Archive for category: Economy

Information and stories about economy.

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US Benefits from Foreign Aid to Guinea

U.S. Benefits from Foreign Aid to Guinea
Guinea is one of the world’s most impoverished countries. More than half of its population lives below the poverty line and 17.5 percent struggle for food security. In 2010, Guinea established its first elected, civilian government. The U.S. benefits from foreign aid to Guinea and its strong economic potential. Assistance with Guinea’s health, stability and effective governance is not only deeply needed by Guinea, but also something from which the U.S. ultimately gains.

Strong Economic Potential

Guinea has rich mineral resources, possessing over half of the world’s bauxite (aluminum ore) reserves. The country is also abundant in high-grade iron ore, diamonds, gold and uranium. The mining sector in Guinea is thus a major part of its economy: about 80 percent of Guinea’s foreign exchanges consist of joint-venture bauxite mining and alumina operations. Compagnie des Bauxites de Guinee (CBG), one of the major two routes for exporting Guinea’s bauxite, is a venture jointly owned by the Government of Guinea, a U.S. company called Alcoa, and an Anglo-Australian company Rio Tinto Group. The other major export force is Chinese conglomerates as well as small and midsize business.

Guinea is also blessed with reliable rainfall, abundant sunshine and natural geography that are favorable for renewable energy. The 240MW Kaleta Dam project, constructed and financed by China, began operating in 2015 and has since more than doubled Guinea’s electricity supply. The country’s climate means that it has great potential for commercial agriculture as well.

Investment Friendly

Pressed to improve development, Guinea has been increasingly open to foreign investment. The country’s government has been depleted of financial resources to improve the economy, especially since the Ebola outbreak in 2014-2015. Meanwhile, enterprises in Guinea are in need of more credit than is available.

In 2016, the government launched a new website via the Investment Promotion Agency of Guinea (APIP). The website is meant to promote transparency and help make investments more smooth. The APIP also offers services to foreign investors, including creating and registering businesses, helping with access to benefits of the new investment code, providing information and research studies to interested investors, etc.

The Guinea government does not allow any foreign investor to own media in the country, but besides that, there are no restrictions discriminating against foreign investors. The U.S. also helped a group of foreign investors in Guinea and the government of Guinea form a liaison in 2015.

Barriers to Overcome

While Guinea has extremely investment-friendly laws, the enforcement of those laws needs a stable political environment and a reliable legal system. It is worth noting the country had its first democratically-elected government in 2010 after the country’s independence in 1958, but state institutions are still recovering from two years of rule by the military junta. It’s also faced a number of security and socio-economic vulnerabilities.

Guinea has a disproportionately large military with serious, deep corruption and human rights abuses. It is also feared by law enforcement because of the potential for military revolt. Even though a panel was formed in 2010 to investigate the violent crushing of tens of thousands of peaceful democracy protesters in 2009, two military commanders that the U.N. revealed to be guilty were able to keep their government positions.

Aid for Stability and Development

U.S. foreign aid would directly address barriers to private sector growth as well as improvement of economic life in Guinea in general. For one thing, the U.S. supported the 2010 election process significantly, which has greatly improved the country’s development prospects.

U.S. foreign aid was restricted in 2008 and 2009 due to the rise of the military coup at the time, but restrictions were lifted after the country’s political transformation. Aid from the U.S. helps improve democratic practices, governance, security sector reform, regional peace and stability, etc. These aspects of society are essential for the alleviation of poverty and the establishment of a solid economic infrastructure. A peaceful Guinea is also viewed as significant for restraining conflict in a region already plagued by political tension and armed struggles.

The Consortium for Elections and Political Process Strengthening, supervised by the USAID, supported the 2015 presidential election and 2018 communal elections. It strengthened Guinea’s Independent National Electoral Commission as well as civil society organizations in monitoring the domestic election.

Ultimately, U.S. foreign aid will assist with areas of life in Guinea that in turn presents a great economic potential for the U.S. In other words, the U.S. benefits from foreign aid to Guinea.

