What does it take for a Development Bank to succeed?

Development Matters Development finance, policy , , ,

DEV-IN-TRANS-BANNER

By João Carlos Ferraz, Instituto de Economia, Universidade Federal do Rio de Janeiro, Brazil

This blog is part of an ongoing series evaluating various facets
of Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion

bank-finance-growth-financePublic finance institutions, or development banks, have “development DNA”. But, can they effectively engage in financing “development in transition” or the call to rethink international co-operation to help countries at all levels of income sustain their development gains? What would it take for such institutions to succeed? How can they anticipate and effectively respond to societal and market needs and aspirations?

Political space for this does exist. A consensus exists that development banks must have at least four priorities: infrastructure, innovation, sustainable environment and firms of smaller size. That’s the easy part! No policy maker or analyst in their right mind would be against these priorities. But, consider the nature of these priorities: each one is time- and place-specific but evolving permanently; they are moving targets. More importantly, they are risk-intensive, given the duration and unpredictability of associated projects and/or the potentially low credit worthiness of economic agents pursuing these priorities.
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Getting private resources on board for sustainable development

Development Matters Development finance, Private Sector , , ,

By Royston Braganza, CEO, Grameen Capital India

To learn more about this topic, check out the Global Outlook on Financing for Sustainable Development 2019

Global-Outlook-Cover

GOOOOAAAAAALLLLLL! The frenzied celebration that reverberates across the globe, every time a goal is scored, reflects the seemingly universal passion for football – be it the FIFA World Cup, the Champions League or any other national or local leagues. The game cuts across generations, blurs political boundaries and traverses ethnic divisions. Sadly, some other things do too – hunger, refugee crises, poverty and global warming, to name a few. And yet, everywhere I look, shining examples exist of H.O.P.E.

Holistic approach. Governments, corporations, capital markets, non-governmental organisations need to find integrated solutions. One exceptional example is the catalytic potential of using corporate social responsibility/philanthropic capital to de-risk investment from capital markets. The financial sector can help guide companies to look towards a sustainable future. Grameen Foundation’s Growth Guarantees programme, for example, did precisely that by bringing together donors, international and local banks, microfinance institutions, and poor, vulnerable women borrowers.
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Who will drive consumer spending in the next decade?

Development Matters policy , , ,

By Kristofer Hamel, Chief Operating Officer, World Data Lab, and Homi Kharas, Interim Vice President, Brookings; Senior Economic Advisor World Data Lab1 

shoppingIn October 2018, the international community crossed a historic threshold: the majority of humanity no longer lives in or near poverty. Now and continuing into the foreseeable future, most people on Earth are middle class or rich. This tipping point is of interest to both the research community as well as global and regional companies searching for new markets.

But who exactly are these new middle-class consumers, and how will their profile change over the next decade?

Answering this question begins with an understanding of household classifications. Our projections (all per person spending according to 2011 purchasing power parity) designate households as those in extreme poverty (households spending below USD 1.90 per day), those in the lower middle class (households spending USD 11-50 per day) and those in the upper middle class (households spending USD 50-110 per day). Two other groups –households “vulnerable” to falling back into poverty as well as the “rich” who sit at the top end of the distribution – round out our classifications.
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Why understanding the relationship between migration and inequality may be the key to Africa’s development

Development Matters Africa, Migration , , , ,

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By Professor Heaven Crawley, Centre for Trust, Peace and Social Relations (CTPSR), Coventry University, UK

Learn more about this timely topic at the upcoming
18th International Economic Forum on Africa

Africa-MigrationPick up any newspaper or switch on any TV in Europe over the past five years and you might think that the entire population of Africa is on the move – and heading across the Mediterranean. Images of young men travelling in boats in search of protection and a better life for themselves and their families have become a staple part of the media diet, with the so-called ‘migration crisis’ dominating political debates within the European Union and beyond. The use of development assistance to leverage co-operation and compliance from African countries in limiting migration flows has, in turn, become an increasingly important focus of policy efforts.

But these representations and the policies with which they have come to be associated reflect long-standing biases in how we think about migration in the African context.

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Unlocking Africa’s Aviation Potential

Development Matters Africa , , ,

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By Hassan El-Houry, Group CEO, National Aviation Services (NAS)

Learn more about this timely topic at the upcoming
18th International Economic Forum on Africa
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Check out the 30 October 2018 OECD EMnet Meeting on Africa’s
“Infrastructure and Regional Connectivity”

africa-aviationAfricans make up 12% of the world’s population but only 2.5% of the world’s passengers. Why the gap?

