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The Role of the Private Sector in Poverty Reduction

Private Sector in Poverty Reduction
Poverty and world hunger stand on the docket of extinction, for the first time in human history. Even just one generation ago, this acknowledgment would seem absurd. The United Nations advocates that the world can meet the unimaginable goal of eradicating world hunger by 2030.

To achieve this goal, it would take between $170 and $190 billion a year from the U.S. to take everyone out of extreme poverty in the next two or three decades. Just to put that number in perspective, as the largest bilateral donor, the U.S. allocates roughly $49 billion to foreign funds every year to 96 percent of the globe. This article will look at the role of the private sector in poverty reduction.

Advantages of Private Sector in Poverty Reduction

Directing focus on the magnitude of the nation’s role in poverty reduction must be noted, considering only 1 percent of the federal budget goes to foreign aid, the question arises if there is a cheaper, quicker way to fast-track the eradication of extreme poverty. What about the private sector?

The role of the private sector in poverty reduction is that it naturally brings to the table what governments and nongovernmental organizations do not. Federal funds can only cover so much with a $49 billion a year budget. Some of the most transformative investments in poor regions around the globe come from private lenders.

Most U.S. money goes to direct assistance, like world health programs, providing aid packages and doing the heavy lifting for broad-based long-term economic development. The private sector can help stimulate poor economies. Private business contributes a different model to aid and public resources. They can provide jobs, goods and services sometimes more effectively than agencies can do alone.

Developing Countries Opportunities

Developing countries offer business opportunities unheard of in the developed world. The potential for market growth in underdeveloped regions is monumental. Social entrepreneurs likewise are more flexible in carrying out the demands of poverty because they can develop new cross-sector models out of competition, without being tied to the orthodoxies of foreign aid.

Take for example infrastructure in the developing world. The International Finance Corporation (IFC) estimates that it will take $2 trillion a year to fix the world’s infrastructure needs, especially in the developing world where billions of people lack access to safe water, electricity, roads and other basic services.

While often the domain of governments, poor countries cannot support the immense costs of upgrading infrastructure. Infrastructure is essential to eradicating poverty. To escape low-income agricultural dependency, countries need infrastructure projects to communicate, process and transport quality goods. The private sector can work at a much larger scale enabling investments in energy and transportation infrastructure that administer long-term benefits to the economy for local entrepreneurs to take advantage of.

In theory, by solving insurmountable problems in developing countries economies, the role of the private sector in poverty reduction is improving value chains. The private sector and entrepreneurship play a fundamental role in innovation, improving business standards and job creation without development goals as their primary agenda.

Things to Consider when Investing

Private companies can provide lending to update infrastructure projects as Chinese companies have done in Africa. However, there are negative aspects of foreign funding as well. While the inflow of investments does help locals and spark economic growth, these are debts to be repaid to commercial outsiders. For example, several Chinese infrastructure investments have helped support corrupt and undemocratic regimes and only compounded local problems. Not to mention this activity supports an extractive business model.

Infrastructure and jobs help immensely, but the private sector needs to share its wealth capacity with the developing world. Since 2000, the poorest half of the world has received just 1 percent of the increase in total wealth, while the wealthiest 1 percent of the world received over 50 percent of the total wealth. Wealth tends to stay in the hands of the wealthy people. Businesses need to keep in mind that the most valuable asset for then is their labor force. Better paid skilled jobs are keys to growth anywhere.

Foreign direct investment grew from under $50 billion in 1990 to almost $500 billion in 2011. For the first time in 2013, foreign direct investment in developing countries exceeded investment in developed countries. At the same time, commercial lending and remittances have grown significantly.

GDP growth has been high for the last decade in developing countries. But the growth in jobs has not been enough to transition from an agricultural economy to a high productivity economy. Stimulating these economies to help in that transition is key to transitioning. The role of the private sector is that it must be relevant to the poor. Their intervention can be life-changing in guiding the poor to the path to prosperity, remembering that their labor force may be the main assets they possess.

– Joseph Ventura
Photo: Unsplash

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Economic Growth in Saudi Arabia and Argentina

capital flows support economic growth
Economic growth is one of the most powerful tools for reducing poverty, and a key driver of economic growth is investment. Argentina and Saudi Arabia, two countries that have committed to political and economic reforms in recent years, are hoping to spur investment from abroad. The announcement by MSCI, an equity index provider, to classify them as emerging markets has attracted sizable foreign investments to the two countries. But whether the capital flows support economic growth is still up for debate.

