Workers arrive early in the morning at the One World Apparel factory in Port-au-Prince to assemble garments for export from Haiti. Credit: Ansel Herz/IPS

By Carey L. Biron
WASHINGTON, Aug 26 2014 (IPS)

Civil society groups from several continents are stepping up a campaign urging the World Bank to strengthen a series of changes currently being made to a major annual report on countries’ business-friendliness.

The World Bank is in the final stages of a years-long update to its Doing Business report, one of the Washington-based development institution’s most influential analyses yet one that has also become increasingly controversial. Critics now say the first round of changes, slated to go into effect in October, don’t go far enough."It’s a public relations exercise but with reasonably solid metrics behind it, and it’s the joining of these two things that makes Doing Business valuable in the policy world.” -- Scott Morris of the Center for Global Development

On Monday, a coalition of 18 development groups, watchdog organisations and trade unions called on the World Bank Group to take “urgent action” to implement “significant changes” to the Doing Business reforms. In particular, they are asking the bank to adhere more closely to detailed recommendations made last year by a bank-commissioned external review panel chaired by Trevor Manuel, a former planning and finance minister for South Africa.

“It looks like the flaws found by the Independent Panel chaired by Trevor Manuel will be ignored and its recommendations are nowhere close to being implemented,” Aldo Caliari, director of the Rethinking Bretton Woods Project at the Center of Concern, a Catholic think tank here, told IPS. “This is in spite of a wide chorus of civil society organisations and shareholders that supported them.”

While the World Bank’s mission is to fight global poverty, Caliari and others dispute whether the Doing Business report’s metrics are pertinent to poor communities. Others say they can be outright detrimental.

Both civil society investigations and the Manuel commission have suggested “how little relevance the areas and indicators have to the reforms that matter to small and medium companies in developing countries,” Caliari says. “They seem far more oriented to support operations of large transnationals in those countries.”

Such concerns stem from the outsized influence that the Doing Business report has built up, particularly in the developing world, since it was introduced in 2003. Reportedly, the report is used by some 85 percent of global policymakers.

The core of the report remains a simple aggregated ranking of countries, known as the Ease of Doing Business index. While based on a complex series of business-friendliness metrics, the high profile of the index results has inevitably led governments to compete among one another to raise their country’s ranking and, hopefully, strengthen foreign investment.

Yet a direct effect of this competition, critics say, is governments being pushed to adhere to a uniform set of policy recommendations. These include lowering taxes and wages and weakening overall industry regulation, thus potentially endangering the poor.

“[T]he report’s role is to inform policy, not to outline a normative position, which the rankings do,” the 18 groups wrote to World Bank Group President Jim Kim at the end of July. “Doing Business needs to become better aligned with moves towards greater country-owned and led development and an appreciation of the importance of a country’s circumstances, stage of development and political choices.”

In its report last June, the Manuel commission likewise urged the bank to drop the ranking system entirely, noting that this constituted “the most important decision the Bank faces with regard to the Doing Business report.”

Maintained but reformed

In response, the bank is reforming the methodology behind its ranking calculations. In part, this includes broadening its analysis to use data from two cities in most countries, rather than just one.

More broadly, the new calculations will constitute an effort simultaneously to continue to offer a relative score for each country but also to decrease the importance of the specific ranking.

“This approach will provide users with additional information by showing the relative distances between economies in the ranking tables,” an announcement on the changes stated in April. (The bank was unable to provide additional comment by this story’s deadline.)

“By highlighting where economies’ scores are close, the new approach will reduce the importance of difference in rankings,” the announcement continues. “And by revealing where distances between scores are relatively greater, it will give credit to governments that are reforming but not yet seeing changes in rankings.”

Some development scholars have pushed against the Manuel commission’s recommendations on the index, defending the need for the bank to maintain its aggregate rankings in some form.

“The Doing Business report isn’t a research exercise – it’s a policymaking tool. Because of the rankings it has a unique value, particularly for those countries that have a long way to go on economic reform,” Scott Morris, a senior associate at the Center for Global Development, a think tank here, told IPS after the Manuel commission’s report was published.

“Internally, it gives government officials something simple and targeted to latch onto, much more than a 500-page report would do. It’s a public relations exercise but with reasonably solid metrics behind it, and it’s the joining of these two things that makes Doing Business valuable in the policy world.”

Decent jobs created?

Yet others warn that the rankings themselves continue to be problematic, even in their new form.

