Business incubation needs a re-think

By Allon Raiz, Chief Executive Officer, Raizcorp


Explore this topic further with the upcoming launch of the
2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa.
Stay tuned for details


Ellon-RaizA little more than 12 years ago I read an article about 981 “entrepreneurs” who had been through a brief new venture creation programme. According to the journalist’s investigation, not one of these would-be entrepreneurs who had been in that programme was in existence a year later. The journalist lamented that despite the obvious evidence that these high volume, low quality programmes were ineffectual, they were nevertheless prolific, wasting hundreds of millions of dollars every year.

Twelve years ago, incubation as a way to promote entrepreneurship was only beginning to appear in any significant manner in the developing world. Unfortunately, in my opinion, the incubation industry inherited a few philosophical approaches from the training industry that have plagued the industry ever since.
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Changing social norms through entertainment education: the case of a soap opera in India

By Poonam Muttreja, Executive Director, Population Foundation of India

 

poonam-muttre
A promotional activity is held for Main Kuch Bhi Kar Sakti Hoon, in Bhourikala Village, India’s state of Madhya Pradesh

“You forced me into marriage. I wanted to study.”
“What difference is that gonna make! Are you going to be the Prime Minister?”
“Yes. I will become the Prime Minister.”

This powerful exchange between key characters in a soap opera demonstrates reel life emulating real life.
In 2011, the Population Foundation of India (PFI) set out to use the soap opera Main Kuch Bhi Kar Sakti Hoon (MKBKSH) or I, A Woman, Can Achieve Anything as the centre of a transmedia initiative that leverages the power of entertainment education to change social norms. At the heart of the soap opera are the struggles and triumphs of Sneha, a doctor working in Mumbai, as she journeys from the city to her village, emotionally torn between family and society, between professional aspirations and personal commitment.

But why pursue entertainment education and what has been the experience?

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Gender and Skilled Immigration: Challenges and Recommendations

By Dr Anna Boucher, University of Sydney

woman-looking-forwardWith population ageing occurring in all advanced industrial nations, immigration policy is one key way to augment the skill base of domestic labour forces. Though the economic benefit of skilled immigration for receiving states has been a central policy focus globally, the equity considerations of such policies have attracted less attention. Yet, in the global race for human capital, gender equality matters.

Research demonstrates that while women comprise an equal proportion of migrant stock globally, they are underrepresented within skilled immigration flows (Brücker et al 2013 and Piper and Yamanaka 2008). This is particularly true of women from key developing countries in the global South (i.e. Sharma 2006: 129). These data stand despite the increasing educational achievements of women globally, which suggests that governments utilise factors other than educational status to assess “skill” within selection criteria (Brücker et al 2013). As such, labour migration is segmented by both country of origin and by gender. Considering these factors is important for understanding intersectional equality as gender discrimination can operate alongside other forms of disadvantage.

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Global Skill Partnerships: A proposal for technical training in a mobile world

By Michael Clemens, Center for Global Development

Migration can have benefits for everyone involved, but this is far from automatic. It requires new institutions, institutions designed for a world that moves. We propose Global Skill Partnerships (GSP) as a new way to make skilled migration more beneficial to migrant-destination countries, origin countries and migrants. A GSP is an up-front agreement between employers and/or governments in destination countries and professional training centres in origin countries. These parties agree on a practical and equitable way for the benefits of migrants’ professional service at the destination to finance training at the origin — training for both migrants and non-migrants. Such an agreement allows mutual gains by taking advantage of large international differences in both professional earnings and training costs.

An Example: Nurse Training and Employment
Within a decade, Europe will require hundreds of thousands more nurses than it is likely to train [1]. Nurses will and must move in large numbers to Western Europe from other countries, including those in Eastern Europe. But Eastern Europe critically lacks nurses, [2] while Eastern European youths crave opportunities in skilled employment. How can nurses trained in Eastern Europe move in a way that benefits both regions?

A new type of nurse training could address these problems. A GSP is a bilateral agreement designed to facilitate nurse training in Eastern Europe. Some of its graduates could migrate to work in Germany —either temporarily or permanently — while others remain to work at home. Those who migrate typically earn ten times more than those who do not,[3] because their economic productivity is vastly greater at the destination than at the origin.