MSCI

MSCI created its Emerging Markets Index in 1998 and since then it has become a benchmark for investment in emerging markets. Many investment funds track the index by buying a similar composition of stocks. Therefore, when stocks are added to the index it inevitably prompts investment flows to increase in certain countries.

In late June, MSCI decided to add Argentina and Saudi Arabia to its emerging markets index. The decision is a result of the reform efforts in both countries. The Crown Prince of Saudi Arabia, Mohammad bin Salman, is trying to shift the country from its oil dependency and increase social liberalization, including allowing women to drive while President Mauricio Macri of Argentina has sought to end disputes with international investors and remove barriers to capital entering and leaving the country.

The effects of their addition to the index may be profound. Some estimates predict approximately $3.5 billion and $40 billion of capital inflows into Argentina and Saudi Arabia respectively in the coming year. The inflows could lead to businesses in these two countries giving them cheaper access to credit that will further lead to more investments; thus boosting economic growth and productivity.

Poverty in Saudi Arabia and Argentina

The two countries are seeking to boost economic growth and stability by any means possible. Saudi Arabia’s economy contracted 0.7 percent in 2017, driven by lower oil prices. Argentina also had to turn to the International Monetary Fund for a $50 million line of credit after capital flight weakened its currency.

Given these countries’ extensive poverty, economic growth is needed for their governments to maintain its credibility. Argentina’s poverty rate is over 25 percent, and while there are no exact figures for poverty in Saudi Arabia, it is believed that almost four million people or approximately 12 percent of the population, live on less than $17 a day.

Do Capital Flows Support Economic Growth?

Do capital flows support economic growth in emerging markets? The answer to that is vague. Take Africa for instance. An economic study concerning private capital inflows found that capital flows had a detrimental effect on Africa’s economic growth in the absence of well-developed financial markets. Conversely, a research paper by the World Bank in 2015 found that capital inflows into Sub-Saharan Africa would have a positive effect on its economic growth. This study found, however, that the most effective type of capital inflow in boosting growth wasn’t private capital flows but aid.

The economic literature debating whether capital flows support economic growth is expansive and divisive. Therefore, increasing private capital flows to Argentina and Saudi Arabia may or may not be the answer to the economic instability plaguing the two countries. But both aid and private capital will continue to play an important role in the economic growth and futures of emerging markets.

– Mark Fitzpatrick
Photo: Pixabay

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How the Media Misrepresents Liberia and Its Economic Successes

How the Media Misrepresents Liberia
For many years, the media has portrayed Liberia as a country in perpetual turmoil, referencing events like the civil war and Ebola outbreaks. Although these events have undoubtedly created obstacles for the Liberian government and its citizens, the country has also had notable accomplishments, like the election of Ellen Johnson Sirleaf, the first black female head of state in the world. The international media omits Liberia’s progress, and that omission is how the media misrepresents Liberia.

Liberia’s Politics and Economy Improve After Civil Wars

More than a decade of political strife from civil war has left more than 250,000 dead and about half of the country’s three million people displaced. The severity of war and widespread poverty in Liberia has received substantial media attention. Fifteen years later, the media still manages to make war the focus rather than the country’s positive economic efforts.

The presidential elections in 2017 attracted some media attention when Joseph Duo, who fought rebels during the second civil war, ran for president. Articles covered the war, the poor economy and political instability yet again instead of positive events. The U.S. Embassy in Monrovia described the 1.5 million Liberians who voted in the election as inspirations for democracy, resulting in the victory of current president George Weah.

The economy has grown since the wars, despite media representation of it being stagnant. Liberia has emphasized the importance of economic growth, aided by former president Ellen Johnson Sirleaf. In 2013, 10 years after the end of the war, GDP growth reached 8.9 percent with natural resources like rubber, palm oil, gold and iron ore greatly contributing to the country’s industry.

Despite the setback of the Ebola outbreak, these sectors have begun to help augment GDP growth in Liberia. In 2017, Liberia experienced 2.5 percent growth, and rates are projected to reach 3.9 percent in 2018 and 5 percent in 2019.