– Feng Ye
Photo: Google

Everything to Know About Tanzania’s Improving Economy

Tanzania's Improving Economy
The African country of Tanzania has a population of 53 million people, and it is estimated that around 70 percent of its people live in poverty. Although this constitutes a large amount of their population, the economy is improving and poverty is slowly decreasing. In fact, the economy in Tanzania has vastly improved over the last decade, averaging more than 6 percent growth a year. These improvements have come from many changes within the country.

Improvement in Corruption

There was a new government elected in 2015 that promised they would fight corruption within the government. In 2015, around 72 percent of Tanzanians said that corruption has been declining when compared with the previous year. In addition, 71 percent of citizens believe the government is doing a better job fighting corruption overall.

Improvements in Agriculture

Advancements in agriculture over the past few years has also helped Tanzania’s improving economy. Agriculture is one of Tanzania’s leading largest contributors to the GDP, at 30 percent, and it makes up 67 percent of the workforce. USAID has been working in Tanzania to help improve their agricultural sector. They have expanded irrigation and provide better access to the market through the reduction of transport costs for equipment and other important agricultural products. Tanzania has now become more competitive in domestic and regional markets.

Increasing Tourism

Tourism is the number one earner of foreign currency in Tanzania. In 2017, the tourism industry in Tanzania was ranked one of the fastest growing sectors in East Africa. From 2015 to 2016, there was a 15 percent increase in the number of tourists that visited Tanzania. This has helped with Tanzania’s improving economy by providing jobs and bringing in revenue to the country. In 2015, $2.9 billion had been earned from tourism, which was greatly increased by 30.4 percent in 2016 to 3.8 billion.

Growing Urban Middle Class

Around 10 percent of Tanzania’s population is a part of a small urban middle class. Although it is a small percentage of the population, it is growing at a steady rate as a direct result of Tanzania’s improving economy. Over the past few years, this group has gained political influence, purchasing power, and started to demand cheaper electricity, imported goods and improved urban social services and infrastructure. This growing middle class has motivated the government to work harder for their demands as well as for improved conditions throughout the country.

Reforms in Education

Over the past several years there have been many changes and improvements in education in Tanzania. This includes greater access to secondary education for both male and female students. This has had a large impact on Tanzania’s improving economy. Tanzania is one of the only low-income countries that has almost achieved universal access to primary education; however, there are still many obstacles keeping children from getting a good education.

Global Giving is attempting to change the lives of many children in Tanzania by placing technology in their schools to help them master their curriculum. Tanzania’s schools lack all resources, including teachers, which makes it very hard for students to learn, finish school and enter the workforce. Global Giving donates raspberry pi computers that already contain important math and science curriculum, along with tablets, laptops and phones for that can also be used to access the curriculum. Global Giving has improved the quality of education for many students in rural areas in Tanzania, which will improve their quality of life and prepare them to enter into a skilled workforce in their country.

Although there is a lot of work left to be done in reducing poverty and growing the economy of Tanzania, these are some of the important ways that the country has been improving over the past decade. A new government, advancements in agriculture, increasing tourism, a growing middle urban class and reforms in education have all had a positive effect on the economy in Tanzania.

– Ronni Winter
Photo: Flickr

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The Economic Benefits of Education

The Economic Benefits of Education
The notion that education and economic growth hold a relationship with each other is not a new idea. However, what is the extent of this relationship? What role does education play in development? And finally, what are the exact economic benefits of education both in the U.S. and abroad?

The Economic Effects of Education

According to the World Bank, one of the pivotal benefits of education is labor market earnings. Workers with more education earn higher wages than employees with no post-secondary education. Those with only a high school degree are twice as susceptible to unemployment than workers with a bachelor’s degree. Median college-educated workers earn 84 percent more than those with only a high school education. Additionally, workers with some college education but no completed degree earn 16 percent more than only high school trained employees.

Education’s value in the economy is also evident in the notorious fall of manufacturing jobs. The loss of 9.3 million manufacturing jobs among non-college educated workers has been strenuous. However, workers with some college education have gained 2.5 million manufacturing jobs.

There is significant data reflecting the education of the majority of technologically-oriented job holders. In fact, 92 percent of patent inventors have a bachelor’s degree and 92 percent of high-tech companies behind the growth of GDP are college educated as well.

