 Good evening everyone, just waiting for another one minute to see how many people come in, then we will start. So good evening everyone again and welcome to the 2020-2021 SOS Economics webinar series, Intensifying Equalities and the Limitations of Global Capitalism. So this webinar is aimed at bringing together perspectives that extend our understanding of how inequalities take root in our societies and economics and how this relate to the crisis of global capitalism. So the series is organized by the SOS Economics Department in collaboration with our students in the department as well as in the Open Economics Forum, the SOS Feminist Economics Network and the Black Economics Network. So the topic we're going to be discussing today is the elusive quest for structural transformation in Africa. Will China make a difference? And today we have a guest speaker and we have two other co-chairing coordinators who are going to be discussing the subjects and I'm going to be introducing them to us one by one as we go. So first of all, let's talk about a lead to of what the topic is all about. So despite various attempts, citizen dependence and the growing economic engagement between China and Africa in the last two decades, structural transformation in Africa has remained elusive. The current engagement with China is strengthening the situation by making Africa more and more commodity dependence for its foreign exchange earnings. This studies in this issue were consciously optimistic about some potential positive contributions of China for Africa structural transformation. We underscore the such success is conditional on African capability and from strategic policy, you know, to be able to implement this in a pragmatic way. So I will be introducing our guest speaker from the Addis Ababa University. His name is Almey Hu and I'm just going to be reading his biography. We also have Linda Calibris and Carlos Oya, but we take the biography of Almey first. Okay, so Almey Gaida is professor of economics at Addis Ababa University. He specializes in micro economics and international economics. Among other things, he has been working on macro model building in Africa. He taught in our department at SOF some years ago, and it is a research. He's a research associate at SOF economics as well as other centers including the Kenya Institute for Public Policy Research and Analysis and the African Economic Reset Consortium. Almey Hu has written extensively on a variety of topics that shed light on the workings of African economies. His most recent book published in 2019 is the historical origins of the African Economic Crisis from colonialism to China. I'm going to be reading the biography of Linda Calibris as well, who is going to be part of the discussions for this evening. Linda Calibris is a development economist and research fellow at the ODI in London, where she leads on the Institute's China Africa work. She works on trade and investments, Chinese outward investments in Africa and Asia, and the Belt and Road Initiative. She is currently doing a PhD at the Lahu China Institute. I'm introducing Carlos Oya, who is another discussion for this evening. Carlos Oya is professor of political economy of development at SOAS, University of London, and development economics by training. His main research interests are labor relations and employment, agrarian political economy, development policy, poverty, and research methodology. Carlos has done extensive field-based research on contemporary labor market dynamics in various African countries, especially in Ethiopia, Mozambique, Angola, and Senegal. He has recently led a project on structural transformations and employment outcomes in infrastructure construction and manufacturing sectors in Ethiopia and Angola, but with a special focus on Chinese film. So just before I bring the guest speaker, I'll mail you up. I just want you to know that you can drop your questions, any questions you have for the discussion, so I'll mail you in the chat, and we're going to answer them at the end of the discussions. So Dr. Almey, you have about 40 minutes, and welcome on board, you can start now. It seems Almey has disappeared. He's not on the list. He's not on the list. Should we wait about two minutes to see what's going to happen? Yes, sorry to jump in. This is Sara. I think, yes, Almey is back in now. I think he's definitely having some issues with his connection. He's back in now. So, let's see if he's able to speak. Apologies to everybody for this technical issue. Alimey, can you hear us? I think you're back in. So, if you can unmute yourself. If he's getting ready, we can talk about the webinar series. If that's okay. Yeah, is that okay, Sara? Yes, of course. Sorry, I'm trying because I think now he's back in. So, I don't know if he's able to keep on losing him on the list. Apologies everybody, just bear with us and hopefully we will be able to hear from Alimey. Hello. Can I ask a question? Regarding the webinar series. Yes, yes, go ahead. This is my first time I'm coming to this because this is my ex-colleague. So, how often do you do this webinar and when, if I may ask? Okay, I think the dates already been allocated but the next one. Hello, can you hear me? Yeah, he's coming. I stop, I stop, I stop. Thank you. I'm sorry, you know, you know, the internet in Africa. It was working the whole week and I was very happy in the whole day and suddenly it went off. I was afraid of such possibilities but now I managed to connect with my mobile phone. I think at least you can, you can hear me, right? Yes, we can. Yes, yes, I can hear you. Good. Shall I proceed then? Yes, please. Okay. Good. Thank you very much for inviting me and I'm sorry for this inconvenience of the ETL telecom. But I hope I'll finish before this, the other one goes off. I can proceed like, say. Yes, you can. You have 14 minutes. Excellent. Okay. Now, this presentation is based on a special journal article that we did with African Economic Research Consortium. Actually, it was done by myself and the Executive Director of the ARC, Professor Lamma, on December, the previous director before Jogunan Dungu and witness Simbani, now with the Reserve Bank of South Africa. So I will basically, what I will do is I will give you the picture of the African trade and financial interaction with China and highlight the major findings of the three papers that appeared in the special issue of the World of African Economics in 2018, from which I have prepared this presentation. Now, so let me go straight. As you all know, the recent economic development in Africa was like up until 2007 quite impressive because the country was growing since 2002 on the average by 5% per annum. This growth was primarily propelled by the demand for primary commodities from emerging economists in general and China, India in particular. So it has also significant this growth and the connection with the China that we have have significant implication for structural transformation in Africa and structural transformation in terms of strong connection with job creation and poverty reduction. Now the question is whether the engagement up until now has this potential. So that's what I'm going to discuss. Now, if you see a African growth is strongly linked with commodity prices. And I have, I have divided this into three periods if you see, as you can see here, the first period is just after independence up until the oil crisis. Then you have the second period, the famous 1980s and 90s, where commodity price stagnated. And the third period, which I would like to call the Chinese period, where there was a surge in demand for primary commodities. And also there's a huge increase in the price of major commodities that Africa is selling. Now, interestingly, I had a book in 2019 here, I'm taking all this information from there. And if you link this pattern of commodity prices with the growth in the continent, there is a strong linkage between the two. As you can see here, you see the growth rate was 4.6 in the furious period and reached the peak of 6.3 in the first period. Then collapsed, collapsed in the 80s and 90s. And then it went up in what I call the Chinese period. Now, actually this figures there is a, there is a very contested numbers. Like, I checked angstard numbers, wallet bank numbers, the ECN number. For instance, the ECN number puts this 2.8 at that time, actually below 1 person. So in any case, you can see the pattern. And I mean, if you want a recent information, African