Can Chinese investment lead to knowledge and technology transfers? The case of Madagascar

Economic transformation in Africa: What is the role of Chinese firms?

“…Regardless of the reasons that drive Chinese entrepreneurs to invest in Africa, the literature offers many examples of how their investment helps kickstart and develop modern and productive sectors of the economy, promoting structural change. Many studies have documented the presence of Chinese investment in Africa's manufacturing sector, either at the continent or country levels (Brautigam et al, 2018;Chen et al, 2015Chen et al, , 2016Chen et al, , 2018Eom, 2018;Gu, 2009;Landry & Chen, 2021;Lee, 2017;Rotunno et al, 2013;Shen, 2015;Wolf & Cheng, 2018a). 6 But manufacturing is not the only sector for Chinese firms in Africa.…”

Foreign Investment and Upgrading in the Garment Sector in Africa and Asia

“…Since the early 2000s, Madagascar's economy has relied heavily on the export‐oriented textiles and garment sector for jobs and revenue. The government's industrial policy was based on the adoption of a single factory EPZ model which allowed firms to benefit from a range of incentives, including duty exemption on capital transfers, tax holidays and concessions (Landry & Chen, 2021; Morris & Staritz, 2014). Alongside the EPZ incentives, preferential access to key markets (the EU, US and the Southern African Development Community, SADC) also served as an important motivation for locating production in Madagascar.…”

“…However, in a similar manner to the sector's development in Lesotho, different types of inward investors have made varied contributions to upgrading, based on the differentiated nature of their GVC relationships, their level of local embeddedness and the varying end markets they have targeted (Staritz & Morris, 2013). Asian‐owned firms investing in Madagascar operated a ‘both‐ends overseas’ model mostly focused on CMT activities (Landry & Chen, 2021). These firms, many of whom were focused on supplying the US market and exited after the MFA phase‐out at the end of 2004 or when Madagascar lost AGOA eligibility in 2010, tended to source fabric and other inputs from their own mills in Asia, which was made possible by the AGOA’s single transformation provision.…”

“…Garment exports to the US were boosted heavily by the introduction of the AGOA, which stimulated growth in garment production from 2000 onwards (Morris & Sedowski, 2006). However, Madagascar's loss of AGOA benefits between 2010 and 2014, following a political crisis, prompted most of the Asian-owned firms focused on supplying the US market to relocate their operations away from Madagascar (Landry & Chen, 2021).…”