Information and stories about economic growth.

poverty reduction through microloans

Poverty reduction through microloans has been a successful strategy in many parts of sub-Saharan Africa. Between 2007 and 2016, Tanzania’s poverty rates have decreased from 34.4% to 26.8%. Consequently, microloans have become a necessity for low-income earners whose businesses are apart of informal sectors.

MYC4 is an online platform that helps individuals loan money to small enterprises in sub-Saharan Africa. Mads Kjaer, its chief executive, describes the importance of microcredit by stating how “people need access to capital to grow their informal and formal businesses that offer them a regular income and enable them to lead decent lives.”

As a result, governments now appreciate the impact of microfinance. They are encouraging investments by opening up the industry to foreign capital and improving policing mechanisms for customer protection. With micro and small enterprises making up approximately 32% of Tanzania’s GDP, microcredit strategies have played an essential role in reducing poverty through progressive business approaches.

New Microfinance Act in Tanzania

In 2018, the parliament of the United Republic of Tanzania passed a Microfinance Act that illustrates the framework under which microfinance institutions operate. The Act allows for enhanced regulation of the microfinance sector for the mainland of Tanzania and Zanzibar. But with only 16% of Tanzania’s population banked, 27% is financially excluded. Microfinance options and the accessibility of mobile money have expanded financial inclusion to nearly half of Tanzania’s population. For example, as of 2017, financial NGOs, mobile money and microloan providing institutions served 48.6% of the population.

Nonprofits that are Helping

Opportunity Tanzania, a nonprofit organization that provides loans, savings, and insurance to impoverished entrepreneurs, has helped over 3,625 clients in Dar Es Saalam. Its microfinancing services provide entrepreneurs and their families with a path out of poverty. Only 20% of Tanzania’s population has access to a formal bank within an hour’s walking distance of their home. Therefore, Opportunity Tanzania is now working to build a regulated bank that will offer clients savings products and provide them with a secure place to store their money.

The International Labour Organization [ILO], in collaboration with the UN joint program on Youth Employment, established a five-day training program for financial service providers to create outreach strategies that will educate youth on microfinance resources.

High population growth and substantial poverty are still present in Tanzania. However, the expansion of microloan services play a crucial role in supporting entrepreneurs and creating more job opportunities for youth. In short, poverty reduction through microloans is an important avenue for growth in Tanzania.

Erica Fealtman
Photo: Unsplash

Modern Business Opportunities in Africa
Over the next 10 years, Africa’s total populace could surpass 1.5 billion. Moreover, only 20% of the continent’s predicted population growth will transpire in rural areas. Therefore, an industrial transformation is occurring. International markets now have multiple modern business opportunities in Africa.

Online Finance Services

The demand for financial consulting is immense. Estimates have determined that 80% of Africa’s population does not have access to banking or financial services. Therefore, the evolution of the FinTech industry is underway. FinTech utilizes modern technology to improve the affordability and accessibility of financial services. Approximately 88% of sub-Saharan African countries now implement FinTech policies. Companies such as M-Pesa and Branch have successfully established their business strategies in these regions.

Branch is a digital financial service provider that capitalizes on the worldwide growth of smartphone usage to deliver financial consultation to those in need. The company operates in Tanzania, Kenya and Nigeria. Branch currently serves 3 million customers. Recently, Branch acquired over $150 million in funding to further pursue its initiative. The company hopes that providing small loans will stimulate economic development in low-income areas.

Virtual Healthcare

Providing equal access to affordable healthcare is an objective modern technology can accomplish. In sub-Saharan Africa, only one physician is available for every 5,000 people. In the U.S., there is one physician per 384 citizens. Generating digital platforms to further distribute healthcare in Africa is an under-crowded market. Companies such as Redbank and Lafiya Telehealth App now operate in this sector.