Not only are destination-country wages higher, origin-country training costs are lower. Just a small part of this dual arbitrage opportunity can finance training for migrants and non-migrants. The gain can be captured either by destination-country governments, by the employers, by the migrants (as a kind of student loan) or some combination of these.

Here is one example of how a GSP might work:
Maria and Ion are two young, low-income Moldovans who train as Registered Nurses in Chisinau. Maria plans to work in Germany, Ion in Chisinau. Training each of them costs €3500 per year in Moldova. A private hospital group in Germany agrees to finance two years of Maria’s training in Moldova, before bringing her to Germany for a final year of training, as well as financing half of Ion’s full training in Moldova. The total training cost in Moldova is €12250. In return, Maria commits to work within the German hospital network for at least four years.

Observe the consequences of this arrangement: Germany gains a nurse (Maria) whose net earnings are still about ten times what she could earn in Moldova; the German employer gains a profitable employee and saves tens of thousands of euros from supporting Maria’s first two years of training in Moldova rather than in Germany; Moldova gains a nurse (Ion) with a sizeable free scholarship; two low-income Moldovans get professional careers that might be otherwise inaccessible; Moldova expands the capacity and quality of its nurse training facilities, creating benefits that spill over into the rest of the health sector; and there is no cost at all to the German or Moldovan governments. Other benefits to Moldova could arise if Maria chooses to remit some of her earnings home, or to return one day to work in Moldova. But the arrangement remains mutually beneficial if she does not.

These all-around benefits are possible for two simple reasons: 1) a nurse’s labour is worth enormously more money in Germany than in Moldova, and 2) it is much less expensive to train a nurse in Chisinau than in Germany. A GSP turns those two facts into an engine of human capital creation. And the framework could be flexibly adapted to different settings: First, GSPs could include nursing assistants and personal care workers, in addition to or instead of full professional nurses. Second, they could begin with health professionals, but the same framework could later be applied to various types of training to fill semi-skilled and skilled labour shortages in Germany.

GSP Financing
GSPs could be financed differently than the above example. Initial finance could come either from the German government, from private-sector employers or both. Employers who cover migrants’ training costs should be compensated either by a subsequent work commitment or by repayment following migration. Regardless, training requires little or no up-front cost to students and is thus accessible to Moldovans of any income level. Training for migrants costs Moldovan taxpayers nothing, reducing fears of brain drain or fiscal drain. Graduates who do not migrate pay much lower tuition, heavily subsidized by a small portion of migrant graduates’ earnings.

GSPs could become privately profitable and self-sustaining, with no ongoing cost to taxpayers either in Germany or Moldova. But they require initial co-operation and support from policy makers on both sides. This mutual support must arise from the prospect of mutual benefits. The gains for Moldova (and savings for Germany) largely emerge from conducting some of the nurse training in Moldova. The initial involvement of policy makers on either side, which may require multiple ministries working together, can include the following:

  • The destination country must work directly with employers to understand their unmet needs and design training around those needs; craft visa policy that allows graduates to reliably enter the country; and cooperate to seek repayment from any graduates who might not fulfil post-graduation work commitments.
  • Both governments must collaborate to ensure that graduates’ qualifications and skills are recognized at the destination, with positive effects on the quality of nurse training in Eastern Europe as facilities conform to German training standards.
  • The destination country must regulate graduates’ work commitments so that nurses are not bound to a single post for years, lest they be exploited. If employers finance training, there should be a mechanism for workers to buy out any work commitment to one employer so they can work for another.
  • Both destination-country and origin-country governments will need to work closely with their health sectors. In the destination country, it will be critical to communicate to other nurses that GSPs are one of many tools to address long-term shortages that will end up improving the negotiating power of existing nurses, not harming them. In the origin country, it will be important to communicate to training authorities that GSPs assist in the net creation of nurses, rather than taking them away.
  • Finally, start-up capital from governments may be necessary to get GSPs off the ground.