Africa has 731 airports and 419 airlines with an aviation industry that supports around 6.9 million jobs and USD 80 billion in economic activity. According to the International Air Transport Association (IATA), Africa is set to become one of the fastest growing aviation regions in the next 20 years with an annual expansion of nearly 5%. While it is evident that aviation in Africa has the potential to fuel economic growth, several barriers exist. Weak infrastructure, high ticket prices, poor connectivity and lack of liberalisation rank amongst the many challenges.

Consider the reality: Airport infrastructure in most African countries is outdated and not built to serve the growing volume of passengers or cargo. Airlines and airports are often managed by government entities or regulatory bodies. Foreign investment is discouraged. In Malawi, for example, it’s illegal for a foreign airline or private investor to own more than 49% of a national airline. So, this prevented Ethiopian Airlines from purchasing more than a 49% stake in Malawian Airlines. Continue reading →

How can the new African free trade agreement unlock Africa’s potential?

Development Matters Africa, Trade , , , ,

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By Professor Landry Signé, David M. Rubenstein Fellow in the Global Economy and Development Program and the Africa Growth Initiative at the Brookings Institution, Distinguished fellow at Stanford University’s Center for African Studies, Chairman of the Global Network for Africa’s Prosperity, and author of “Innovating Development Strategies in Africa: The Role of International, Regional and National Actors.”

Learn more about this timely topic at the upcoming
18th International Economic Forum on Africa

Africa-TradeAfrica has an opportunity to show leadership on the world stage through strength in unity, as the rest of the world retreats from multilateralism and increases protectionism. For the first time in recent history, with the African Continental Free Trade Area (AfCFTA), Africa could wholly embrace intra-African relations, global trade, structural transformation and sustainable development. But for the agreement to succeed, businesses, which make up the backbone of the deal, need to be aware of their potential gains and be actively involved in its implementation, working alongside governments and regional institutions that are ultimately responsible for speeding up the process.

The challenges to African trade have been immense: Africa only represents 2.4% of total global exports. Intra-African trade only represents 15% of total African exports (compared to 58% and 67% for Asia and Europe, respectively), even if the regions of Eastern and Southern Africa are outperforming Central Africa.

The AfCFTA, launched with signatures from 44 African countries in March, has the potential to open up the free movement of goods, services and people, building the capacity of African businesses. If successfully implemented, the AfCFTA could generate a combined consumer and business spending of USD 6.7 trillion by 2030, accelerate industrial development, expand economic diversification, and facilitate quality job creation — including for youth (72% of poverty rate), women (majority of small-scale traders), and small and medium-sized enterprises (SMEs) (about 80% of regional employment).

But all this will depend on how well businesses are able to engage in the deal’s implementation. These are a few things they need to know:

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Africa: Time to Rediscover the Economics of Population Density and Development

Development Matters Africa , , , ,

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By Professor Erik S. Reinert, Tallinn University of Technology, and Dr. Richard Itaman, King’s College, London

Learn more about this timely topic at the upcoming
18th International Economic Forum on Africa

Africa-Industrialisation-Factory.jpgAt the OECD’s origin, we find the 1947 Marshall Plan that re-industrialised a war-torn Europe. At the very core of the Marshall Plan was a profound understanding of the relationship between a nation’s economic structure and its carrying capacity in terms of population density. We argue that it is necessary to rediscover this theoretical understanding now, in the mutual interest of Africa and Europe.

In early 1947, worries grew in Washington that an impoverished Germany – where manufacturing industry had been forbidden under the Morgenthau Plan – would fall an easy prey to the Soviet Union. US President Truman therefore sent former president Herbert Hoover on a fact-finding mission to Germany. One powerful sentence in Hoover’s Report of March 18 that year zeroed in on the basic problem:

‘’There is the illusion that the New Germany left after the annexations can be reduced to a ‘pastoral state’. It cannot be done unless we exterminate or move 25.000.000 out of it’.1 

Hoover understood that the population density of a country is determined by its economic structure: Industrialisation makes it possible to dramatically increase the population carrying capacity of a nation. ‘Exterminate’ was an extremely strong word to use after the horrors of World War II, and everyone understood that there was no place where 25 million Germans could be sent: Re-industrialisation was the only option. Continue reading →