Lafiya Telehealth App incorporates smartphone application technology to provide healthcare to citizens of Nigeria. Lafiya focuses specifically on individuals living in isolated areas, who tend to be poorer. Lafiya’s programs aim to replace in-person medical examinations with voice calls, video calls and instant messaging. With wide and accessible reach, Lafiya is serving an enormous market.

United States Government Initiatives Promoting Commerce with Africa

The African Growth and Opportunity Act (AGOA) is a U.S. government initiative that provides African countries with access to thousands of American commodities. In order for countries to participate, they must launch programs to decrease poverty, protect individual rights, institute a criminal justice system and more. Currently, 38 African countries are eligible to engage in trade and investment with the U.S. AGOA has directly created over 100,000 American jobs, connected U.S. businesses with buyers and suppliers in Africa and generated over $1 billion in exports. Trade between the U.S. and African nations has grown by 300% since the Act came into effect. The U.S. government has extended this program to 2025.

The success of AGOA has prompted the creation of Prosper Africa. Prosper Africa is a U.S. policy with a design to further increase opportunities for trade between the United States and Africa. Prosper Africa increases Africa’s availability to U.S. digital and in-person services, supports commerce by advancing profit-making contracts and enhancing cooperation with African institutions to create healthy business environments. The completion of these objectives will produce profits for employees, businesses and stakeholders among both regions.

The U.N. Conference on Trade and Development recognized Africa as one of the most profitable regions in the world. The continent’s growing urban population, increase in consumer spending and largely untapped markets provide ample scenarios for international corporations. Modern business opportunities in Africa will continue to grow with the implementation of U.S. government initiatives to improve local economies, promote stable growth and persuade future business investments. These modern business opportunities in Africa will expand as wealthy nations share resources and generate economic growth in regions across the continent.

John Brinkman
Photo: pxfuel

Natural Disasters in the Philippines
Every year, hundreds of natural disasters are reported worldwide. In 2019, 409 natural disasters occurred, many in the Asian Pacific region. Natural disasters in the Philippines are quite common and they pose great difficulties for islands with large populations and vulnerable infrastructure.

Geography of the Philippines

The Philippines is one of highest-risk countries for natural disasters. The nation’s location exposes it to storms that lead to floods, mudslides and typhoons. Additionally, the presence of offshore trenches such as the Manila Trench puts the Philippines at risk for tsunamis. Unfortunately, the list does not end there. The Philippines is also on top of the Ring of Fire, a path in the basin of the Pacific Ocean where there is a high risk for earthquakes and active volcanoes.

Infrastructure

The Philippines is made up of 7,107 islands, which poses many challenges to improving infrastructure. Natural disasters also disproportionately impact infrastructure in poverty-stricken areas. That being said, in the past decade, the Filipino government made strides to improve infrastructure and make the nation more disaster-ready.

In 2020, nearly a quarter of the Filipino government’s budget was allocated for infrastructure. President Rodrigo Duterte hopes to allocate 6% of the nation’s GDP to infrastructure by 2022. His “Build, Build, Build” program has played a large role in this increase of funds, which will be allocated to projects such as the Manila subway and other modes of transportation, water resources and energy.

The Global Facility for Disaster Reduction and Recovery (GFDRR) has outlined $2.5 million in funds being used for infrastructure projects in the Philippines. GFDRR focuses on understanding and reducing disaster risk, strengthening governance and improving recovery, rehabilitation and reconstruction. GFDRR currently has three active projects in the Philippines. First, the “Support to the Sustainable, Inclusive, and Resilient Tourism Project” is set to be complete in June 2021. The second project is “Philippines Disaster Risk Financing,” scheduled to be complete in August 2020. Finally, the “Support to the Earthquake-Resilient Greater Metro Manila Program” is set to be complete in September 2021.

Poverty Reduction

According to the World Bank’s October 2019 report, the Philippines is expected to sustain its progress in poverty reduction. The Philippines’ GDP growth was roughly 5.8% in 2019 and is expected to reach 6.2% by 2021. Many believe this growth is tied to transportation infrastructure among the Filipino islands. According to the 2013 Philippines Human Development Report, economic integration will be key to creating sustainable growth throughout all of the Filipino islands and reducing poverty in rural areas.

