Time to accelerate debt relief to finance Africa’s recovery

By Marin Fouéré, Policy Analyst, OECD Development Centre and Daniele Fattibene, Research Fellow at Istituto Affari Internazionali (IAI)

The COVID-19 pandemic continues to take a heavy toll on African economies, home to the fastest growing population in the world. The burden of the crisis adds to the fact that Africa’s per capita real GDP growth over the period 2009-2019 was 1.3% per year, which is half the global average of 2.5%.

Ahead of tomorrow’s Summit on Financing African Economies, gathering African and other world leaders and international organisations, President Emmanuel Macron called for a New Deal for financing Africa’s sustainable recovery through profoundly innovative solutions.

Against this backdrop, on 9 April 2021, the OECD Development Centre and the T20 Co-Chair International Affairs Institute (IAI), engaged in a conversation to inform the G20 process, exploring how it could support African-led initiatives to leverage on new liquidity to mobilise more investment in the continent’s sustainable development.

The Italian G20 Presidency can do more to ensure international debt relief efforts are channelled towards Africa’s sustainable development. As the COVID-19 crisis intensifies pressure on fiscal resources, the international community is exploring ways to address the issue of debt sustainability above the scope of the G20’s Debt Service Suspension Initiative (DSSI) and Common Framework for Debt Treatments beyond the DSSI. These initiatives allow for 73 low-income and Least Developed Countries to request either a temporary suspension of payments or further treatment, from rescheduling to restructuring, of their public debt owed to G20 and Paris Club member countries. Although these initiatives can be considered as a step in the right direction, they will not cover the magnitude of the current crisis.

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Why governing data is key for the future of cities

By Carlos Santiso, Director and Marcelo Facchina, Lead Smart Cities Specialist, Digital Innovation in Government Directorate, Development Bank of Latin America

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Technology is changing city dwellers lives, as well as how urban centres evolve to meet their needs. The pandemic has accelerated this transformation, and the digital transition has generated an explosion of data, especially in cities. In this context, the ability of local governments to manage urban problems will be paramount for the recovery, and the pandemic has helped us better understand the missing elements we need to govern cities effectively. For instance, the World Bank’s World Development Report of 2021 underscored that a data infrastructure policy is one of the building blocks of a good data governance framework, both to foster the local data economy and promote digital inclusion.  

It is inconceivable not to consider cities as an integral part of the solution to challenges like tackling social exclusion, improving public services and reducing insecurity, among others. A key issue that has become increasingly prominent in city agendas is the good governance of data; that is how data is handled and for what purpose, its quality and integrity, as well as the privacy and security concerns related to its collection and use. In other words, city governments need to preserve people’s trust in the way they handle data to improve lives.

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Putting metrics to action: global co-operation and the Anthropocene

By Pedro Conceição, Director of the Human Development Report Office and lead author of the Human Development Report

Forest fires in California and Australia. Heatwaves in Europe and India. Snow in Texas. These are only some of the recent extreme weather events that are increasingly ravaging our planet. Climate change is likely playing a crucial role in all of them. Add in COVID-19, which almost certainly sprang from human interaction with wildlife, we have an even clearer warning of the risks of human pressure on the planet. These pressures have had such an impact that many scientists argue that we have entered a new era, the Anthropocene, or the age of humans, in which humans have become a dominant force shaping the planet.

The ongoing planetary crises pay no attention to national borders, and nor should our efforts to come up with solutions. The most notable and ambitious of these—the Paris Agreement on Climate Action—has prompted virtually all countries to commit to reducing their carbon emissions. Nations have also come together to agree on international frameworks for other goals such as preserving biodiversity.

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Revisiting knowledge for development

By Pierre Jacquet, President, Global Development Network

Beyond the short term costs and challenges of the COVID-19 pandemic for developing countries, this post takes a more long-term view, starting from a less discussed lesson of COVID-19, namely, how it has revealed a deficient culture of dealing with uncertainty and the role of science in society. The pandemic has shown both that ignoring science endangers lives and that scientists typically disagree on the best course of action. Science reveals true knowledge, but knowledge always remains incomplete: it therefore cannot deliver a blueprint for action, but it informs decisions under uncertainty and risk mitigation. The real potential of scientific knowledge is in interpretation and judgment. This has important implications for the knowledge-for-development agenda.  

