Monday, January 7, 2013

Is US FDI to Africa more transparent than China's?

Guess which country, the United States or China, refused to release official data on its firms' investments in resource-rich Libya, Chad, Gabon, Guinea, Mozambique, Uganda and Zimbabwe in 2010?

If you guessed China, you'd be wrong. Yes, it was the U.S.

I have long made the point that the Chinese data on foreign direct investment (FDI) to Africa does not reflect the reality. Yes, official data is openly published (unlike aid, which remains very secretive). And yes, since 2002, the Chinese Ministry of Commerce has reported outward FDI using the standard OECD/IMF definitions of FDI. Yet because of exchange controls, and because so much FDI goes through tax havens (like Hong Kong, the British Virgin Islands, and the Cayman Islands) it is nearly impossible to track the ultimate

I always assumed that the US was a lot better in this regard. I was wrong. At least as posted on the website of the OECD's statistics bureau, the US claimed that 2010 FDI data by US companies in twelve African countries (almost all resource-rich) was "confidential". What's more, in 2010 the second most popular destination for US FDI flows to Africa was ... Mauritius (a tax haven) where US firms sent $1860 million.

Surely we can do better than this!


Anonymous said...

Yes, I noticed the same when doing research for the CCS. Guess who's even providing less data: the UK. Due to "commercial interests". At some point, after having been sent from the one person to the other to end up with the first person we contacted, surprised UK government department representatives had to admit that they did not have the data concerning FDI outflow from their country. As if it is not difficult enough already to do research on FDI flows with all these tax havens.

Unknown said...

Thanks a lot for the revelation, Deborah. Western medias always try to portrait China and Chinese government as opaque and under the table, base on the assumption that western countries did a better job. But ironically, Western countries did the worse job.

Thierry Pairault said...

Nothing really astonishing! In fact, it is quite impossible today to compute precisely the destination of FDI whatever the country (Western or not, developed or not). When 80% of China’s outward FDI are done by a small number of big enterprises under the direct supervision of the central government which have to register their investment before going out, it is a lot easier. The problem is that 80% of the registered Chinese outward FDI is done in tax havens (HK, BVI…). Thus it is quite impossible to record where the money actually goes. The reinvestment of profits made abroad is too very difficult to compute.

Anonymous said...

Well the only thing I have to comment here is that, China is far better than the western countries.And am sure if the African countries concentrate on china they will see their feature.
Am African and I know why and am following up always.

Anonymous said...

So the US should be more transparent and has to. Never point a figure to someone while the other figures are directed to yourself

Anonymous said...

Disclaimer: I am a Chinese.

I will not say that China is far better than the Western countries, in terms of their investment in Africa.

True, in many ways China's investment focus more on infrastructure developments such as road building, power generation, port construction, electricity grid, hospital extensions, etc., which benefits more African people in more direct ways.

And true too that China's FDI don't come with so many hypocritical strings attached, unlike those from the Western countries.

But FDI without any string attached sometimes is a double-edged sword - while it can benefit the people but it could also benefit the despots that oppress the people.

The thing about China is China does not give a darn who is running the country - China works with everyone, even characters like Omar Al-bashir.

That's the thing that I draw the line in the sand.

I have investments in Africa, but there are places that I would not go, such as Sudan. I don't go there because it is not my interest to help despots such as Omar Al-bashir who kills his own people for fun.

Anonymous said...

TO the researchers, don't be lazy..US, UK sourced FDI by listed companies are public. Go to the ministries of finance or central banks of most countries and you will find what is coming in. Now agree it does take detours via tax heavens and other places but unless you are on a fishing expedition, you will get the data you need.
This relates to my second point, why exactly is everyone so fascinated with BRICS vs. West as if life would change because the source of these funds. We better focus on what it does for the development and job creation of our regions.