The Philippines' Improved Economy
The Philippines is a developing nation located in the East Asian Pacific region. Although the nation is still developing, the Philippines economy is improving exponentially. According to the World Bank Group, the country is experiencing increased urbanization and the middle class of the country is growing. Businesses have experienced notably positive performance in the past few years. Real estate, finance and the insurance industry are all areas where the economy is having exceptional growth. However, the COVID-19 pandemic has slowed the economic growth of the Philippines. If the Philippines contains the virus on both a domestic and global level then the economy of the Philippines will rebound in late 2021 or 2022. The Philippines’ improved economy occurred in several ways.

Investing in Agriculture

Agriculture accounted for about 25% of the Philippines’ GDP in the 1980s. However, only 9.3% of the agriculture industry contributed to the economy in 2018. Yet, the agriculture sector employs about 25% of the Philippines’s workforce. Some important agricultural goods from the Philippines include coconuts, rice, corn and pineapples. In recent years, the agricultural sector’s low rate of growth has contributed to poverty and unemployment.

As a result, the government has begun supporting the Philippine Department of Agriculture’s programs. Some of its programs include improving food security within the nation. The World Bank’s Philippine Rural Development Project is providing external support to the agricultural sector. This project aims to improve infrastructure that is vital to agricultural production. Furthermore, improving agriculture is vital to the economy.

Improving Industry

The industry sector has been another contributing piece to the Philippines’s improved economy. Currently, this sector has currently been able to employ 18.4% of Philippine workers. Additionally, the Filipino government is attempting to increase the amount of foreign direct investment. It also plans on achieving this goal by working to improve the infrastructure of the nation. This will then attract the attention of possible investors. Manufacturing is another important industry in the Philippines. The Philippines is home to a variety of metallic resources. The mining industry itself has already brought different mining companies to the Philippines to conduct business. Mining businesses working in the Philippines include BHP and Sutimo Metal Mining Co LTD.

The Growing Service Sector

The growth of the service sector is another contributor to the Philippines’ improved economy. Around 60% of the Philippines’ GDP comes from this sector. In addition, the service sector also employs about 56.7% of people in the Philippines’ workforce. One vital part of the service sector includes business process outsourcing (BPO). The Philippines has an extremely large BPO market due to the United States aid.

The Philippines’ improved economy is noticeable in several ways. First, the income-per-capita saw an increase of 17% from 2016-2018. Additionally, the unemployment rate has decreased as a result of foreign direct investment into the country. The Philippines has become the 13th largest economy in Asia. Despite the challenges, organizations like EY and the World Bank note that the Philippines has the potential to have a flourishing economy.

– Jacob E. Lee
Photo: Wikipedia Commons

investing in BrazilThere are numerous reasons to invest in foreign aid in general. That can include partaking in growing the global economy, promoting international human rights and opening donor countries to potential investment returns. What makes Brazil a particularly good market to invest in is its promising role in the global economy. There are several reasons why investing in Brazil is beneficial.

COVID-19 Response

As of January 2021, Brazil has the third-most COVID-19 cases worldwide. The Brazilian economy was not in its best shape at the start of the pandemic because it has not fully recovered from the 2014-2015 recession. This made the economy vulnerable to precarious economic shocks that resulted in increased poverty, unemployment and small business fragility.

The COVID-19 pandemic has left countries like Brazil with possible lasting economic damages. Many emerging and developing countries rely heavily on foreign aid for financial and humanitarian support. Offering foreign aid to Brazil will not only help pave the way for a domestic post-COVID recovery but also alleviate some of the negative impacts of the pandemic through humanitarian benefits.

Diversified Opportunities in Emerging Markets

The Brazilian economy is classified as an emerging market. Emerging markets are economies that are transitioning into a developed economy. Since the launch of the MSCI Emerging Market (EM) Index in 1988, which measures portfolio performances of emerging markets, investing in emerging countries proved to create new and diversified opportunities outside of common markets.

Market Expansion and Economic Growth

Since 2016, Brazil has shown an increase in GDP growth with approximately a 1.3% increase. In 2020, Brazil fell back into recession because of COVID-19. However, Brazil’s economy displayed growth and has played an important role in the growth of the Latin American economy as it makes up 35% of the Latin American GDP. It is approximated that the Brazilian market reaches 900 million consumers in just the Americas.

