Archive for category: Economy

Information and stories about economy.

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China and Senegal Grow an Economy

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A growing number of Chinese migrants are working in Africa due to economic growth in recent times. While many world officials claim China’s relations with African nations are heavily linked to exploitation of resources, such as Africa’s gold, diamonds, timber and oil, China has since the 2000s began migrating to nations without these resources.

Notably, Chinese have migrated into Senegal. Senegal has good economic stability and attractive location in West Africa.

These factors are suitable for China’s workers to invest in Senegal. The motivations behind the Chinese workers as a whole are business-rooted. Senegal’s compliance to work with the Chinese is based on a desire to seek diverse investment opportunities and trade partners, as well as an improved position in international affairs.

With the large Chinese presence in African nations, Chinese traders have created competition among the migrants. This competition has forced many workers to expand into other business sectors, thus supporting the economic growth.

Historically, China and Senegal have had international relations with each other since 1971, (with a gap between 1996 and 2005, where Senegal acknowledged Taiwan) the growth of Chinese migrants traveling to the nation increased greatly in 2005. Today, most Chinese in Senegal are completing state work in infrastructure, communication, mining, and oil.

The business relationship still remains unbalanced, however. The Senegalese imports are very small compared to the Chinese exports to the West African nation. However, officials know this is common for Chinese relationships with African nations, and this is just another example of how China’s economy wields strength and influence.

To visualize, in 2010, China and Senegal reached $549 million, where China invested $45 million in Senegal, primarily within the infrastructure sector.

In late September of this year, the Chinese ambassador to Senegal, Xia Huang said China is looking for ways to share its developmental experience and knowledge with the Senegalese to boost further their emerging economy. The ambassador explained how the relations between Senegal and China are still growing in a positive way.

At the celebration of China’s National Day on October 1st, he said Sino-Senegal relations had, “remained fruitful, tangible and has continued to give concrete results to the Chinese and Senegalese people.”

In addition, Xia mentioned that even though China is the second largest economy in the world, 100 million Chinese people are living below the poverty line. Concluding, Xia said by the year 2021 Chinese officials will double the nation’s GDP.

– Laura Reinacher

Sources: All Africa, Migration Information
Photo: Forum on China-Africa Cooperation

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Tujijenge Tanzania Helps ‘Build Africa’ through Microfinance

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Tujijenge Tanzania is a microfinance company based in Dar es Salaam, Tanzania. Founded in 2006, the organization is both the largest and fastest growing microfinance institution (MFI) in Tanzania. Broadly speaking, MFIs are companies that provide financial services to low-income individuals, or that provide services in areas without access to “typical” banking. They operate off of the idea that poverty-stricken individuals can remedy their own situation if given access to financial services.

Today, Tujijenge Tanzania is part of the larger, not-for-profit company Tujijenge Afrika, a Swahili name that roughly translates to mean “let’s build ourselves, Africa.” The company was founded by six microfinance practitioners, who now serve on its board of directors. The founders sought to remedy a problem that they observed in African society by employing their own skills. That is, 90 percent of the country does not have access to financial services. They saw that few MFIs existed, forcing residents to rely on expensive banking alternatives that perpetuated a lifestyle of poverty.

Tujijenge Tanzania aims to provide financial help to individuals, both men and women, who are engaged in all manner of small businesses, ranging from stationery shops to restaurants. The company operates by sending Loan Officers into local communities to give presentations about their services. Interested individuals then form groups of up to 35 members and receive four weeks of training from the Loan Officers. This includes instruction on lending methodology and creating viable business plans. During this period, the group must satisfy several requirements, including electing leaders and opening an account with a commercial bank (the company partners with both Bank of America and Kenya Commercial Bank).

Furthermore, every member is required to save 20 percent of the expected amount of the loan during this training period. This serves the dual purpose of teaching the discipline of making weekly payments, as well as demonstrating that the individual is engaged in a serious, capital-generating business. Upon completion of the training period, if all requirements have been met, the group can make a formal application for a loan. After receiving the money, the group will continue to meet every week, both to make repayments and to discuss general business issues and practices.

Beyond making loans to small business owners, the company is also engaged in a wide variety of product development. Currently, Tujijenge Tanzania is in the process of developing a mobile banking solution for their clients to help serve those in less accessible areas.

