Recent years have seen an influx of Asian investment in African textile production as the industry gradually shifts locations in light of rising wages in Asian countries. Most notably, as China and India cultivate industries that require higher-skilled labor, transitioning to a more advanced rung on the ladder of economic development, African economies are beginning to fill demand for low-cost textile production, assisted by investment funds flowing in from Asia. African countries should strive to capitalize on this trend by taking measures to facilitate business and build up domestic manufacturing sectors integrated into global trade chains. By instituting beneficial laws and regulations, African countries can use the textile industry to advance their own development just like Asian countries such as China and India before them.
The “flying geese” economic model predicts that, as wages rise in regions like Asia, low-skilled manufacturing like textiles will relocate to less-developed areas such as Africa, where wages remain lower. In accordance with this model, in many cases today it is Asian manufacturers themselves that drive growth in the textile industries of southeast Africa through investment; in fact, most textile manufacturers operating in this region originally come from Asia (1).
As Asian countries establish an increased presence in the region, they shape both policy and the economic landscape. For instance, as Chinese and other Asian textile companies increasingly source their cotton from African countries like Zambia and Tanzania, the added demand shapes the market in a way that favors a decentralized industry free of government involvement (1). In addition, Asian companies introduce technology and innovations that boost productivity and increase inputs (1).
In fact, it is the gradual liberalization of trade and lowing of protective barriers that allows for the current increase in foreign investment in Africa. Much of this has come as a result of ongoing WTO efforts over the previous decades to convince African leaders to reduce tariffs, enticing more multinational corporations to enter into the domestic market (2). Today, however, further reform is necessary for African countries to fully capitalize on investment inflows. According to the World Bank’s ease of doing business rankings, most African countries still lag far behind other regions, clustered in the lower half of the 189 countries ranked (3). The mere presence of Asian investment and global demand cannot ensure that African economies will prosper by means of the textile trade; it ultimately falls upon the governments themselves to institute practices that will facilitate the integration of domestic textile industries into global trading chains. In today’s liberalized global business environment, there is no room for trade protectionism and isolationism as viable development strategies.
While the West is often inclined to take a skeptical view of the great rise of Chinese investment into Africa in recent years, labeling it as exploitative of the region’s resources and labor, this influx of funds has the power to help shape the region for the better. In 2014, China pledged to achieve a $400 billion trade volume with Africa by 2020 on top of $100 billion in direct investment (2). While much of this is centered on the textile industry, Chinese investment also often targets infrastructure projects that are key to paving the way for lasting development (2). Today, much of the region’s economic woes stem from a fundamental inability to successfully integrate into global trading chains; a lack of basic infrastructure like roads and ports severely stunts business efficiency and discourages multinational corporations from establishing their operations in the region. In this way, Chinese money is instrumental in transforming Africa into a business-friendly environment in which the textile industry, and the entire economy, can flourish.
(1) Xiaoyang, T (2014). The Impact of Asian Investment on Africa’s Textile Industries. Available at: http://carnegietsinghua.org/publications/?fa=56320 (Accessed: 10 July 2016).
(2) Kuo, S (2015). China’s Investment in Africa – The African Perspective. Available at: http://www.forbes.com/sites/riskmap/2015/07/08/chinas-investment-in-africa-the-african-perspective/#3048fb1716e2 (Accessed: 10 July 2016).
(3) World Bank Group (2015). Economy Rankings. Available at: http://www.doingbusiness.org/rankings (Accessed: 10 June 2016).
Image: © Paweł Opaska | Dreamstime.com - <a href="https://www.dreamstime.com/royalty-free-stock-image-thread-factory-workers-image24439606#res14972580">Thread factory workers</a>