As the panel discussion by VIDC with Anzetse Were, Jue Wang and Cornelia Staritz commenced a lot of thoughts were going through my head. How do we, in the North and specifically in Austria, see influence as a concept especially in the realms of development cooperation.
During the panel a lot of interesting points were raised. Jue Wang focussed her talk on the investments of Chinese stakeholders in different African country and pointed out that even though most investments are in manufacturing, generally a wide field of investments is being approached. The approach to foreign direct investment (FDI), which itself had a massive influence in the development of the Chinese development, is quite different to the aid work typically provided by countries of the Global North. The three points that interested me the most were:
- Investment into Chinese special economic zones came, according to Wang, to a big part from Chinese diaspora and nearby countries. Is this a way to reintroduce the brain-drain, which is very much experienced by African countries, and a model which could be adapted?
- As climate change has more severe effects and the Chinese government introduces stricter standards, is FDI a way to find places which offer lower standards and/or wages. What effects are to be expected for the growth of sustainable industries, as many African countries have higher standards for environmental protections?
- Many African nations particularly in Eastern and Southern Africa built their independence from a socialist ideology, such as Ujamaa in Tanzania, which is different to the Chinese development but still builds on similar values. As well as the additional common denominator of being a place of conquest for Europeans. Which role do identity politics and similarity of history play in creating a more level playing field when it comes to investments?
Secondly Anzetse Were a development economist from Kenya was pointing out several different notions about FDI in general but also specifically from China. Her input on the issues of special economic zones as being significantly more advantaged than local production, which in turn disincentivises local production and specifically scaling up and formalizing business practices. The development of capacities and skills, creating a spill-over for the local economy is instead a dual process working separately. The increase in wages however is undeniable and investment capacities can be built through this system, but industry development is not underway. The two most poignant observations and burning questions were:
- The lack of specialization and regionally value chain which were pointed out by Were led to each nation trying to build a diverse portfolio of industries but scaling up is limited. What are the true costs of focus and what is the difference between specialization and monocultures of business?
- Secondly, even though governments are looking towards formalisation as a tool to generate tax revenue, how realistic and beneficial are these practices on a local level. Lack of infrastructure, culminating in different hurdles such as high electricity cost, lack of grid systems, etc. are not a benefit to micro and small businesses. However, looking towards the cost of formalization through taxes but also standards for workers health, environmental protections, etc. what is a realistic approach to create a framework for these businesses? What role could investments to the local level play in this regard?
Both Were and Cornelia Staritz pointed out that initiatives for indigenous businesses are still few and far between. Adding that the development of good policies for local African economies lay with the governments, in order to avoid just being a gateway due to beneficial trade deals and circumventing taxes. The responsibility lies with the African governments which as nations like Ethiopia show can have a very strong hand in shaping policies with positive long-term effects.
During the Q&A part of the panel Were also raised attention that especially historically Europeans tend to infantilize African governments and at the same time downplay the horrors of colonialism by equating China to a colonial power. Rather than seeing China’s influence as a pure negative or positive I would suggest learning from their practices, creating pro-active strategies for development which don’t reinforce neo-colonial patterns and give everyone a seat at the table.
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