The economic benefits of education are undeniably important to the U.S. In the country alone, GDP has potential to increase by $32 trillion, or 14.6 percent if all students are brought up to basic mastery by the National Assessment of Educational Progress standards. Intensive efforts at test score maximization for students in a handful of states with highest economic performance in the U.S. can increase GDP by $76 trillion over approaching decades. Furthermore, improvements in education according to spending on K-12 schooling is said to reap more improvements from investment than the burden of the cost.

The Return on Investment (ROI) of Education

Above the economic benefits of education is an ROI that investors cannot overlook. The global rate of ROI in schooling is approximately 10 percent for primary education, five percent for secondary education and 16 percent for university education. Social ROI of education for the world is 18.9 percent for primary education, 13.1 percent for secondary education and 10.8 for higher education. Finally, private ROI of education for the world is 26.6 percent for primary education, 17 percent for secondary education and 19.0 for higher education.

It is worth noting that girls have higher ROI for secondary education at 18 percent while boys have 14 percent. However, boys have higher ROI for primary education than girls, 20 percent versus 13 percent. Latin America, the Caribbean and Sub-Saharan Africa have the highest ROI on both social and private education. Overall, another year of education raises earnings by 10 percent a year. The 10 percent ROI for education investments is higher than alternatives: 1.4 percent for treasury bills, 5.3 percent for treasury bonds, 4.7 percent for savings accounts, 3.8 percent for housing and 7.4 percent for physical assets.

Next Steps Forward

The economic benefits of education are clear for the entire globe. Nevertheless, there are further steps to maximizing productivity and reaping even more economic benefits of education.

  1. Increase investment in the quality of primary schooling, given that primary education has expanded exponentially already
  2. Promote educational efficiency in policy through policymakers and government
  3. Reform school management systems and implement more effective performance metrics
  4. Implement more effective and fair approaches to school funding
  5. Report more data on school performance

Education has the power to uplift a country and establish a healthy, efficient economy. It has also played a pivotal role in the increase of productivity and wages amongst workers and proved to be a successful endeavor for investors. Fortunately, there is much more potential within education to help the world to flourish.

– Roberto Carlos Ventura
Photo: Flickr

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A Journey to Stay: Migration and Industry in the South Pacific

A Journey to Stay: Migration and Industry in the South Pacific
Migration led to the population of the South Pacific Islands, along with innovation to sail against the wind. The islands developed a unique history, language, and culture and migration and industry built the South Pacific nations. There are challenges facing the islands, but people are rising up to face them. 

What are the South Pacific Islands?

The South Pacific includes about 10,000 islands located in the South Pacific Ocean that, based on their ethnic geographic history, can be further broken down into Melanesia, Micronesia and Polynesia. 

About 3,400 years ago, people left land and started sailing, and the wind brought these new settlers to many remote islands such as Tonga, Fiji and Samoa. Eventually, this exploration stopped for about 2,000 years due to a lack of technology to sail against the wind. Once the technology was developed, many continued their migration and industrialization in the South Pacific to explore and settle the rest of Oceania to Tahiti, Hawaii and New Zealand.

From the 16th to 18th Century, the Europeans began to make infrequent and accidental discoveries of the islands that helped add to the narrative of wealth in unknown lands. It was not until the 18th Century that Europeans began an organized colonization effort in the South Pacific Islands. By 1980, most of the South Pacific Islands had reached independence.

Recent Migration

The general consensus is that people are happy on the islands and few leave unless searching for work or education. However, due to an increase in dangerous weather and rising seas, many are faced with a possibility of being forced out. An estimated 10 tropical cyclones are predicted to hit the islands between November and April each year.

While, there is no international law that recognizes people leaving on account of weather changes, talk of a new refugee has begun. On Tuvalu, it is estimated that migration will increase 70 percent by 2055, and already about 23 percent of citizens on Kiribati have migrated due to climate stressors, 41 percent for work and about 40 percent may migrate if flooding or climate changes worsen.

Business

Many of the islands face similar challenges — islands possess limited natural resources, a distance from larger markets and a greater susceptibility to external factors such as natural disasters. Despite these challenges though, tourism and other businesses are becoming a strong reality for many.

