Recent discussion by the Carnegie Endowment for International Peace on how India and the US could partner with Africa to foster its development. This is relevant because foreign investors interested in Africa are facing similar risks and opportunities to those they faced when investing in India. African countries could therefore learn from India’s successful economic reforms in service and industrial sectors which helped it achieve an impressive growth rate for several years.
Some useful ideas from this discussion include:
India can contribute to Africa’s development by sharing its experiences in mobilizing human capital and social policy innovation, such as the ongoing large-scale rural employment program launched in India in 2006. In fiscal year 2009/10 alone, it provided employment to 52.5 million rural households. India can help Africa produce high tech yet low cost goods that are within the purchasing power of the African people.
India’s Green Revolution transformed the country from a food deficit nation into a food self-sufficient country. The introduction of high-yielding varieties of seeds, increased use of fertilizers, and improved irrigation helped to increase agricultural productivity in India, leading to self-sufficiency in food grains. It also helped India to effectively address famines. This revolution is similar to what happened in China.
Foreign investors need to diversify from energy investment in Africa and investment needs be increased in non-energy sectors as well.
The US government and the private sector could consider public-private partnerships in order to reduce investment risks while making investments in Africa. This could also be done by developing tax incentives and credits for US investors in Africa (see previous post on this here).
On financing, U.S. banks are risk-averse and less willing to finance businesses in Africa, which creates a financing problem for U.S. businesses interested in doing business in Africa. However, European banks have been more forthcoming in financing investment in Africa. A possible proposed solution in this regard could be increased support from the Overseas Private Investment Corporation (OPIC) in the US.
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