In the past, they have developed both solar loan and agricultural loan models in collaboration with organizations such as Oxfam. They have also engaged in market research in the promotion of medical and life insurance all around Africa.

– Rebecca Beyer
Feature Writer

Sources: Tujijenge Afrika, KIVA

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Where Walmart Won’t Win

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Walmart has sales reaching over $135 billion in 26 countries outside the United States making it the world’s biggest retailer. It’s also the world’s largest public corporation when ranked by revenue.

It has shattered the expectations of many small businesses that have either opened in a Walmart’s vicinity or have had a Walmart take over the local community. It’s a seemingly unstoppable force in the retail business. But looking abroad to several of the world’s largest economically sound countries, not a single Walmart store can be found.

On October 9, 2013, Walmart announced that it was breaking up its corporate partnership with Bharti Enterprises, which hints to the dissolving of its vision of opening up hundreds of stores throughout India. Scott Price, head of Walmart Asia, referred to the breakup being fueled by “poor investment conditions.”

This is a deeper issue than pro-small business owners and supporters celebrating over this breakup. When an individual, group, or corporation ascends to the heights that Walmart has in its respective niche, competition has no choice but either to compete and take a tiny share of the market or to hope that the empire crumbles.

While this decision by no means points to Walmart losing its stranglehold on the retail market, it sends a sign to most investors looking to put money in Southeast Asia. If Walmart is backing out and cannot make a steep, yet potentially rewarding investment, how can others?

Russia is another market Walmart has not tapped. For six years, Walmart has been in talks with a Russian-based company to join a partnership that would ease Walmart’s entry into the bureaucratically strict nation. Germany and South Korea are without Walmart stores, as well. Walmart was present in both nations until 2006 when it shut down all operating stores.

For Germany, it was a rather strange issue that possibly stems from cultural and sexual repression. German men did not like when Walmart clerks handed their groceries to them and smiled as they were leaving the store. They believed the friendliness was a sign of flirting which made them uncomfortable. South Korea has also found it hard to house a Walmart chain, as it preferred to stock electronics and clothing as opposed to food and beverages, which can be bought at local markets.

This is not a loss for Walmart as much as it is a rattling in its marketing process. This shake up abroad almost seems like collusion between governments not wanting to take away domestic profits from local businesses, and can anyone blame them?

– Sagar Jay Patel

Sources: Business Week, New York Times
Photo: Chieforganizer.org

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Africa’s Rising Middle Class

Growing Middle Class in Africa
The middle class is essential for economic and democratic growth. The continent of Africa, consisting of 54 independent countries, contains the poorest countries in the world, according to the human development index created by the United Nations. However, over the last 15 years, the middle class in Africa has grown.

As the middle class expands, so does consumerism. The growth of the African middle class not only means more stability for Africa, but also more profit for American businesses. More of the African population is buying televisions, cell phones, and leisure and entertainment items, which Western companies provide.

But, how is the African middle class defined? In the U.S., there is a struggle to define the middle class. However, it is clear that those earning about $20,000 to $120,000 a year would categorize themselves as middle class. In Africa, the range is quite different. The middle class consists of those earning $2-$20 a day, or $730-$7,300 a year.

A strong and large African middle class is beneficial. The African middle class consumed approximately $680 billion in 2008, consisting of nearly a quarter of Africa’s GDP. At this rate, Africa will comprise approximately 3 percent of worldwide consumption by 2020, with about $2.2 trillion of consumer spending. The middle class will help grow the economy as they have more income to spend and can invest more of their finances in health and education. However, 60 percent of the African population continues to earn a meager $2-$4 daily.

Those in this floating class, earning $2-$4 a day, are at risk of leaving the middle class and descending into poverty. This represents 180 million people. The floating class could slip into poverty very easily; a job loss or the death of the head of household could cause the slip. Therefore, a balancing act is required to help grow the middle class while also preventing the floating class from slipping back into poverty.

Policies that focus on both human capital development and job generation will ensure the growth of the African middle class. Continued improvements in governance, better access to technology, the rapid spread of mobile telephones, and the better use of natural resources are necessary. Additionally, social changes and policies that focus on education and health will work to support those earning $2-$4 a day.