Larger islands such as Fiji, Samoa and French Polynesia have already begun to build a strong tourism industry. Fiji, in particular, is partnering its tourism with oceanic sustainability — a priority for many. Some tourism operators engage tourists with local communities by bringing them to view the Shark Reef Marine Reserve or visit villages away from the popular resorts.

Leaders in the Pacific Islands encourage entrepreneurialism, but efforts in the past have had mixed results, often beginning with loans and ending with shut-downs due to lack of payment. Currently, a refocus on education and training has started to take place, and informal polling has pointed out the importance of community in building businesses and highlighted microfinance for the future.

Migration and Industry in the South Pacific

Migration and industry in the South Pacific work to change islanders’ lives for the better. Australia still looks at many Pacific Islands as recipients rather than providers, which often detracts from viewing these islands as loci for businesses. To combat this perception, the Australian government is challenging financial institutions to sign a memorandum that will promote private sector development through financial inclusion.

Migration and industry in the South Pacific are of key importance. The islands are faced with finding their innovative selves to develop businesses and new technologies to avoid migration.

– Natasha Komen
Photo: Flickr

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Timor-Leste’s Future Is Business

Timor-Leste’s Future Is Business
Timor-Leste, also known as East Timor, occupies the eastern side of Timor Island; the other half is Indonesian territory. Timor-Leste has had a difficult history. Poverty rates and unemployment remain high, but the rate of improvement is astounding. The country’s extreme poverty rate fell from 47.2 percent to 30.3 percent over a seven-year period, showing more progress than most developing countries. With some sources of income such as oil coming to an end, it is becoming increasingly clear that Timor-Leste’s future is business.

Timor-Leste’s Tumultuous History

Portugal invaded and colonized the island of Timor in the 1600s. In 1749, the island was split into East and West Timor, with Portugal remaining in control of East Timor until 1975. In November 1975, after Portugal’s revolution and the administrative withdrawal, the Fretilin (Revolutionary Front for an Independent East Timor) declared East Timor independent. Less than a month later, Indonesia invaded and claimed East Timor as its new territory.

After many years of occupation, Indonesia let East Timor vote on independence in 1999 and 78 percent voted for freedom. This led to many Indonesian nationals and supporters rebelling, but April 2002 saw Xanana Gusmao (a leader of the Fretilin against Indonesia) win the presidency of Timor-Leste. In May 2002, independence was celebrated and in September Timor-Leste became the 191st member of the United Nations.

The Obstacles to Growth

Timor-Leste’s weak infrastructure has made improving quality of life and building business difficult. Roads are inadequate and electricity can be haphazard. The lack of infrastructure can be attributed to Portugal’s neglect during its control of East Timor. Indonesia’s occupation did contribute towards better infrastructure, particularly buildings and roads, but ironically many of the roads and power lines were destroyed by the rebellion of Indonesian supporters and nationalists after the 1999 vote for independence.

With a population of 1.1 million, only about 200,000 people have a conventional job or the ability to employ others. Most citizens live in an off-grid manner, sustaining themselves on agriculture, forestry and fishing. On top of this, Timor-Leste imports half its food, creating difficulties in acquiring fresh, nutritious food. Up to now, Timor-Leste’s main source of income has largely been from the oil and gas fields discovered in 2005. Now those fields are beginning to dry up; profits decreased from $1 billion in 2015 to $400 million in 2016. With stagnation in other areas such as coffee, many believe Timor-Leste’s future is business.

The Efforts to Ensure Timor-Leste’s Future Is Business

Despite difficulties, Timor-Leste is revealing an astonishing ability to overcome. In 2007, the basic needs poverty rate was 50 percent, which fell to 41.8 percent in 2014. Over this same seven-year period the domestic economy grew by 77 percent. Electricity access rose from 36 to 72 percent, and access to improved sanitation increased from 42 to 60 percent. School attendance rates increased from 58 percent to 83 percent. Coffee exports were stagnating with a lack of investment, but in 2016 coffee exports totaled $30 million, double the amount of the previous three years.

