Economic Development In Iraq Contributes To Fight Poverty

According to the World Bank, after the complete eradication of ISIS in all of its territory, economic development in Iraq will most likely be deployed and bear fruitful results.

ISIS and Iraq

More specifically, the increase of oil prices and the promising rise of investments towards reconstruction are presumably fueled by a set of government actions. These decisions are set to facilitate and accelerate the process of economic and social recovery in the wake of ISIS which, as of December 2017, is no longer a major threat for Iraq.

Since 2014, the ISIS war and prolonged decrease of oil prices heavily contributed to the contraction of a non-oil economy by 21.6 percent. Therefore, a safer economic and social environment will bring nothing but economic and social relief.

Indeed, the most treasured tool for economic development in Iraq is certainly oil extraction, which accounts for 55 percent of the GDP. The remaining part of this number is divided between the services sector (33 percent), manufacturing, construction, water and electricity production (8 percent) and agriculture (4 percent).

Iraq’s Economic Growth

Oil prices and restored security, then, have been the main factors for Iraq’s solid economic growth in 2016, which amounted to 10 percent. However, fiscal responsibility and curbing corruption should go hand-in-hand with such economic development in Iraq.

To maintain a steady trend in economic growth and the road of improvement, the Iraqi government should take a serious look at how tax revenue as a percentage of GDP is barely detectable because of quite high levels of evasion and poor enforcement. Moreover, in terms of public spending, the government has been spending an amount close to to 42.7 percent of the (GDP) over the past three years, and budget deficits have averaged 8.6 percent of GDP. Public debt, as a consequence, is equivalent to 63.7 percent of GDP.

Poverty Eradication

Actions, however, have been taken towards the greater goal of poverty eradication in Iraq. In terms of analysis and planning, the government has, in fact, determined an official poverty line based on the 2006/07 IHSES (Household socio-economic survey), which also formed the basis for Iraq’s National Strategy for Poverty Reduction 2009.

Assessment reports measuring causes of poverty paired with high frequency, advanced impute expenditure surveys are top methods used to estimate poverty.

Road to Improvement

The Iraqian economy is largely state-run and oil extraction represents some 90 percent of government revenues. Meanwhile, 3.9 percent of people in Iraq are living in extreme poverty (2012). In fact, 18.9 percent live below the national poverty line (2012), with greater rural poverty than urban poverty; 11.6 percent of people in Iraq are multidimensionally poor (2011).

In recent years, economic improvement has been proven effective due to major social internal accomplishments — liberating ISIS territory is certainly on top of the list. Government and state presence can certainly encourage investments and economic development in Iraq, as they have done sporadically in previous occasions. However, it would be quite beneficial towards goals of poverty reduction if a larger portion of the economy could be left to the private sector.

– Luca Di Fabio
Photo: Flickr

International Economic Development: US and World Bank Capital Increase

The World Bank has secured a $13 billion paid-in capital increase by committing to reforms in its lending programs. The increase, opposed until recently by the Trump administration, will help the bank continue its mission of alleviating poverty and supporting international economic development.

The World Bank

The World Bank is a multilateral institution that supports developing countries through loans and grants for investment in education, healthcare, infrastructure and a variety of other initiatives that accelerate and sustain economic growth. Given its status as a nonprofit organization, the bank is willing to fund projects in poorer and riskier countries that privately funded and profit-focused organizations may not be willing to.

The World Bank must have a secure capital base in order to lend this money. This funding is supplied by its 189 member countries, with the United States (17.25 percent of total subscribed capital), Japan (7.42 percent), and China (4.78 percent) providing the most capital and thus being among its largest shareholders.

In 2015, The World Bank set a goal for a capital increase for the International Bank for Reconstruction and Development (IBRD) and International Finance Corporation (IFC), two of its lending arms, by the end of 2017.

International Economic Development and the U.S.

Initially, this goal faced a major obstacle: the United States government. A contributor of approximately 16 percent of the bank’s capital, the United States is The World Bank’s largest shareholder and the only member to have veto power over changes in the bank’s structure, giving it the capability to block the increase.

In 2017, the Trump administration expressed skepticism over the capital increase, with Treasury Secretary Steven Mnuchin expressing concerns that too much lending is being directed to upper middle-income countries that have plentiful sources of credit. Mnuchin contended that the bank should target lower income countries, supporting international economic development in locations more in need of a source of loans and grants.