The U.S. should continue investing in Africa through aid. History demonstrates that the U.S. benefits greatly by assisting poorer countries. For instance, from 1960 to 1974 the U.S. provided South Korea with $5.6 billion in aid. In 2010, the annual U.S. export to South Korea was $38.8 billion. But this is just one example. Find more information about the benefits of reducing global poverty here.

Now is the time to increase the investment in Africa. As the middle class is beginning to grow, investment in Africa will result in a more stable economy, growth of democracy, and an increase in consumerism. Both the U.S. and Africa will benefit from building a strong middle class throughout Africa.

– Caressa Kruth

Sources: How We Made It In Africa, UN Development Program, The Borgen Project, National Geographic
Photo: Forbes India

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Pressure on Developed Nations to Contribute More Aid

Leaders have begun to discuss what will replace the Millennium Development Goals once they reach expiration in 2015. Mukhisa Kituyi, the new secretary general of UNCTAD, the UN Trade and Development body, stated that aid-flows from wealthy nations were drying up and that developing economies must contribute more in order to assist the poorer nations.

Kituyi, who took office last month, urged Brazil, China, and other emerging economies to take responsibility for the fight against extreme poverty. “From Brazil to China, while they have shown a willingness to invest in economic infrastructure – the construction of roads, railways, and ports – that capacity should also extend to the construction of social infrastructure,” he said.

There has been constant pressure on developed nations to contribute more aid in both reaching the Millennium Development Goals and ending extreme poverty; however, Kituyi’s call for action represents one of the rare voices asking the developing nations to pay tribute as well.

UNCTAD, which was formed in 1964, is seen as the intellectual counterweight to the World Bank and the IMF, urging even more liberalized trade and deregulated finance. However, in recent years, some of the organization’s staff members are increasingly concerned about Unctad’s future. Kituyi claims that he is determined to boost the organization’s reputation, and is especially concerned in taking part in the formation of what follows the Millennium Development Goals.

– Sonia Aviv

Sources: The Guardian, International Development News, News 168
Photo: The Habari Network

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Inflation and Food Shortages in Venezuela

For residents of Venezuela, food and grocery shortages have become a part of daily life. Outside of many government-subsidized grocery stores, people line up before dawn hoping to purchase what they can before supplies run out. Items such as milk, meat and toilet paper are bought up quickly. The shortages have lasted for more than a year, prompting calls for President Madura to reevaluate the economic policies of his predecessor, Hugo Chavez.

Though Venezuela is one of the most oil rich nations in the world, it is struggling to mitigate inflation and keep subsidized grocers stocked with products. Many experts say that strict price controls are to blame for the country’s economic problems, while President Maduro insists that it is all part of an effort by the opposition and CIA to destabilize the government and sabotage Venezuela’s oil industry.

Asdrubal Oliveros, an economist at one of Venezuela’s leading consulting firms, told the Guardian that the current crisis is the result of several factors, which include the country’s overreliance on imports and the government price controls. Another factor is the decrease in agricultural production due to the government’s recent land expropriations. “It’s cheaper to import than it is to produce,” Oliveros said. “That’s a perverse model that kills off any productivity.”

Many economists echo Oliveros analysis, saying that the Venezuelan government is not helping the problem by fixing prices so low. When prices are set low, companies and producers are not able to make a profit—this, in turn, leads to a cessation of farming, manufacturing, and production. Originally designed to help Venezuela’s poor and working classes afford food and staples, the price-fixing program has instead led to empty shelves and long queues.

After becoming President of Venezuela, Hugo Chavez and his ministers sought to reduce the growing wealth disparity in their country. To achieve this, they implemented price controls on certain goods so as to make them cheaper for individuals and families with lower incomes. This step and increased spending on social programs, however, may be contributing to the country’s current economic crisis.

Aggravating the problem is the fact that inflation is increasing at an alarming speed. In August, 12-month interest rates rose to 45.4 percent. This is the highest since Venezuela’s hyperinflation crisis in the mid-1990s. Officials in Maduro’s government have said that they will be considering changes in the country’s economic policies in an effort to combat the rising prices and food shortages in Venezuela.

– Daniel Bonasso

Sources: The Guardian, New York Times, Wall Street Journal

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How the 10 Richest Countries Could End Poverty

Top Richest Countries International Aid Spending
At last count, there were 193 independent countries in the world. Let’s start by reviewing the top 10 richest countries. Contrary to popular belief, the U.S. is not the richest country in the world; it comes in at seventh place.