growth was forecasted from 2013 until now to grow on the average 3-4%, but following the collapse of commodity prices 2013, it declined nearly by 50% and the COVID added to it. Now, if you see over period, like the last 100 years, this is the terms of trade of Africa for the last 100 years, the top part. And the second part is, for the first time in 100 years, we had an improvement in terms of trade of Africa. The second, since 2002 we have this positive terms of that's after 100 years of almost annual decline by 0.8%. We have improvement. This is related to the Chinese, the engagement that we have with Chinese in general, in general with emerging economies, but Chinese in particular. Now, this engagement is not only in trade, but also in terms of FDI and financing. So the FDI also has significantly increased during this period. For instance, now the trade is about 200 billion, which is 66 times higher than the US 3 billion level that was registered in 1990, or 20 times the 10 billion that we had in 2000. So the trade has grown significantly. China's rapid economic growth has contributed for this. And African trade with China is invariably bundled with financing, like FDI and also what is called vendor financing. So, the law is normally handled by the Exim Bank of Africa, and it is estimated, I estimated it, you know, the FDI financing could be over 100 billion right now accumulated. Now, what is the nature of FDI that's coming from China to Africa. Now, in general, you know, despite the media hype about China in Africa, the share of Chinese FDI stock in the total FDI stock of Africa is very negligible, about 3%. India and China combined is 6%, about 6% of the stock. So therefore, still, you know, it is dominated by traditional partners, the OECD countries. But when you see the existing FDI, you can characterize it as follows. One, the flows are largely motivated by the desire to secure sources of energy and raw materials, as well as to exploit preferential markets in advanced countries. The second feature of Chinese FDI to Africa is that with this growing FDI, there is a proliferation of a number of small and medium-sized firms that usually come with the big Chinese transnational corporations. The third feature is that FDI coming from China do not seem to be deterred by the nature of governance, like the fragility of a particular country in question. And finally, FDI and other forms of investment flows from China are, as I said, bundled with provisional infrastructure, tied concessional development, financing and trade, with no political conditionality of touch, unlike what Finanza we get from the West. Now, but to understand Chinese investment engagement in Africa, FDI is not a good indicator. The best probably is what I would like to call Chinese quasi FDI or vendor financing, which invariably comes from the exit bank of Africa. Now, that is huge. But this is not FDI because the investment is actually carried by a particular African countries. They came up, they came with the financing and the condition is that they have to do the job. They're multinational companies have to do the job. Now, if you see that financing, it is estimated probably between 2001 and 2010. It is about 67 billion, and I extrapolated this figure in 2019, it reached over 100 billion, 105 billion to be specific. Now, when you see this finance, first the majority of this loan were infrastructure related and Chinese firms are the one building it invariably directed at facilitating the export of primary communities from the port to from the source to the port. Second, compared to concessionary financing, that the majority of countries in the country used to get from international financial institutions is very expensive. For instance, in some very, it is very security, but in some of the European projects I checked the interest rate alone is live or plus 3 percentage points. So comparatively expect compare this to the average that you get from idea of just 0.7%. They are characterized by potential risk that includes indebtedness, vulnerability to global economic shocks, and political and strategic vulnerability of Africa to China. And part, if individual African countries are exposed too much, like for instance in Ethiopia or in Djibouti, there is also a strategic vulnerability at risk that probably you have heard what happened in Sri Lanka. Sri Lanka was so indebted that the Chinese have to take even the part. And I think there is a similar stories about the utilities in Zambia. So finally, this kind of financing also a vehicle for Chinese multinational global strategy of expansion by helping them to win and involve in various projects in the continent. So the sheer magnitude of this figure shows you how important this kind of analysis. Now, generally, this is the path of huge threat, huge financing, both FDI and quasi-FDI, but the quasi-FDI is the most important one. Now, given this picture, what would be the challenge and the opportunities of engaging with China for Africa? This is from ARC studies. Earlier, we did about 22 country case studies from ARC. I was involved in it. Later on, we tried to summarize that and we had a sort of planarization for policy makers in the car, Senegal. So the summary of this result is, I'm summarizing three papers here. One is by Justin Lin, now probably in Peking University. Previously, he used to be the vice president of the World Bank. And then Bertung at John Hopkins, who specializes in China-Africa relation. And my paper, so three papers, we summarized them here. Now, the major issue for Africa, the policy issue for Africa is, you know, what are we getting from this engagement? China's economic impact on Africa. How can the China-African economic partnership could be leveraged to enhance industrial upgrading or structural transformation on the continent? These are the issues. Now, indeed, this is very important issue because, you know, recent poverty and growth studies shows that, again, done by ARC. And there is an excellent review by my colleague Abhavish Mellis about the poverty issue in the last 15 years. What he concluded is that, despite this huge growth propelled by the engagement of Africa with emerging economies, which was on the average 5% per annum, the effect on poverty reduction is extremely limited. Poverty reduced only by 4 percentage pointers throughout this huge growth period. Now, if you compare that, like I got a picture here, you see it. You know, the head count ratio in Africa from 1981, 2008, and 2018 now, if you see it, it just declined from 55, 51, and 47. This is the head count ratio using $125 PPP. Now, if you compare it to Asia, the same period, you see in Asia, in East Asia, it dropped from 77 to 14 and now to zero. And see, you can compare it with the condition in Africa. Now, actually in numbers, in the 80, 163 million people have been poor. In 1980, this increased to 313, and now right now, it is 413. So what is the difference between the two? We observe structural, serious structural transformation in East Asia, and in fact, even in South Asia. I didn't put the figure here, but we missed that in Africa. Now, if you see the structural change, I mean, this is a big literature about at least, if you use the standard definition that a movement from low productivity area to high productivity area. You can see here an interesting picture that I took it actually from one bank study in 2016. You see, in the 80s, this has, you know, the x-axis is sector employment share, while the y-axis, I mean the x-axis is value added per capita. This is in manufacturing. This is the best indicator of the manufacturing. Now, as you see here, the blue one was the 1980s here. And in 1990, it declined, the green one. In 2000, further declined. And 2010, nearly now, right now, it has further declined. So actually, the regional structural transformation in the continent, as you can see from this data actually, it is getting worse. And on the other hand, there are movements from agricultural sector to another sector, the service sector. Here you can see, you know, this is for the service sector. In the 80s, with the blue one, the 90,000 increased. In 2000, it has increased. And then 2010. Now, this would have been an interesting shift, had our service sector have been as sophisticated as the one we have in the West. But it is not. You know, the majority of the service sector, if you take for instance in Ethiopia, the urban areas, 40% of the population is in the informal sector, basically. And