In April, following a World Bank agreement to commit to certain reforms, the United States pivoted from its previous objection and supported the increase, resulting in an injection of $13 billion of paid-in capital from the bank’s shareholders and channeling more resources to developing countries.

Global Financing

Lending is now expected to average around $100 billion annually until 2030, compared to $59 billion last year — a stark increase that will ensure funding for the bank’s ongoing initiatives. To cite a recent example of the bank’s capital being put to work, The World Bank approved an $180 million guarantee to Kenya in April to encourage private sector financing in the country’s largest electricity company and increase energy security.

The aforementioned reforms accompanying the capital increase will result in a greater share of initiatives directed to lower-income markets. Countries classified in the lower- to mid-range of the IBRD income classifications currently receive approximately 60 percent of IBRD commitments, and the reform package will seek to elevate that to 70 percent.

Hurdles and Hope

These reforms mean that the bank’s increased capital will be in service of supporting international economic development for countries on the lower end of the income spectrum.

The ultimate success of the capital injection and its associated reforms will be determined in the years to come, but by overcoming the Trump administration’s initial reservations and obtaining funding, the World Bank, backed by the U.S. and other shareholders, has secured its role as a leading institution for economic development for the foreseeable future.

– Mark Fitzpatrick
Photo: Google

How Partnership Drives Development in Agra, Malawi and Tanzania

Empowering and creating partnerships with local actors is a longstanding tenet of effective development projects. When those in need rely too heavily on outside influences, regardless of their intentions, they risk losing control of the resources and decision-making best left to those closest to the problem. Partnership with local actors gives development projects the best chance of being effective and sustainable. Here are three examples of how partnership drives development.

Agra

In 2009, the community of Agra, India — home to the iconic Taj Mahal — suffered from a water sanitation crisis. Waste collection and disposal became nonexistent and a large majority of residents practiced open defecation. As waste flowed into the Yamuna river of which locals relied for irrigation and drinking, residents risked exposure to polio, typhoid, dysentery and cholera.

In partnership with the Center for Urban and Regional Excellence, a USAID-supported non-governmental organization (NGO), Agra’s governing municipality constructed a wastewater treatment plant to protect the water source used by the 2,000 community members living in Agra.

The plant employs natural processes requiring minimal power and maintenance; however, the true indicator of the project’s success came in 2017, when Agra’s municipality took over all operations from outside actors and ensured clean drinking water for the people of Agra for years to come.

Malawi

In another example of how partnership drives development, the Human Resources for Health in 2030 (HRH2030) program is partnering with the government of Malawi to recruit and hire 300 medical workers to combat the HIV epidemic. In Malawi, more than 900,000 people currently live with HIV. To add to the problem, the country suffers from a severe shortage of healthcare professionals needed to address this issue.

While the program only started in November 2017, facility managers from the HIV-freighted Lilongwe and Zomba districts have already noted the positive impact of the increase in workers. Furthermore, the local government has signed an agreement to take on financial responsibility for the new workers by 2020, committing to self-reliance and sustainability.

Tanzania

In addition to increasing access to a network of health professionals, the community of Tabora, Tanzania highlights the effectiveness of another way of combating HIV — male circumcision. Studies suggest that male circumcision reduces transmission in heterosexual men by near 60 percent, and is a powerful preventative tool, especially in combination with other approaches.

In an example of how partnership drives development, The USAID-funded Strengthening High-Impact Interventions for an AIDS-free Generation (AIDSFree) project is partnering with the Tabora regional health administration to increase access to voluntary medical male circumcision (VMMC). A standard bearer of the cause, traditional healer Albert Cosmas acts as a VMMC ambassador, encouraging other men to have the procedure and thereby helping reduce the HIV footprint in Tabora.

When development agencies make top-down decisions without partnership with local actors, they risk harming the communities they aim to serve. Indeed, “acting in collaborative partnership” is explicitly included in the United Nations 2030 Agenda for Sustainable Development. These three stories illustrate the powerful impact of a bottom-up approach that empowers local actors with the capacity to carry progress into the future.

– Whiting Tennis
Photo: Flickr

The Mechanisms and Determinants of Development

The enduring issue of why some countries are rich while others remain poor has long been the subject of great interest among scholars. New research on the determinants of development, though, appears to better identify the driving force behind development by taking an incisive look at the three traditional economic explanations for these cross-country disparities – economic policy, political institutions and geography.