The Path to a Better Future

Timor-Leste has gone through much to claim independence and counter the difficulties it inherited. Many entrepreneurs in Timor-Leste have identified the end of the U.N.’s peacekeeping mission in 2012 as a wake-up call that it was time for the country’s citizens to take control. With half the population being under 30 years old and having jobs to turn to, many are finding the boldness to trust that Timor-Leste’s future is business.

Business operations in Timor-Leste are still not perfect. Its Ease of Doing Business rating–a reflection of potential foreign investment or local growth–fell to 178th place after being at 167th place out of 191 countries. However, there are improvements underway. The office that registers new businesses has made efforts towards creating a more efficient process. The office used to process about 5,000 applications every five years, but was recently able to increase this to 11,000 applications over three years.

With few external options and a government focus on development, Timor-Leste’s future is business. The continued focus on business will lead to continued decreases in poverty and improvements in the country’s infrastructure.

– Natasha Komen
Photo: Flickr

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The Future Course of Alleviating Poverty in Iran

Poverty in Iran

As Iran is currently at the epicenter of geopolitics and regional conflicts in the turbulent Middle East, the country’s role in international affairs is steadily growing in importance. Moreover, the Iran nuclear deal is also revitalizing Iran’s presence and significance on the global stage at the same time.

The Current Situation in Iran

According to the World Bank Group, Iran’s GDP in 2017 was $439.5 billion while its population peaked at 80.6 million. On the poverty alleviation front, poverty in Iran fell from 13.1 percent to 8.1 percent between the years 2009 to 2013. Also, in the changing dynamic of its domestic politics and a new wave of secularism and liberalism brought on by a burgeoning young population in the country, addressing poverty in Iran is a very key objective for various stakeholder groups.

However, according to a report by the Independent from Dec. 2017, the economic situation in Iran appears rather bleak in some regard because food prices are on the rise and unemployment figures are at an all-time high at over 12.4 percent. Expanding income inequalities in the country are also becoming quite widespread due to major deficiencies in the taxation and welfare systems offered to the people.

How Iran’s Political Climate Could Affect Poverty

Historically, since the culmination of the Pahlavi dynasty and revolution in Iran in 1979, the country’s social and economic progress has been a vital priority. In recent years, owing to the perceived threat of its nuclear arsenal, Iran’s diplomatic relations with its western counterparts have impacted its trade and commerce majorly due to the imposition of crippling international sanctions.

Furthermore, the changing attitudes of the Trump administration are a major threat to the deal as it may be detrimental to the future economic and diplomatic recovery Iran is trying to seek. Unfortunately, the collapse of the deal could be a major hindrance to countering poverty in Iran.

The Iran nuclear deal can help greatly bolster the capacity to alleviate poverty in Iran due to the level of investment Iran could easily achieve in the future with the expansion of its oil market, given its vast and abundant reserves. Iran can boost its oil output, GDP and household incomes in the future with diminished sanctions.

Consequently, the introduction of the Iran nuclear deal was followed by noticeable economic recovery in the country with Iran’s economy growing at an annual rate of about 12.5 percent after a sizeable contraction of about 1.6 percent in the year 2015. The country hopes to maintain growth amounting to four percent annually.

Alleviating Poverty in Iran through Investment

Moreover, remediating poverty in Iran can also be achieved by increasing the level of investment and tapping into Iran’s potential. Iran is beginning to expand and diversify its industries, especially its hydrocarbon, agriculture and services sectors, and is also continuing to focus on boosting its financial and manufacturing capabilities as well. Additionally, this may help decrease Iran’s over-reliance on its oil market as prices have often tended to remain quite volatile, especially in recent years.

The government is also implementing its twentieth-year vision and sixth five-year development plan in order to focus more on market-based reforms and techniques. This strategy is targeting three important realms: economy, science and technology. The subsidy reforms orchestrated by the government will directly help reduce poverty in Iran as they aim to target price adjustment and further increase cash transfers to low-income households in the country.

Alleviating poverty in Iran shall largely depend on existing and future initiatives that involve opening up the economy further, engaging in economic and trade liberalization with its key trading partners and embarking on further domestic structural reforms.