On how quickly the Brazilian economy rebounded, Bloomberg reports boosted domestic demand and exports with a 9.47% rise in economic activity index from July to September of 2020 in comparison to the previous months.

As Brazil recovers from COVID-19’s economic impact, it leaves opportunity for foreign investors to take advantage of Brazil’s growing market, especially with its low interests. Some of Brazil’s profitable sectors include real estate and agricultural goods like coffee, sugar cane, corn and soybean. Participating in these sectors expands Brazil’s domestic market and hence the world market size.

Geographical Location

Especially for the United States, Brazil’s proximity allows easier trade. For other advantages, Brazil’s geographical properties for the agriculture sector also make its commodities attractive. Approximately 28.7% of land is used for agricultural production which makes up more than 4% of the annual Brazilian GDP. Following China, the United States and Australia, Brazil has the fourth-most amount of agricultural land.

Foreign Investment Returns

Encouraging enterprises to invest in foreign aid can ultimately result in great returns. A common type of foreign aid for these corporations is Foreign Direct Investment (FDI). Through FDIs, corporations can potentially gain lasting interests, multinational consumers and flexible production costs. This type of foreign aid also brings developing countries like Brazil innovative technology, investment strategies, jobs and infrastructure from investing corporations of developed nations.

Foreign investment is critical to developing and emerging markets. Investing in Brazil promotes development and sustainability and also benefits foreign investors greatly. Furthermore, foreign investment assists economic recovery following unforeseen economic shocks like that of the COVID-19 pandemic.

Malala Raharisoa Lin
Photo: Flickr

Silk InvestSilk Invest is a private equity firm founded in 2008 that invests in emerging markets that demonstrate the potential for long-term economic growth. The largest private equity fund managed by the firm is called The Silk Africa Food Fund. Investments made from this fund target companies involved in food processing and distribution throughout Africa.

The Silk Africa Food Fund

The fund was started in June 2012 and focuses primarily on businesses that distribute food to African consumers. Countries that attract investment the most are those which are institutionally and politically stable enough to support long-term economic growth. Silk Invest is distinct from many other foreign investment funds that support the effort to reduce hunger in Africa in that it does not target agriculture but rather the distribution of food to consumers.

The three largest investments the fund is involved with are Nigeria’s Sundry Foods Limited, Ethiopia’s Nas Foods Plc and Egypt’s El Rashidy El Asly. Of these three, Nigeria’s Sundry has seen the most significant success and expansion following its partnership with Silk Invest.

The Success of Sundry Foods Limited

The company runs the popular restaurant chain, Kilimanjaro, as well as bakery and food catering services throughout the country. When Silk Invest first gave funds to Sundry in 2012, the company had seven restaurants open and a revenue base of around $3.4 million. In 2020, just eight years later, Sundry has 40 restaurants and a revenue base of around $34 million. The entrepreneurial effort of the company’s founder, Ebele Enunwa, has been instrumental in this progress.

Sundry is a company firmly rooted in supporting its fellow local businesses. Instead of setting up in the more commercial capital of Lagos, Enunwa established headquarters in Port Harcourt where he is a local entrepreneur. Its management team consists of local hires and its supply chain uses locally sourced raw materials, including chicken and rice from rural areas.

Sundry’s Impact and Potential

Sundry Foods Limited represents an example of the enormous potential which exists for businesses in developing nations when the proper investment is made. By providing capital to Sundry, Silk Invest gave the company the tools it needed to expand its operation. By doing so, Sundry has not only offered an improved service to consumers throughout Nigeria but has also stimulated its broader community’s own economy by maintaining a steady and even increasing demand for local products.

The impact made by Sundry’s growth is palpable. Over the last 10 years, the company has created over 2,000 jobs. Silk Invest’s Africa Food Fund is hugely impactful in the effort to reduce poverty in developing nations not only because of the direct benefit the invested capital provides to individual businesses but also because of the economic growth created in broader communities as an indirect result.