Based on the findings, the researchers conclude that the primary determinant of developmental success may be the strength of institutions.

Economic Policy, Political Institutions and Geography

The research first laid out the traditional arguments for the importance of policy, institutions and geography as determinants of development.

All three are pretty straightforward: economic policy, such as a nation’s savings rate and the strength of its currency, clearly dictate, to some extent, the economic vitality of a country; geographic factors can also matter, for instance, a landlocked country like Chad – without access to the ocean or major rivers – is at a natural disadvantage because trade becomes a logistical nuisance; institutions — like the rule of law to maintain public safety, ensure property rights, and mitigate corruption — still were found to have a greater impact.

However, the researchers’ revelation was not just that policy and geography took a back seat in importance to the role of institutions in development, but that they were, independently, hardly influential at all. Research sampling 72 countries found that while poor policies may hurt growth rates temporarily, they did not have the sort of impact on long-term income levels that many had previously suspected.

Promotion of Stable Institutions

The relationship between geography and development was a bit more complicated. Although nations with poor geography and stable institutions still do well, the authors acknowledge the role geography often plays in promoting stable institutions historically.

Specifically, nations colonized by Europe in unfavorable regions (in regard to disease and other conditions) were typically turned into rentier states and dealt poorer institutions. Conversely, regions which could be settled were afforded European-mainland style institutions: democracy, property rights and the rule of law.

Determinants of Development

So, Europe’s unique colonial history shows that geography did affect the type of institutions implemented in various countries, and it is these institutions that explain differences in development.

In a sense, the revelation that among the determinants of development, growth is primarily a function of institutions should be somewhat heartening, as institutions can be reformed. Therefore, instead of nations across Sub-Saharan Africa and parts of Central America being condemned to second-class status economically, focus can shift to the ways their poor institutions can be altered to better catalyze development.

Although researchers failed to explain the means of doing so directly, recognizing that building robust institutions is the best path toward progress is an important insight.

– Brendan Wade

Photo: Flickr

Involving Affected People a Key Part of How to Overcome Poverty

According to The World Bank, more than 767 million people live in poverty. That represents one person out of every 10 living on less than $1.90 per day. Although that number has dropped significantly from almost four out of 10 people in 1990, these figures continue to remain unacceptable.

The effects of poverty can be dire, especially for the 328 million children living in extreme poverty: a lack of food, clean water and medical care can lead to malnutrition and other diseases, a lack of shelter can further impact illnesses and a lack of education and job training often lead to an increase in crime, which exacerbates these issues.

Information on how to overcome poverty comes from a wide variety of sources and offers a vast range of advice, as overcoming poverty is as intricate as poverty itself. However, in researching and learning how to overcome poverty, there are a few core aspects that should remain at the forefront of combating this global issue.

Sense of Community

According to Outreach International, a community can only succeed in alleviating poverty if the people involved are “actively and authentically participating in the efforts to fight poverty.” This refers to not just the leaders, but also the people most affected. Their situations need to be taken into consideration and through open dialogue and simplification they become part of the process of resolving their problems.

Governmental Accountability

The spending of taxpayers’ money should always be visible to citizens. This makes their actions and inactions easier to address and discourages corruption within the bureaucracy. Implementing oversight can be especially beneficial to those whose government might, for example, be spending money on its nuclear weapons development instead of its poverty programs.

Education an Important Part of How to Overcome Poverty

While education provides knowledge and training, which can fortify the economy, poverty is also a mental and psychological condition. Education in impoverished populations provides a way for people to better understand their situation and visualize their way out of poverty. It has the power to bring about an end to other social issues as well such as racism and sexism, both of which are intrinsically connected to poverty.

Job Creation

Extensively planned employment programs started by the government can grow the job market. Oftentimes, industries with a substantial labor force can be given larger aid from the government. Developing companies that offer sustainable and long-term jobs to the community should be given focus.

Prioritizing Human Rights

This might prove to be the hardest due to the inequalities that persist in developing countries. Every person should have access to the necessities of life: food, housing, electricity, healthcare and clean water. Only after these basic amenities have been put in place should governments move on to other projects.

One of the most important aspects of learning how to overcome poverty is understanding that it takes time. The process is not simple and short, especially when trying to achieve a deep transformation. Sustaining collective efforts to address the issues involves individuals having an increased level of consciousness about their own capabilities and situations. It takes time to break the culture of silence.

– Aaron Stein

Photo: Flickr