– Shivani Ekkanath
Photo: Flickr

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Growing Ecommerce in India a Sign of the Nation’s Progress

Ecommerce in India
With Walmart’s recently announced acquisition of Flipkart, India’s largest online retailer, the U.S. retail multinational has placed a substantial bet on the future of ecommerce in India and the country’s economic potential.

Confirmed in recent weeks, Walmart’s purchase of almost 80 percent ownership of Flipkart represents the largest single foreign direct investment transaction in the country’s history. Although ecommerce represents a small portion of total retail sales in India, companies like Walmart are betting that a burgeoning middle class and greater access to technology offer the potential for a sizable market.

Indeed, the more bullish analysts predict an ecommerce boom in the country. U.S. investment bank Morgan Stanley estimates that online retail sales in India could grow by more than 1,200 percent, from $15 billion in 2016 to $200 billion in 2026. These numbers would trail the world leaders in online retail sales such as China ($1.1 trillion in 2017) and the U.S. ($453 billion) but would already put India among the largest ecommerce markets in the world and unmatched in the rest of the world in terms of potential size.

Forecasts include burgeoning internet usage and lower data access costs in the country, which will broaden the accessibility of online retailers. Optimism also stems from size and growth of the Indian economy: its population is 1.3 billion, the second-highest behind China, with a young demographic profile and GDP growth of 7.2 percent in 2017. This represented the fastest rate among all major economies. It is also hoped that Prime Minister Narendra Modi will be successful in implementing economic reforms to ease the cost of doing business, including for foreign investors, in the coming years.

Walmart is not alone in betting on the potential of ecommerce in India. Amazon entered the market in 2013 in an attempt to challenge Flipkart’s success and has steadily gained ground. Alibaba, the Chinese ecommerce giant, first made inroads into the space in 2015 by investing in Paytm, a financial technology startup, and has since continued to expand its investment into other ecommerce groups.

Some observers are more tepid about India’s potential. GDP per capita remains low compared to other major economies; at approximately $1,700 in 2016, it is roughly one-fourth that of China. Moreover, the wealth of 80 percent of the population falls below that number, reflecting the country’s problem with income inequality, with the richest segment of the population holding an outsized share of the wealth.

In fact, despite proclamations heralding the arrival of India’s massive middle class, a 2015 Pew survey found that the country’s progress in poverty alleviation has largely moved its population from poor to low-income earners. This leaves them dangerously close to re-entering poverty with such limited disposable income.

Outlooks vary, but the commitments to the country by some of the world’s major online retailers represent their belief in its likely transformation and growing earning potential. As some experts have noted, the acquisition by Walmart and its competitors represents a long-term bet that India could be on the cusp of the consumption explosion China saw earlier this century. If their bets on ecommerce in India pay off, it will likely be because it coincides with rising prosperity and economic security for Indians as a whole.

– Mark Fitzpatrick
Photo: Flickr

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World Update: Top 10 Facts About Poverty in Japan

Top 10 Facts About Poverty in JapanJapan is a sovereign island nation located on the eastern coast of Asia and stretches from the Sea of Okhotsk to the East China Sea. Its household income per capita in 2017 was $1.7 billion, and Japan ranks the top three world’s largest economy, only behind U.S. and China. In 2016, its GDP reached $4.94 trillion.

Japan has outstanding technology achievements, a comprehensive social system and a very advanced transportation system that included bullet trains 51 years ago. Even though the overall economic condition of Japan is very mature, there are severe poverty issues behind these numbers. Here are top 10 facts about poverty in Japan.