The Importance of Investing in Africa

This impressive progress was all stimulated by a $2.4 million investment. The high return for Silk Invest demonstrates that funding businesses in developing countries is not only beneficial to the growth and development of those businesses but is also a practical and sound investment for the firms offering the capital.

Investing in the effort to reduce world hunger presents impactful and beneficial opportunities for all parties involved. By establishing the Africa Food Fund, Silk Invest has committed itself to this effort while simultaneously supporting developing economies.

– Haroun Siddiqui
Photo: Flickr

Impact Investing in RwandaImpact investing is a growing industry with huge potential for combatting poverty around the world. The practice consists of firms and individuals directing capital to businesses and enterprises that have the capacity to generate social or environmental benefits. Traditional businesses tend to avoid such investments due to the high level of risk, low liquidity and general difficulty to exit if returns are not satisfactory. Most impact investing is done by particularly adventurous capitalists as well as nongovernmental organizations (NGOs) that aim to create social change. Impact investing in Rwanda, in particular, has yielded positive results.

AgDevCo

AgDevCo is an example of a social impact investing firm that aims to invest with the intention of reducing poverty and increasing opportunity in developing regions. Based in the United Kingdom, AgDevCo was incorporated in 2009 and has engaged in numerous projects since.

The firm’s specific area of investment is in African agriculture, where it believes that impactful investments have the potential to be a significant force in reducing poverty. The firm is currently investing in eight different African countries. Its portfolio includes $135 million worth of funds in 50 different companies. These investments have engaged more than 526,000 customers and have created or sustained more than 15,000 different jobs.

Uzima Chicken Limited

One of its investment projects is a partnership with the East African poultry company, Uzima Chicken Limited. Uzima Chicken produces and distributes the Sasso breed of chickens. Sasso chickens are resistant to disease and can feed through scavenging. These beneficial traits make Sasso chickens particularly useful in the struggle to reduce poverty in East Africa.

In 2017, AgDevCo invested $3 million to support Uzima’s establishment in Rwanda. As a result of the investment, Uzima gained funds necessary for rapid operational growth as a domestic producer of poultry. This is in line with the government of Rwanda’s strategy to achieve poultry self-sufficiency in two to three years. Uzima has also been able to expand into Uganda, where its business is rapidly scaling upwards.

The Uzima Business Model

The Uzima model of business involves the employment of company agents who raise the chicks for six to eight weeks before selling them to low-income households in rural areas. Such a model provides benefits to farmers, who can increase income through the sale of the more valuable Sasso chickens, as well as the agents.

Agents typically make a 25% profit from selling chickens. A survey of Uzima agents found that, on average, 27% of household income came from selling Sasso chickens. By providing a reliable source of extra income for employed agents, Uzima helps to alleviate the burdens of poverty for these people. As of 2017, the efforts had created 150 new jobs, 40% of which are held by women. Rwandan women have benefitted significantly from Uzima’s employment with 64% of women agents reporting that the income they earned from selling Sasso chickens led to a positive change in the decision-making power they had in their households.

Impact Investments for Poverty Reduction

Uzima’s Sasso chickens grow faster, live longer, produce more eggs and have higher market prices. They are disease-resistant and thrive in local, rural conditions. Out of all the customers buying these chickens, 54% live below the $2.50 poverty line. AgDevCo investment gave Uzima the capital necessary for operational expansion, and as a result, a greater quantity of impoverished people in East Africa could buy superior chickens and increase income. Uzima’s business also has clear potential for women’s empowerment, making it a great tool in the effort to reduce poverty and inequality in the region.

The impact investments made by firms like AgDevCo have clearly measurable impacts in impoverished regions, particularly noting the success of impact investing in Rwanda. This makes impact investment firms an important part of the global effort to reduce all poverty.

Haroun Siddiqui
Photo: Flickr

prosper africaAfrican markets claim six out of 10 of the fastest-growing economies in the world. Africa’s middle-class is likely to have an annual household consumption of $2 trillion before 2030, and by 2050, the U.N. predicts that Africa will be home to one-quarter of the world’s population. Prosper Africa is an initiative that strengthens U.S. investment in Africa.