The role of foreign direct investment also indicates economic growth as well as improvements in the country’s stability as foreign companies begin to work in Liberia. Large multinational companies like China’s UnionPay, India’s ArcelorMittal and Russia’s Putu Mining are taking advantage of the new market opportunities in Liberia and have added more than $13 billion to the Liberian economy. These companies’ investments have contributed to the growth and development of the country. The lack of attention given to this growth, however, is how the media misrepresents Liberia.

The Media Misrepresents Liberia by Ignoring Its Progress After Ebola Outbreak

The Ebola virus outbreak, which began in December 2013, affected Liberia the most, and by the time it was eradicated from the country in June 2016, a total of 4,810 people had died. The media heavily covered the progression of the outbreak in West Africa; however, coverage halted after the spread slowed. This lack of discussion is another way the media misrepresents Liberia and its growth. Since the outbreak, Liberia’s healthcare services have improved with the help of the World Bank and other developmental organizations.

Dr. Asinya Magnus, a Liberian doctor who worked in affected hospitals outside the capital of Monrovia, told the World Bank that “Ebola revolutionized health services…with a transition from a closed to an open healthcare system.” Better healthcare systems, more medical supplies and efficient training of medical officials in the country have helped Liberia’s health sector in the aftermath of tragedy.

Liberia still struggles with numerous complicated economic and social issues. These issues, however, remain the overwhelming majority of what is represented in the media. As a small, West African country, the Western media only offers rare glimpses of Liberia to the outside world, and these perpetual negative discussions alter the overall perception of the country and its people. Despite these issues, the country continues to recover and catalyze positive growth and change, hoping that it will eventually receive proper, and positive, representation in the media.

– Matthew Cline
Photo: Flickr

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India’s Solar Story: The Renewable Energy Sector in India

Renewable Energy Sector in India
In a deserted, rocky and barren land with temperatures up to 80 and 90 degrees Celsius, millions of silver-grey solar panels glimmer in the sun. This is a start of what is said to be the biggest solar power station in the world in Pavagada, a town located in southern India. This city is where a massive solar park is set to be built and is expected to produce 2,000 megawatts of electricity, enough to power 700,000 households. This is the start of a clean-energy revolution in the renewable energy sector in India.

The Renewable Energy Sector in India

The renewable energy sector in India is now the leader in creating a new revolution in solar energy. Prime Minister Narendra Modi’s government aims to achieve 100 gigawatts (GW) of solar installations by 2022, of which 40 gigawatts is expected to come from rooftop installations. This emphasizes India’s commitment to the Paris Agreement and its strong will to push for solar energy generation in countries with huge potential.

Solar energy serves as a clean and affordable form of the renewable energy sector that would help India cut down its carbon emissions as well as reduce its dependency on the import of crude oil (at least to some extent).

Although India has committed to going solar, challenges still remain. Infrastructure development, technological know-how, attracting foreign investment, procuring raw materials for solar panels and a lack of access to existing storage technologies remain huge obstacles. Despite these concerns, India has taken an initiative to make solar energy the focus of clean energy.

Foreign Direct Investment in India’s Solar Power

The boom in the renewable energy sector in India has attracted investors from abroad. The ambitious target of 100 GW by 2022 is tough, and to achieve this mission, India solar sector requires investment from foreign countries.

In 2015, the solar sector had secured more than $278 million through various avenues. The international business consulting firm KPMG forecasts that the market share of solar power in India would be 5.7 percent (54 GW) and 12.5 percent (166 GW) in 2020 and 2025, respectively.

Several countries look at investing in the renewable energy sector in India. In 2016, the U.S. and India partnered to launch the U.S.-India Clean Energy Finance (USICEF), an initiative to help promising distributed solar projects develop into viable investment opportunities via essential early-stage project preparation support.

Job Creation Through Renewable Energy Sector

The massive push for solar energy opened up ways of employment with hopes to reduce the poverty rate in India. In fact, 22 percent of the population or 270 million people live below the poverty line in India. Clean-energy jobs are seen as a game changer in India’s rural and urban areas.

There are various positions of job profiles that have opened up due to India commitment to go solar. Jobs like installation, operations and maintenance, sales and more. Many of these jobs provide steady incomes, healthcare benefits and skill-building opportunities for unskilled and semi-skilled workers.

A report by World Resource Institute ‘Can Renewable Energy Jobs Help Reduce Poverty in India?’ states that in addition to improving energy security, enhancing energy access and mitigating climate change, renewable energy may be able to help reduce poverty by creating good jobs that poor people can perform.