these are very, very weak sectors. As you can see here, the whole sales, retails, and micro or micro firms. Now, so generally the pattern is, you know, countries that translated, basically translated to a service sector. And in the manufacturing sector, there is no really structural transformation. Now, people are saying, I mean, there are a lot of studies, the latest one being by, by, there is a wider study. Basically, they are saying, no, no, the African structural transformation is different. Now, then Asia, it is going to ICT based services, tourism and transport. And this are half characteristics similar to the firm, to the firm like it means scale economics are important agglomeration is important. And we need to think differently. That is sort of the finding of a Brookings Institute study and the wider study plan. And they think that this is like manufacturing. We shouldn't worry about that, but I very much doubt that, because this reminds me of the classic previous article about about the terms of deterioration of developing countries where he basically says, if you specialize in primary communities, you are specializing in an area where the scope for technical focus is limited. You are specializing in an area where the market structure is not your advantage. IE, the manufacturers are sold in a fixed price market while primary comedies are sold in a flexi price market and invariably a consumer benefit in the latter one was not in the former one. So, if you guys just check that class, particularly you can see this are not, according to my opinion, a good areas. And I can also see from the effect of COVID on these sectors, in the last couple of years, you can see how vulnerable it is to depend on such sectors. So, given this picture, what was the message of DRC studies, three of them. Then Lin's study, he examined the Chinese economic rise and the opportunities that the Chinese rise is giving to Africa and tries to draw a lesson for us. And he basically concluded this one. He says, the Chinese grow up is an opportunity for Africa. But if Africa want to benefit from this, it requires clarity of vision, state capacity and willingness to implement a policy of development by credible, committed and capable government. That is basically his conclusion. He says, you know, Chinese adopted a pragmatic gradual dual track approach, which provided necessary protection to non viable firms in the priority sectors to avoid their collapse. While at the same time simultaneously liberalizing the entry of private enterprises, joint ventures and the DI. So you guys have basically Lin says you guys have to follow that. And he said again, African country should begin by building up the necessary infrastructure. That is that is key for him and improving business environment, especially for the sectors where they have a comparative advantage. You have to do that. That was his basically a message of his paper. Then he said the market, he basically says the market on its own will not deliver what is required in terms of structural transformation. Therefore, both the state and the market have important roles to play, according to Lin. Then finally he says, in China, there is a huge shift in economic activity, what they call rebalancing like focusing internally. And because of this, there is a rising weight in China, which implies that the relocation of labor intensive manufacturing out of China. He estimated that to be about 85 million strong. And he says, this is an opportunity for African countries, you know, to take advantage of this firm is moving out of out of China and create job for his people. So for this he says a strategic and pragmatic approach is necessary. That was his message. The micro study basically micro study was done by Bert, Bertigan, I hope by pronouncing it one. Now, she, she's very, you know, very famous person on this area at John Hopkins. She attempts to characterize Chinese manufacturing investment because manufacturing investment key for this structural transformation. Basically firms that coming to Africa are motivated by industrial gradient transfer from China, all into the right din cost of labor in China and excess capacity in China. So she focused on four countries. She had a case study on Ethiopia, Ghana and Nigeria and Tanzania. These are selected on the base of having large number of Chinese manufacturing firms. And then she just take stock of the current state of knowledge on Chinese manufacturing investment in Africa, where they that she come up with the conclusion that Chinese manufacturing in Africa stood about 4.6 billion in 2016. At the same time, the total Chinese investment in Africa was about 24 billion. So the firm, the manufacturing was about 4.6. In terms of the scope of investment, she find that most of the Chinese manufacturing firms were engaged in leather products, textiles, weighing up your rubber plastic products and metal and mineral products. There is a little bit of exporters and also import substitution. So they are basically interstate manufacturing firms. So this different types of Chinese manufacturing firms, she says basically pauses different opportunities and challenges to Africa. Therefore it is up to the Africans to identify those challenges and opportunities and optimize from that was basically her message. Now that the other paper is mine, as I showed you initially in my studies. I was basically saying that the engagement was huge in terms of both FDI and trade. But I argued that the engagement does little to move Africa away from realized on primary commodity trade into my factory. In addition, I argued that whatever grows is coming, it is a low quality grows low by low quality grows. I mean, it grows that doesn't lead to structural transformation and has job creation and new employment. And I also argued that this engagement, because you know price of commodities are very high and very profitable for us is working in African countries on trade in the export sector. A sector where the scope for technological development is limited and generally characterized by deteriorating terms of trade and volatility of prices as I showed you earlier. Now, poor quality grows. There are two economic studies, one I did, and the other than by Collier basically shows that the primary commodity rise leads only to short-term growth, not long-term growth. Actually, the Collier paper is much more pessimistic because it says in the long-term the growth effect is negative. Why? My econometrics says in the long-term it's not in zero, but in the short-term it has benefits. So that's, as a result, it is a low quality growth. There is also, you know, in the manufacturing sector, there is a comparative trade to manufacture firms in Africa. There is a vulnerability to macroeconomic ramification like the disease governance of resource sector. So these are challenges. The opportunities are implemented in terms of trade, as I showed you earlier for the first time in the last 100 years. Infrastructure, you know, the Chinese built a lot of infrastructure in the continent and the finance it. That is also an opportunity. And then the potential, the positive potential implication of the Chinese rebalancing. That is when they focus to the higher ladder of manufacturing and exporting. There is an opportunity for their firms to move to Africa and Japan. So these are, I think, the advantages. However, in general, according to my opinion, among my studies, that the persistence of challenges as opposed to opportunities in the current engagement shows to me lack of human and institutional capacity to make advantage of these things. So our human capital, the expertise, our capacity in the continent is so weak in terms of a negotiating with them, in terms of implementing whatever is negotiated, and in terms of technological transfer, technological and managerial transfer to us is very weak. Therefore, as long as this weakness continues, I am, you know, less optimistic than the two, the two authors, unless we address this strategy Chinese problem, it's our problem. So we have to do something about it. So the challenge of coming up with appropriate policy or strategy. In short, the Chinese have a strategy when they come to Africa and we don't. And that has to do with expertise, human capital and strategic engagement. So unless we do that, my conclusion is perhaps we will repeat what we have with industrial countries in the last 100 or 200 years. Thank you very much. I'm glad I finished before this