US-Africa Ties

Nations such as Germany and China are competing for investments in Africa in preparation for its burgeoning role in the global economy. In the past 20 years, the United States has also attempted a number of initiatives to expand U.S.-Africa economic ties. Unfortunately, results have been modest because the focus has been on Africa as a foreign aid recipient rather than a strong future trading partner. However, Prosper Africa’s latest initiative, set to launch in 2021, offers hope for a more engaged economic partnership between the U.S. and Africa.

Prosper Africa

Prosper Africa was launched in December 2018 to “vastly accelerate” U.S.-Africa trade and investment through the coordination of 17 U.S. agencies and departments. This mutually beneficial endeavor not only opens market opportunities and grows Africa’s economic sustainability, but also protects the United States’ interests in the competition against other nations’ involvement in Africa.

Far from being a foreign aid program, Prosper Africa’s official website acts as a one-stop-shop for U.S. and African businesses and investors. It offers toolkits for African businesses and investors seeking to export or invest in the United States and vice versa for U.S. businesses and investors seeking to become involved in Africa. According to the website, Prosper Africa represents “a new way of doing business” through its portfolio of support services. To date, the initiative has serviced more than 280 deals valued at more than $22 billion. In keeping with its expanding ambitions, Prosper Africa’s budget request for the 2021 fiscal year rose from FY2020’s $50 million to $75 million.

Prosper Africa: 2021 Plans

On Nov. 17, 2020, USAID announced a new Prosper Africa trade and investment program for 2021. Valued at $500 million over five years, its goal is to expand Prosper Africa’s services. The four project objectives are increased trade, increased investment, improved business environment and providing support for USAID and Prosper Africa. A strong emphasis will be placed on private investment. By 2026, the program is expected to raise billions of dollars and create hundreds of thousands of jobs in both Africa and the United States.

It is still uncertain exactly what this program will look like. The program’s blueprints from Feb. 2020 describe its implementation approach fairly loosely. It aims to be flexible in shaping private sector demands concerning the facilitation and brokering of deals. Most of its transactions will take place directly through the firms and actors involved.

In addition to Prosper Africa’s website toolkits, local offices and trade hubs will provide further customizable services to align with the needs of different sectors. Some examples of services include investor matchmaking, transaction facilitation, targeted reforms and export support. Resource allocation will be determined by impact potential. Opportunities within the private sector will comprise the majority of activities and projects may be funded by grants or subcontracts. Throughout its services, Prosper Africa encourages African states to support economic transparency and rule of law.

Prosper Africa’s Chances of Success

Because Prosper Africa is effectively a harmonization of 17 U.S. agencies and departments, success largely comes down to effective cooperation. However, the initiative’s goals vary in difficulty. For example, Prosper Africa has already made impressive strides in streamlining its toolkits and providing specific U.S. services to aid transactions. However, more long-range goals, such as procedural reform and transparency, sector expansion, the rule of law and improving business environments may prove more challenging to achieve. However, from an economic standpoint, it is certainly encouraging to see Prosper Africa approach U.S.-Africa relations as an equal, viable trade partnership rather than merely an aid recipient.

Andria Pressel
Photo: Flickr

Ukrainian InventionsUkraine is the second poorest country in Europe, with a per capita GDP of less than $3000. Ukraine had a difficult time rebuilding its economy after the collapse of the USSR in 1991 and was left with a crumbling economy due to corruption, poor infrastructure and many other factors. Despite the shortcomings of Ukraine’s economy, it has shown incredible potential for innovation and ingenuity because of the high-tech inventions that have come out of the Ukrainian workforce. Increased investment in Ukrainian inventions would drive it to success and improve the economy by creating stable work conditions. Improving infrastructure and creating sustainable job opportunities would help the economy grow and help Ukraine continue making world-renowned inventions.

