As global investment paradigm shifts, Dr Arvind Mayaram, former Finance Secretary to the Government of India and the Chairman of the Institute of Development Studies, examines how Africa and Asia can move from fragmented competition towards coordinated capability, enabling resilient and high-quality FDI flows.
A Structural Shift in Global Investment
The global investment landscape has shifted in ways that demand a calibrated policy response across Asia and Africa. Artificial intelligence, digitalisation, supply-chain diversification, and climate constraints are now central determinants of where and how foreign direct investment (FDI) is deployed. The earlier model—anchored in low costs, fiscal incentives, and industrial enclaves—no longer shapes outcomes in sectors that drive productivity and long-term growth.
Investors today evaluate jurisdictions through a different lens: regulatory predictability, digital readiness, skill depth, and the ability to integrate into distributed and technology-intensive value chains. Many Afro-Asian economies face a shared constraint. Individually, they often lack the scale or ecosystem maturity required by such investment. Collectively, however, they represent a large and under-leveraged economic space. This suggests that the next phase of investment policy may need to move beyond purely national strategies.
From Fragmented Competition to Coordinated Capability
Across the region, investment strategies continue to be designed in isolation, often targeting similar sectors with similar incentive structures. This has led to competition without differentiation and, in some cases, a dilution of fiscal resources without commensurate gains in capability.
A more effective approach would be selective coordination—aligning policies where it reduces friction, while preserving national autonomy. India’s recent experience in digital public infrastructure, renewable energy scaling, and targeted industrial policy offers useful operational lessons. But the role it can play is best understood as facilitative: working with partner countries to build platforms, share institutional learning, and enable convergence where it strengthens outcomes.
Regulatory Interoperability in a Digital Economy
A first priority is regulatory interoperability, particularly in the digital domain. Investment in manufacturing, logistics, finance, and services increasingly depends on data flows and digital systems. Yet regulatory frameworks across the region remain fragmented, with differing standards on data protection, cybersecurity, and digital transactions.
A coordinated effort to develop broadly compatible frameworks—adaptable to national contexts yet aligned in principle—would significantly reduce friction. The goal is interoperability: enabling firms to operate across jurisdictions without navigating conflicting regulatory regimes.
Value-Chain Complementarity Over Replication
Many countries seek to build complete domestic value chains, often at the expense of limited resources. In practice, this can lead to inefficiencies and underutilised capacity.
There is a strong case for complementarity. Different economies can specialise in segments of a value chain while remaining connected through trade and logistics. Electronics, pharmaceuticals, textiles with traceability requirements, and electric mobility offer clear entry points. What matters is the coherence of the network, not the completeness of each node.
Financing the Foundations
Infrastructure—energy, logistics, and digital connectivity—remains a binding constraint across much of the region. Fiscal pressures limit traditional public financing. This makes it necessary to design financing structures that crowd in private capital without creating unsustainable liabilities.
Blended finance—combining public funds, multilateral support, and private investment—can reduce project risk and improve bankability. Success will depend on transparent governance and credible project pipelines across participating countries.
Deepening Capital Markets: Financing and Exit Within the Region
Many Afro-Asian economies have limited capital market depth. Financial systems remain bank-centric, with underdeveloped equity and corporate bond markets. This affects access to long-term capital and reduces investor exit options—critical for investment decisions.
Strengthening regional capital market linkages—including connections among financial centres like India and South Africa—can expand access to equity and debt capital. It also provides better exit routes for foreign investors.
Key measures include cross-listing arrangements, harmonisation of disclosure standards, regional bond markets (especially for infrastructure and green finance), and frameworks that enable cross-border institutional investment.
Human Capital for a Technological Economy
The skills gap remains a major challenge. Education and training systems have not kept pace with AI-enabled production, automation, and green technologies.
Cross-country skilling partnerships—shared curricula, mutual recognition of qualifications, and industry-linked training—can help. India’s scale in digital skilling provides opportunities for collaboration.
Strengthening Institutions and Investor Interface
Institutional capacity determines investment outcomes. Many investment promotion agencies (IPAs) act more as facilitation bodies than strategic institutions. To adapt, they need stronger analytical capabilities, targeted investor engagement, and coordination across ministries.
A networked approach among Afro-Asian IPAs can allow shared intelligence and coordinated outreach. Strengthening investor aftercare—tracking investor experience and resolving issues—can improve credibility and reinvestment.
Policy Credibility as a Foundation
Policy credibility matters more than policy intent. Investors look for clarity, consistency, and predictability. Regulatory volatility increases perceived risk and cost of capital.
Incentives are effective only when embedded in stable, rule-based frameworks. Coordinated regional signalling can further reinforce investor confidence.
A Collective Opportunity
Global supply chains are reconfiguring. A fragmented response from the region may yield only marginal gains. A coordinated approach—built on interoperability, complementarity, and capability—offers more durable outcomes.
India can play a facilitative role through partnerships and platforms, but the effort must be framed as shared problem-solving.
Dr Arvind Mayaram is a former Finance Secretary to the Government of India, a senior policy advisor, and Chairman of the Institute of Development Studies.