The main production sectors in the Philippines are electronics assembly, garments, footwear, pharmaceuticals, food processing, petroleum refining and fishing. Agriculture is also a significant sector; however, self-employed farmers are the most susceptible to geographic hardships from natural disasters. Additionally, many farmers struggle due to a lack of insurance, inadequate post-harvest facilities, inadequate irrigation techniques and limited access to the market as a result of poor transportation services.

To address these problems, the Philippine Development Plan for 2017-2022 plans to expand economic opportunities for those engaged in the agricultural sector, especially small farmers. This plan aims to get rid of irrigation fees for small farmers, pass the National Land Use Act to protect important natural lands, implement the Agrarian Reform Program to distribute land to landless farmers.

Conclusion

The Philippines is still considered at third world country according to its GDP, human development index, life expectancy and infant mortality rate. However, while the Philippines still has many structural issues inhibiting its growth, its progress over the last decade has been momentous. Equipping islands to handle natural disasters in the Philippines and supporting farmers are two key ways the country can reduce poverty and improve livelihoods.

Danielle Forrey
Photo: Flickr

Economic Development in Developing Island Nations
Island nations such as Fiji and Tonga are isolated paradises largely cut off from global markets. As tourism increases through the year however, these countries’ economies thrive. While ecotourism in developing island nations increases employment rates and the development of other important sectors, it has to be done with the land and its people in mind.

What is Ecotourism?

Ecotourism in developing island nations is an economic development tool that involves bringing local communities and travelers together in an environmentally friendly way. The main benefits include the preservation of native lands, increases in local employment rates and increased funds for continued conservation. If not kept in check however, ecotourism has the potential to exploit an island’s natural resources and populations, so it must be implemented in the most sustainable way possible. Once nations see improvements in their tourism industry, they can easily become vulnerable to large corporations wanting to create new—and potentially damaging—markets there.

Why Tourism is Important to Developing Island Nations

The World Bank has identified 11 Pacific Islands (PIC 11) that will benefit immensely from increased tourism. These islands are: Papua New Guinea (PNG), Solomon Islands, Vanuatu, Fiji, Tonga, Samoa, Kiribati, Palau, Marshall Islands (RMI), Federated States of Micronesia (FSM) and Tuvalu. These countries received over 1.3 million visitors in 2014 and are renowned for their beautiful landscapes, diverse cultures and incredible natural resources. Of this group, countries with the highest tourism rates also have the highest employment rates. The industry employs 15% of the population in Tonga, 18% in Samoa, 50% in Palau.

The Caribbean is one of the most popular tourist destinations, with many of its nations’ economies heavily or completely reliant on tourism industries. The World Bank has started initiatives within the region to establish “blue economies” that take both economic development and environmental effects into consideration. Since 2010, the region’s GDP has increased alongside the growth of island tourism. Unfortunately, these changes have come with an increase in plastic marine debris and the destruction of coral reefs. The main focus of these “blue economies” is to establish a balance between the ocean and the economy so everyone benefits.

Ecotourism Efforts to Support

There are many organizations working to make ecotourism in developing island nations a reality. Ecotourism Belize hires local workers in the Toledo District as guides for tours through the Belizean jungle. They also have a group of bird specialists and traditional healers hired. All employees are of Mayan descent so they are able to give honest representation of ancient Mayan culture and convey how it has been passed down through generations. All of Ecotourism Belize’s profits fund conservation efforts within the Maya Golden Landscape.

In 2017, Palau became the first country to require an “Eco-Pledge” by visitors upon entering. Over the past several years it has seen tourist rates grow seven times larger than the region’s native population. Home to beautiful natural ecosystems, Palau knew it had to mitigate the rise in the destruction of its land due to increased tourism. The country’s government found this destruction was due to a lack of education. By introducing visitors to a localized way of thinking about the environment, the government has taken an important first step towards successful ecotourism.