thing went off again. Thank you. You finished quite some time. Thank you so much. I'm going to call on Carlos over here now, one of our discussants to give us some contributions and observations on the slides. Thank you. Thank you very much for inviting me and participate in this great discussion and meeting Alema you once again after many years I haven't seen him. And online counts, we're getting used to it so my I've got a few comments basically building on on on the article that Alema you has been referring to in the last part of his presentation. So my comments are basically focus on that that article but also on a few points that Alema you has made during the presentation which relates to this. So I think a key outcome of the presentation on this paper is identifying what we consider three key vectors in understanding Africa China relations and now trade finance and foreign direct investment. It's quite clear I mean that the evidence so far is is clear that these vectors have been dynamic of the past 20 years at least, but also, and I think Alema you has referred to this. It's interesting to consider the interconnections between them. It's hard to really understand either trade finance or FDI from China to African countries without looking at the interconnections I think there was there were a few examples. From Alema you, which reflected this these connections. I think it's important. I mean that would be one initial premise to consider variation across countries variation is important within Africa it's hard to articulate arguments about these relations and the implications for Africa without considering the quite substantial variation that takes place across different African countries. I think it's interesting to to consider, for example, contrast between, you know, Alema use on country Ethiopia, and its experience with with with these Chinese different vectors and experience of other African countries, for example, Angola, which was one of the countries we covered in our projects and employment outcomes. In contrasting these different experiences and what's been done in different places is quite useful in terms of understanding what is possible. And what can be achieved given the serious constraints and problems that challenges that Alema you has referred to. A key issue that comes from these three different papers that my you has discussed and his own work is is there is uncertainty on some of the outcomes, some differences in the assessment in terms of how optimistic or pessimistic different approaches are. And some of these differences also have to with the different methods that different authors use I mean certainly the kind of analysis that my you does is very different from Deborah Broutigan and her team on FDI. So I think with this premises I would like to make four main points to, you know, trying to contribute to the discussion and perhaps add some elements to the key question that we asking here whether China will make or can make a difference for the quest for structural transformation in Africa and I do share some of the pessimism of my in terms of the record so far. So yes if you look at the word in terms of industrialization and structural transformation in the 80s 90s and 2000. And I believe this very little to, to report on. Now, my first point is on on the linkages be finance infrastructure on any industrialization I think what Alemai you has called these Chinese quasi FDI is an important issue. I don't call it I think it's important not to confuse this with FDI in the sense that this is finance that is provided by, you know, XM and many other development agencies and banks in China to finance infrastructural development in particular it is that the executors of many of these projects or the vast majority of this project are Chinese very well established Chinese construction companies. So, strictly speaking, what these companies do is basically the export of construction services on the back of these of these finance. And it's important to make this distinction because, indeed, some of these companies, especially the very famous ones like Sinohydro, which is now power China. Some of them have actually invested in some African countries so they've turned projects eventually into actual FDI in the construction sector. So it's important to make this distinction because in some countries there is some substantial construction FDI real FDI. And in other cases what you have is this export of construction services. But my point here is more about the linkages with the quest for structural transformation. And I think a lot of what's happening and we're talking the last 15, 20 years in some countries less than that has been a lot of infrastructure development in key areas of infrastructures, especially in communications and power generation. Now my question is, are these kinds of infrastructure development not conducive to medium and long term processes of industrialization? Don't they create the kinds of conditions that are missing in many countries for industrial investment to be minimally profitable. So I think it's important to always remind ourselves that these investments, which have a longer termaterity, can indeed substantially contribute to the process of structural transformation towards the kinds of high value and high productivity activities that Alemai was referring to. And I think countries like Angola and Ethiopia are interesting examples where you do see a significant infrastructure boom and this infrastructure boom is creating some basic conditions for industrial investments to take place, particularly in the case of Ethiopia. There is another linkage that is often forgotten in a lot of the literature, which is how these kinds of projects generate linkages for the expansion of domestic production capabilities in the industries for building materials. So think about the cement industry, steel or materials such as bricks and cement products. Some countries and indeed Ethiopia is an example of that Angola, interestingly also an example of these sectors actually growing really fast on the back of some of these finance deals. So let's not forget about those dynamics because they may have implications in the future in terms of the development of domestic manufacturing capabilities. And my second point is about FDI and different paths to structural transformation. I think Deborah Broutigam and her team have done quite a lot of work on these and they clearly show that how Chinese FDI is uneven, variegated with different kinds of aims and aspirations, different kinds of logics. And it's important to unpack these different flows of FDI and indeed for case like Ethiopia do have good examples of the kinds of geese as they call them that fly from China to Africa. And what is interesting is how to what extent a lot of these industrial firms are market seeking to what extent they're not just using some African countries as potential platforms for export to third markets, i.e. those that are trying to take advantage of a go type of China preferences, but also those who are, you know, just basically finding opportunities. And the paradox here is that and I'll let you make reference to, you know, how Chinese products compete with African producers and therefore, you know, they create a disincentive to the solidization. Well, things are going on and things are changing and to what extent many of those Chinese exporters of goods are turning into manufacturing investors in a number of African countries basically sort of switching roles in a way that is likely to generate capabilities in these sectors. Now, my third point is an area where I do agree with with with my you quite strongly, and that is the centrality of African agency and to develop homegrown development strategies, and the fact that, you know, by and large, the outcomes that we'll be able to see or not see from from these engagements will very much depend on what African governments, African firms do on the back of these potential opportunities. And that is, I think, particularly important in the case of government policy, and therefore needs to be tackled. I think I'll am I use pessimism about human and institutional capacities is evidence based to an extent but I think it's a slightly too pessimistic. I think if we look at variation across African countries we do find instances where where there has been at least a tendency that has led to decisions and investment public investment that has indeed taken has taken advantage of