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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.
In recent years, regulators have raised their expectations for what counts as adequate AML/CFT compliance. At the same time, they have cracked down on institutions that have fallen short. While arguably necessary, this more stringent enforcement has produced some unintended side effects. In particular, it has put pressure on banks’ ability and willingness to deliver certain types of services, notably correspondent banking services.
Effectiveness sounds dull. But what if an extra dollar or rupee in a budget could feed ten people instead of one? Or if $100,000 of international aid spending could be tweaked so it would save ten times as many lives? When the stakes are this high, efficiency in spending becomes a moral imperative. Moreover, unlike debates over ideology or religion, debates over efficiency can actually get somewhere, because there is a straightforward mechanism for resolving them: compare the predictable costs and benefits of different courses of action and see which yields more bang for the buck.
We are inundated by bad news about Syria and the heartbreaking stories of refugees fleeing this war-torn country. But there is another side to the story. A groundbreaking study by the NGO Building Markets indicates that there are over 10,000 Syrian-owned businesses in Turkey. Since 2011, Syrians have invested nearly $334 million into 6,033 new companies.
The Financial Stability Board's long-awaited report finds that the number of active CBRs has declined by 6 percent since 2011 and has continued through 2016, affecting all regions and major international currencies. The analysis suggests that small economies are among the most affected by CBR withdrawal. The bottom line: the decline of correspondent banking relationships, especially with smaller and poorer countries, remains an important policy issue.
The informal sector is a major source of economic activity and job opportunities in poor countries as well as emerging economies. In sub-Saharan Africa, the size of the informal sector is estimated to employ over 70 percent of the population. Why do businesses remain informal? What gains in productivity or profitability do they forego by as a result of that choice?
This work analyzes fresh data made available by updated, more comprehensive Enterprise Surveys of formal firms of various sizes and, importantly, of informal firms. It concentrates on five countries (the DRC, Ghana, Kenya, Myanmar, and Rwanda) to provide more fine-grained insights into differences in characteristics and productivity levels between formal and informal firms or different sizes in different developing countries.
The first Economic Inclusion Strategy for the EBRD, to be officially launched in May 2017, builds on four years of implementing inclusion concepts through the Bank’s operations. Economic inclusion, the opening up of access to labour markets, entrepreneurship and, more generally, economic opportunities to all is integral to achieving a transition to sustainable market economies. The strategy covers the period of 2017 – 2021 and reflects the experience and lessons learned from the EBRD’s distinctive private sector focused inclusion approach as well as evolving inclusion challenges and best international practices across sectors and geographic regions.
Originally published in October 2013 and updated January 2015
Food security has arisen again on the development agenda. High and volatile food prices took a toll in 2007–08, and in many low-income countries agricultural yields have risen little, if at all, in the last decade. Moreover, food production in these poor countries is especially vulnerable to climate change. Meeting this demand is a global challenge. The Food and Agriculture Organization of the United Nations (FAO) is expected to lead the way in meeting this challenge and, with the arrival in 2012 of the first new director-general in 18 years, it has an opening to restructure itself to do so.
January 12, 2014 marks the fourth anniversary of the massive quake in Haiti that left over 200,000 people dead and several million people homeless. The response from rich countries was overwhelming—over $9 billion was disbursed towards relief and reconstruction efforts ($3 billion from the United States, an estimated $3 billion in private contributions, and another $3 billion from foreign governments).
January 12 will mark the third anniversary of the tragic Haiti earthquake that killed over 220,000 people, displaced millions, and flattened much of Port au Prince. Damage and losses estimated at $7.8 billion exceeded Haiti’s entire GDP at the time. The country received unprecedented support in response: more than $9 billion has been disbursed to Haiti in public and private funding since 2010. Private donations alone reached $3 billion, much of it from individuals donating small sums via text messages to the Red Cross and other charities. Official donors tripled their assistance from 2009; in 2010 aid flows were 400 percent of the Haitian government’s domestic revenue.
How big is China’s aid to Africa? Does it complement or undermine the efforts of traditional donors? China releases little information and outside estimates of the size and nature of Chinese aid vary widely. In an effort to overcome this problem, AidData, based at the College of William and Mary in Virginia, has compiled a database of thousands of media reports on Chinese-backed projects in Africa from 2000-2011. The database includes information on 1,673 projects in 50 African countries, and $75 billion in commitments of official finance.
The CGD working paper released at this event describes the new database methodology, key findings, and possible applications and limitations of the data, which is being made publicly available for the first time. The paper and database offer a new toolset for researchers, policymakers, journalists, and civil society organizations working to understand China’s growing role in Africa.
FOR IMMEDIATE RELEASE
New dataset identifies reports of 1,673 Chinese-backed projects in 50 countries in Africa over past decade
Washington, D.C. (April 29, 2013) - How much aid does China give Africa? Does it complement or undermine the aid from the United States and other Western donors? China releases little information and outside estimates vary widely. A novel approach to studying Chinese aid flows that relies on a database of media reports may offer fresh insights.
One initial result: Chinese official development finance to Africa seems to be roughly similar in size to the finance provided by the United States.
The new estimates come from a database compiled by AidData-- a partnership between the College of William and Mary, Brigham Young University, and Development Gateway – and a joint paper, China’s Development Finance to Africa: A Media-Based Approach to Data Collection, released this week by the Center for Global Development (CGD) in Washington, DC.