The findings of WET report suggest that:

  • The majority of jobs in the sector are contractual and do not offer benefits or job stability.
  • Permanent jobs in the sector have the potential to reduce poverty, but they need strengthening before they become “good” jobs.
  • Most poor people face barriers to entry to training and the job market.
  • Few programs include features that help reduce poverty, such as capacity building, development of ownership opportunities or the inclusion of women.
  • The absence of data makes it difficult to establish connections between jobs in renewable energy and poverty reduction.

India depends heavily on fossil fuels. Energy production and consumption accounts for 58 percent of India’s greenhouse gas emissions and is projected to grow exponentially in the coming decades due to a rising energy demand associated with urbanization, better living standards and economic modernization. As a result, clean energy is the main focus for the government of India in the coming years.

Commitment to Positive Change

In order to meet the commitment under Paris Agreement, India must dramatically boost solar and wind power to light up millions of houses that still lack electricity. Due to the initiatives by the government of India, India is looking at renewable energy options and acts as a home for the  largest solar plants in the world.

The government schemes and policies have contributed in transitioning from fossil fuels to clean and green energy in India, and with solar tariffs falling to a record low, new government schemes to encourage rooftop installation has put India on the map in the renewable energy sector. Being a part of this renewable energy sector has the potential to create jobs, reduce poverty and propel India into the ways of the future.

– Preethi Ravi
Photo: Flickr

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The Ways How Foreign Aid Has Benefited Costa Rica


Costa Rica sits just above Panama in Central America, and foreign aid has benefited the nation so well that could be considered the overall standard for the effectiveness of foreign aid. This claim comes with a disclaimer and compliment to Costa Rica: Costa Rica is unique in that the will and dedication of the people caused Costa Rica to hold onto a tradition of democracy and relatively stable governments. This type of behavior and system is not always the case when it comes to the regions that receive foreign aid.

A stable government can help increase the effectiveness of foreign aid. Even after a substantial economic downturn during the 1980s and defaulting on is loans from the International Monetary Fund (IMF), Costa Rica was able to economically recover with guidance from the IMF — a success  often considered controversial.

United States’ Withdrawal from Costa Rican Aid

By 1996, the United States’ International Development Fund closed its mission in Costa Rica. In the last ten years, the United States government has allocated less than $50 million in foreign aid to Costa Rica.

During the years that IMF imposed economic planning, Costa Rica was able to begin to diversify its economy. Before the 2008 economic crisis, large tech firms shifted the manufacturing of microprocessors and other hardware to Costa Rica.

The investment from international business before 2008 helped shift Costa Rica away from its agrarian-based economy. Currently, only 5.5 percent of Costa Rica’s 58.91 billion GDP is attributed to agriculture, 21 percent of the GDP comes from industry and 73.5 percent is from the service and tourism industry. It can be seen that foreign aid has benefited Costa Rica due to the nation’s survival of the 2008 economic crisis.

Diverse Economy and Loan Qualification

Due to its new, more stable and diverse economy, Costa Rica was able to qualify for loans from the IMF and other international banking organizations. Although it weathered the storm, Costa Rica is still paying the price — its credit rating was downgraded in 2017.

In March of 2018, the United Nations and Costa Rica agreed to United Nations Development Assistance Framework from 2018-2022 to help both the private and public sectors of the nation. The plan seems to target sectors and institutions hit hardest by increased public and government debt post-2008.

Due to Costa Rica’s reliance on foreign direct investment, a downgraded credit score has the potential for a loss in those investments, making aid more risky for investors. Poverty still remains between 20-25 percent in Costa Rica, so stabilizing its economy and increasing FDI is extremely important for the nation as a whole.

To Remain Steadfast While Promoting Growth

While the economic story of Costa Rica seems akin to a roller coaster, it will hopefully stabilize again with the help of the United Nations. Foreign aid has benefited Costa Rica in other ways as well. Due to the relatively stable economy, Costa Rica spends 7 percent of its GDP on the education system, a decision that has caused the youth literacy rate (ages 15-24) to increase to 99 percent.

The country also boasts a nearly 100 percent primary school graduation rate, and a low teacher-to-student ratio of 1 to 13 in primary school and 1 to 14 in secondary school. The United States Peace Corps has maintained a presence in the education system of Costa Rica since 1963.