some of the opportunities that we're talking about here. Interestingly, I think Ethiopia is a good example of that. The problem is not so much capacity as such I mean capacity can be developed capacities is not a study issue is something that change centers of the time it requires investment. I think the key sort of challenge and threat is politics and and to what extent these sorts of processes can be sustained or not over time, you know what is the continuity of some of the good examples of policies and interventions that have at least taken advantage of some of these opportunities that we're discussing here. I think we're going to manage with the with the methodological point. I think if we want to answer the research question of whether China can make a difference in the quest for structural transformation. And basically it's too early to say a cross country regression analysis of trade flows with data up to 2015 are unlikely to help us answer this question. Perhaps, by 2030 or even later, and assess some of these issues and some of these outcomes with longitudinal methods within countries not just across countries of course the patterns across Africa are also important but I think it's in. It's crucial to really look at what's going on within countries and, and follow up over time. So even a country like Ethiopia, for example, most manufacturing foreign direct investment, and it's not just Chinese although the Chinese has been clearly dominant, compared to other foreign investors has really kicked off in numbers from 2015 and not earlier. So it's it's a very fluid situation. A lot has happened in the last five years and of course, a lot of these an Ethiopian is an example of that is potentially can potentially be undone by you know political processes political dynamics that threaten these these ongoing dynamics. So I think we have to be a little bit careful with you know how far can we go in terms of answering this kind of research question. When the issue of structural adjustment is indeed a long term issue. What we do know is that there has been very limited structural transformation as we usually understand it in the period 1980 to 2010. That's definitely the case. And I'll stop there. Thank you very much. Thank you very much Carlos. Just to let everyone know you can please drop your comments and contributions or questions in the chat for Professor and my who to answer when we're done with the next discussion so I'd like to introduce Linda, please you have about 10 minutes. Thank you. Thank you very much. And first of all, let me say I'm very excited to be here. I'm also a former student of this department from a few years ago so it's really my pleasure to be here to be part of this discussion. And also, thank you, I'll imagine for this very comprehensive presentation with a very long historical overview also of structural transformation Africa which I think was a really good reminder to all of us about the trends that have been taking place. I do agree with, you know, the analysis that has been undertaken and, and also with a few of the conclusions for example the fact that African countries should take a more strategic approach in the way they engage with China, especially on the economic side. I also think and I'm also actually on the more positive view in terms of the impact of Chinese investments and Chinese economic engagement in general including finance including trade and so on so forth. So I think I would partly characterize things a bit differently. And partly I think also look at what is happening, maybe not so much of the macro but at the micro level that can really help us inform our view. So I think, I mean Carlos already alluded to this basically but it's true that a lot of the investment in infrastructure, a lot of the infrastructure finance that was provided by China to African countries was really done to you know sort of to build roads and ports and things to allow you know the use of natural resources, but it's also true that a lot of this is not in that same does not have that same scope. So we can think about several examples of you know energy generation, or roads that feed that that allow people to actually move across countries and to trade among themselves as well. For example it's one country that's not normally on the sort of China Africa discussion radar really has seen in recent year the construction or the starting of the works on two power plants, and this is a country that really needs a lot more energy generation than it currently has. So you know we see a lot of examples of of investment of infrastructure works as well that can infrastructure projects that can really enable increase in productive capacity in African countries. Moreover, I think, at the micro level, we also see a lot of positive signs of the impact of Chinese investments or Chinese financing in African countries. So I work with a sort of a research program UK founded research program that has undertaken several research projects in the past few years and actually Carlos projects was was one of these. And recently we put together a synthesis report of the main findings of these studies in the past few years. And we looked at how Chinese trade aid finance investment into Africa helps and supports economic transformation actually we don't we don't just refer to to structural transformation we also refer to increases in productivity in different sectors of the economy and so structural transformation plus increasing productivity is what we refer to as as as economic transformation. And we really found a lot of positive examples of China's role in Africa in this sense. So, in terms of enhancing productivity to the sort of productivity part of economic transformation. We see a lot of example we see that Chinese firms engaging in Africa really contribute to a lot of knowledge and technology transfer. And this is in many ways, through trainings that are provided on the job, very often, but also in some cases some rare cases through overseas training where African workers actually go to China to be trained. What happens for specific services and specific firms is not a really widespread instance, but it does happen. The Chinese government also finances, a great extent there's in Africa where agricultural technologies that are developed or used in China are also brought and transferred and taught or shared with with African agronomists and scientists. With knowledge and technology transfer, we see a lot of spill overs among firms. Actually, spill overs can be divided into two types spill overs among firms in the same sector and spill overs among firms in different sectors through buyer supply relations. So spill overs among firms in different sectors have actually been quite rare. They don't happen commonly but this is not just unique to Chinese investment actually this is broader and it's found in the economic literature. But specifically about vertical spill overs. So the spill overs that happens between buyers and suppliers. So for example, if we have a Chinese firm buying inputs from African firms, or if we have a Chinese firms providing inputs to African firms, we see that these raises capacity of African firms quite often. The problem with this is actually that these beneficial relationship between firms do not happen as often as they should actually they're quite rare, especially the long term one that are particularly beneficial don't really happen very often. So we also see that one way in which China Chinese investment or Chinese trade actually in this case helps economic transformation in Africa and helps increase in productivity is through trade in equipment and machinery, for example. So these really enable African firms to purchase this equipment and this machinery that maybe is cheaper than what they were buying before, and this allows them to start producing and to start maybe getting into new activities. So for example, a few years back I was, I was in Rwanda, and I went to interview the owner of a potato chips factory and they just bought machines from from China to produce potato chips. And they were saying that first of all these machines were cheaper. So they could use them to produce and they could buy them which they couldn't afford before, but also they were in a way simpler in terms of the technology. So if one of these machines breaks down, then one of the workers in this factory in this Rwanda factory can look at it and understand where the problem is and sort of fix it, which is