Asia-Africa Growth Corridor (AAGC) – A Game Changer?

During Prime Minister Narendra Modi’s visit to Japan in 2016, both India and Japan sought to institutionalize socio-economic development of Asia and Africa. There, the idea of promoting a growth corridor was crystallized. Subsequently in 2017, at the African Development Bank meeting held in Gujarat, India unveiled the vision document of the Asia-Africa Growth Corridor (AAGC).

The joint declaration on AAGC is being seen as a masterstroke of geopolitics in this region, as it apparently counters China’s Belt and Road Initiative which India has blatantly snubbed owing to sovereignty issues.

What is Asia-Africa Growth Corridor (AAGC)?

The Asia-Africa Growth Corridor is an India-Japan economic cooperation agreement aimed at the socio-economic development of Asia and Africa.  The vision document for AAGC was released by India in the 2017 African Development Bank meeting.

The aim of the Asia-Africa Growth Corridor is to develop infrastructure and digital connectivity in Africa through Indo-Japan collaboration. It will envisage a people-centric sustainable growth strategy by engaging various stakeholders. The priority areas will be health and pharmaceuticals, agriculture and agro-processing, disaster management and skill enhancement.

The Asia-Africa Growth Corridor is to be based on four pillars:

1. Enhancing capacity and skills.
2. Quality Infrastructure and Institutional Connectivity.
3. Development and Cooperation Projects.
4. People-to-People partnership.

Why is it important for Asia and Africa?

Opportunities are abundant in both the resilient economies of Asia and the rapidly growing African continent. Both regions have the advantage of young demography, and their social indicators are on an accelerating trajectory. There is an urgent need to explore the untapped potential of these regions.

The Asia-Africa Growth Corridor will be instrumental in creating new production channels, expanding and deepening the existing value chains, ensure economic and technical cooperation for enhancing capacities, facilitate a greater contact of peoples between the two continents, and achieve sustainable growth over the longer term. This project is responsive to the Sustainable Development Goals (SDGs) too.

What is the current role of India and Japan in Africa?

India

• India has always had contributed to Africa, huge human and financial resources. The recently held India Africa Growth Summit in New Delhi attended by heads of state of all 54 countries was a huge diplomatic success that rejuvenated and strengthened ties between both entities. There were crucial announcements of economy and trade, that included a $10 billion concessional credit line offer.
• India has a voracious appetite for natural resources and is seeking to expand its markets. It has made significant strides to counter China’s juggernaut and reported ‘neo-colonialism‘.
• At the same time, India’s contribution to the development of the social sector of Africa through the Pan Africa e-network has been indispensable in cementing such strong ties between the Indian subcontinent and the African continent.

• There is a significant presence of Indian banks and companies in Africa. The EXIM Bank is the lead organization for carrying out the development credit tasks. India has a unique distinction in providing affordable, appropriate and adaptable technology.
• It is also working on project execution and in building technical capacities in many developing countries in the region.

Japan

• Japan’s robust developmental assistance plays a major complementary role in this region.
• Japan has expertise in designing, planning and delivering hardware infrastructure.
• It enjoys a leading edge in research and development areas. It also has the capacity to transfer capabilities for managing and strengthening supply chains in the manufacturing sector and infrastructure projects.
• Japan holds Tokyo International Conference on African Development (TICAD), which provides an open forum to generate innovative discussion among stakeholders participating in the African development programs. Since its inception in 1993, TICAD has contributed in improving social and economic conditions in Africa mainly through aid grants and technical assistance.

What is the common interests of India and Japan in Africa?

A Special Strategic and Global Partnership exist between India and Japan. Both nations have common interests in the region such as:

• Freedom of navigation in the sea lines of communication
• Elimination of terrorism
• Chinese rising belligerence and hegemony in the Asian region, and
• Sustained economic growth

Hence, the Asia-Africa Growth Corridor is set to be a fine-tuned vision and agenda of both governments, aligning with their own development priorities.

What are the aspects on which the AAGC will deliberate?

The Asia-Africa Growth Corridor will deliberate on the following aspects:

• The existing mechanisms for cooperation between Asia and Africa.
• The broad-based agenda for the synchronized growth of Asia-Africa for sustainable and innovative development.
• Establishment of optimum linkages and cooperation among the sub-regions of Asia and Africa.
• Establishment of the industrial corridor and industrial network.
• Improved partnership for infrastructure development between the two continents, and their sub-regions to address the current demands of trade, investment, and services in a sustainable manner.
• Complementary ways through which infrastructure and connectivity complement the development of industrial corridor and industrial network.
• Coordination between institutional and infrastructure partnerships.
• The role of people-to-people partnership to strengthen the growth corridor.
• Ways to ensure better and freer institutional and people-to-people partnerships between Asia and Africa.
• Identification of priority projects, which can be optimized and which are economically and financially feasible.
• Mechanisms that can result in the exchange of best practices of growth, governance, and partnership between Asia and Africa, including their sub-regions.
• Technical, economic, and institutional barriers.
• Specific recommendations for AAGC, and for the larger global periphery around Asia and Africa for sustainable and innovative development.

What is the mode of infrastructure development in AAGC?