Keeping Things Balanced

Ecotourism in developing island nations has the potential to help eradicate poverty in these regions. Done correctly, it allows locals to hold onto their culture while protecting their resources and ecosystems at the same time.

Stephanie Russo
Photo: Flickr


Since the beginning of the digital age, there have been several advances in the world of digital currency. From mobile banking apps to mining for cryptocurrency, the use of physical bills and coins is becoming less common. The potential of this new technology in developing countries, particularly for those in Africa, cannot be ignored. Here are four ways digital currency in Africa can improve the economy.

4 Ways Digital Currency in Africa Can Improve the Economy

  1. Transferring money is easier and faster when combined with technology. For those who cannot waste time waiting for money to travel from one location to another, digital currency in Africa would allow for conveniently instantaneous transfers. Additionally, more companies are taking notice of the strong potential market for digital currency in Africa and the positive impact it could have on citizens and businesses. Airtel Africa, a telecommunications company serving East, West and Central Africa, has recently partnered with Mukuru, an online remittance company, allowing Mukuru customers to instantly send money transfers directly to Airtel Money customers across 12 African countries. This means that people can make intra-Africa payments from Southern Africa, where Mukuru has a major presence, to other nations in Africa. Users would also benefit from no longer going to an agent to receive international payments physically. Once Airtel Money customers receive the money, they can use it to pay bills, purchase goods and services or even cash out at one of Airtel Africa’s branches or kiosks. This will allow African citizens to get the most out of their money.
  2. Managing personal income leads to greater financial literacy. As the use of digital currency spreads, people are increasingly exposed to the language of business as well as standard banking practices. For those living in countries with low financial literacy rates, this could be the difference between economic stability and poverty. The implications of digital technology in Africa are astronomical due to the previous lack of education on these financial principles across the continent. In Somalia, the current rate of financial literacy is estimated to be 15%. On the other side of the spectrum, Botswana has a rate of over 51%—the highest in all of Africa. With this first-hand knowledge, more people will be able to learn how to manage their finances properly.
  3. Digital currency allows for more connections between African citizens and the rest of the world. The use of digital money transfers not only allows those living in Africa to pay and request money from people within their continent but also those around the world. With the recent partnership between Airtel Africa and Mukuru, small business owners in Africa can now establish business relationships with people in Europe, Asia and the United States, among others. As these relationships continue to grow, the digital currency can flow freely between Africa and the rest of the world, opening the continent up to high-dollar investments from more developed regions and, in time, lead to a potential rise in the African economy.
  4. More women have access to their finances. Only 37% of women in Sub-Saharan Africa have a bank account compared to 48% of men—a gap that has only widened in the past few years. The numbers are worse in North Africa, with around two-thirds of the adult population remaining unbanked and the gender gap for access to financial education standing at an 18% difference, the largest in the world. However, with the rise of digital technology in Africa, more women can become empowered and take control of their finances. Female entrepreneurs rarely apply for loans as a result of low financial literacy, risk aversion and fear of losing their businesses. If these women were to utilize digital banking technology, they would be able to pay employees, investors and, most importantly, themselves more efficiently. As more and more women manage their finances, they will be able to lift themselves out of poverty and strengthen their local economies.

As digital currency in Africa continues to flourish, more entrepreneurs, families and willing investors will be able to witness the rise of the African economy. Money transfers and online banking will likely support the growing economy as it joins the rest of the world in the technology age. With continued global support, African citizens will be able to lift their economy to new heights.

Daniela Canales
Photo: Flickr

Palm Oil in Indonesia
One can find palm oil in most U.S. packaged products. Indonesia was the top palm oil exporter in 2019 with a record output of 36.18 million tons, making this resource a significant contributor to economic prosperity. However, meeting the high demand for palm oil has taken a toll on the country’s social and natural environment. Here is some information about palm oil production in Indonesia.

