The clout of emerging economies is increasing in global trade, according to a benchmark report on Africa, showing the ability of nations, including Turkey, to open inroads into the economic centers of the African continent.
India, Turkey, South Korea and Brazil are emulating China’s push to boost trade with Africa, as they erode the market share of the continent’s traditional European and North American trading partners, according to the 2011 African Economic Outlook released Monday.
The report comes at a time when HSBC’s influential chief economist Stephen King talks about the creation of a “Southern Silk Road,” a network of new “south-south” trading routes connecting Asia, the Middle East, Africa and Latin America.
In his analysis also released Monday, King claimed that such connections are set to revolutionize the global economy. “We believe that trade and capital flows between emerging areas of the world could increase 10-fold in the next 40 forty years,” he said. “In the same way that trade between the developed nations exploded in the 1950s and 1960s, we expect the 21st century to see turbocharged trade growth between the emerging nations.”
Emerging economies accounted for about 39 percent of Africa’s merchandise trade in 2009, up from 23 percent a decade earlier, according to the 2001 African Economic Outlook, which was released in Lisbon.
China accounted for 13.9 percent of Africa’s total trade of $629 billion in 2009, while India accounted for 5.1 percent, South Korea 2.6 percent, Brazil 2.5 percent, Turkey 2.4 percent and Thailand 1.1 percent, said the Outlook.
The report was produced by the African Development Bank, the Organization for Economic Cooperation and Development, the United Nations Development Program and the UN Economic Commission for Africa.
“Africa now has two engines to fly on,” OECD economist Jean-Phillipe Stijns, one of the report’s authors, told Bloomberg News. “The diversification of its trading partners bodes well for its ability to resist better the ups and downs of the global business cycle.”
Africa’s new trading partners may also help it reduce its reliance on exporting raw materials. While 85 percent of foreign direct investment flows from traditional investors into resource-rich countries, the ratio for emerging partners is closer to 70 percent, according to Stijns.
“There is this perception that emerging partners, more than any other partners, are resource hungry and the reason they are in Africa is to get the lion’s share of natural resources,” he said. “They are not the culprits. In fact, emerging partners are more diversified than traditional partners in terms of where they are active in Africa.”
According to HSBC’s King, the ongoing “trade revolution” will soon be joined by new finance centers. “Asian financial centers are growing rapidly and, in time, the [Chinese] renminbi may become the world’s most important reserve currency,” he said, continuing: “Already, China has five of the 10 biggest ports in the world. Other emerging nations are not quite so advanced. But, with the help of Chinese investment, the process of infrastructure ‘catch-up’ is slowly being established.”
King raised eyebrows with his latest “Losing Control: The Emerging Threats to Western Prosperity” book. In Monday’s report, he said proposed railways coast-to-coast “across Colombia and from China through to Turkey” alongside new port construction in the Indian Ocean show the shape of things to come. According to King, the center of economic and political gravity is “heading South and East” in a 21st-century version of the original Asian Silk Road, this time involving South-South connections over “land, sea, air and the electronic ether.”