Enabling Asian SMEs to thrive in a digital world
By Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore
A 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
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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Food prices must drop in Africa: How can this be achieved?
By Thomas Allen, Sahel and West Africa Club Secretariat (SWAC/OECD)
After the 2007-08 crisis, we got into the bad habit when discussing food prices of focusing almost exclusively on volatility and overlooking the question of the level of prices. Of course, reasons were good for this; between February 2007 and February 2008, world food prices jumped 60%. These increases combined with local factors had dramatic effects, particularly in West Africa, where millions of households already had insufficient income to cover their basic nutritional needs. Today, according to OECD and FAO projections, food prices are expected to remain stable in the medium-term. This is a good time to re-examine some important questions.
Are food products cheap in sub-Saharan Africa?
The question may seem surprising, as food is no doubt cheaper in the poorest countries. This is the first thing that any tourist would tell you, and it is confirmed by statistics. Sub-Saharan countries do indeed have the lowest prices in absolute terms (see figure). African food products are therefore much more affordable…for the European consumer. What about for the African consumer? Continue reading “Food prices must drop in Africa: How can this be achieved?”
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
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:
- 50–65% of mining revenue goes to operating and capital expenditure, such as the suppliers who are paid for their inputs.
- 15–20% goes to government, which receives its share through royalties and taxes.
- 15–20% goes to investors who receive profits, typically a residual after the other payments have been made.
- 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.
Reflections on scaling up financing for development
By Charlotte Petri Gornitzka, Chair of the OECD Development Assistance Committee
Spending last week at the World Economic Forum in Davos and today in the Private Finance for Sustainable Development conference, my head is spinning with financing for development issues.
Chairing the OECD Development Assistance Committee (DAC), I often find myself reminding members to uphold their aid levels and to use their public finance resources to stimulate private capital for sustainable development.
It’s a balancing act. Governments risk being accused of shying away from commitments when we talk too much about the “innovative financing tools” and about involving the private sector for development outcomes. It is true that upholding aid levels and directing them to countries most in need will continue to be important to leave no one behind. However, OECD countries must continue to move from talking to taking action when it comes to stimulating private finance.
Why? Faced with an estimated USD 2-3 trillion annual funding gap for achieving the Sustainable Development Goals, public or philanthropic capital will be able to meet only half of it; opportunities for the private sector, thus, are significant.
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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
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
When 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
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.
Bridging the green investment gap in Latin America: what role for national development finance institutions?
By Maria Netto, Lead Capital Markets and Financial Institutions Specialist, Inter-American Development Bank, and Naeeda Crishna Morgado, Policy Analyst – Green Growth and Investment, OECD
The developing world urgently needs more and better infrastructure. Affordable and accessible water supply systems, electricity grids, power plants and transport networks are critical to reducing poverty and ensuring economic growth. The way new infrastructure is built over the next 10 years will determine if we meet the Sustainable Development Goal (SDGs) and the Paris Agreement objectives. Considering the long lifespan of most infrastructure projects, the decisions developing countries make about how they build infrastructure are critical: we can either lock-in carbon intensive and polluting forms of infrastructure, or ‘leap frog’ towards more sustainable pathways.
Many countries in Latin America are making this shift: thirty-two of them have committed to cut their emissions and improve the climate resilience of their economies, in infrastructure and other sectors, through Nationally Determined Contributions (NDCs). The cost is estimated at a staggering USD 80 billion per year over the next decade, roughly three times what these countries currently spend on climate-related activities. What is more, this is in addition to a wide investment gap for delivering development projects and infrastructure overall – the World Bank estimates that countries in Latin America spend the least on infrastructure among developing regions in the world.
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The lost secret of aid efficiency
By Simon Scott, Counsellor, OECD Statistics Directorate
In 1963 John Pincus of the RAND Corporation suggested redefining aid to reduce all forms of aid to their value as grant or subsidy, and in 2014 the OECD’s Development Assistance Committee (DAC) agreed to his suggestion. (See an earlier post about this evolution.)
Of course, in the meantime, DAC members had not just been sitting around for 51 years. In 1969 they used Pincus’ “grant equivalent” method in a Recommendation to soften the terms of aid, and in 1972 they used it again to decide which loans were soft enough to count as official development assistance. The World Bank and the IMF also used the method in measures to keep the lid on developing countries’ debt, and the Paris Club used it to equalise creditors’ efforts under different debt relief options.
Yet one potential use of grant equivalents has been thoroughly neglected. Ironically it was the very application of the method that was most discussed 50 years ago, namely its potential to ensure the most efficient use of aid funds.