The Need for Palm Oil

The market for palm oil quickly became robust following a rise in boycotts of trans fats in packaged food items. Many companies previously utilized trans fats to extend products’ shelf lives, but discoveries of their associated health risks in comparison to other vegetable oils led to a worldwide shift toward safer alternatives like palm oil. Palm oil is cheaper to produce and buy than other oils, costing roughly $2 per 2.2 pounds. Although its low price is certainly beneficial, the heavy demand for palm oil has harmed plantations workers and forest regions.

Deforestation and Reduction of Biodiversity

Indonesia is the largest exporter of palm oil, producing approximately half of the global product. Palm trees are highly efficient, so growers can produce palm oil quickly and in large volumes. Still, the deforestation that is necessary to expanding palm oil plantations is devastating to forest areas and wildlife. Global Forest Watch stated that between 2001 and 2018, Indonesia lost “26 million hectares (Mha) of the forest,” leading to a 25% deforestation rate — the highest in the world. This land clearing releases carbon into the atmosphere, causing wildfires that reduce biodiversity to a mere 15%.

Societal Impacts

To accommodate the growing palm oil industry, many indigenous people had to leave their homes. In addition to losing their shelters, these individuals have lost rights to their land, culture and resources. The Human Rights Watch carefully inspects the devastation that many native families experience.

Local workers within the palm oil industry have experienced a burden from long hours and little pay, sometimes working overtime without proper compensation. For females, the gender divide makes conditions even worse: these workers usually do not receive paid contracts, meaning their labor is abused. Despite a minimum wage requirement set in 2017, women receive 66,000 rupees ($5) a day. Their male counterparts obtain nearly 100,000 rupees ($7.50) a day. Additionally, women often work in maintenance management where they work with harmful pesticides and chemicals, predisposing them to more health problems than men. The accumulation of these negative conditions perpetuates the cycle of poverty for many Indonesian palm oil workers.

Economic Impacts

Palm oil production in Indonesia generates nearly $18 billion annually in foreign exchange, a significant benefit to the country’s economy. In comparison to other vegetable oils, palm oil is the most sustainable, efficient and versatile option. Despite the deforestation that has destroyed much of Indonesia’s forest area, palm oil production remains more environmentally friendly than any of its alternatives. Even with a substantial gender pay divide, the industry lifts locals out of poverty by providing over 4.5 million jobs.

Here to Help

The Asian Agri’s One to One Commitment has helped local palm oil farmers develop smallholder partnerships since 1987, with the ultimate goal of improving land productivity. Independent smallholders often lack access to the newest technology or industry standards. Asian Agri creates partnership opportunities to assist these local farmers keeping their protocols as effective as possible. The One to One Commitment has boosted the efficiency of palm oil farms, improving incomes and living standards for thousands. Given the palm oil industry’s overwhelming success, Asian Agri’s investment in local stakeholders provides hope for the future of palm oil production in Indonesia.

Allison Lloyd
Photo: Flickr

Incentives to Invest in Developing CountriesIn an era of large corporate business and capitalism, many low-income nations are struggling to increase economic growth. Although industries like fast fashion utilize cheap labor in developing countries, these companies neither invest in local economies nor help improve living standards for their employees. Businesses have the potential to play a major role in strengthening low-income economies and bringing citizens out of poverty. Thus, it is critical to create and publicize incentives to motivate businesses to invest in developing countries.

Incentives for Investing

  1. Fiscal Incentives. Fiscal incentives are one of the most common incentives used to attract businesses to developing countries. Fiscal incentives include tax exemptions, tax holidays and loans. Other examples include reduced restrictions on shareholders and stocks, as well as greater access to domestic and international partners. These rewards can be provided by local or city governments, and are designed to encourage businesses to expand into developing countries. The presence of fiscal incentives in these nations can draw in new investors, skilled workers and economic growth.
  2. Privileged Treatment. Some businesses, especially major corporations, may ask for “preferential treatment in the domestic market.”  Privileges could include increased access to resources, less regulation and priority for business decisions.
  3. Resources and Infrastructure. If a business opens in a developing country, it may possess the authority to demand lower infrastructure costs or resources. These businesses can also request lower interest rates on imports and exports in order to expand their international networks, as well as request resources to increase long-term investment domestically and internationally. Large corporations often have the power to request assistance in increasing local ties with other firms and organizations. Overall, due to developing countries’ strong desire for economic investment, companies choosing to establish this presence gain access to a plethora of resources.

