(CPV) – As their mainstay export markets in the rich world shrink due to the euro zone debt crisis and the economic woes of the United States of America, developing Asia-Pacific countries are realizing the importance of trade with the fast growing markets of Africa and Latin America and the Caribbean (LAC).
ESCAP estimates show that imports by developing Asia-Pacific countries from Africa and the LAC region grew 17-fold and 26-fold, respectively, between 1990 and 2010 with an even larger increase in exports by developing Asia countries to these regions during the same period. The total two-way trades present estimated worth is 573 billion USD and has enabled these regions to significantly reduce reliance on exports to developed economies.
The ESCAP Economic and Social and Social Survey of Asia and the Pacific 2012 highlights that greater South-South linkages can lead to win-win situations as the economic woes in developed countries will further weaken import demand and negatively affect investment flows.
“With its continued dynamism, the region has begun to play the role of a growth pole for other developing regions, such as Latin America and Africa, helping them to reduce their dependence on the low-growth developed economies as South-South trade becomes an important trend,” says ESCAP Executive Secretary Dr. Noeleen Heyzer.
At present, African and LAC exports to developing Asia are dominated by primary commodities. If the income from such exports is invested in building social and productivity capacities, it would enable lower income African and LAC countries to move up the export value chain, reducing reliance on raw commodities and enabling more exports of processed and manufactured goods.
ESCAP estimates that the potential annual increase in export opportunities for Sub-Saharan Africa to developing Asia could exceed 20 billion USD while the potential annual increase for Latin America to developing Asia could be more than 25 billion USD.
There has also been a sharp increase in foreign direct investment (FDI) by developing Asia – Pacific countries in Africa and LAC, mainly by China and India. Developing Asia’s share in total FDI in Africa has more than doubled to 15 percent since the late 1990s. FDI flows from China to Africa and LAC increased 6-fold to 31.6 billion between 2004-2010.
The ESCAP Survey 2012 notes that Asia – Pacific FDI in Africa and the LAC is increasingly diversifying into infrastructure development and manufacturing. For example, FDI from China to Ethiopia, which boasts few primary resources, increased more than 135 times between 2004 and 2010 to 58.5 million.
This is partly due to rising production costs in several economies in Asia. It is also a result of targeting economies with greater market potential. It is also increasingly meeting the development needs of these regions. Being more labour intensive, such investment has the potential to boost local employment and incomes at a faster rate than FDI from developed economies.
Asian businesses are also actively engaged in merged and acquisitions (M&A) in Africa and LAC. These include the second largest cross-border M&A with the purchase of Zain Africa BV, a mobile operator in 15 African countries, by India’s Bharti Airtel in 2010. Developing Asia accounted for 68 percent of all M&A activity in LAC in 2010./.