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Maureen Lewis, a CGD senior fellow who specializes in health economics and has recently studied the economics of epidemics, recently returned two weeks in East Asia gathering information about the region’s response to the threat of avian flu. She spoke on the topic at Beijing University in China and participated in a meeting organized by the World Bank in Jakarta, where donor countries reviewed Indonesia’s response and sought to identify ways in which the international community could further support Indonesian efforts. On her return, Maureen discussed the key conclusions from her trip.
Q: What’s the single most important thing that rich countries should do now to prevent a global avian flu epidemic among humans?
A: The good news is that the international community has responded very well under the circumstances. Countries have agreed on coordination under the World Health Organization to provide international surveillance, to alert the international community and to intervene jointly if and when the avian flu emerges. Research into the pathogen, its likely mutations, and possible vaccines and treatment is being funded and undertaken in the rich countries. All these first steps are being put in place.
The main problem now is that developing countries, especially the poorest countries in East Asia where the threat is the greatest, lack the capacity to put in place sophisticate surveillance systems quickly. Moreover, countries like Indonesia and China are so vast that it is difficult to cover the entire country in any case. Rich countries should offer both technical help and funding to find alternatives.
For example, it may be that rewards need to be offered to farmers who voluntarily report their sick and dying chickens, or volunteers can be recruited to do something similar within a defined area. Again, some form of compensation will be needed or surveillance will fail.
Q: What happens then? What can be done to strengthen the global response if there is a rapidly spreading epidemic among humans?
A: In a sense much of the ongoing effort is merely buying time, time to better understand the virus and put in place the arrangements needed to cope with a new epidemic. The specific virus that could emerge and spark a pandemic is not yet known, so vaccinations and treatment must rely on more generic vaccines and medicines that may or may not help. Scientific advances on related viruses will help the process and prepare the world.
Once the Avian Flu reaches a human-to-human transmission either we have the treatment and preventive tools in hand to immunize and cure the disease, or we fall back on isolation and quarantine. The problem, of course, is that movement of birds simply cannot be controlled, and controlling the movements of humans is almost as difficult.
Q: Your paper, The Economic Implications of Epidemics Old and New, looks at the short-run and long-run economic implications of four epidemics: Plague in the 14th century, the 1918–19 flu epidemic, HIV/AIDS and SARS. What does this historical experience tell us about the likely economic impact of an avian flu epidemic?
A: Avian flu has more in common with the Plague, the 1918 “Spanish Flu” and SARS than the slower-moving HIV/AIDS epidemic. In the 1918 pandemic the new pathogen was overlooked in the early stages. Infected troops in the US mobilizing for World War I were put in barracks and on ships, spreading the disease. Although SARS was not a particularly lethal virus, it offers important lessons because it occurred in today’s globalized world, where rapid travel and instant communications tie the fates of all countries.
Although only 8,422 cases of SARS were reported, reactions to the news of the disease shut down economic activity not only in Guangdong Province, where the disease originated, but in Hong Kong, and other Asian cities as well. Travel bans affected tourism, hotels and restaurants, as well as factories serving the international market. The total cost to the region was $15 billion or 0.5 percent of GDP. But the true cost was in expectations and faltering business confidence.
China’s rapid response to the Avian Flu problem no doubt stems from a realization of the consequences of inaction. China has been aggressive in dealing with surveillance and culling of infected birds. Thailand too has internalized the need to contain a potentially lethal communicable disease. Other at risk countries have not acted as quickly, although most of these countries are poorer and have less capacity to act.
CGD and JHU-SAIS will host a seminar with Francisco H.G. Ferreira, Pontifícia Universidade Católica, Rio de Janeiro and the World Bank. Garance Genicot, Assistant Professor, Department of Economics, Georgetown University, will serve as the discussant.
Most studies of privatization look at what happens to companies. Reality Check, a new volume of case studies from Latin America, Asia, and the former Soviet Union, examines the impact on people. Surprise: privatization has often been a reasonably good thing, even for the poor.