How Foreign Aid Has Benefited Costa Rica

Foreign aid has benefited Costa Rica immensely in the 20th and 21st Centuries. Due to the wise use of aid, Costa Rica was able to remain firm and grow, albeit slowly, though the 2008 economic crisis which made every country in the world stumble.

As the country steadies itself with only slight economic assistance in the coming years, it will hopefully regain its secure footing. And this is the aim of most foreign aid — to help a nation prosper so that it can one day stand on its own.

– Nick DeMarco

Photo: U.S. Air Force

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How China Facilitates Israeli Development

China facilitates Israeli developmentBetween 2010 and 2016, Israel’s GDP grew from $233.61 billion to $317.75 billion. Foreign direct investment in Israel increased from $6.98 billion to $11.9 billion. In particular, Chinese investment in Israel increased tenfold to $16.5 billion. China facilitates Israeli development mainly by investing the technology market.

Chinese technology companies, such as Baidu, Alibaba and Ping An, have been boosting Chinese investment in the Israeli technology industry by 50 percent year-on-year. All of these data show a positive growth trend of the China-Israel business relationship. China facilitates Israeli development on a large scale.

Last year, Eli Cohen, the Israeli Economic Minister, said in an interview, “We are willing to see more Chinese companies operating in Israel […] and we are willing to increase the cooperation between China and Israel.”

According to a report from an Israeli research firm, the number of Chinese entities investing in Israeli technology companies has increased from 18 in 2013 to 34 in 2017. Baidu, Alibaba and Qihoo 360 are typical examples of how China facilitates Israeli development by investing in Israeli technology.

Baidu China Facilitates Israeli Development

Baidu is a Chinese multinational technology company founded in 2000 that provides China’s most popular search engine. In 2014, Baidu helped Carmel Ventures, an Israeli venture capital fund, raise $194 million for its fourth investment fund.

In 2015, Baidu invested $5 million in Tonara, an Israeli music software company founded in 2008. It aids in music development by providing an interactive platform for music teachers, parents and students. Users can chat, track daily piano practice progress and get music sheets from the app. The company also produces Wolfie, a teaching and evaluation tool for music teachers.

Baidu’s senior director of corporate development, Peter Zhang, joined Tonara’s board, and Tonara expanded its Chinese market with Baidu’s help. The aim is to grow the use of Tonara’s teaching tools, as there are more than 50 million piano students and 10 to 20 million violin students in China.

Alibaba Group Holding Limited

Alibaba is a Chinese e-commerce company founded in 1999. It provides consumer-to-consumer, business-to-consumer and business-to-business services online. In 2015, Alibaba invested $5 million in Visualead, a company producing innovations in QR codes, which are heavily used in China.

The funding helps Visualead expand its business in the technology market. Alibaba also benefits from the connections with Visualead’s clients, which includes Coca-Cola, Sina Weibo and BMW.

Qihoo 360 Technology Co. Ltd

Qihoo 360 is a Chinese internet security company founded in 2005. It mainly provides three products for users to guarantee safe accesses to the internet: a web browser, an app store and a search engine.

In 2014, Qihoo invested $60 million to start a global early-stage fund, which focuses on China, the U.S. and Israel. Qihoo also aided Carmel Ventures in its fourth investment round, as well as Jerusalem Venture Partners, an international venture capital firm. Previously, Qihoo invested in Israeli messaging app maker Glide Talk Ltd., gesture control-technology company Extreme Reality Ltd. and image recognition technology company Cortica Inc.

According to Cohen, other leading Chinese firms such as Huawei, Legend and Xiaomi have been investing in Israel by setting up research and development centers. China facilitates Israeli development by boosting its technology expansion.

“China and Israel are destined for partnership,” Nathan Low, an Israeli-American investment banker, said. “China has the money and the markets. Israel has the products to solve problems and address opportunities.”

– Judy Lu

Photo: Flickr

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How Chinese Foreign Aid Boosts African Development

Chinese foreign aid boosts African developmentIn 15 years, China has built invested over $350 billion in Africa. Chinese foreign aid boosts African development and covers 140 African countries and territories.

China has been engaging with African countries since 1955, with the Bandung Conference. From the first efforts in Egypt to the TAZARA Railway, the most remarkable project China has in Africa, Chinese foreign aid boosts African development mainly in infrastructure, education, agriculture and energy generation.

