Distribution of Material Input Purchases by Origin Market and Nationality

INVESTMENT
-
TRADE LINKAGES IN AFRICAN
-
ASIAN COMMERCE
321
one firm heating up iron ore ingots and another casting the molten iron into designated shapes.
Data from the new WBAATI survey provide an opportunity to assess the extent of these practices see tables 6.8 and 6.9. With respect to vertical integration, African firms tend to engage significantly more in downstream integration (intracorporate sales of outputs) than “upstream”
integration (intracorporate purchases of inputs. This is a different practice than that of both Chinese and Indian (as well as European) firms, where upstream integration dominates downstream integration. Across firms of different nationalities, there are also significant differences whether in terms of downstream or upstream integration, Chinese businesses in Africa engage insubstantially more vertical integration than do all other firms surveyed.
Generally speaking, it is not uncommon to find firms—regardless of locale—relying more on the open market than on internal channels for
TABLE 6.8
Extent of Vertical Integration by Nationality
(percent)
Firm nationality
Intrafirm transactions
African
Chinese
Indian
European
Output sales to parent firm or affiliate 19 Input purchases from parent firm or affiliate 23 Source World Bank staff. Note Data pertain to 2005 median values.
TABLE 6.9
Extent of Arms-Length Transactions with Private Firms
(percent)
Firm nationality
Outside transactions
African
Chinese
Indian
European
Arms-length output sales to private firms 24 42 57
Arms-length input purchases from private dirms
92 75 89 Source World Bank staff. Note Data pertain to 2005 median values.
06-Chap6:06-Chap6 10/9/06 2:39 PM Page 321

322
AFRICA
’
S SILK ROAD
:
CHINA AND INDIA
’
S NEW ECONOMIC FRONTIER
sales of outputs or purchases of inputs, though of course there are variations across sectors due to differences in industries underlying technologies. In the case of the surveyed firms in Africa, the data do indeed suggest that these businesses generally transact more with independent, private firms via the open market than through vertical integration. Where arms- length interbusiness transactions are being conducted in Africa, the firms engage in this practice more for output sales than for input purchases.
Across nationalities, however, the differences are striking. Businesses from
China transact with private firms in the open market—both for purchases of inputs and sales of outputs—to a much smaller degree than other nationality firms operating in Africa.
Taken together, the findings suggest that Chinese businesses, which tend to rely both more heavily on vertical integration and less heavily on arms-length transactions with independent private firms, perceive the risks associated with commercial activity in Africa differently than do
Indian (or European) firms. This conclusion is consistent with the findings above on differences across firm nationality in investment patterns.
TABLE 6.10

Download 5.17 Mb.

Share with your friends: