The Big Players in ASEAN-Africa Trade

April 28, 2015 Posted by ASEAN Briefing Reading Time: 5 minutes

The Asia-Africa Summit has been taking place in Jakarta over the past few days, with government officials from over 100 countries taking part. High-level dignitaries attending the event have included Chinese President Xi Jinping, Japanese Prime Minister Shinzo Abe, and Indian Minister Sushma Swaraj, as well as heavy hitters from the smaller nations of both regions.

Themed “The Realization of the Asia-Africa Partnership for Progress”, calls were made to push for reform of the global economic architecture, this included implied criticism of the World Bank, IMF and Asian Development Bank, with suggestions that they had done little to deal with issues both in Asia and certainly in Africa. Noting that China’s weight in the IMF was the same as a medium-sized European country, Singapore’s Prime Minister Lee stated that such institutions no longer reflected the true world order and welcomed China’s recent plans for the Asian Infrastructure Investment Bank.

We can compare the five largest African economies with the five largest ASEAN economies as follows:

Many Asian countries have significant trade links with East Africa especially, and have done for centuries. The Portuguese, Dutch, and British all maintained colonies in Africa as well as Asia, ensuring a legacy of cross-fertilization and trade that continues to this day. In terms of contemporary trade, there has been a boom in Indian Ocean transshipments. From a base of ASEAN-Africa trade of just US$2.8 billion in 1990, trade levels reached US$42.5 billion in 2012, equating to an annual growth rate of 14 percent. This has made Africa the second fastest-growing continent for ASEAN trade other than Asia, according to the Asian Development Bank.

Of the ASEAN nations, the biggest traders with Africa are Thailand (US$11.6 billion), Indonesia (US$10.7 billion) and Singapore (US$9.5 billion), while South Africa, Nigeria and Egypt have the largest import markets in Africa for ASEAN goods. Additionally, the Asian Development Bank is understood to be keen to develop trade agreements between Asia and Africa, which may see a later stage of ASEAN reaching out to one of the African trade blocs. Such a move would follow developing trade patterns.

Singaporean companies have become ASEAN’s largest investor in Africa, with some US$16 billion reaching Africa in 2012. This has been closely followed by investments by Malaysia and Thailand, mainly now exploring Africa through the long-established ethnic Chinese commercial diaspora. Although such residents do not generally associate themselves with the contemporary Chinese Communist Party, they do share cultural and linguistic links with their counterparts elsewhere in Asia, and many are heavily involved in making these trade flows happen. Many have settled for centuries, and several ancient populations of Muslim Chinese have become part of the social fabric in North Africa, yet retain their language and cultural identity. The large South African Chinese diaspora is mainly composed of the original Straits Chinese, who were brought to Malaysia by the British to construct railroads. They originally trace their ancestry back to Fujian. Now they are heavily involved in commerce with trade contacts throughout the continent, and have become a key part of the ASEAN-Africa trade flows.

With local assistance ready and willing to assist Asian trade in Africa, it is no real surprise that Africa has become, after Asia itself, ASEAN’s largest continental trade partner. With Cape Town just a six-hour time difference and a 14-hour flight from Singapore, that makes Africa as easy to reach as Europe from Asia.

This trend of developing ASEAN-Africa trade can be expected to continue, meaning the ASEAN-Africa trade corridor will be one to watch over the coming decade.

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Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

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