5 High-Tech Ukrainian Inventions

  1. Grammarly: Grammarly was founded in Ukraine by Alex Shevchenko and Max Lytvyn in 2009. Grammarly uses AI software to proofread text on sites like Google, LinkedIn, various social media sites and more, while offering grammatical corrections. It is now a U.S.-based company and a widely popular tool for producing academic papers, professional documents and other bodies of text.
  2. Snapchat Filters: Snapchat filters and lenses first came about when Snapchat acquired Ukrainian startup, Looksery. Looksery is a facial recognition software that allows users to put filters on themselves while video chatting. Looksery was bought in 2015, started by a Ukrainian team with Victor Shaburov as the CEO. Snapchat uses the technology to create its filters, one of the many successful and important updates to the social media app. Instagram, another social media app, followed in the footsteps of Snapchat and introduced a version of Instagram photo filters in 2018.
  3. Apps for Deaf People: BeWarned, a Ukrainian-based startup co-founded by Vitaliy Potapchuck, is an application that people who are deaf can download on their phones to help them communicate with others. Potapchuck is also deaf and designed the app to pick up possible dangerous sounds and call for emergency help. BeWarned also makes other software for those who are deaf and hard of hearing.
  4. Virtual Reality Gloves: In 2016, a Ukrainian team of engineers created a prototype virtual reality glove that allows users to “feel” virtual reality items as if they were real. The glove mimics real-life hand motions and is used for a variety of things besides virtual reality gaming. Healthcare professionals can use the glove to study mobility and disease treatments. Co-founder, Denis Pankrushev, wanted the technology to “open new horizons for mankind.” This opened doors for virtual reality innovation and put Ukrainian technology startups in the spotlight.
  5. Uber for Yachts: The company CharterClick was started by three Ukrainian immigrants in Dubai to provide an easy way to rent a boat or luxury yacht for events. The team created CharterClick to show that complicated tasks like renting an expensive cruise with a full crew, can be completed in a short amount of time with just a few clicks. The service operates in more than 40 countries and is dubbed “the world’s most convenient vessel booking service.”

Ukrainian Inventions: Potential for the Economy

Ukraine ranked second place in the Top Three Innovation Economies by lower-middle-income group according to the Global Innovation Index. It is also ranked 45th in the world by the Global Innovation Index. There is massive potential for Ukrainian technology to continue its path of innovation and unlock itself to the European market. International investment can help improve the poor infrastructure that drives creative minds and job opportunities out of the country.

Google Ukraine’s CEO recognizes the brilliant minds of the country, but notes that many of them choose to work in the U.S. because of more “favorable conditions.” Favorable conditions include better infrastructure, better pay and a market that attracts investors. Ukraine is closed off to the international market because of its poor societal conditions, which is detrimental to its working-class and the overall economy.

How Supportive Infrastructure Will Improve the Economy

Ukrainian infrastructure is one of the main reasons that working in the country is difficult. The majority of the roads in Ukraine are too poor to carry cargo and passengers, limiting trades in the country and making it difficult to get to work. Ukraine has set an infrastructure plan for 2030 that includes improvement of all transportation systems with a high price tag. Over the next 10 years, Ukraine requires up to $25 billion of investment to complete the plan as it can only fund $.1.5 billion per year on its own.

Transforming Ukraine: Inventions and Infrastructure

Putting technological growth in the spotlight will attract more investors that want to see the Ukrainian technology sector thrive. Much-needed funding can come from international attention to the infrastructure problem. Improvement will create construction job opportunities and motivate the government to tend to the sectors that are struggling.

Ukrainian inventors should be able to work in their own country without having to migrate to another. Not to mention that infrastructure improvement will help many other citizens easily find work and improve the economy. Ukrainian inventions have the potential to kickstart the country’s economy and help with its development.

– Julia Ditmar
Photo: Flickr

Livestock WealthPoverty in South Africa has historically been linked with the institution of the racial apartheid regime. The national government began to pass segregationist policies in 1948, with racial discrimination policies only officially dismantling in 1994 when South Africa became a democracy and Nelson Mandela stepped into power. Livestock Wealth is a company that introduced South Africa to “crowdfarming” as a means of supporting farmers and alleviating poverty in the country.

Apartheid and Poverty

Under the apartheid regime, the minority-white government passed policies aimed at keeping black South Africans, who made up a majority of the population, from having any meaningful participation in the economy. This left millions trapped in cycles of poverty and the residual effects of such discriminatory policies are still being contended with, in the effort to reduce poverty today.