  1. Qatar, GDP per capita: $88,222
  2. Luxembourg, GDP per capita: $81,466
  3. Singapore, GPD per capita of: $56,694
  4. Norway, GDP per capita: $51,959
  5. Brunei, GDP per capita: $48,333
  6. United Arab Emirates, GDP per capita: $47,439
  7. United States of America, GDP per capita: $46,860
  8. Hong Kong, GPD per capita: $45,944
  9. Switzerland, GDP per capita: $41,959
  10. Netherlands, GDP per capita: $40,973

So, how are the wealthiest countries in the world combating global poverty?

In 2002, the world’s leaders got serious about ending world poverty. At the International Conference on Financing for Development in Monterrey, Mexico, each country agreed to dedicate 0.7 percent of its national income to international aid. If each of the 22 leading countries were to adhere to this agreement, a total of $200 billion a year would be invested in foreign aid. However, this goal has yet to be reached.

In 2005, the top richest countries in the world committed a total of $106 billion to foreign aid – $119 billion short of the 2002 target.  Each country dedicated an average of only 0.33 percent of their national income to international aid. The U.S. ranked second to last, with an investment of only 0.22 percent. The country in last place, Portugal, dedicated 0.21 percent.

However, there are five countries that have already met or surpassed the 0.7 percent goal. Starting with the largest contribution, they are:

  1. Norway at 0.93 percent
  2. Sweden at 0.92 percent
  3. Luxembourg at 0.87 percent
  4. Netherlands at 0.82 percent
  5. Denmark at 0.81 percent

What is the big deal about .07 percent?

  • This pledge was initiated in 1970 at the General Assembly Resolution, and has been recommitted several times since, the most recent being at the Monterrey conference in 2002.
  • Through this 0.7 percent commitment, world poverty can be halved within our lifetime.
  • If all 22 of the world’s leading countries met the .07 percent goal by 2015, extreme world poverty would end within a generation.
  • 16 of the 22 leading countries have already met or have agreed to meet the 0.7 percent target by no later than 2015. The U.S. is not one of them.

Why is the U.S. trailing behind the fight against global poverty?

Most Americans believe the U.S. contributes 25 percent of our gross national income (GNI) to international aid. In reality, we contribute less than 1 percent. Moreover, most Americans believe the U.S. should combat world hunger through foreign aid efforts.

Americans support investment in foreign aid. As one of the world’s wealthiest and leading countries, we can do better than second to last. It is time our values as Americans are accurately reflected in our national budget. Contact your congressional leaders today to voice your support in investing in foreign aid. Here’s a place to get started: Call Congress.

– Caressa Kruth

Sources: Forbes, United Nations Department of Economic and Social Affairs Division for Sustainable Development, Borgen Project
Photo: The Why of Development

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What is the OECD?

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What is the OECD?

In short: OECD stands for Organization for Economic Co-operation and Development. It is an international economic organization whose mission is to “promote policies that will improve the economic and social well-being of people around the world.”

A little more detail: In the beginning, the OECD was actually named the OEEC – the Organization for European Economic Co-operation. It was founded in April of 1948, with 18 original European participants. The first and original principles of the OEEC were as follows: “Promote cooperation between participating countries and their national production programs for the reconstruction of Europe; Develop intra-European trade by reducing tariffs and other barriers to the expansion of trade; Study the feasibility of creating a customs union or free trade area; Study multi-lateralization of payments; and Achieve conditions for better utilization of labor.”

In 1961, the OEEC became the OECD, and membership was extended to non-European countries. Most OECD members are regarded as “developed countries” with a high human development index. To this day, according to Pierre Tristam at about.com, the OECD remains one of the most cited sources for “economic data and information” because the organization keeps vast databases and “conducts some of the world’s most authoritative analyses and studies on the world economy.”

The OECD said that it provides a forum in which countries can work together to “seek solutions to common problems.” The organization aims to identify good practices and to coordinate “domestic and international policies.” It is committed to democracy and a sustainable market economy. Some of these good practices include taxes and social security, leisure time, school systems and “pension systems” that look after country’s elderly citizens, since the OECD tries to look at issues “that directly affect the lives of ordinary people.”