Since about a quarter of a century, when former World Bank President James Wolfensohn labelled the Bank a “knowledge bank”, the idea that development strategies and practices need to mobilise sound knowledge has become a driver of development aid thinking. However, the subsequent knowledge-for-development programme has erred. This is not due to development research itself: it has become a vibrant segment in research departments in the best universities of the developed world and has improved our understanding of development challenges and productively shaped international debate and development policy thinking. Moreover, with the rise of experimental work and random control trials, it has also hosted a much-heralded advance in empirical work. But the knowledge for development agenda has ignored and even compounded three issues which, taken together, doom its effectiveness.

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“Ambidexterous” development: changing the paradigm

By Nuno Gil, Professor of New Infrastructure Development, Alliance Manchester Business School, The University of Manchester

After many decades of development assistance, we are still failing the poor. We have reached a broad consensus that promoting economic growth and welfare requires a two-pronged approach: building institutions matters, but building infrastructure matters too. Hence, focusing development assistance on one goal at the expense of the other will not work. Yet, frustratingly, development assistance is only now starting to look for ways to become truly ambidextrous.  

If we go back to the first decades of development assistance, the prevailing approach was to emphasise stand-alone infrastructure projects. At the time, traditional donors used limited conditionality and the deals were not transparent. But by the mid-1980s, the donor community realised that this choice was leading to disappointing results in terms of poverty alleviation and economic growth. By focusing on quick infrastructure building at the expense of institutional reforms and local capability building, the ruling elites could exploit weak institutions, turning the new infrastructure projects into instruments to enrich themselves and capture more rents.

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Understanding migration as an asset: the Colombian case

By Adriana Mejía Hernández, Vice Minister for Multilateral Affairs of the Republic of Colombia

The massive exodus of Venezuelan migrants is the world’s second largest migration wave and is unprecedented in the history of Latin America. Colombia, host to almost 30% of Venezuelan migrants, responded with comprehensive measures and most importantly, has approached the mass arrivals of migrants as an opportunity for development and growth. However, the lack of identity documents and irregular status of migrants are the source of many challenges to achieving an effective state response.

The Colombian case is particular. During the 1990s thousands of Colombian nationals migrated to Venezuela making Colombia the country of origin. Nonetheless, the worsening of the social and economic conditions in Venezuela caused a reversal of the migration dynamics between the two countries. As of 2015, Colombia began to receive flows of regular migration that later, in 2019, were surpassed by the number of irregular migrants crossing into national territory, through various pathways along the border, risking their lives and belongings along the way.

The dramatic circumstances that irregular migrants have to face make them more vulnerable to suffering from human rights violations, including sexual or gender-based violence, discrimination, xenophobia, labour exploitation, as well as migratory-related crimes like human trafficking or migrant smuggling. They are more likely to fall victims to criminal acts, or even, in some cases, of becoming involved themselves in criminality due to a lack of job opportunities or access to basic services.

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Why investing in intermediary cities should be a priority for a green recovery

By Michael Lindfield, Senior Consultant, former Senior Specialist at the ADB

Although the COVID-19 pandemic will change the context for investment decisions – including for climate investment in intermediary cities in emerging markets and developing countries – little has been done to detail these consequences. In general, consequences for financing institutions and cities may include lower inflows to institutions like pension funds and insurance companies, and increased pressure to buy government bonds and lower revenue base, thus reducing cities’ and other urban institutions’ ability to service debt and/or provide availability payments to concessions. Additional consequences include potentially lower emerging market and developing economy sovereign and sub-sovereign credit ratings (increasing the cost of debt), and curbed economic growth, thus curtailing the potential for cost recovery in relation to green projects.    

These consequences are likely to impact intermediary cities more than capitals or megacities because they have lower credit ratings and less technical capacity. However, there will be opportunities if climate investment is integrated into COVID-19 recovery financing, creating the right incentives for investors. The critical alignment relates to the perceived risk/return profile of investments. If the rate of likely return will be sufficient to compensate for the risks of investing, then private, institutional and commercial entities will invest, provided minimum regulatory hurdles, such as minimum credit ratings, are met.