Potential Risks

While incentives for businesses to invest in developing countries are certainly important, disadvantages to this practice are also worth noting. Incentives can distort the market and even create dominant monopolies. Monopolistic competition makes it difficult for small businesses to gain traction and thrive long-term, which can lead to unemployment for many local workers and business owners. Furthermore, with fiscal incentives come greater risks for inflation, corruption and fraud. Therefore, although incentives may be critical in creating economic growth and development, it is important to address their drawbacks.

Deciding Whether to Provide Incentives

In sum, encouraging large businesses to operate in low-income countries boosts profits and yields exposure to new markets. Perhaps more importantly, though, developing countries themselves benefit immensely. Corporate presence from just one company opens the door for other businesses to expand into these countries, attracting new jobs, income, resources and opportunities. This economic growth can help reduce extreme poverty by involving more citizens in the job market.

However, it remains essential for developing countries to acknowledge the potential drawbacks of corporate investment and make economic decisions accordingly. Regardless, providing incentives for business investment has the potential to give hope to low-income countries aiming to improve life for their citizens.

– Sophia McWilliams
Photo: Flickr

Poverty in Mongolia
Mongolia is a landlocked nation in East Asia, caught between Russia to the north and China to the South. Since transitioning into a capitalist democracy in the 1990s, it has become one of the region’s fastest-growing economies. However, Mongolia is held back by various issues such as poverty and uneven economic growth. Here are five facts about poverty in Mongolia:

Five Facts About Poverty in Mongolia

  1. Poverty Rates: According to the World Bank, 28.4% of Mongolians lived below the poverty line as of 2018. The Mongolian Poverty Line is defined as living off 166,580 Tugrug ($66.4 USD) per month. A further 15%  are considered vulnerable to falling into poverty due to unforeseen events. Taken together, these statistics show that two out of every five Mongolians live in or close to poverty.
  2. High Inflation: Mongolia has been experiencing rapid inflation over the past few years, compounding the issues surrounding poverty in Mongolia. Inflation rates increased from 0.73% in 2016 to 7.26% in 2019. This financially strains vulnerable communities who already struggle to provide for necessities. High inflation notably impacts the urban poor more than the rural poor; while the urban poor need to buy all their food, many rural herders and farmers can produce much of their own food and gain greater profits from increased prices.
  3. Uneven Economic Growth: Mongolia’s GDP has grown in the past few years, but that doesn’t mean that everyone has benefited. Approximately one-third of Mongolian GDP growth comes from mining, which only employs about 6% of the total population and relies heavily on foreign investors. Rural areas are experiencing continuing economic growth due to increased livestock prices, as well as higher rates of consumption and decreasing poverty rates, as opposed their urban counterparts. This is most evident in the rates of herders who fall below the poverty line. According to the World Bank, “Herders were among the poorest in 2010, but now only one in three herders are estimated to be poor.”
  4. Rural v. Urban: This uneven economic growth can best be seen in the divide between the rural and urban poor. While poverty percentages have decreased in rural areas, the rate of urban poverty has remained unchanged. As previously stated, those in rural areas are experiencing economic growth while the urban poor are trapped in stagnation. Rural poverty decreased from 34.9% in 2016 to 30.8% in 2018, while Urban poverty hovers just above 27%. While the rural poverty percentages are still higher, it’s important to keep in mind that 63.5% of the poor live in cities.
  5. Poor Living Conditions: Due to the country’s nomadic past, gers (traditional Mongolian tents), are still widely used throughout the country. These structures are cheap compared to apartments and other housing arrangements, with both the rural and urban poor living in them. A reported 57% of all poor Mongolians live in gers. However, most gers lack many modern necessities such as insulation and running water. This exacerbates the fact that nine in 10 poor Mongolians lack access to various basic infrastructure services like sanitation and heating. The central government is continuing to address these issues and is attempting to move those living in gers into more modern housing.

