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05/21/2013

Who is Asia's No. 1 investor in Africa? Not China

Watchdog groups have sounded repeated warnings about China’s interest in Africa.

China, its critics contend, has a voracious appetite for Africa’s wealth of natural resources and is building new seaports and financing the construction of highways, hydro dams and other infrastructure to build up its influence there.

After years of watching western powers vie for control of Africa, some Africans muse China could become another colonial power there.

Yet new data released by the United Nations shows China is not the biggest Asian investor in Africa. And the title doesn’t go to India, either.

Rather, Malaysia, a country of 28 million, is the biggest Asia-based investor of all in Africa, behind only the U.S. and France.

Malaysia reported $19.3 billion worth of foreign direct investment in Africa in 2011, more than the $16 billion of African investments owned by China and the $14 billion held by India, according to the UN Conference on Trade and Development.

Reuters reports Malaysia’s interest comes largely through the investments of Petronas, Malaysia’s state-owned oil company, and Sime Darby, a trading and manufacturing company.

Malaysia, where the economy has expanded an average of 6 per cent for each of the past three years under Prime Minister Najib Razak and is expected to grow more than 5 per cent this year,  may be drawn to Africa for slightly different reasons than China.

According to a report in Foreign Policy magazine, corporate Malaysia's investments in Africa are mostly in Mauritius - a well-known tax haven.

By the end of 2010, Mauritius hosted 27,500 holding companies controlling more than $400 billion in assets. Setting up a company there takes just two weeks and $10,000, Foreign Policy notes, adding offshore companies now represent 5 per cent of the African country's gross domestic product.

Rick Westhead is a foreign affairs writer at the Star. He was based in India as the Star’s South Asia bureau chief from 2008 until 2011 and reports on international aid and development. Follow him on Twitter @rwesthead

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