New development thinking: rising powers and the role of business

Published on 20 April 2016

Sarabe Chan

Alumni Advisory Committee Member

The blossoming of Chinese and Indian investments in other emerging countries is a contemporary and frequently discussed topic. With these growing business partnerships, what kind of new development thinking is derived from them? I attended one of the panels at the Rising Powers Young Researchers Conference, where four researchers presented their research projects about the roles that Indian and Chinese businesses play in development.

India’s Preferential Trade Agreements (PTA): the state’s economic and political tool?

Are PTAs motivated by business interests or are they tools of economic statecraft? India, with its growing impact on global politics, is an intriguing case. By examining the evolution of 13 PTAs that India concluded from 1998 to 2014, Nicolas Köhler, a PhD student at the University of Cambridge, argued that they were motivated by top-down considerations of the state rather than bottom-up dynamics driven by domestic interest groups. This happens when the local industry is inward-looking and import-competing especially when serving a large domestic market.

India’s economic and political motivations could be attracting foreign direct investment, soft-balancing to China’s rise and strengthening its diplomatic relationships. India currently has PTAs with other emerging countries such as Chile, Brazil and Argentina. However, PTA determinants can shift overtime, for example if local firms become more outward-looking and increase their intelligence of foreign markets and the process of PTA formation.

Role of Corporate Social Responsibility (CSR) of Transnational Indian Businesses: motivations and catalysts

In 2014, India became the first and only country in the world to mandate businesses to allocate 2% of their net profits to CSR activities. Although CSR is not a new concept in India, for example major corporates like Tata Group and Aditya Birla Group have been involved in community engagement activities ever since their inceptions, how are businesses really engaging with poverty and human development issues?

Anuja Prashar, a PhD candidate at Open University, dug deep into the motivations, catalysts and practices of CSR of transnational Indian businesses in Kenya, another emerging country also with high economic growth but prevailing poverty issues.   This project is still in progress and I look forward to understanding more about the researched case studies.

This presentation raises my interest in how CSR, initially formulated in the West through pressure from environmentalist groups, is adopted by businesses from emerging countries like India and China. The level of significance that CSR could have in influencing future state-business-civil society relationships is also worth keeping an eye on, which hopefully would contribute meaningfully to development issues. Thus, understanding the motivations of these businesses is essential, as it would determine the depth of their CSR programmes.

One Belt, One Road Initiative: a Chinese Marshall Plan or, simply, a Chinese plan?

The debate whether China’s One Belt One Road (OBOR) Initiative is a “Chinese Marshall Plan” has been around for a while now. Enrique Martínez-Galán, Head of Department of Multilateral Affairs of the Ministry of Finance of Portugal, and Luís Melem Pereira, an advisor to the European Bank for Reconstruction and Development, assessed China’s growing role in the global economy by looking into the parallels between OBOR and the Marshall Plan.

Arguing that both initiatives follow the same motivation and rationale, Luís pointed out the similarities between them. These include interests of the USA and China in promoting trade facilitating networks, and increasing cross-border economic, cultural and political influence. The creation of multilateral development banks to fund the projects (the Asian Infrastructure Investment Bank in the Chinese case) also supports his argument.

However, I felt the analysis should also have explored the fundamental differences between both projects.

Broadly speaking, the Marshall Plan was a politically motivated aid project with links to the USA’s overall Cold War strategy to prevent the spread of communism, whereas OBOR emphasises more on trade and business, which remains  faithful to China’s traditionally non-interventionist approach to international affairs.

However, given China’s long-term investments and vested interest in their partner countries, it is difficult to believe that China would remain neutral to local political factors that determine the states’ stability. Lastly, the presentation did not mention the differences in understanding aid and development from the Western and Chinese perspectives, such as the fact that the latter believes less in approaching development through aid.

Chinese Foreign Direct Investment and technology transfer in Nigeria: the extent of technological diffusion and learning

With increasing Chinese investment in Africa, Nigeria and its growing middle class is an attractive ground for investment. Yunnan Chen, a PhD candidate at Johns Hopkins University, looked at the extent of technological diffusion and learning that Chinese firms can bring to Nigeria, and evaluated their potential to further catalyse industrialisation in Nigeria.

The key sectors include:

  • automotive assembly
  • food and beverage
  • furniture
  • steel and construction materials

A scoping study identified some technological transfer and spillover mechanisms. For example, there are labour training and skills transfers for local workers, but they are usually low levels of skill training.

Also, Chinese firms generally employ about 80% of Nigerian staff but there are hierarchal differentials between the jobs that Chinese and Nigerians occupy, owing to sense of mistrust, cultural and language barriers and so forth. Significant hardware and machinery transfers took place in Nigerian firms partnering with Chinese ones, although they bear advantages (and disadvantages) of low cost and low quality.

The presentation was an insightful perspective on the potential of Chinese engagement in promoting structural transformation in Nigeria, and what it could mean for future China-Africa business partnerships.

No doubt China-Nigeria trade and investment relationship is growing, but challenges are also ever evolving and a more coherent strategy is needed to leverage this new source of capital. The study recommended the need for local and national government level support for technological transfer and skills training beyond menial employment. With more structured support, overseas businesses could better utilise local human resources instead of bringing in labour from home.

The views expressed in this opinion piece are those of the author/s and do not necessarily reflect the views or policies of IDS.

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