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Green windows of opportunity for latecomer development in renewable energies

By Xiaolan Fu, University of Oxford, Rasmus Lema, University of Aalborg and Roberta Rabellotti, University of Pavia

There is increasing recognition that policies aimed at meeting environmental targets may open new economic development paths, especially for emerging economies, given the green transformation and related techno-economic paradigm changes across institutional, market and technological domains. Looking at China, a recent article highlights the importance of institutional transformation to create “green windows of opportunity” (GWOs) for economic structural change associated with the green economy. Green windows of opportunity represent a set of favourable, temporary conditions for “latecomers” to catch-up in the long run in sectors central to the green economy. 

To investigate GWOs there needs to be a new framework for two main reasons. First, it is essential to deviate from the environmentally unfriendly development pathways undertaken in the past by advanced economies of North America and Western Europe. Emerging economies should ‘develop differently’ from the outset rather than catch-up along established pathways. Second, the green transformation, as a significant driver of current capitalist development, has features that sets it apart from earlier transformations. It is the first industrial and technological revolution with a deadline and it is steered explicitly by public policy, driven not just by economic motivations, but also by social value. 

Green windows of opportunity

This new analytical framework is summarised in Figure 1, with green windows of opportunity at its core, driven by institution and policy changes rather than technological or market change. Empirical evidence on biomass, hydro, solar photovoltaic, concentrated solar power and wind shows that institutional changes are the central drivers of green windows of opportunity. Examples from China include both cross-cutting changes such as the implementation of the 2006 Renewable Energy Law and sector-focused missions such as the Golden Sun Demonstration Program in the solar photovoltaic sector and the Rind the Wind Program. While the drivers of the emergence of these green windows are essentially institutional and policy-driven in nature, they influence and interact with technological and market transformations.

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Amid cyclones and COVID-19, Vanuatu makes bold decision to graduate from ‘least developed country’ category

By Violeta Gonzalez Behar, Head of Partnerships, Outreach and Resource Mobilisation, Enhanced Integrated Framework (EIF), World Trade Organization & Michelle Kovacevic, Communications Specialist and Consultant for EIF

Fresh fruit and vegetable market in Port Vila, Vanuatu. Photo: Shutterstock

On 4 December 2020, Vanuatu shed its official classification as one of the world’s least developed countries (LDC). This significant milestone – called ‘graduation’ – is something that only five other countries have managed to achieve in the last 40 years. And Vanuatu’s graduation achievement may be the most impressive of all given that, over the past few years, not only has it has weathered significant economic and social fallout from repeated natural disasters, but also a major drop in tourism revenue due to border closures during the global COVID-19 pandemic.

At this time of exacerbated economic vulnerabilities, some have questioned whether this is the right time for Vanuatu to leave its LDC status behind. Indeed it is a courageous choice – on the surface it may seem that there is more to lose than gain from graduation. Graduating countries usually surrender international support measures earmarked for LDCs such as preferential market access, targeted multilateral aid funding, free legal advice and technical assistance from some United Nations agencies, as well as travel support to attend international UN meetings.

While the impact of losing international support measures will depend on what goods a country exports, the trade agreements it is part of, and other factors, the UN’s Committee for Development Policy’s (CDP) LDC graduation impact assessments have shown that the loss of these measures doesn’t actually make much of a practical difference.

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Quality Infrastructure: putting principles into practice – the viewpoint of a development agency

Takenori Nasu, Senior Deputy Director, Operations Management Division, Operations Strategy Department, Japan International Cooperation Agency (JICA)

Investing in infrastructure is critical for recovering from the COVID-19 crisis and achieving long-term development objectives. The crisis has triggered a reshuffling of investment priorities for governments globally and significant shifts in demand. Moreover, the pandemic adds further pressure on already-constrained fiscal space in developing countries. Ensuring quality in infrastructure development has become more fundamental than ever for the efficient and effective use of limited resources for a resilient and sustainable future.

In 2019, the G20 Osaka Summit endorsed the “G20 Principles for Quality Infrastructure Investment”, a set of voluntary, non-binding principles designed to reflect the G20’s common aspiration for quality infrastructure investment. But how can “quality infrastructure” be put into practice?

Achieving quality infrastructure, in other words maximising the effectiveness of infrastructure projects, has been a long-standing challenge. To maximise the positive impact of projects, many factors must be taken into consideration, such as economic efficiency in terms of life-cycle cost, natural disaster risks, environmental and social impacts, climate change, gender mainstreaming, openness, transparency, debt sustainability, and accountability in line with international standards outlined in the G20 Principles. These factors should be considered throughout the entire project-cycle from project formulation to service delivery and maintenance.

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