The database draws upon thousands of news reports on Chinese-backed projects in Africa from 2000 to 2011. It includes information on 1,673 official projects in 50 African countries, of which 1,422 have reached the commitment, implementation, or completion stage. All this amounts to a total of $75 billion in reported commitments of official finance during that period.
“Definitions matter a lot when trying to measure China’s aid to Africa,” says CGD senior fellow Vijaya Ramachandran, an expert on private sector development in Africa and a co-author of the new paper. “There is a huge debate about what should be counted as aid and what should not.”
Further complicating matters, Chinese package financing often brings together agreements that mix aid, investment, export credits, and both concessional and non-concessional financing. Chinese state-owned enterprises also blur the line between official government finance and private flows.
Estimates of total Chinese financial assistance to the region range from less than a billion dollars to more than $67 billion (for Exim Bank credits). Deborah Brautigam, considered by many to be the leading authority on Chinese foreign assistance to Africa, recently estimated 2007 official development assistance (ODA) from China at $1.4 billion.
The new AidData - CGD study counts as “official finance” two types of assistance:
Official Development Assistance or ODA – concessional finance, mainly grants and loans, provided by official Chinese sources and aimed at the promotion of the economic development and welfare of developing countries. This aid largely meets the definition of ODA used by the Organization for Economic Cooperation and Development (OECD), and
Other Official Finance or OOF – other bilateral transactions from Chinese government entities (excluding investments and military aid).
Using these definitions, the study finds that China’s ODA + OOF combined was roughly equal to that of the United States from 2000 to 2011, varying from a low of about $2 billion per year at the start of the period to a peak of about $17 billion in 2006. (See chart for a comparison of China’s official finance with comparable flows from the United States and all members of the OECD’s Development Assistance Committee (DAC)).
By comparison, US ODA + OOF to the region has averaged about $9 - $11 billion a year in recent years. This rough comparison is useful, but just the start, say the authors.
"We are not claiming that the database is fully comprehensive,” says Bradley Parks, co-executive director of AidData and a co-author of the CGD paper. “We understand that some projects may not get picked up by the media. However, if we want to make sense of the competing claims made about Chinese 'aid' to Africa, we need higher-resolution data that are collected in a transparent, systematic, and replicable manner.”
Media contact for CGD:Catherine An(202) email@example.comMedia contact for AidData:Suzannah Dunbar(614)-firstname.lastname@example.org
Further analysis of the media reports of Chinese-backed projects may eventually yield insights into such controversial questions as to what extent Chinese assistance to the region is focused on natural resource extraction, and whether Chinese activities complement or compete with assistance from other donors.
The full dataset is being released online at china.aiddata.org with an explanation of AidData’s media-based data collection methodology, an interactive map to view reported projects by country and project type, and a tool for users to add information about specific projects.
“We hope to tap into a wisdom-of-crowds effect and enlist the support of scholars, journalists, and members of civil society to help make the data more comprehensive and precise," Parks adds.
The paper and new database will be launched at the Center for Global Development on Monday, April 29 at 4 pm.
AidData is a development research and innovation lab that seeks to make aid information more accessible and actionable. AidData tracks more than $5.5 trillion dollars from 90 donor agencies, undertakes cutting-edge research on aid distribution and impact, oversees efforts to geocode and crowdsource aid information, and develops web and mobile applications and custom data solutions for development finance institutions.
The Center for Global Development works to reduce global poverty and inequality through rigorous research and active engagement with the policy community to make the world a more prosperous, just, and safe place for us all. A nimble, independent, nonpartisan, and nonprofit think tank, CGD combines world-class research with policy analysis and innovative communications to turn ideas into action.
Countries cannot grow without a vibrant domestic private sector, yet most growth in sub-Saharan Africa in the past decade has come from extractive industries, not private, entrepreneurial activity. Furthermore, non-extractive activity in the private sector is often dominated by firms owned by minority ethnic entrepreneurs--of Asian, Middle Easterner or Caucasian descent--not indigenous Africans. In this working paper, CGD visiting fellow Vijaya Ramachandran and her co-author analyze the constraints faced by domestic firms in five countries in sub-Saharan Africa. They offer policy recommendations to help indigenous entrepreneurs enter and survive in the private sector, including increasing university education and building networks among business professionals.Learn more
How do employers decide whether to provide their employees with HIV/AIDS prevention services? CGD Visiting Fellow Vijaya Ramachandran's data from 860 firms and 4,955 workers in Uganda, Tanzania, and Kenya shows that larger firms, and those with more highly skilled workers, invest more in HIV/AIDS prevention. Firms in which more than 50 percent of workers are unionized also are more likely to provide more prevention services.
The world has increasingly recognized that private capital has a vital role to play in economic development. African countries have moved to liberalize the investment environment, yet have not received much FDI. At least part of this poor performance is because of lingering skepticism toward foreign investment, owing to historical, ideological, and political reasons. Results from our three-country sample suugest that many of the common objections to foreign investment are exaggerated or false. Africa, by not attracting more FDI, is therefore failing to fully benefit from the potential of foreign capital to contribute to economic development and integration with the global economy.
This paper ties together the macroeconomic and microeconomic evidence on the competitiveness of African manufacturing sectors. The conceptual framework is based on the newer theories that see the evolution of comparative advantage as influenced by the business climate—a key public good—and by external economies between clusters of firms entering in related sectors. Macroeconomic data from purchasing power parity (PPP), though imprecisely measured, estimates confirms that Africa is high-cost relative to its levels of income and productivity. This finding is compared with firm-level evidence from surveys undertaken for Investment Climate Assessments in 2000-2004.