Jere R. Behrman, William R. Kenan, Jr. Professor of Economics, University of Pennsylvania, will present his paper entitled "What Determines Adult Cognitive Skills? Impacts of Pre-School, School-Years and Post-School Experiences in Guatemala" at this CGD seminar.
Human capital flows from poor countries to rich countries are large and growing. A leading cause is the increasing skill-focus of immigration policy in a number of leading industrialized countries—a trend that is likely to intensify as rich countries age and competitive pressures build in knowledge-intensive sectors. The implications for development are complex and poorly understood.
Download the CGD press release on the debt deal announcement.
CGD began working on Nigerian debt issues in early 2004 to provide analytical support to Nigeria's ongoing efforts to persuade its creditors to agree to an appropriate debt relief package. In October 2005 Nigeria and the Paris Club announced a final agreement that should lead to debt relief worth $18 billion and an overall reduction of Nigeria's debt stock by $30 billion. CGD Research Fellow Todd Moss, who leads Center's work on Nigeria's debt, explained how the deal will work in a Q&A just days before it was announced.
Q: What is the current status of Nigeria's debt? How much debt is there, and what are the prospects for debt relief?
A: Nigeria has about $36 billion in external debt, most of which is owed to the Paris Club creditors. More than half is owed to just Britain, France, and Germany. The Paris Club agreed in June to a 'framework' for reducing Nigeria's debt which involves two steps. First, Nigeria has to clear about $6 billion in arrears. Then Nigeria can negotiate a reduction with the Paris Club on so-called Naples terms for the remainder, which is likely to also include a discounted buyback. The signs are fairly good for a deal soon, perhaps the first step concluding later this month. The second step will depend on Nigeria keeping macroeconomic conditions under control for another six months or so. If that all happens, Nigeria's debt problem could effectively be over by early next year.
Q: Nigeria exports oil, and oil prices are at near record highs. Why should the rich countries be interested in providing Nigeria with debt relief?
A: It is exactly the high oil prices that enable this deal at this time. Nigeria will use a big chunk of its oil windfall to clear its arrears and buyback its debt. So the creditors are not giving anything away for free, nor is Nigeria avoiding its past obligations. At the same time, agreeing to a discount is in the interest of the creditors who not only want to collect this old debt, but also have other interests in the region, especially encouraging economic reform and helping to stabilize a fragile democracy in a volatile country which supplies a lot of western oil.
Q: What would the implications be of a Nigerian debt deal within Nigeria itself?
A: A successful debt deal would be a huge boost to President Obasanjo and his economic team which has been working to try to break the stranglehold of cronyism and corruption that stifles Nigeria. On a short-term cashflow basis, the impact isn't very large. But the deal will free up the government to focus on other pressing issues. One other bonus of a buyback is that it locks in a rate of return for the savings from oil. In the past Nigeria's oil savings have been stolen by crooked regimes. Using the extra money to buy back the debt means that the money can never be stolen, no matter who comes to power. And the debt will be gone forever.
Q: CGD has played a key role in the debate over Nigerian debt relief. What can you tell us about that?
A: If the deal goes ahead, the real credit goes to the finance minister Ngozi Okonjo-Iweala and her colleagues who have put in months of grueling work to get this done. The creditors also deserve credit for thinking creatively about how to get all sides out of this lose-lose situation.
CGD did help to move things along in two ways. First, Nigeria was not considered for debt relief in the past because of a technicality related to its classification within the World Bank. We did some analysis last year which showed that Nigeria was in the wrong category. In June 2005, partly as a result of our work, the World Bank reclassified Nigeria as IDA-only, opening the door to everything else. Second, in April this year we proposed a debt buyback and gave some benchmarks for a possible deal. This proposal was used to open the dialogue over the buyback and gave both sides an opportunity to openly consider what might otherwise have been a sensitive topic for either one to broach. As a neutral player with no financial interest in the outcome, CGD could make both of these proposals and be taken seriously by both sides. I think the key role for think-tanks like CGD is to undertake independent analysis and generate new ideas helping policymakers to solve problems of common interest. This is a great example of that in practice.