Energy Generation

China spent $134.1 billion on energy generation and supply from 2000 to 2014. In August 2017, China-Africa Renewable Energy Cooperation and Innovation Alliance and Africa Renewable Energy Initiative (AREI) signed a Memorandum of Understanding to consolidate a cooperative relationship. This project includes building micro-grids for which Chinese providers and core renewable energy manufacturers will provide technological and financial support. This project shows prominent progress in renewable energy.

In addition, China has been increasingly engaging in the wind and solar PV industries under South Africa’s Renewable Energy Independent Power Producers’ Procurement Program, which focuses more on Chinese investors and companies’ investments, technology supply and manufacturing. Renewable energy generation is a win-win strategy, protecting the global environment and building the China-Africa connection.

Agriculture

Until 2014, China spent $10 billion on agriculture, forestry and fishing projects. In 2015, Chinese President Jinping Xi announced a $60 billion funding for 10 comprehensive plans to strengthen China-African cooperation. China-Africa agricultural industrial chains are one of the top priorities in these plans.

Additionally, China has been introducing agricultural technology and new breeds into Africa and has been sending agricultural experts to train African farmers. From 2000 to 2013, Chinese foreign aid to Africa in the agricultural sector has grown from $25 million to $325 million. The remarkable growth has brought African citizens an alternative way to improve their lives.

Infrastructure

Infrastructure investment has dominated Chinese foreign aid to Africa for more than a decade. The most significant project is the TAZARA railway in East Africa. The TAZARA railway was designed and built from 1968 to 1976. This 1,860 km railway stretches from Tanzania’s largest city, Dar es Salaam, to New Kapiri Mposhi in Zambia, which eliminates Zambia’s economic dependence on Rhodesia and South Africa.

This railway benefits the many rural regions along the route. There are thriving marketplaces at every train platform, providing a valuable method for rural residents and farmers to trade daily necessities. China invested more than $400 million in this project, along with technical assistance.

TAZARA railway is only one example of the many infrastructure projects China has worked on in Africa. From 2000 to 2014, China invested $88.8 million in transport and storage. The infrastructure aid has helped to stabilize African economic development.

Overall, Chinese foreign aid boosts African development mainly in infrastructure, agriculture and energy generation. Even though Chinese foreign aid to Africa is controversial, its investment has motivated African development on a large scale.

– Judy Lu

Photo: Wikimedia Commons

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Why US Businesses Should Invest in Africa

Why US Businesses Should Invest in AfricaThe continent of Africa is home to seven of the fastest-growing economies in the world. Seen as the “final frontier” for investors, Europe and China have pioneered these investments. Consequently, China has become Africa’s number one trading partner and job creator. American businesses, on the other hand, have been slow to invest in Africa and lag behind. As Josh Becker, the CEO of Impele Consulting Group, said, “We are seeing tremendous growth in interest in Africa [from the U.S.], but not the same growth in action”.

Africa is in a position that many envy. Different from the rest of the world, Africa is a frontier with the capability to build on lessons learned from other countries. Without the fuss of resistance and a lengthy trial-and-error period, they can establish institutions and infrastructure with the most effective methods that have been tested by others.

Africa is a clean slate. It has the capacity to lead sustainability continent-wide without having to change an existing framework. American businesses specializing in these areas have the opportunity to invest in Africa to assist in its development.

  • Agriculture
    Much of Africa’s landmass has been largely untouched agriculturally and has the potential to become a big name in world food production, and possibly a sustainable one.
  • Transportation
    Much of sub-Saharan Africa lacks well-built airports, railroads and highways. Africa can implement efficient, modern and sustainable transportation methods that other countries wish they could execute on a mass-scale. Once transportation hubs are built, markets will be connected and Africa can expect impressive gains in production.
  • Electricity
    Sub-Saharan Africa faces repetitive power outages, leaving households and businesses without electricity. This curbs production and ultimately threatens economic growth. If this problem is fixed, a higher standard of living and economic gains will result.
  • Mobile Connectivity
    Currently, Africa is the leader in mobile adoption. Cell phones have linked African countries to each other and with the outside world. In a 2014 pilot program in Ethiopia, a telephone hotline was established, allowing farmers to discuss agricultural techniques with agronomists. In the first couple of months of the program, 30 million calls were made. Communication flow is so vital in production, and investors can encourage this elsewhere by building telephone lines and bringing mobile companies to Africa.