The reforms are “not satisfactory, as the rankings will continue to influence the policy agenda of many developing countries despite their methodological flaws,” Tiago Stichelmans, a policy and networking analyst at the European Network on Debt and Development, told IPS in an e-mail.

“The problem of the rankings is the fact that they are based on regulatory measures in a single city (which is due to become two cities) for every country and are therefore irrelevant to many communities. The rankings also have a bias in favour of deregulatory measures that have limited impact on development.”

Of course, many would support the idea of tracking country-by-country policies aimed at encouraging industry to help bolster development metrics. But Stichelmans says this would require major changes, including a move away from the report’s current focus on reforms to the business environment.

“A shift from promoting low tax rates and labour deregulation to taxes paid, decent jobs created and [small and medium enterprises] supported would be a step in the right direction,” he says.

Ideas from NGOs have included indicators on corruption and human rights due diligence, Stichelmans continues, “but this must be accompanied by a drastic overhaul.”

For now, some of the newly announced changes are expected to be incorporated into the Doing Business report for 2015, slated to be released in late October. Other reforms, including some yet to be announced, will be introduced in future reports.

Edited by: Kitty Stapp

The writer can be reached at cbiron@ips.org

President Barack Obama takes the stage to deliver remarks at the U.S.-Africa Business Forum held at the Mandarin Oriental Hotel during the U.S. Africa Leaders Summit in Washington, D.C., Aug. 5, 2014. Credit: Official White House Photo by Pete Souza

By Julia Hotz
WASHINGTON, Aug 7 2014 (IPS)

As the three-day U.S- Africa Leaders Summit here drew to a close Wednesday, experts across the private, public and non-profit sectors continued to debate the opportunities and obstacles posed by the U.S’ expanding business partnership with Africa.

Speaking Tuesday regarding the 17 billion dollars pledged toward African business development, U.S President Obama declared his determination to be a “good,” “equal” and “long term” partner for Africa’s success.“African leaders are asking for US investment, while Africans are asking for jobs…this disconnect hasn’t completely been dealt with.” -- Gregory Adams

“We cannot lose sight of the new Africa that’s emerging,” Obama said Tuesday, announcing new private partnerships, as well as a reaffirmed commitment to improving infrastructure, expanding trade, and providing educational opportunities for young entrepreneurs.

While such business advances most directly benefit actors in the U.S. private sector, non-profits expressed similarly qualified enthusiasm about the summit’s promise of increased economic engagement with Africa.

“What the summit has offered is an opportunity for the United States is to see Africa as a land of opportunity,” Gregory Adams, director of aid effectiveness at Oxfam America, a development organisation here, told IPS.

Adams also said the proceedings have helped move U.S.-African relations more “from patronage to partnership,” and have facilitated “good” and “direct” exchanges between civil society actors and leaders from both the United States and Africa.

But he warned that not all African voices were heard during the three-day proceedings, and that an “important distinction” between the diverse economic interests of Africans has yet to be established.

“African leaders are asking for U.S. investment, while Africans are asking for jobs…this disconnect hasn’t completely been dealt with,” Adams told IPS, noting how “tremendous” economic growth does not necessarily translate to job creation.

More intensive effort to listen

Adding that representatives from Africa’s local and small business have historically been absent from large-scale conversations about U.S-African engagement, Adams explained that “if we’re truly moving from patronage to partnership,… we’re going to need a more intensive effort to listen to variety of African voices…and do more to engage with civil society and local African businesses.”

In a plea to examine just how “demand-driven” the announced investments to Africa are, Adams also called for there to be “follow-through” on such pledges, saying that “all of these commitments are coming fast and furious, so it’s hard to keep track of them and determine what’s real and what’s not.”

Such commitments were premiered within the three-day U.S-Africa Leaders Summit, in which delegations from more than 50 African countries – including more than 40 heads of state – came to Washington to discuss security, trade, infrastructure, and governance with U.S. President Obama and other top U.S. government officials.

Announced last year during U.S President Obama’s visit to Africa, the joint African leaders summit is the first in U.S. history, and has marked a major effort to play catch-up with the EU and China, where governments have previously used summits with Africa as a platform to expand economic partnerships and strengthen diplomatic ties.

While civil society groups participated in the proceedings, the summit’s centrepiece came Tuesday with the U.S-Africa Business Forum, which featured pledges by U.S. government officials, World Bank leaders and CEOs of major U.S. companies – including General Electric, Coca Cola, Walmart, Marriot, and  Mastercard – to provide aid to a variety of sectors in Africa

Special emphasis was given to Obama’s Power Africa programme, which has mobilised 12 billion dollars from both the public and private sector to an initiative that will provide 600 million Africans with a reliable electricity supply.