The Good News

Mongolia has been experiencing nearly 30 years of economic growth and social development. Many experts describe Mongolia as “The Wolf Economy” due to its massive growth and supply of natural resources. The nation has tripled its GDP since 1991 with help from international groups and smart government investments. Healthcare industries have seen a massive improvement, with Mongolia seeing declines in maternal and child mortality rates. The government has also instituted various programs to help people out of poverty in Mongolia and raise the general standard of living. The United States has provided aid and development funds to help strengthen the Mongolian economy and promote democratic political reforms. As a result, the US is Mongolia’s fourth-largest import partner, valuing more than $200 million dollars in items such as machinery and consumer goods. Various American businesses also operate within Mongolia such as Visa, Caterpillar Inc. and GE.

– Malcolm Schulz
Photo: Flickr

infrastructure development in CambodiaCambodia has remained one of the fastest-growing economies since 2017. The Southeast Asian country’s growth rate averaged about 7.9 percent since the mid-90s. The economy’s fast growth can be attributed to Cambodia’s focus on textiles, tourism and infrastructure development. Although still agriculture-dependent, Cambodia is improving its lagging infrastructure and attempting to rise out of its lower-middle-income status. Foreign nations such as China and organizations such as the European Development Bank are investing in infrastructure development in Cambodia, such as transport infrastructure to help Cambodia facilitate trade, increase competitiveness, add jobs and help reduce poverty.

Progress in Infrastructure Development

Although infrastructure development in Cambodia is increasing, only 96 percent of rural roads and 70 percent of provincial roads are paved. The World Bank-financed the Road Asset Management Project (RAMP) to support Cambodia’s path to road development, which resulted in more than 292 miles of rehabilitated roads with improved climate resiliency and road safety. Ports are also important to Cambodian trade, though it has been stated that the country’s seaport has the highest fees out of all Asian countries. The government said in 2019 that it would reduce its high fees to help increase competitive prices.

Sihanoukville Autonomous Port (SAP) is Cambodia’s only commercial and international deep seaport. Since 2014, the number of containers the port received has grown by 11 percent. It can hold about 4,560 containers total, but there is a plan to expand the port so that it can handle approximately 90 percent of ships in the region by 2023. When completed the TEUs (twenty-foot equivalent units) will rise from 537,000 to 1.29 million. A TEU is the length of a standard shipping container.

Investors See a Positive Future in Cambodia

China is Cambodia’s largest investor. Cambodia is seen as an important project due to frequent trade between the two nations. The development of roads, ports, railways and other forms of transportation benefits both countries. China has created jobs through manufacturing investments and has contributed to real estate and hydropower plant construction. China Development Bank invested more than $5.7 billion from 2007 to 2019 in infrastructure development in Cambodia, and the bank is constructing an expressway between Sihanoukville and Phnom Penh costing $1.87 billion. The port in Sihanoukville is a part of China’s Belt and Road Initiative.

The European Development Bank (EIB) is also seeing a great future in Cambodia’s development, as it is investing $57 million in Cambodian rural infrastructure starting in 2020. The project is a joint operation between the EIB, the International Fund for Agricultural Development and the Royal Government of Cambodia. About 200,000 rural families will benefit from new technology, safer roads and better food supply. The money is invested in the Sustainable Assets for Agriculture Markets, Business and Trade project (SAAMBAT), which is a rural development project launched in February 2020. The project will create 4,500 jobs and 500 SMEs. It will also result in training 25,000 Cambodians on digital technologies that will improve business and increase trade.