The Asia-Africa Growth Corridor would provide guaranteed quality infrastructure, both physical as well as institutional, that would connect people, towns, regions, and countries. There are five remarkable paradigms associated with AAGC:

1. effective mobilization of financial resources;
2. their alignment with socio-economic development and development strategies of partner countries and regions;
3. application of high-quality standards in terms of compliance with international standards established to mitigate environmental and social impact;
4. provision of quality of infrastructure taking into account aspects of economic efficiency and durability, inclusiveness, safety and disaster-resilience, sustainability as well as convenience and amenities; and
5. contribution to the local society and economy.

What are the unique features that push the need for AAGC?

1. The basic concept of the Asia-Africa Growth Corridor is that it aims for an open, inclusive, sustainable and innovative growth of the entire Asia-Africa region, in cooperation with the international community.
2. Trade Facilitation is a major component of AAGC Framework. In a study conducted by the European Commission, it is found that the time taken for export and import activities is among the highest in Africa.
3. The Declaration of African Union Ministers of Trade has also underscored the importance of trade facilitation and stated their priorities on enhancing infrastructure, boosting productivity and trade capacities, reducing transaction costs, supporting reforms, and improvements to customs regulatory systems.
4. According to OECD trade facilitation indicators, Asia and Sub-Saharan Africa are below the best practices.
5. There is a need for customs modernization plan with a focus on better organization and management, coupled with administrative, financial and technical autonomy as well as accountability.
6. India has established the Directorate of Valuation, Special Valuation Branch, and National Import Database to improve custom valuation practices. Similar institutions can be established in other developing countries in Asia and Africa through technical assistance.

What are the possible benefits of the Asia-Africa Growth Corridor?

1. India has highly skilled software professionals who ensure high quality of service delivery meeting international standards. Frugal innovations and quick fix solutions have been harnessed with limited resources resulting in good quality and affordable products adding to the comparative advantage of countries in the region.
2. India’s success in the single-window custom clearance through SWIFT could be replicated in African countries.
3. AAGC initiatives will also enable Afro-Asian countries to industrialize and increase exports. For this, the Indian Ocean Rim Association (IORA) countries would be on the forefront.
4. AAGC initiatives will aim to integrate existing programmes of partner countries. This will spur activities/projects to augment production for exports. India has already made efforts through various initiatives to develop capabilities in other countries in Asia and Africa in the past.

AAGC and the China factor

The Asia-Africa Growth Corridor has been portrayed as a response to China’s Belt and Road Initiative (BRI). Maritime expert for Observer Researcher Foundation Abhijit Singh has made few observations:

1. There’s high reason to suspect that China will expand its berthing rights at the Hambantota port in Sri Lanka to eventually account for its own military facilities.
2. Through investments in port projects and rail construction such as the East Coast Rail Link project in Malaysia, where ports and rail are developed and heavily financed by China, Beijing may eventually be able to bypass Singapore, cut off key Malaysian trade routes.
3. It can further weaken ASEAN unity by playing both neighbouring states off against each other.

China is paranoid with the “Malacca Dilemma” where it suspects that at the time of any crisis, the country’s main access to energy can be cut off by an enemy power via the narrow straits of Malaysia and Sumatra. Evidently, it is concerned about security issues and is adamant to find alternative routes (China Pakistan Economic Corridor serves that purpose partly).

76 years after attacking the US at Pearl Harbor following an oil and gas embargo, Japan also fears a sabre rattling neighbour controlling its access to trade and resources. For India, too, China’s decision to build an economic corridor with Pakistan through disputed Kashmir is symptomatic of a far greater Chinese revisionism and a break with the current rules-based system.

The Asia-Africa Growth Corridor provides a benevolent alternative to Belt and Road Initiative. Japan enjoys a greater trust in that region. Investing in strategic infrastructure projects such as ports, rails, and telecommunications would find receptive customers in countries seeking to minimize their dependence on individual trading partners. Its past experiences would allay the local perceptions of foreign control.

Matching Japan’s high skills and capital, India’s own size and experience with economic development has challenged it to pursue key technologies – be they in pharmacology or solar energy – on a mass scales. With close links in ASEAN, India is widely seen as a benevolent power and via its cultural and religious ties to diaspora populations, India has a strong advantage in promoting trade.

Weakness in AAGC

1. Unlike China, the third largest arms exporter globally, Japan and India face notable constraints. Where Article 9 of the Japanese constitution limits the size and engagement of the Japanese army, India, the greatest importer of weapons, remains far behind its main competitor.
2. India doesn’t have pockets deep enough to offer freebies to Africa. All it can do is make African nations stakeholders in development.
3. Structural changes within India and Japan must take place before the two can promote sustainable people-to-people exchanges.
4. With protectionism and significant domestic hurdles to overcome, it is difficult to envision both leaders effectively promoting meaningful regional integration on the people-to-people level.

Conclusion

The Asia-Africa Growth Corridor Vision Study will use the Geographical Simulation Model (GSM) to bring out the economic gains for Africa through its integration with India, South Asia, South-East Asia, East Asia and Oceania. The AAGC is designed to be responsive to the needs of equitable and sustainable growth. Its development programmes and projects are based on equal partnership, mutual trust, and cooperation. AAGC aims for an open, inclusive, sustainable and innovative growth of the entire Asia Africa region, in cooperation with the international community.

Article by: Mausam Bharati