normally not the case with more sophisticated machinery that's produced in other countries. So the technological gap, the technological distance in a way smaller between technologies employed in China and technologies used in Africa. Although of course, trade with China especially manufacturer trade has some potential for the industrialization as well when it competes directly with with African products. And we've seen a few examples of these especially in countries with much more developed manufacturing sector in Africa such as South Africa, for example. And but it's not commonly happening in many countries. In terms, so we spoke about the sort of increasing productivity side of economic transformation in terms of the structural transformation side though, there's also a lot that Chinese investment and trade and finance are contributing to. So, one thing one side is on the investment on the FDI in particular, and I think you already mentioned that this is actually quite small in Africa, and this is true. But still, if we compare Chinese FDI to Africa with the investment of the largest sort of FDI flows which are coming from the US, Netherlands, France and the UK. These European countries and the US mostly invest in two areas, financial services and extractives. So it's really just these two that dominate investments from the West to Africa. Whereas Chinese investments are a lot more diversified, they may be smaller, but Chinese firms also invest in agri-tech and agribusiness in manufacturing, in construction and so on. So it's really supporting the creation of these new sectors and the development of these new sectors in African countries is more modern sectors that really promote African transformation. So it's really a small flow of investment, but it's extremely beneficial, I believe, and what we would need is something that's more similar to that actually, rather than more of the old type of investment coming from Europe, for example. In terms, and so it's not just investment that helps structural transformation, as Carlos mentioned, I think it's also infrastructure, so he already mentioned the sort of support to industrialization of infrastructure development. But more in general, infrastructure is very important to reduce production costs for all investors, for all producers, not just the Chinese, but everyone else, other foreign and African domestic investors who want to invest. So if there's a road, if there's an industrial park that's created, that really can lower production costs can allow, can allow others to invest as well. Especially economic zones where industrial parks are very interesting example in particular, especially in some countries, Ethiopia, but also Ghana, Nigeria and so on. They're present and they're usually financed by through Chinese loans and very often built by Chinese companies, but Chinese companies also very often become leading manufacturers in these zones. So there are others who invest as well, but Chinese companies are usually present. So this is a series of ways, a sort of a series of ways in which Chinese trade investment in finance really facilitate economic transformation in Africa and I think it's really important to look at the entire picture and to look at it in terms of trends so Carlos also mentioned that the important time factor in a way. We see that at the moment structural transformation in Africa has not yet happened or it hasn't happened in a way that we wish it had, but we also see that there are some positive signs and there are some positive trends, and this can be further developed I think in the coming years. So I have a lot of other things that I'd like to say but I think I'll stop here for now. Thank you very much. Thank you very much Linda for your comments and contributions. Professor and my who there are some questions here in the chat. So I would like to read them out to you so you can answer them all, you know, at the same time. There are about three questions. Hopefully it's not too much going on at the same time. So the first one is from a bracelet man, and it says my question is to prove how do you put the fast growth in utopia recorded over the years. So how do you put the fast growth in utopia recorded over the years. How important was China's role in this. And it goes. How. How do you take the optimistic view of say Dr. Al Keebe on industrial packs and the like. So that's questions from Abra. Would you like me to go over it again all. You were able to get them. Prof. Oh, I mean, who are you there. Oh, the Internet. Okay. I got, I can see them in the chat in the chat. So second one, I think my question, this is from Nengi. I think my question takes this takes this away a bit from the main discussion, but to increase growth in Sub-Saharan Africa. Do you think we should be taking lessons from China's industrialization process. Does it make sense to especially given the very different initial conditions in China from the early 1900s. That is, command economy highly trace levels already to see when compared to SSA at the time. Then there's another question here. This is from Sarah. In addition to the sectors of trade finance and FDI, I wonder if the speakers think that employment creation is another channel through which we can access the role that China is playing in fostering growth and development in African countries. Okay, I think there's a response from Carlos about that. Two more questions from Yulu. In relation to employment creation, how African countries can prevent China's inclination towards hiring Chinese workers, instead of local workers in Africa development projects. It is known that some countries put some barriers and percentage of hiring Chinese workers. However, it seems that not many African countries have such by gaining power. Yeah, I think those are the questions in the chat. You can go ahead and respond. Excellent. Thank you very much. I mean, thank you very much, Carlos and Linda. It's nice to see you Carlos after a long time. I completely agree with you guys I mean, this is the disadvantage of having a macro and overall overall picture. And I'm sure as you as you were one say that if we got deeper into specific country context is there, there will be different. So I completely agree with you. This is the disadvantage of having a macro and general perspective. I hope it gives you a perspective to focus in a particular country to have a general picture. Definitely infrastructure, as Carlos said, is very, very important. But is it like, I think in the in the book that I did, I tried to see all these infrastructures, huge in terms of how good the figure overseas 75 billion dollars, but invariably, it is like resource to part. You know, like, depending on your strategic engagement, you could have tuned it to need to focus on what you think in a particular country in a growth in a growth centers. So that that that is missing what when I see it. Market seeking definitely actually the, as Carlos said, some of the firms are market seeking, I think. One of the paper focus on characterization of those firms. politics definitely Carlos at the end of the day, you know, the politics is the most important glaring example is in Ethiopia. Probably, I can also relate it to to our question. Nice to have to see him, he was my colleague at the Department of Economics. So probably I'll combine the two to answer that. Like a good example in Ethiopia is, you know, like the growth. The growth has been quite quite nice in Ethiopia in the last 15 years, although it's not as as exaggerated that 11% per annum I did, I did sort of investigative paper and came up about six 7% per annum. And as you do, I fitted a solo model and tried to identify the source of growth. I found it that out of 11, what the government says officially 11% the labor contribution is about 0.1%. The capital is around that 2.1. The rest seven something is total factor productive. And as you know, total factor productive in all a series is like 2% and probably in the paper I did before. Before probably this paper, this data is touched. I got 1% labor productivity which varies with weather conditions. So if you add that you came six, probably six 7% but that's quite quite nice by African standard you don't you don't have to exit to exaggerate it. Now, what is the role of China, like the financing of this, this investment is came. If you see the financing through monetization of deficit and external volume. I mean the money supply in Ethiopia, during this period, 10 years