Apartheid laws confined poor South Africans to rural regions and made the migration to urban areas difficult. The lack of opportunities and social mobility in rural areas made overcoming poverty a challenging task. The legacy of this limited mobility is still present today. South African provinces in rural areas have more households in chronic poverty compared to urban provinces. As of 2015, 25.2% of the population of urban areas lived below the upper-bound poverty line (UPBL), whereas 65.4% fell below the UBPL in rural areas. In order to reduce poverty, it is most important that rural communities receive support and investment.

Livestock Wealth

Livestock Wealth is a startup founded in 2015 by Ntuthuko Shezi which aims to provide investment for farmers in South Africa’s rural areas. Livestock Wealth allows investors from anywhere in the world to effectively purchase from South African farmers four different livestock and crop options: a free-range ox, a pregnant cow, a connected garden or a macadamia-nut tree. When the cows or the crops are sold, both the farmer and the investor receive a share of the profit.

The investment provides liquidity to farmers for whom there is limited availability of short-term funds. Livestock Wealth is currently a credit provider with South Africa’s National Credit Regulator and is registered with the Agricultural Produce Agents Council.

Livestock Wealth currently has 58 partner farmers all across the country and all cows are hormone-free and grass-fed. In recent years, its business has expanded to also provide meat for investors who join the “Farmers Club.” There are currently more than 2,800 investors with Livestock Wealth and more than $4 million has been invested.

Alleviating Poverty in South Africa

Livestock Wealth is a representation of an initiative that has great potential to alleviate poverty in South Africa. South Africa’s rural populations have a long history of exclusion from the economy and have struggled to reduce poverty for decades. Livestock Wealth provides cash investments for farmers and creates a market in which they can reliably trade. By doing so, the firm exemplifies an innovation within the South African economy, one which is helping to alleviate poverty and can inspire others to do the same.

– Haroun Siddiqui
Photo: Flickr

poverty relief in haitiPlagued by historical political oppression and a series of recent natural disasters, Haiti is among the poorest nations in the Western Hemisphere today. An estimated 8.5 million Haitians live below the poverty line, 2.5 million of whom survive on $1.12 a day. Thus, it is not surprising to see an influx of immigrants from the country. According to the activist organization RAICES, Haitian immigrants make up nearly half of families detained in U.S. Immigration and Customs Enforcement (ICE) facilities. Immigration policy must consider the origin countries of migrant families and why they chose to migrate in the first place. Though the U.S. has prioritized harsh security measures at the border, investing poverty relief in Haiti may improve the situation.

Haiti’s History of Poverty

Haiti’s ongoing economic crisis stems from a long history of political unrest. From national corruption to human rights violations and the damaging effects of colonialism, Haiti’s economy has never fully recovered. After regaining independence from France, the small country owed 150 million francs to the European nation. Haiti finally finished paying off this debt in 1922.

A World Bank report estimated that 6.3 million Haitian citizens could not afford certain consumer goods in 2012, while another 2.5 million struggled just to buy food. Additionally, despite some poverty relief in Haiti, about half of the population cannot access public services. From 2001 to 2012, Haiti saw improvements in tap water, energy and sanitation accessibility, but coverage rates remain well below 50%. Furthermore, recent statistics from the World Bank claim that Haiti’s GDP per capita was only $756 in 2019. This poverty, along with a particular susceptibility to natural disasters, creates incentives for mass migration from Haiti.

The Price of Immigration Enforcement

When it comes to immigration enforcement, the U.S. spares no expense. The American Immigration Council found that, since 2003, the federal government has spent approximately $381 billion on immigration control. The U.S. Customs and Border Protection (CBP) and ICE  have grown, with nearly triple their original budgets today. In 2020, federal spending was $8.4 billion for ICE and $16.9 billion for CBP.

Despite the generous contributions to these enforcement agencies, immigration issues have not necessarily disappeared. Instead, this tough approach at the border has created a new set of problems. Claims of trafficking, abuse of power by enforcement officials and poor conditions in holding facilities have surrounded the departments. Specifically, RAICES found that Haitian and other Black immigrants face discrimination and mistreatment while under ICE custody.