Ben Leo, director of Rethinking U.S. Development Policy at the Centre for Global Development (CGD), a think tank here, claimed that the Power Africa initiative is a key pre-cursor for business development in the region, explaining how the promise to provide electricity across Africa may even save the otherwise-neglected small businesses.

“If some of these commitments under the Power Africa initiative are effective in addressing both access to power and reliability to power, there will be significant benefits for [Africa’s] small and medium enterprises,” Leo told IPS.

Yet the Atlantic Council, a think tank here, believes that despite the promising nature of Power Africa, the region still lacks adequate infrastructure, and suffers from profound geographic disadvantages.

“Most data-driven investors in the world”

In a report released Wednesday, the Atlantic Council cited these two factors, along with the need for more market data and stronger policy implementation, as obstacles plaguing business development in sub-Saharan Africa.

“Although these are obstacles that affect everyone, the U.S. is the most frustrated with the lack of data… [because] they are the most data-driven investors in the world,” Diana Layfield, CEO of Africa Operations at Standard Chartered Bank, said at the report’s premiere.

But through harnessing innovation, a virtue that CGD’s Leo dubs as one of “America’s core strengths,” the Atlantic Council is optimistic about the opportunity for increased investment in sub-Saharan Africa.

From using satellite imagery to identify local traffic patterns, to issuing SMS surveys to learn about consumer preferences, private companies have been using technology as means to obtain basic information about consumer behaviour, which, the report says, is otherwise unavailable from public sector sources.

Yet for Oxfam’s Adams, such tech innovations miss a crucial point.

“I think we’re really skipping a step as a country if we’re not looking ahead to 30 years from now and asking if all this investment is a flash in the pan, or if  it’s going to lead to the emergence of  local businesses that will lead to job creation,” Adams told IPS.

Stressing that the U.S. is “incredibly non-transparent” and rarely “tell[s] countries the details of their own aid,” Adams concluded that “there is a lot more that the U.S. government needs to do if it actually wants to support Africa.”

Edited by: Kitty Stapp

The writer can be contacted at hotzj@union.edu

Sub-Saharan Africa has large potential for hydropower generation, but is yet to exploit it. Pictured here is the Kariba Dam. Credit: Kristin Palitza/IPS

By Carey L. Biron
WASHINGTON, Jul 21 2014 (IPS)

Pressure is building here for lawmakers to pass a bill that would funnel billions of dollars of U.S. investment into strengthening Africa’s electricity production and distribution capabilities, and could offer broad new support for off-grid opportunities.

With half of the U.S. Congress having already acted on the issue, supporters are now hoping that the Senate will follow suit before a major summit takes place here during the first week of August. That event is expected to include heads of state or representatives from as many as 50 African countries."We could see an energy revolution that looks similar to what happened with mobile phones – leapfrogging centralised systems altogether and moving towards transformative solutions.” -- Justin Guay

The summit, the first time that such an event has been organised in Washington, will focus in particular on investment opportunities. As such, many are hoping that the three-day event’s centrepiece will be President Barack Obama’s signing of a broad investment deal aimed at Africa’s power sector.

“The overwhelming majority of the African leaders are going to be coming to Washington emphasising trade and investment, and in that context this issue is very central to their many constituencies – touching on economic, political and social issues,” Ben Leo, a senior fellow at the Center for Global Development, a think tank here, told IPS.

“Coming forward with something concrete that will lead to additional capital, tools or engagement will be noticed and welcomed. But lack thereof would also have a message for African leaders and others travelling to Washington.”

A U.S. Senate subcommittee did pass a bill, called the Energize Africa Act, late last month, but much remains to be done. The legislation now needs to be voted on by the full Senate, after which the final proposal would have to be brought into alignment with a similar bill voted through by the House of Representatives in May.

Meanwhile, the entire Congress is scheduled to go into recess for a month at the end of July. Still, backroom talks are reportedly well underway.

“There’s growing pressure and momentum in the Senate, as well as a growing appreciation of how doing this is both strategic and important,” Leo says. “Not having a bill to sign would certainly be a missed opportunity in terms of the optics and concreteness of action, either before or when everyone’s in Washington.”

Some 68 percent of the sub-Saharan population lacks access to electricity. Both the House and Senate bills would seek to assist African countries in expanding basic electricity access to some 50 million people.

