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Shashikanth asked: What is the fundamental difference in the Indian and the Chinese models of investment in Africa?

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  • Gunjan Singh replies: Africa with its huge resources of energy and various other raw materials has become the new destination for investments by the two emerging Asian powers; China and India. If one goes by the available trends, one would be compelled to conclude that China is way ahead of India when it comes to wooing the African nations. China in the past decade has given great prominence to its relations with Africa, while Indian diplomacy has been lagging on several fronts. It was reported in an article published by the International Business Tribune (June 27, 2013) that the Indian FDI investment in Africa in 2012 was about $27.3 billion while China invested around $119.7 billion. However, it still remains to be seen as to who will have the competitive edge in the long run; the Indian tortoise or the Chinese hare!

    China has received a lot of criticism for its investments in Africa in the recent years. The primary areas where the Chinese Government has been keen on investing are raw materials, energy resources and infrastructure development. Even though the Chinese Government insists that its investments come with ‘no strings attached’ (engaging with countries like Sudan and Zimbabwe in spite of huge international criticism), the practice of employing Chinese personnel to work on the projects has generated a lot of anger as it does not help in bringing employment to the local African population. Another controversial aspect of the Chinese investment and aid to African countries has been ‘buying’ their acceptance of the ‘One-China Policy.’

    The Indian investment (though smaller than the Chinese investments) too has been directed towards securing supplies of energy and raw materials in order to fuel its domestic growth. However, India has benefited from the historical ties and huge presence of Indian diaspora in Africa. Indian investments are largely perceived as positive and helpful in the overall development of the domestic African economies. In addition to this, India is also regarded as a nation which abides by the international norms and thus its presence is widely viewed as benign in nature.

    Posted on September 16, 2014