Top 10 Facts About Poverty in Japan

  1. The Japanese economy decreased sharply since 2012. While the world GDP grew from $74.89 trillion to $74.1 trillion from 2012 to 2014, Japanese GDP shrank from $6.203 trillion $4.85 trillion in 2015.
  2. Japan sets disposable income below $14,424 as the poverty level. In 2013, there was 12 percent of the national population under the poverty level.
  3. In 2010, there was 32 percent of females who are 23 to 64 years old in poverty, and the rate of males was 25 percent. Since the GDP growth was -0.115 percent in 2011 and later it has been recovering in a very slow path, the poverty condition is consistent.
  4. The average wages of Japan in 2016 was around $39,113. This number was far less than the average U.S. wage, which was about $60,154. More importantly, while constant prices increased 1.2 percent from 2015 to 2016, its average wage only increased 0.7 percent. The wage growth rate makes Japanese people barely able to pursue higher standards of life.
  5. At least one in every six children struggle with poverty problems, issues that often inhibit them from accessing higher levels of education. To solve this problem, Japan sets the compulsory education system until the age of 15. In 2013, the Japanese government passed the law to increase the number of social workers in school and increased free, after-school tutors.
  6. The aging population is one of the most severe issues in Japan. In 2016, the Japanese population was around 127 million; however, in the next five decades, the population is likely to shrink by about one-third, and the population of over-64-year-olds may increase from 25 to 38 percent. This dilemma largely decreases Japanese labor force.
  7. The Japanese government announced in 2009 that there were around 16,000 homeless people on the streets. Around 35 percent of this population was about 60 years old, but the number has been dropping since April 2012. For example, the number dropped around 12 percent from 2011 to 2012 due to the support of health and welfare ministry.
  8. The average house price in greater Tokyo increased more than 12 percent from 2014 to 2015; however, the price-to-income ratio in 2016 was 11 percent. This is the first time the ratio has exceeded 10 percent since the 1990 bubble economy. The higher house price puts more people in jeopardy and as a result, more people become homeless.
  9. There is a large income gap in Japan, especially under Prime Minister Shinzo Abe’s policies. For example, people who live in Tokyo are gaining benefits an their average taxable income raised near 7 percent through fiscal 2016. However, the income of people who live in Kagawa dropped during the same period.
  10. In Japan, more than 99 percent of businesses are small and middle-sized enterprises (SMEs). SMEs are influential supporters of the Japanese economy. Based on a report in the Economist Intelligence Unit, though, SMEs have been in decline since the 1990 bubble economy, and the decline continued through the 2008 economic crisis as many of them are reliant upon the domestic economy.

The Japanese government currently works to set new policies to promote economic development, and strives to effectively solve issues such as the ones in the top 10 facts about poverty in Japan. 

 – Judy Lu
Photo: Flickr

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The Mechanisms and Determinants of Development

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

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Bettering Credit Access in Niger

Credit Access in Niger

In today’s economy, credit access is a necessity. Credit access in Niger, however, has been a struggle in recent years. Individuals and businesses need it to sustain themselves and use registered credit to increase buying power. Without it, people are often exposed to predatory lenders who will abuse the power of the loans. For low-income communities, credit access can provide hope in the economy by providing citizens the opportunity to build a credit history for themselves. 

Niger doesn’t offer sufficient credit access for its communities, forcing them to use personal savings to sustain businesses. This often means their only savings go back to the production of more profit to be used for maintaining their business, not to sustain their household. The cycle of earning just the minimum to sustain the small business forms and doesn’t allow for the businesses to grow. Additionally, the smaller the business, the less likely it is to apply for and receive a loan.

One of the biggest struggles for credit access in Niger is geography. The country’s population is low in density and there are large distances between communities, which hinders access to microfinance institutions. The distance and cost of transportation make it impossible for some individuals to gain credit access. Some can not even afford a viable way to get to the institution without spending a sufficient amount of their household income. The need for multiple visits doesn’t help the situation.

The correlation between distance and access to credit institutions in Niger can not go unnoticed. Of adults living in rural areas, only seven percent have access to a bank account. Less than two percent of Nigerians had taken out a loan as of 2014.

Niger’s rural areas, business types and economy also factor into its underdeveloped classification as a country. Credit access in Niger has been very timid for agriculture and other industries on the rise, such as technology and media. However, there have been recent initiatives to help the lack of credit access in Niger.

BAGRI, a public agricultural bank in Niger, and SOS Faim have been trying to implement certain experiments and programs to address the ongoing problem of credit access in Niger. SOS Faim led an experiment in 2015 where it analyzed four cases in Niamey. The experiment aimed to better understand credit management strategies of farmers, identify support requirements and come up with possible solutions. What is needed now is more research and economic evidence to start and find a real solution to a problem that has been affecting Niger’s economy on a higher level.

– Elisa Martinez Cancino

Photo: Flickr