The World Bank predicts that Africa has just started growing, and will only flourish more with investment. However, current Chinese investment is damaging and will eventually stunt Africa’s growth. The George W. Bush Presidential Institute stated that China does not help Africa fight corruption, encourage gender inclusion, promote sustainability or connect its regions. The United States needs to step in and be the source of positive encouragement Africa needs. By competing with China, American businesses can ensure they will benefit from investment and Africa will exceed its potential.

In 2017, President Trump expressed desires to enhance trade and partnership with Africa. One can hope these desires will be implemented and inspire businesses to invest in Africa. If so, vast economic advancements await Africa and lucky American businesses.

– Mary McCarthy

Photo: Flickr

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Infrastructure in Russia Falls Behind

Leaky Pipes? Infrastructure in RussiaDespite high levels of foreign investment and a thriving energy sector, the development and maintenance of infrastructure in Russia remains sluggish and disproportionately benefits a small elite. Russia is one of five major emerging economies grouped under the heading “BRICS”— Brazil, Russia, India, China and South Africa. Investment in infrastructure in Russia, however, lags behind other member nations, particularly India and China.

Even with overall low rankings in infrastructure investment, Russia remains an “energy superpower” as a major exporter of oil and natural gas. Indeed, one active area of infrastructure development in Russia is pushing pipelines through Central Asia towards China in an effort to solidify the country’s hold on that market.

This commanding position hasn’t necessarily translated into widely-shared prosperity for the people of Russia. Poverty in the world’s largest country is up by nearly 15 percent. The majority of economic gains go to a fairly small privileged class. As it stands, only 110 households hold between 19 percent to 85 percent of all Russian financial assets. This uneven distribution of prosperity is in large part due to endemic corruption in Russia, facilitated by weak government institutions, a legacy of the breakup of the Soviet Union.

This disregard of the law threatens the future of investment for infrastructure in Russia. Andrey Movchan, senior fellow and director of the Economic Policy Program at the Carnegie Moscow Center, opines that due to corruption state investment in infrastructure not only would likely fail to revitalize the Russian economy but might actively damage it.

The Russian government under Vladimir Putin has actively blocked efforts by the U.S. to improve governance in the nation. Putin’s administration ordered the U.S. Agency of International Development (USAID) to shut its operations in Russia in 2012, claiming that the organization was engaging in subversive activities. 

Domestic efforts to combat entrenched corruption likewise face challenges. Enemies of the state are notorious for being sidelined by illness, exile or death. One prominent example of such a suspicious neutralization is the case of Sergei Magnitsky, a Russian tax accountant who died in prison in 2009 following his investigation into potential tax fraud. This prompted the U.S. Congress to pass sanctions in 2012 targeting Russian officials believed to have been involved in human rights violations.

Despite the risks, Russians continue to fight for their futures and for better infrastructure. Alexei Navalny, head of the Anti-Corruption Foundation and a frequent inmate of Russian jails who attracts thousands to his rallies, has announced his intentions to run against Putin in the 2018 presidential elections.

– Joel Dishman

Photo: Flickr

Five Development Projects in Ethiopia

Development Projects in EthiopiaThe capital of Ethiopia is the base for multiple development efforts in the country. Ethiopia has become one of the fastest-growing economies in the world, with 11 percent average growth since 2005. The development projects in Ethiopia are a product of foreign aid, government goals and foreign direct investments.

Ethiopia is Africa’s second most populated and oldest independent country. Although it has the fastest growing economy in the region, it is also the third poorest country in the world with a Multidimensional Poverty Index (MPI) of 87.33 percent. To address the growing capacity issues related to the large population and poverty rate, the Ethiopian government has focused on advancing development.

These five development projects in Ethiopia are examined based on the organizations that implement them.

The Federal Democratic Republic of Ethiopia

The Ethiopian government is focused on addressing developmental concerns in multiple areas. Past development projects in Ethiopia include the Sustainable Development and Poverty Reduction Program and the Plan for Accelerated and Sustained Development to End Poverty. Now, Ethiopia is in its second of two, four-year Growth and Transformation Plans (GTP I, II). GTP I focused on advancing industrial development to relieve fiscal and capacity deficits in Urban Local Governments (ULG). The GTP II goals address specific challenges the GTP I goals met.

Within Ethiopia’s twin GTP’s, the country’s Agricultural Transformation Industry (ATI) and Industrial Park Development Corporation (IDPC) achieve specific goals. The corporation “nurtures manufacturing industries to accelerate economic transformation and attract both domestic and foreign investors.” IDPC is currently working on four major industrial parks, three of which are in the capital, Addis Ababa.