increased from 62 billion to 970 billion by average annual growth of 30%. At the same time, our debt external date increased phenomenally like it became 29 billion dollars. That is huge for Ethiopia because the domestic and the external they added together becomes 60% of the GDP. And out of that 29 external date about 70 or 80 billion is from China. So how does not mean for them. I think we wouldn't have a change a pain that that that grow in all sense of the word, but that for me actually I usually think that because we are not strategically and in an important way engaged with them. We wasted an opportunity they gave us. That's the conclusion I came up with doing this stuff. And that boils down to my major point that African expert base in negotiation, technological transfer, human capital formation, when you do a particular project is generally lazy. And unless we did that from the continent, we will lose the end up being, you know, primary committee produces that that's what I'm afraid. Although I should, you know, lower lower that pessimism given given Linda's in the Carlos Carlos points earlier. Coming to I believe with Linda's spillover argument productivity. I didn't, I didn't see that people have to see and compare to China and waste, you absolutely right. And, you know, in general, invariably, well, both East and West engaged in the primary in the resource sector. And the data, what is coming in particular China says they are diversifying to manufacturing and services. And I feel the published papers I saw used projects as per sector, instead of value per sector. When you do with value per sector, I did it. And I got like 2% of super very small. And whatever diversification is invariably goes to telecom sector and it sector which is related to privatization of those those stuff. So what has to to see deeper on those issues. methodology. What my Carlos, you know, Carlos is very, very good at like all of them. So, I'm an after economist. And I agree later that there is a trade off between depth and width of a study and I agree that I think if you do a lot of micro stuff we will be more important. Probably related to this was our first point about industrial parks in Ethiopia. And the role of China, huge industrial parks, are you are my optimist as I'm not, I'm not really, because as I say, it's not an important way of engagement for this is just give you an idea. Like, one of the companies, the big shoe companies came to Ethiopia in Eastern zone and employed a lot of people. But the largest, although they came to reduce the labor cost, which they claim by trade use by 22% had to, I forgot the name should be true company. They claimed their wage reduced by 22%. I believe it is more than that because the average wage in in China is about 400, 500 dollars and it's a 75 dollars is huge reduction the way it costs. And actually I did a paper studying that and you wouldn't believe under what bad condition workers are working below poverty line below poverty line. Although they came to that but the logistic cost increased eightfold according to the manager. Okay, so, you know, Carlos point of infrastructure and all those stuff, probably, I don't know coming came is I don't expect but it should have reduced that stuff but it didn't, and hopefully will will reach it in the future. Because we did the assignment our part, we may not benefit in Ethiopia, you know the packs are pretty much informed by political repositioning special done cost. Hey, so by the time you reach the port of Jupiter your cost could be larger than you know the minimum cost globally. So that kind of rationalization is required I guess. Good. What, what else. There are two three point one is kind of we learn from China industrialization. I don't know. I mean, I'm not experts on Chinese industrialization because I don't know very much. As you said, I think I identified about four pointers initial condition, which distinguish African countries and given their colonial history from China or East Asia. So one of the reasons you say low level of infrastructure low literacy rate. Like I was in the book in my book if you see 2019 book I'm comparing Taiwan and Taiwan and Korea with with African countries at the initial stage. I found for instance, the Taiwanese by the by the time of independence by the 70% was literate and compare it to zombie which is almost zero. So if you compare those initial conditions, they are different, but still we can learn, we can learn and there are some African countries who who learned good and good example, and I included a case study in my book was Mauritius and both one. And it has to do with Carlos point, political inclusiveness, political stability vision of the leaders, those kinds of stuff. So we can learn but you know, smart way of learning it employment could be a direction another channel. And body will you know the trade and investment and financing goes through employment because you know the trade practice employment. You know we call firms engaging in trade are creating employment. The investment also creates us, like in India about you go to industrial parkers on road construction railway construction, they are employment, but the last person says, What about the entire deal the inclination of Chinese to employ to employ Chinese. I think that it is the responsibility of the government, like for instance, if you compare zombie and Ethiopia in Zambia. Any Chinese car and Chinese can go and start shopping when I was going to China to Zambia to circle, sometimes 10 years back, probably seven eight years back, the supermarkets were completely run by zombies and after the Chinese. These completely inundated by Chinese now come to Ethiopia by the law, the law doesn't allow Chinese to engage in and retail businesses and small power business. So it is up up to us I think we can design in such a way that we protect the employment or the local people. Thank you so much. Thank you so much. Thank you so much. I would like to call on call us and Linda if you would like to give some contributions. Yeah, I just wanted to add on the because there's a couple of questions of employment and that was the focus of our four year research project where we did quite substantial large scale surveys of workers in, in two sectors in both Ethiopia and in fact, the, the, these two examples Angola and Ethiopia were not casual. They were by design because we expected Angola to be very, very different from Ethiopia, which is why the point that I'll am I was making at the end about you know, a lot of these depends on what the government does is absolutely true. And there's a huge difference between Ethiopia and Angola when it comes to the extent to which Chinese firms generated jobs, and the kinds of control mechanisms that exist in the two countries, and that can be used to discipline firms, in terms of the employment policies. If the opiate is a good example I have to say, where you barely notice any difference between Chinese firms and other foreign firms when it comes to the proportion of expert labor in the in their premises, especially in the manufacturing sector, we did not find any difference. Of course, I mean that has to do with the types of investors the type of sector is different, you know how it works in Ethiopia and Angola, but primarily one of the main reasons was the Ethiopian government being far stricter when it came to visas, working visas for foreign companies, but labor. So, in Angola for example we did find that I mean Angola is probably one of the countries in Africa where you have the lowest percentage of local labor and still in Chinese firms it was above 70%, 72 to 75%, a bit lower than all the other countries, but by and large if you looked at construction companies in this in these sectors. There were full of Brazilian and Portuguese employees at different levels, you know but generally sort of skilled labor and managerial technical stuff and so on. So it is less than in Chinese firms but not too far. So it is certainly something that is up to governments to decide how they want to discipline and encourage or, or sort of force firms to only recruit expert labor for very particular conditions. For example, in manufacturing firms in Ethiopia. This is a big challenge for some of the manufacturing, especially the foreign investors that operate within very demanding global production networks, where they need a managerial workforce that is hard to find in Ethiopia. Right. So you will see in many firms. This