Maximising the public-private investment multiplier

By Alain de Janvry and Elisabeth Sadoulet, Professors at the University of California at Berkeley and Senior Fellows at the FERDI
 

Development-finance

At the FERDI-IDDRI conference on “Development, Climate and Security” held in Paris on January 15, 2018, Barbara Buchner from the Climate Policy Initiative reported on the state of global climate finance flows for mitigation and adaptation. She made two points. First, finance is under-invested to combat climate change if the COP21 target in temperature increase is to be met. Second, private investment’s role in complementing public investment in climate finance is large, with an estimated 2/3 private for 1/3 public in current total contributions. This stresses the fundamental part private investment can play in meeting the COP21 objectives, particularly at a time when governments face multiple demands on public expenditures.

With public investment targeted to induce private investment, this raises the issue of public investment’s effect as a private investment multiplier. A useful way of thinking about the under-investment issue is consequently how to target public investment to maximise the public-private investment multiplier.

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Enabling Asian SMEs to thrive in a digital world

By Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore

e-commerce-digital-business-dmA young lady in a remote village in northern Vietnam is using new technology to create and sell her family’s traditional silver necklace designs to customers across the region and even globally who can collect their purchases directly from 3D printing facilities.

Another small firm in Bangkok has transformed its eyewear company to sell online using a mobile app that allows users to visualise glasses from different angles as the phone tilts. Shoppers are finding and increasingly buying these products from all across the region.

These small companies — and many more like them — show the promise of e-commerce and digital trade to transform business in Asia. The tiniest firm in the most remote location can become a “micromultinational.”

But this promise comes with a catch: such business practices work if, and only if, governments in the region are able to build a supportive and enabling policy environment. For smaller firms, complicated or difficult policies that cause delays and drive up costs can be impossible to overcome.
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Promoting innovation: Lessons from the Global Fund

By Guido Schmidt-Traub, Executive Director, Sustainable Development Solutions Network

funding-health

Since its inception in 2001, the Global Fund to Fight AIDS, Tuberculosis and Malaria has become a highly respected pooled financing institution that scores top marks in independent reviews.1, 2

It has disbursed some USD 40 billion in grants for complex disease control and treatment programmes in fragile and non-fragile countries alike.

Success was far from assured in 2001, as developing countries, particularly in sub-Saharan Africa, faced a perfect storm of surging HIV/AIDS, multi-drug-resistant tuberculosis and surging malaria deaths. Control and treatment interventions were available in high-income countries, but no one knew how to tackle the diseases in resource-poor settings. In particular, HIV/AIDS treatment was deemed impossible in Africa and was outside recommended approaches for tackling the disease.3

The Global Fund was designed precisely to tackle the lack of quality programmes and implementation mechanisms in developing countries. All too often, however, it is seen as just another funding mechanism. Many reviews lump it together with other multilateral mechanisms and trust funds.4

This is a mistake. The Global Fund has unique design principles that set it apart from bi- and multilateral financing mechanisms with the notable exception of Gavi.5

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What gets measured gets managed: Tapping into local procurement in the mining industry to advance development

By Luke Balleny, Manager, Role of Mining and Metals in Society, International Council on Mining and Metals

Zambia-Mining-shutterstock_267616874
Zambia – crusher for manufactured sand. Photo: Shutterstock

How do mining companies spend their money? If you didn’t know and listened only to the media, you might think such companies spend the most on taxes and royalties. However, you’d be wrong.

When minerals or metals are monetised, the revenue is shared between four main stakeholders in the following ways:

  1. 50–65% of mining revenue goes to operating and capital expenditure, such as the suppliers who are paid for their inputs.
  2. 15–20% goes to government, which receives its share through royalties and taxes.
  3. 15–20% goes to investors who receive profits, typically a residual after the other payments have been made.
  4. 10–20% goes to employees who are paid their wages.

A World Gold Council (WGC) study shows that out of the total annual spending in 2012 of USD 55 billion by the 15 WGC members studied, some USD 35 billion were payments to other businesses, mostly subcontracting and procurement. Less than USD 10 billion were royalty and tax payments to governments.

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Reducing violence in El Salvador: What it will take

By Ian Brand-Weiner, Policy Analyst, OECD Development Centre; Katharina Ross, Project Officer Latin America & Asia, Plan International Deutschland e.V; Francesca Cárdenas, Head of Public Relations, Plan International El Salvador; César Pineda, Grants specialist, Plan International El Salvador

el-salvador-plan
A young woman is being trained through the Youth Employability and Opportunities initiative.

Violence holds El Salvador’s economic and social development potential hostage. Violence and inequalities often reinforce each other in Latin America: countries with higher levels of inequality tend to have higher rates of intentional homicides (Figure 1). El Salvador, however, stands out. Its homicide rate is disproportionately high compared to its level of inequality. The small Central American country surpassed Honduras and Venezuela in 2015 to become the most violent country in the Americas, with 108 homicides per 100 000 inhabitants.

The violence and its consequences are costing the government, households and enterprises 16% of GDP annually. These costs include expenses for public and private security, extortion, medical treatments, preventing and combating violence, the penitentiary system, and the opportunity costs for those in prison or forced to emigrate. These costs exclude the intangible ones, such as the suffering of victims and their families, the long-term fear and psychological effects impacting their employability and that of future generations, and decreased trust in the community and state.
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Are we ready to prevent the next food price crisis?

By Denis Drechsler, Project Manager, Agricultural Market Information System (AMIS), Food and Agriculture Organization of the United Nations

food-crisisWhen prices of staple food crops soared in international markets in 2007-10, it was a wakeup call for many world leaders to take action. In view of millions of families being pushed into hunger, the G20 decided to create the Agricultural Market Information System (AMIS) to combat excessive volatility by enhancing transparency and policy co-ordination in international food markets.

Since its launch in 2011, AMIS has provided more reliable and timely assessments of global food supplies by working closely with the main trading countries of staple food crops. This has created a more level playing field for all market actors to make informed decisions. Even more important have been achievements in the area of policy dialogue. When maize prices spiked in 2012, for example, regular exchanges among the key producing countries helped avoid a repeat of hasty policy action, such as export bans that had exacerbated market turbulences in the past. Through AMIS, it seems, the world is better prepared to minimise the risk of future food price crises.

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Energy for the 2030 Agenda

By Dr. Fatih Birol, Executive Director, International Energy Agency

Birol
Africa’s night sky could change dramatically if we achieve “energy for all” by 2030.

The 2030 Agenda for Sustainable Development has been ratified, and access to affordable, reliable, sustainable and modern energy for all by 2030 is a target in its own right (SDG 7). Modern energy is central to achieving global development: it has never been a more important time to understand where the world stands on achieving this target, and to propose pragmatic strategies for achieving universal energy access.1

Achieving modern energy for all is within reach. The number of people without access to electricity fell below 1.1 billion in 2016, from 1.7 billion in 2000. We have undertaken an in-depth assessment of each country’s progress, finding some staggering successes. Half a billion people gained access to electricity in India alone, with government policies putting the country on track to universal access by the early 2020s, a tremendous achievement. Moreover, some countries in sub-Saharan Africa, including Kenya and Ethiopia, are on track to universal electricity access by 2030. However, progress overall has been uneven. Despite current efforts, over 670 million people will still be without electricity by 2030, 90% in sub-Saharan Africa.

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