Infrastructure development in Cambodia is not the only area affected by recent population growth. Poverty reduced from 48 percent in 2007 to 13 percent in 2018, which went along with Cambodia’s fast growth rate in the past two decades. As a country develops, its poverty rate is lowered. Ports, roads, airports and the power sector are all improving as part of Cambodia’s Rectangular Strategy Phase V, which encourages the development process and the policies that align with further development. Cambodia’s goal of becoming an upper-middle-income country by 2030 expresses the country’s positive outlook in its future.

– Lucas Schmidt
Photo: Flickr

Garment Industry in Nepal
Nepal is one of many developing South Asian countries that plays a substantial role in the global ready-made garment industry. These mass-produced textiles have become a staple export from Nepal, but they have also normalized the unethical practices of fast-fashion chains within the country. Over the last two decades, Nepal has struggled to regulate both economic and ethical issues within the garment industry, but the last few years have produced a shift towards a brighter future for garment workers. Here are six facts about the history of the garment industry in Nepal and the efforts to address both the problems of fast-fashion chains and the country’s economic reliance on them.

6 Facts About the Garment Industry in Nepal

  1. In the 1980s, the garment industry in Nepal boomed because of interest and funding from Indian exporters. Due to the product quota limits in India, exporters looked to Nepal to increase their production. This expanded production served to boost not only Nepal’s economy but also its reach on the global production scale. Thus, Nepal became a viable option for countries to produce and export various textiles.
  2. In 2004, intense competition in the global garment market broke out after the World Trade Organization’s Agreement on Textiles and Clothing expired. Nepal struggled to outproduce their competition and subsequently saw a fall in revenue from garment exports. The Multi-Fiber Agreement, an international trade agreement that allowed duty-free access to the U.S. for Nepal, also fell through in 2005 and further exacerbated the country’s declining international revenue.
  3. The international economic aftermath of 9/11 also negatively affected the U.S.’s reliance on the garment industry in Nepal. The U.S. was the recipient of 87% of Nepal’s readymade garments until 2002. In subsequent years, Europe, Canada, Australia, and India have become the largest markets for Nepali garments, making up 90% of the country’s exports.
  4. In the 2018 fiscal year, the garment industry in Nepal hit a new high. The industry made approximately RS 6.34 billion (approximately  $84.9 million), up 6.52% from the previous year. Despite this rise in revenue, Nepal had exported fewer garments than it had the year before.
  5. Chandi Prasal Aryal, president of the Garment Association of Nepal, claimed that the financial growth was due to a shift from quantity to quality. By focusing on producing better garments instead of more garments, other countries were willing to pay extra for better products. Because of the fine quality of the exports, those same countries are now willing to buy even more of the pricier garments.
  6. The focus on quality over quantity changes the focus of the garment industry in Nepal. Instead of relying on fast fashion practices that prioritize creating as many items as possible within a set amount of time, the industry can now shift to more ethical work forms. Thus, the quality of the garments will continue to improve and raise the value of each item, bringing more money back into the Nepali economy.

The exact reach and impact that the garment industry has had on Nepalese poverty remains unclear, but the future looks bright. The Nepalese government reports that employment data within the garment industry is “not readily available” but at the peak of its power, the garment industry employed 12% of the overall labor pool of the Nepalese manufacturing sector. As of 2019, the World Bank calculates the poverty line in Nepal to be $1.90 per person per day. Nepal lacked substantial policy in terms of a minimum wage, but the Library of Congress reports that since 2016, Nepalese workers across industries now make a minimum wage of approximately $3.74 per person per day. The modern garment industry, regulated with a minimum wage, can help lift Nepalese workers above the poverty line of the country, even if the garment industry of the past once presented a potential hurdle.

There still exists substantial work to transform the garment industry in Nepal into both a thriving industry and an equally ethical one; the country is making the first successful steps towards achieving both. This change will provide garment industry employees a better quality of life, as well as ensure that they and their families receive fair treatment.

Nicolette Schneiderman
Photo: UN Multimedia