A Way Forward
Nursing offers just one example of a field where a GSP could be arranged. Other forms of technical training could also be suitable — including basic information technology services and skilled trades such as heating systems maintenance. Moldova and Germany, too, are just one example of many country pairs where wage and training cost differentials are more than large enough to power a GSP. Designed correctly, a GSP can provide both good jobs and professionals to the destination country and the origin country, without harming the public coffers or health systems of the country of origin. This is a better way to strengthen developing nations’ employment markets versus blocking the migration of skilled people.

[1] Consultants for the European Commission project that, in 17 years, the EU will need 590,000 more nurses than it will produce: Matrix Insight (2012), EU level Collaboration on Forecasting Health Workforce Needs, Workforce Planning and Health Workforce Trends: A Feasibility Study, Brussels: European Commission, p. 13.

[2] The World Health Organization Country Cooperation Strategy for Moldova lists “brain drain…in the health workforce” as one of its principal challenges. Approximate number of practicing professional nurses and midwives per 1000 residents: Germany 12; France 9; Moldova 7; Bulgaria 5 (WHO Global Atlas of the Health Workforce).

 

[3] The average salary in Moldova is about €205-230 per month, in Germany roughly €2800–3000 per month. The full, start-to-finish cost of a Registered Nurse education in Moldova is approximately €9000–11000.

Is migration good for development? Wrong question!

By David Khoudour, Head of the Migration and Skills Unit, OECD Development Centre

This summer’s conference in Addis Ababa acknowledged migration’s positive contribution to development. The newly adopted Sustainable Development Goals (SDGs) now take the next step of announcing migration-related targets. The SDGs recognise the need to protect the rights of migrant workers, especially women migrants, adopt well-managed migration policies and reduce remittance fees. However, international migration remains a very sensitive issue for most countries, as the current refugee crisis reveals. Such apparent schizophrenia between the international development agenda and the national policy one raises one important question: Can migration be good for development in countries migrants leave behind? Continue reading

How the private sector can advance development

By Lorenzo Pavone, OECD Development Centre EMnet Co-ordinator; Kate Eklin, Policy Analyst; Myriam Grégoire-Zawilski, Programme Assistant; Josep Casas, Trainee

The Millennium Development Goals (MDGs) launched in 2000 centred on addressing basic human needs throughout the developing world. The recently adopted Sustainable Development Goals (SDGs) for the post-2015 era focus on economic growth, social inclusion and environmental protection as interconnected dimensions of broader global development. Unlike the MDGs, achieving this new set of ambitious goals calls for bolder action from diverse actors across society, whose collective efforts outweigh what they could deliver individually. And the private sector is not least among these actors. Why? Business-led initiatives, such as research and development partnerships, knowledge-sharing platforms, technology and skills transfer, and infrastructure investment have the potential to kick-start development, enable productivity gains, generate better quality jobs, strengthen skills and promote technological advances. Continue reading

How to continue the shifting wealth momentum

By Carl Dahlman, Head of the Thematic Division and Head of Global Development Research at the OECD Development Centre and Martin Wermelinger, Economist at the OECD Development Centre

Strong growth over much of the past decade has substantially boosted developing countries’ share of the global economy and accelerated per capita income convergence with richer countries. We call this process “shifting wealth.” However, productivity is still lagging and growth is too low to allow continued convergence. Low productivity also challenges more inclusive and sustainable development. This blog argues that developing countries have many opportunities to boost productivity.

Non-OECD countries’ weight in the global economy is today above that of OECD countries in terms of purchasing power parity, a measure of what money will buy in different countries. This is remarkable especially since their share stood at around 40% just 15 years ago. This change in relative economic size of developing versus developed countries is being led by the BRIICS, particularly China and India. Together, these two countries account for almost one quarter of global GDP.

Non-OECD countries already surpass OECD countries in share of global GDP

fig1.PGD

Despite the momentum towards convergence, several lower middle-income countries, such as India, Indonesia and Vietnam, and countries in the upper middle-income bracket, such as Brazil, Colombia, Hungary, Mexico and South Africa, would fail to converge with the average OECD income level by 2050, given their average growth rates since 2010. In fact, the growth differential between OECD and non-OECD countries has narrowed dramatically relative to the pre-2008/09 crisis period. Their challenge is deepened by the recent slowdown in China, where rapid growth has up to now benefited its neighbours and suppliers, in particular natural-resource exporters.

