Tuesday, March 5, 2013

Wait, so Structural Adjustment WORKED for Africa?

Katherine Kidder, writing on Tom Ricks' excellent blog, points to the importance of private rather than state-led investment into Africa (with a nice mention of Xiaofang Shen's recent talk at SAIS). She mentioned something of particular interest to me:

Most of China's industry grew up in the 1980s and 1990s, with little-to-no regulation. By contrast, many African laws (at least on paper) were copied and/or imposed by the West through such mechanisms as Structural Adjustment Programs (SAPs). As a result, Chinese entrepreneurs find African processes more conducive to business, from obtaining licenses and navigating the bureaucratic process to trusting that the food they eat for lunch is safe. African governments face higher incentives to improve infrastructure and devote resources to political stability and regulatory efficiency in order to attract capital -- precisely the same goals reflected in SAPs.
So, what does this mean for the West? Interestingly enough, Chinese private investment in Africa may be a hat tip to Western models of development and governance: Xiaofang Shen's study finds that going overseas to do business was much easier for up-and-coming Chinese entrepreneurs than starting a business in inland China.
Stop me if I am wrong, but it looks like Chinese investors are coming to Africa because SAPs made for more appealing investment climates than back in China. In short, that SAPS worked. That the conditional loans, the privatization, the deregulation, etc all contributed to private Chinese investment. I have always been interested as to why China rekindled its relationship with Africa around 2000, but I never thought that SAPs having something to do with it. Prof. Deborah Brautigam points to the late 1990s reform of Chinese State-Owned Enterprises as being a major watershed for Sino-Africa relations, but perhaps the SAPs were just as instrumental as the SOEs? I would be very interested to see what sort of research, if any, has been done on the subject. If the success of SAPs did have something to do with Chinese investment, then I salute the chutzpah of every Chinese critique of U.S. or European 'strings-attached' aid while at the same time China benefits from those very strings.

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