The ATI is focused on impacting the smallholder farmer level. In alignment with GTP I, the ATI focused on agricultural productivity, production, marketing, research and natural resource conservation. With GTP II, the ATI continues the GTP I pillars to enhance food security and adds additional pillars to address agri-business and implementation capacity.

Since the inception of the Sustainable Development and Poverty Reduction Program in 2001, Ethiopia’s GDP rose by close to $62 billion, the largest growth recorded in the country. In the past 15 years, Ethiopia’s population also rose by 64 million. Ethiopia has experienced immense growth since these programs were initiated and its ability to track and maintain the growth indicates the effect of these development projects in Ethiopia.

International Fund for Agricultural Development (IFAD)

The IFAD is a specialized agency of the U.N. that “finances agricultural development projects for food production in developing countries.” In 2010, the IFAD established a country office in Addis Ababa to further relations with Ethiopia and oversee the development and expansion of rural finance.

Agriculture is an important asset to Ethiopia’s economy, as a majority of their exports are agriculture commodities and agriculture consists of about 45 percent of Ethiopia’s GDP. The significance of the agriculture industry for Ethiopia’s economy is a large reason the IFAD has invested a total of $398 million in agriculture development programs in Ethiopia. The IFAD’s programs focus on improving poor rural people’s access to natural resources, agriculture and livestock production technologies.

World Bank

The World Bank is a strong supporter of Ethiopia’s development, primarily through its International Development Assistance (IDA), the World Bank’s fund for the poorest. The IDA is Ethiopia’s largest provider of official development assistance. Since 1991, the IDA has committed over $17 billion to Ethiopia’s development primarily to “protect basic services, productive safety nets and roads.”

The World Bank and IDA recently provided Ethiopia with $200 million to fund the expansion of access to energy and has committed $380 million to Ethiopia’s GTP II. The World Bank has implemented development projects in Ethiopia to address education, water and sanitation and road quality and is a large contributor to Ethiopia’s poverty rate reduction from 55.3 percent in 2000 to 33.5 percent in 2011.

United Nations Development Program (UNDP)

The UNDP Ethiopia works with the Ethiopian Government and funding partners to forward a “developed and democratic nation with empowered citizens.” The UNDP in Ethiopia strengthens the relationship between the U.N. and Ethiopia by advocating for Ethiopia’s development and poverty reduction on a global platform and providing support for locating funds.

The UNDP set up the Agricultural Transformation Agency (ATA) to provide innovative technological productivity solutions to the industry that constitutes 80 percent of the employment base in Ethiopia. The UNDP focuses additional efforts on elevating the transparency, accountability and responsiveness of the Ethiopian government. With the support of the UNDP, Ethiopia was able to formulate and adopt Grant Sharing Formula, addressing the balance of resource flow in various regions and bringing equitable development throughout the country.

China

Formal relations between The People’s Republic of China and Ethiopia began in 1970. Now, China is one of Ethiopia’s largest trading partners with the volume of trade estimated to be over $6.3 billion. The China Communications Construction Company is currently contracted to build two industrial parks in Addis Ababa in partnership with the IPDC. These newly built industrial parks will house factories such as the TAL apparel factory, a Chinese company providing new jobs in Ethiopia already.

China is Ethiopia’s key foreign investor, primarily in infrastructure. In 2014, China-funded a $475 million urban rail project in Addis Ababa. China has also invested heavily in dams and roads and even built Ethiopia’s African Union headquarters in the capital. The investments from China have advanced Ethiopia’s development and provided employment opportunities for Ethiopia’s estimated 450 million workforce.

Arkebe Oqubay, from the prime minister’s office driving the industrialization policy, says Ethiopia is “focused on economic performance… the ultimate goal of any nation aspiring to develop, aspiring to catch up, is to improve the livelihoods of the people.”

With support from the Ethiopian government, multiple partners have assisted in growing the economy through development projects in Ethiopia. Today, Ethiopia has surpassed Kenya’s economy and taken the title of “East Africa’s Economic Giant.”

Ethiopia has many challenges to surpass that are associated with growth, such as job creation and capacity, but their alliances across the globe and governmental backing are a strong indicator of Ethiopia’s developmental success.

– Eliza Gresh

Photo: Flickr