct investment (FDI).
The observation from the WBAATI survey that Chinese- and Indian- owned firms in Africa are facing relatively
fierce import competition fromChina and India themselves implies a mutually reinforcing relationship.
African firms that face more competitive markets at home have greater
TABLE 4.5
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