Its reach extends to the environment, the economy and social issues. The OECD is committed to helping the lives of ordinary people, thus making life harder for those “whose actions undermine a fair and open society,” such as terrorists, unethical businessmen and tax evaders.

The OECD promotes policies designed:

“To achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; to contribute to sound economic expansion in Member as well as nonmember countries in the process of economic development; and to contribute to the expansion of world trade on a multilateral, nondiscriminatory basis in accordance with international obligations.”

As of 2013, the OECD has 34 active member countries, including the United States, and “is in accession talks with the Russian Federation.”

– Alycia Rock

Sources: OECD: About, OECD: Report 2013, Middle East About, OECD
Photo: CIB

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What is the G-20?

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G-20 stands for “Group of 20 [nations]” that come together every year in a different place to discuss solutions to global issues, mainly economic issues. The 20 nations included in the G-20 summit are: Australia, Japan, South Africa, France, Turkey, the USA, Saudi Arabia, Russia, Mexico, Korea, China, Canada, Italy, Indonesia, India, the EU, Germany, the UK, Brazil, and Argentina.

At their summit once a year, these nations discuss various problems whose solutions can only be reached with international cooperation. The first G-20 session (conducted in Washington D.C., USA) dealt with the economic crisis of the time.  Ever since then, the G20 has taken the responsibility of preventing further economic meltdowns with international cooperative measures. The G20 summit is also a great place to address poverty. Helping stabilize the economy and encouraging growth will result in a better economy even in poorer nations. It would help improve infrastructure, and allow smaller nations to build their nation and economy.

This year, the G20 summit, hosted by Russia, will again tackle financial and economic problems. Russia has organized its main priorities for growth in three main categories: Regulation; Jobs and Investment; and Trust and Transparency. One of the main recommendations to ensure economic growth is to confront corruption. Corruption effectively holds back progress. Especially in smaller nations, or nations where aid is necessary to build infrastructure and economy, corruption prevents funds from reaching their destination. The G-20 committee will address the issue of corruption in October. In a solution to, and an active fight against, corruption, lies the future of the fight against global poverty.

Solving economic problems will directly impact poverty; fighting poverty will result in a stronger global economy. Attempting to address economic issues with this in mind will help the international economy, and the national ones as well. The G-20 summit, which meets mainly to address these economic issues, has the potential to greatly impact the fight against global poverty.

– Aalekhya Malladi

Sources: G20, U.S. Department of State
Photo: Radio Netherlands Worldwide

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How Diseases Lead to Poverty

How Diseases Lead to Poverty

What causes poverty? When looking at the factors that can lead to poverty in a region, there are many things that could be highlighted. One can look at the government, at conflict, at the lack of natural resources, or at the shortage of quality education in a region. However, poverty in a region is not only caused by conflict or inadequate education, but also by diseases. Increasing health in a region can significantly reduce global poverty, in effective and unexpected ways.

People in developing countries face challenges due to diseases that those in developed nations do not. For instance, in a developing country, someone who gets sick may have to sell their possessions to pay for medicine. Parents, not expecting their children to survive, have more children and spend less on education. Tropical diseases, and other health risks specific to a region limit tourism and foreign direct investment, affecting the potential prosperity of a nation.

According to research done in 2011 by The Foundation for AIDS Research (amfAR), more than two-thirds of all people living with AIDS (23 million) lived in sub-Saharan Africa. An estimated 1.2 million people died from the disease, accounting for 71 percent of all the AIDS related deaths in the world. Not surprisingly, sub-Saharan Africa is also one of the poorest regions in the world.

But while the problem of AIDS – and the poverty it causes – might seem insurmountable, it only takes around $100 a year to save one AIDS victim.  To put this amount in perspective: the United States spends roughly $600 billion annually on its military, nearly twice as much as the second highest spender, China.  How different would the world be if the United States decided to trim the amount it spends on its military, and use that to help other countries eradicate diseases?

People from poor countries need help to get healthier. Unfortunately, most developing countries simply do not have the resources to provide healthcare for their people. The richer nations need to make an involved effort in helping these countries eradicate diseases such as AIDS and malaria. By increasing the amount of aid that the United States and other developed nations give to combat diseases, the world will see a decrease in death from preventable diseases, and, as a result, a decrease in global poverty.

– Travis Whinery

Sources: WHO, UN AIDS, Economist
Photo: China Daily