“Our support for this bill is a direct response to what we hear from African leaders, citizens and global development experts,” Tom Hart, U.S. executive director of ONE, an advocacy group that focuses on eliminating poverty in Africa and has mounted a major campaign in favour of the Senate bill, said in a statement.

“[O]ne of the biggest challenges for overcoming extreme poverty is the inability for millions of people to access the basic electricity necessary to power health clinics, farms, schools, factories and businesses.”

Beyond the grid

The current legislative push comes a year after President Obama unveiled a new initiative called Power Africa, proposed during his June 2013 trip to the continent. Seen as the president’s signature development plan for the region, Power Africa aims to double energy access in sub-Saharan countries through a mix of public and private investment.

While Power Africa is ambitious, its long-term impact greatly depends on the legislation currently under debate.

For instance, while Power Africa directly affects just six countries, the bills before Congress take a continental approach. Likewise, as an executive-level project, the initiative’s policy priorities can only be cemented through full legislation.

Power Africa initially came under significant fire from environmental and some development groups for its reliance on fossil fuel (particularly natural gas) and centralised power projects. Many groups say that such a focus is ultimately counterproductive for poor and marginalised communities.

Yet last month, the United States announced a billion-dollar initiative to focus on off-grid energy projects across the continent. This approach could now be codified through the legislative discussions currently taking place in Congress.

“Congress is now looking to pass a bill that would be relatively historic in terms of its support for beyond-the-grid markets,” Justin Guay, Washington representative for the Sierra Club, a conservation and advocacy group, told IPS. “The [Senate] bill is the first legislation we’ve seen starting to drive investment to unlock that potential.”

To date, Guay says, most investment from the U.S. government and multilateral agencies has skewed in favour of fossil fuels and centralised power generation. For the first time, the new legislation could start to balance out this mix – a potential boon for the environment and local communities alike.

“If you look at the energy access problem in sub-Saharan Africa, it’s largely a rural issue. So this bill could stimulate distributed, clean-energy solutions that can get into the hands of poor populations today, rather than forcing them to wait decades in the dark for power,” Guay says.

“In this way, we could see an energy revolution that looks similar to what happened with mobile phones – leapfrogging centralised systems altogether and moving towards transformative solutions.”

The House’s companion bill includes fewer progressive provisions than the Senate version, but it also doesn’t include amendments that could deliberately doom the legislation. Still, it remains to be seen how conservatives in the House react to the Senate’s proposals.

Strengthened support

These new opportunities have broadened support for the Senate’s legislation. On Friday, for instance, the Global Off Grid Lighting Association, a Germany-based trade group, expressed its “strong support” for the Energize Africa Act.

The legislation is also being welcomed by African environmentalists.

“We believe this bill has emerged as a strong source of support for our efforts to address energy poverty,” Mithika Mwenda, secretary general of the Pan African Climate Justice Alliance, said in a letter to U.S. lawmakers from earlier this month.

“We are particularly supportive of new efforts to expand loan guarantee authority at USAID” – the main U.S. foreign aid agency – “as well as the goal of ending kerosene based lighting. Both of these aspects are critical to ending energy poverty in poor rural areas.”

Meanwhile, both the House and Senate bills have enjoyed an unusual level of bipartisan support. Still, it’s not clear whether that will translate into the passage of a new law – particularly by the U.S.-Africa Leaders Summit, slated for Aug. 4-6.

“There’s not a lot of time left, so it’s is very difficult,” the Center for Global Development’s Leo says. “However, if it doesn’t pass by the summit, the summit will invariably create a lot of action shortly thereafter.”

U.S. foreign aid is becoming increasingly outdated, analysts here are suggesting.

Rather, reforms to U.S. assistance need to focus on issues of accountability and country ownership, according to a policy paper released this week by Modernizing Foreign Assistance Network (MFAN), a prominent coalition of international development advocates and foreign policy experts.“Aid should be structured in a way that citizens and NGOs can monitor how the government implements development projects." -- Casey Dunning

“Aid is a strong expression of U.S. moral, economic, and national security imperatives, and in many contexts the U.S. is still the most significant donor,” the paper states. But according to many metrics, U.S. aid is both non-transparent and inefficient.

“The United States needs to frame and deliver aid in a structured way that would support the effectiveness of aid in partnership countries and generate sustainable results,” Sylvain Browa, director of aid effectiveness at Save the Children, an independent charity, told IPS.

“In such dynamic environments, where all aid remains critical to savings lives, curing diseases and putting children in school, new players come to stage, and these include local leaders and citizens who know first-hand what their priorities are.”