is not Chinese firms, many other firms, you will see many Sri Lankan and Indian managers and supervisors and in the factory floor. Still, but in general that used to happen in the early days where these firms were starting operations and this was part of the kind of negotiation that took place between the firms and the Ethiopian government saying look, you know, we can't possibly start operations without a suitable managerial workforce, especially in the first three, four years of operations. I mean this is something that many investors told us. But then the government comes back and knockers on the door and say, well, you don't need them anymore. You know, what are the Ethiopian managers. Where are you going to employ them. So, so there's a follow up that is quite interesting happening in the Ethiopian context, which could teach a lot of lessons to many other African countries with these kinds of controls, this kind of discipline simply is not there. I mean, the example that you gave of Zambia is relevant, especially this happens for in the services sector in trade, but also in these other critical sectors as construction and manufacturing where creation of employment, creation of jobs is absolutely critical. So just to finish by and large, despite the fact that Chinese firms, well maybe they have a lower percentage of local labor compared to others, not massively lower at all. But in absolute terms they have created many more jobs than other foreign firms, precisely because of the scale of their operations. So that's why, you know, it's a myth that continues to circulate. And I think it's important to to debunk. And I think just one one small comment on on lessons from China, etc. I think that the key thing and Ethiopian is an example of that is not about learning from China specifically is learning from multiple examples and and my understanding from what the Ethiopian policymakers did, like precisely Arkebe who's been mentioned here was was to very much focus on policy learning by looking both at successful examples and failures. Ethiopian policymakers, you know, visited Singapore, China, Malaysia, Mauritius, Madagascar, Bangladesh, Sri Lanka, there's so much to learn from Bangladesh and Sri Lanka or Mauritius, as there is from China and I think this is probably the way forward so that you can create your own environment. What is that is likely to work in Ethiopia or in Rwanda and Zambia? Is it an industrial park? Okay, but what kind of industrial park? Where should industrial parks be located? I think that is a question that is relevant for Ethiopia and where I think the point that Alemahiu raised about the politics is relevant. It is quite possible that some industrial parks in Ethiopia are located in the wrong places for political reasons. Okay, whereas other industrial parks are actually quite promising in terms of, you know, the capacity the firms have there to to to compete internationally. So otherwise many firms would have left Alemahiu. I mean, you know, if you take Bolelemi or Awasa and other despite logistics costs, you're absolutely right. But despite logistics costs, you need labor costs remain still low. Okay, the key issue, however, is, as you mentioned at the end is political stability. Once political stability goes out of the window, then we do have a serious problem. This is where the investors really start freaking out. Sorry to coach us. Thank you, Carla. So, Linda, you have final contributions to make? I mean, I don't think there was any specific question, but like just a couple of quick points, I guess. The first one is on this last point that Carla was was discussing about sort of learning from China in a way. So this depends, right? And what is the China model? What do we define as the China model? There's no clear definition of what the China model is, and therefore it's difficult to learn. So if we mean that African countries need to, you know, follow the same path that China did through infrastructure development, industrial parks, especially economic zones and, you know, letting some get rich before others and so on so forth. I don't think that's the China model that they should follow. I think that the real lesson is about the pragmatism is about like the sort of getting, getting, getting lessons and adapting them to your specific context of it, you know, what Carlos was mentioning. Maybe one final point that I'd like to raise, because there was no question on this, but I think it's quite interesting actually, is to think about all of these, all of these engagement between China and Africa in the context now of the African continental free trade area, which is, you know, work in progress. So African countries are coming together to develop the soft infrastructure to trade freely among themselves. So to create this continental free trade area, which I think is very, is a very interesting initiative, not necessarily because I believe that you know free trade should be everywhere and everyone should be in free trade areas, but because it's an African led initiative so it's really something that's coming from the will of African governments to build this. So as I mentioned, African governments are doing this, and one of the reasons why they are is that they see that they really have challenges in exporting manufacture goods, but there's a lot of intra African trade of manufacture goods. So Kenya struggles really to export its manufacturers to Europe, for example, but it does export quite successfully to Uganda or to Rwanda or other countries in the region. Especially the African continental free trade area is a way to promote industrialization in Africa, if done properly, and African countries are building the soft infrastructure, but there's also ways in which China's contribution can be can help this by building the hard infrastructure that you still need to trade to transport these goods from one part of the continent to the other, and also by sort of investing in the manufacturing sector as we say which sort of boosts domestic production. So anyway maybe this sort of like policy, this agency in terms of policy and this will in terms of policy can come in a continental context also not just in the national context. Thank you so much Linda. I don't know if you'd like to give us your final thoughts. Good. I just want one point on Linda's the continental free trade area. Actually, if you guys are interested, I did a paper last year on empirical evaluation of the trade, the trade effects of the continental free trade area. You know the the message two messages I got was one a the expectation. I mean the political process was excellent. But don't expect a lot. When we when we when we examine the pattern of trade, and you know the sophistication of commodities, what we found was a complementarity between trade we took top 10 products of each country and compare it important export complementarity is a huge problem. Only four or five countries have the potential to supply manufactured goods, Tunisia, Kenya, South Africa, Mauritius at very few, and few compare the comparative advantage of these potential suppliers with the current suppliers by the Chinese Indians, the OECD. Only Tunisia has a comparative advantage of what rebel comparative advantage. So we are by half less 50% less than the current suppliers. So therefore we concluded occur like Linda we concluded the continental free trade area would be an excellent thing. If only it is combined with continental original industrial strategy, that could include China protection of protection of the plant industries compensation mechanism it will have you so the details. So I just want to add that only this point otherwise I'm done thank you very much. Thank you very much. It's been a very amazing time, no listening to our guest speaker and the discussion. So just to give you information on the next webinar. It will be on the wealth inequality and cost of the poverty gap in Arab countries amidst COVID with Khalid Abou Ismail and Valdima Hasli from UN ESCWA in Beirut and our colleague Randa Alami and a discussion by our professor emeritus Masjid Kashinas. So this will be now take place on Wednesday 10th February at 5pm UK time. So I think that's it for today. Thank you everyone for coming. Thank you, Professor. It's been an awesome time. Thank you, Carlos. Thank you, Linda. Hope to see you next time on the next webinar series. Thank you very much. Thank you. It was a pleasure. See you soon. See you, Linda. Thank you. Thank you, guys.