With an estimated 40,000 Haitians making up a large portion of border detainees, some government officials are proposing investing in poverty relief in Haiti. Politicians, such as Rep. Frederica S. Wilson (D-FL), are fighting to restore stability in Haiti during the pandemic. Wilson and some of her colleagues believe that this will have a slowing effect on migration.

Poverty Relief in Haiti Shows Promise

The World Bank has demonstrated the benefits of investing in poverty relief in Haiti. From 2000 to 2012, extreme poverty decreased by 7.4% largely due to economic progress in Haiti’s big cities. Similarly, poverty rates in rural areas reached 74.9%, while the country’s capital, Port-au-Prince, only had a rate of 29.2%. By increasing and distributing aid, the rest of the country can achieve poverty reduction rates similar to those in urban regions.

The same report details how, with the help of the Heavily Indebted Poor Countries Initiative, Haiti eliminated a large part of its public debt. This in turn increased the economy by 2.3% annually from 2005 to 2009. The financial help also “contributed to the generation of optimism in the country and among the country’s partners.”

Researchers urge U.S. policymakers to begin looking at remittances as having investment returns. For example, temporary work visas significantly bolster Haiti’s economy and raise the quality of life for Haitian households. This lessens the need for migration. If the U.S. changes its perspective on immigration, it could begin developing a mutually beneficial relationship with Haiti while decreasing emigration.

Lizt Garcia
Photo: Flickr

Power Production
Development programs often emphasize distributing a needed resource to as many people as possible. Once a program or company finishes with an area, it moves onto the next one. However, that strategy risks leaving people in poor, especially rural areas with infrastructure they may not know how to keep up. One such infrastructure is power production.

Electric Supply in Nigeria

Take the Power Holding Company of Nigeria (PHCN) as an example. It was owned by the government, was the only centralized electric company there and contributed to less than 1% of the country’s GDP. In the U.S., electricity production and movement accounts for five times that GDP percentage. As the country with the second-most total economic activity in Africa, PHCN is a significant player and has the potential to be a leader for the rest of the continent. The inefficiency of power production and the deterioration of existing lines and plants, however, seriously hurt growth. Most Nigerians, if they have power at all, can only use it erratically. If they want a steadier supply, they must rely on fossil fuel generators, which is simply unattainable for many low-income families and groups.

Proposed Solutions for Reliable Electricity

The lack of consistency in power production hurts far more than it may initially seem. If the industry cannot produce with regularity, other countries will outcompete Nigerians in most cases, compounding the issue of growth already present. Even when the industry does get power, it is more expensive because so much of it is lost – the system is currently working at 1/3 capacity, producing less than 3,900 MW for the whole country. With all these issues, it’s obvious that there needs to be a change. Some solutions that the government and other groups proposed are:

  1. Privatization: In theory, letting in investors should allow people to run the power sector of Nigeria with much more efficiency. Additionally, it can reduce the amount of corruption by separating power production from a not-so democratically elected government. This happened in 2012 when control passed to many oligarchs in the Nigerian GENCO group. However, privatization may widen the income gap between the rich and poor, where the top 1% already have 82% of the country’s wealth.
  2. Grants: Many organizations can give money to improve the general infrastructure directly. The World Bank gave Nigeria one such grant in 2018 of around $500 million. This money focuses on increasing access to and stabilizing the already existing power grid that supports 50% of the population. Although $500 million may seem like a lot of money, it’s an investment that can pay off for American and other developed countries’ businesses, as Nigerians can make more wealth and spend it in other parts of the world.
  3. Rethinking the System: The limited amount of energy-producing plants creates an opportunity for alternative energy solutions. Nigeria could invest in greener energy solutions, such as solar panels and wind turbines that produce power locally. Since long-distance power lines lose 7% of their energy, localizing production could save hundreds of megawatts, increasing stability and accessibility. This could also reduce environmental challenges due to greenhouse gases.

Improving access to electricity in developing countries like Nigeria is no easy feat. However, teaching proper maintenance techniques is essential no matter what path the country decides to take. That’s how power will get to the last 50% of Nigerians and be stable for everyone in the nation.

Michael Straus
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