Growth slowdowns can be associated with significant slowdowns in productivity growth. Over the past decade, productivity growth made only a marginal contribution to economic growth in many middle-income countries. It was also insufficient to significantly reduce the very large gap in productivity with advanced countries. In Brazil, Mexico and Turkey, the gap even widened. In contrast, China recorded impressive growth in productivity: around 10% annually in labour productivity in manufacturing and services.

“So, how can countries boost productivity?”

Factors associated with moving up the value chain, expanding inclusive and environmentally sustainable development and promoting effective governance are all part of the strategic mix to drive structural reforms and boost productivity. This mix includes:

Diversifying continuously into higher value-added market segments in agriculture, industry and services:Diversification is particularly important in middle-income countries that are seeing rising wages as well as those rich in natural resources.

Innovating by using global knowledge and developing domestic capabilities: Middle-income countries have significant room for technological catch-up. Besides better integrating in the global trading system and tapping foreign knowledge through trade and foreign direct investment, countries also need to develop capabilities to innovate new products and processes to better suit their own needs. This can be done by licencing technology; obtaining technology, designs, production and management assistance from foreign buyers, consulting firms and technical experts; learning from foreign education and training; copying and reverse engineering products and services; and undertaking domestic R&D.

Developing skills: In many middle-income countries, improvements in educational attainment and deeper integration into value chains have often been insufficient to ensure the competitiveness of the labour force. This suggests that education policies need continuously to adapt the supply of skills to the economy’s changing needs.

Reforming product and financial markets: In many middle-income countries, the development of competitive, innovative businesses is often constrained by an inadequate regulatory environment.

Fostering competitive service sectors: The domestic service sector can grow to meet the demand of the growing “middle classes.” Increased use of services, like engineering, R&D or marketing services, also improves the competitiveness of manufacturing. Moreover, some knowledge- and information-intensive services, such as ICT, and business services can help to improve the efficiency of the economy and can be themselves a source of export earnings. Emerging digital services such as big data analytics and the Internet of things are likely to have game-changing impact on inclusive and sustainable growth.

Growing inclusively: Development challenges are about much more than just economic growth. Many emerging and developing economies have been capable of reducing poverty over the last two decades. At the same time, however, income inequality is increasing in many of these economies. Moreover, the Arab Spring and rising social tensions in other developing economies make clear that social cohesion and equality of opportunity to more broadly share the benefits of economic opportunity deserve greater attention. This also requires identifying regional competitive edges and increasingly tailoring public services to local needs. For example, productive employment and firms can emerge in any region provided they nurture environments conducive to entrepreneurship.

Investing in “greener” growth: The problems of environmental damage caused by growth also raise issues of environmental sustainability. Diversifying into less energy-intensive sectors and adopting energy-efficient technologies would reduce vulnerability to fluctuations in energy prices and changes in regulations and preferences.

Developing capable and effective governments: Better training of government officials and improved coordination across government ministries are essential to ensure effective planning and implementation. Bold changes in strategies may be politically difficult and costly, though less so than no change. Effective communication strategies and the right timing and sequencing are critical to obtain support by multiple stakeholders to implement reforms. China’s rapid rise had been in large part due to its determined, target-oriented government with a vision to address changing economic challenges. It made bold reforms that were possible through effective organisations and procedures to implement the necessary steps. Other countries with more democratically-organised governments need to engage in effective consultations with key stakeholders to build support for necessary reforms and to develop capabilities to implement those reforms.

“Though “shifting wealth” has become more complicated, it can continue.”

A current period of low commodity prices, a slowdown in China as the global growth engine and political turbulences in larger emerging economies mean that other developing countries can today less easily free-ride on the bandwagon to global convergence. Yet, developing countries have a number of practical opportunities to tap their own strengths to advance structural reforms and boost productivity and inclusive, sustainable development.