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In timely and incisive analysis, our experts parse the latest development news and devise practical solutions to new and emerging challenges. Our events convene the top thinkers and doers in global development.
Foreign direct investment, financial flows, private-sector development, humanitarian assistance, Africa
Vijaya Ramachandran is a senior fellow at the Center for Global Development. She works on the impact of the business environment on the productivity of firms in developing countries, and is the coauthor of an essay titled "Development as Diffusion: Manufacturing Productivity and Africa's Missing Middle,” published in the Oxford Handbook on Economics and Africa. Vijaya is also studying the unintended consequences of rich countries’ anti-money laundering policies on financial inclusion in poor countries. She has published her research in journals such as World Development, Development Policy Review, Governance, Prism, and AIDS and is the author of a CGD book, Africa’s Private Sector: What’s Wrong with the Business Environment and What to Do About It. Prior to joining CGD, Vijaya worked at the World Bank and in the Executive Office of the Secretary-General of the United Nations. She also served on the faculties of Georgetown University and Duke University. Her work has appeared in several media outlets including the Economist, Financial Times, Guardian, Washington Post, New York Times, National Public Radio, and Vox.
Even while policy solutions to address de-risking are being implemented, new technologies have emerged to address de-risking by increasing the efficiency and effectiveness of AML/CFT compliance by financial institutions.
IFC Spokesman Frederick Jones has replied to our blog on the IFC’s risk appetite. First off, thanks to Fred and the IFC for replying. The Corporation has a unique role to play in global development finance and we’re keen for that role to grow, so we’re happy that the report has generated so much conversation about IFC’s portfolio, both within and outside IFC. And second, we commend IFC for its plans to do more in poor countries and those that are classified as fragile states—it is where the Corporation can have the most impact and where it is most needed.
Since the publication of our paper on the IFC’s project portfolio last week, we have received several helpful comments from readers. They plausibly suggest that the portfolio may be (even) less risky than we suggested, with even more space to pivot towards the low income countries where the IFC can make the most difference. But until the IFC publishes more information, we won’t really know.
The IFC is designed to catalyze investments in countries that investors might consider too risky to invest in alone. But our recent analysis of IFC’s portfolio found that it is shying away from risky investments, raising serious questions about whether the IFC is focusing on the places where it can make the most difference.
Development Finance Institutions (DFIs)—which provide financing to private investors in developing economies—have seen rapid expansion over the past few years. This paper describes and analyses a new dataset covering the five largest bilateral DFIs alongside the IFC which includes project amounts, standardized sectors, instruments, and countries. The aim is to establish the size and scope of DFIs and to compare and contrast them with the IFC.
IFC’s portfolio is not focused where it could make the most difference. Low income countries are where IFC has the scale to make a considerable difference to development outcomes. While an excessive portfolio shift might imperil IFC’s credit rating, the evidence suggests that there is considerable scope for increasing commitments to low income countries without significant impact to IFC’s credit scores.
On Friday, the World Bank’s chief economist, Paul Romer, told the Wall Street Journal that the Bank unfairly influenced its own competitiveness rankings. He highlighted the case of Chile which suffered lower rankings on the Doing Business index during the Bachelet administration versus the Piñera years, and recalculated these rankings on his personal blog. Today, he issued a clarification of his views.
Due to the potential for snow tomorrow, we are unfortunately canceling this event. We apologize for the inconvenience and hope to see you at CGD soon.
Please join Crispian Olver for a discussing of his latest book How to Steal a City: The Battle for Nelson Mandela Bay: An Inside Account. How to Steal a City is an insider account of this intervention, which lays bare how the administration was entirely captured and bled dry by a criminal syndicate, how factional politics within the ruling party abetted that corruption, and how a comprehensive clean-up was eventually conducted.
Africa’s industrial progress has been disappointing. Part of the reason is that labor costs are higher than one might expect, given GDP per capita. Alan Gelb, Christian Meyer, and Vijaya Ramachandran distill the policy lessons.
Many countries in Africa suffer high rates of underemployment or low rates of productive employment; many also anticipate large numbers of people to enter the workforce in the near future. This paper asks the question: Are African firms creating fewer jobs than those located in other parts of the world? And, if so, why?
What's keeping private business from flourishing in Africa? On the basis of unique enterprise surveys, Vijaya Ramachandran and her co-authors identify poor roads and unreliable power as major physical challenges; ethnic segmentation and the economic predominance ethnic minorities further constrain the business environment. The author show how investing in infrastructure and improving access to education can help bring about a broad-based business class in Africa.
Many developing countries have made progress in political openness and economic management but lag in terms of attracting private sector investments, at least outside of narrow resource-based enclaves.These countries may have recognized potential but have not yet established the reputation needed to sustain investment through the inevitable political and policy shocks that take place in most countries. The concerns that deter investors are many but can be broadly classified into high costs that that prevent global competitiveness and high actual or perceived risks.
The U.S. military has become substantially engaged in the development and stabilization space and will likely continue to operate in this space for some time to come. This paper proposed five policy changes for the military to improve its development activities.
This paper addresses the response to historically high rice prices in 2008 first by presenting a historical review of trends in the West African rice sector and, second, by assessing the effect of world rice prices on domestic prices, primarily at the consumer level.
The World Food Programme has world-class logistics, but its ability to manage financial risk is extremely limited. The WFP should consider implementing a targeted hedging pilot strategy for increased predictability. Greater commitments of untied cash from donors and support for the proposed Food Security Trust Fund at the World Bank would help.
This paper examines how the lack of recognition of Somaliland by the international community—and the consequent ineligibility for foreign financial assistance—has shaped the region's political development. It finds evidence that Somaliland’s ineligibility for foreign aid facilitated the development of accountable political institutions and contributed to the willingness of Somalilanders to engage constructively in the state-building process.
Why do so many businesses choose to remain informal? Vijaya Ramachandran and co-authors discover that the answer is more nuanced than often believed. In East Africa, for instance, the difference in productivity between formal and informal firms is often indistinguishable, while in Southern Africa productivity it is more differentiated. Policies to encourage formalization and increase productivity are likely to be more successful in East Africa, whereas an emphasis on job training and vocational skills might be more appropriate in Southern Africa.
The authors of this CGD working paper analyze what the principal bodies of global government—the Bretton Woods institutions and the UN, the G-20 and the OECD—would like if a country’s membership and roles were contingent upon objective criteria that would better balance representation and effectiveness. They find major disparities between the results of their analysis and the state of affairs today, and they point to the need for changes far more fundamental than the incremental tweaks now being considered.
In this paper, witha foreword by senior fellow Vijaya Ramachandran, Benjamin Eifert of UC-Berkeley investigates the effects of regulatory reform by drawing on years of data across 90 countries. He discusses the characteristics of countries that choose to reform and the results of these reforms. The paper it contains valuable insights for policymakers and institutions focused on regulatory reform in weak states.
CGD visiting fellow Vijaya Ramachandran and co-authors Manju Kedia Shah and Gaiv Tata used firm-level survey data from more than 1,500 enterprises in six African countries to discover how and why African firms lobby. Their working paper concludes that larger, entrenched firms lobby to protect their market share, and that this inhibits competition, reducing efficiency and growth. The authors suggest that regional integration could be one way out of this trap, because it expands the number of enterprises in the marketplace as well as the size of the market, thus making it both harder and less worthwhile for domestically entrenched enterprises to lobby to protect their market share.