In terms of aid quality, the United States ranked just 17th out of 22 major donors according to the Commitment to Development Index in 2013. Each year, the index ranks wealthy countries on how efficiently they help poor ones in areas of aid, trade, finance, migration, environment, security, and technology.

According to that ranking, just one U.S. agency was rated “very good” in terms of transparency. The agency responsible for the bulk of U.S. foreign assistance, USAID, was rated just “fair”, while the State Department and PEPFAR, the landmark anti-AIDS programme, were rated “poor” and “very poor” respectively.

MFAN suggests that a newly streamlined policy agenda, structured around two “mutually reinforcing pillars of reform” – accountability and country ownership – could significantly improve the effectiveness of U.S foreign aid.

“The donor-recipient paradigm of foreign aid is outdated,” the report states, and without priority on these two pillars, “we revert to old, tired, and stagnant paradigms of aid – paradigms that unnecessarily perpetuate aid dependency.”

The new program is designed to empower communities, which in turn should carry out country ownership, says George Ingram, MFAN’s co-chair and a senior fellow at the Brookings Institute, a think tank here.

“The two pillars are prerequisites to build the kind of capacity that will help enable leaders and citizens in the aid-recipient countries to take responsibility for their own development,” Ingram told IPS, “such as spending priorities, as well as making evidence-based conclusions about what works and what doesn’t.”

The report emphasises that such changes are also somewhat time-sensitive. Given looming domestic and international deadlines, MFAN’s analysts say the next two years constitute “an important window of opportunity for U.S. aid reform”.

“The midterm elections in 2014 are certain to shake up the membership of Congress,” they write. “In 2015, the Millennium Development Goals will expire and a new global development agenda will take its place. And 2016 will bring a new administration and further changes on Capitol Hill.”

Local destiny

The recommendations have received quick support from other development groups.

“The paper is of universal importance to all aid agencies, implementers and thinkers,” Casey Dunning, a senior policy analyst for the Centre for Global Development, a think tank here, told IPS.

But she warned that there were inherent difficulties in the recommendations, as well.

“There is a lot of rhetoric on what country ownership means or what accountability encompasses,” she says. “Ambiguities in definitions and measurements of accountability and country ownership make it difficult to make aid more effective. However, the MFAN report helps to find metrics for capacity-building and to see what it actually means.”

Save the Children’s Browa, too, notes that the concepts outlined in the report are not necessarily new.

“But when put together, these pillars are vital to building local capacity and creating local ownership of resources and tools for development,” he says, “so that country leaders and citizens can take leadership in their destiny.”

To achieve better transparency, the report’s authors are calling on the U.S. government to fully implement new global standards called the International Aid Transparency Initiative (IATI) by the end of 2015. In addition, the ratings of the Aid Transparency Index should be extended to all U.S. government agencies, which currently doesn’t happen.

Further, all U.S. agencies should begin contributing comprehensive financial information to a landmark new online government information clearinghouse, known as the Foreign Assistance Dashboard.

Finally, aid and development decisions need to be guided by rigorous evaluation, MFAN says. Together, transparency and evaluation will help these agencies to achieve stronger results for both U.S. taxpayers and communities receiving U.S. assistance.

In all of this, Ingram notes, learning is one of the most important aspects in the policy proposal. “Data and evaluations are useless unless we learn from them and use them to make better decisions and achieve better results,” he says.

Defining partners

The aid paradigm has already shifted, MFAN’s report suggests. “Today, countries that give support through bilateral assistance and countries that receive such support are partners,” it states.

Yet how exactly to define those partnerships remains a work in progress.

“Aid should be structured in a way that citizens and NGOs can monitor how the government implements development projects,” CGD’s Dunning says, “and how the resources are utilised.”

Would such an approach run the risk of strengthening corruption at lower levels? Dunning says this isn’t necessarily the right question.

“We can’t shy away from the corruption issue, since it’s such an integral issue for debate,” she says. “And transparency is the key. It is vital to every programme, every sector. Together with other tools, such as evaluation and learning, transparency contributes to sustainable country ownership, which militates against corruption.”

MFAN’s Ingram, meanwhile, sees the empowerment of local communities as an anti-corruption tool in itself.

“Engaging smart and trusting people who know the culture and know how to manoeuvre through the dynamics of that country is very important,” he says.

“Informed and empowered citizens who demand good governance and sound priorities act as a check against corruption.”

World Bank Group President Jim Yong Kim speaks at the Council on Foreign Relations on Apr. 1, 2014. Credit: World Bank/cc by 2.0

By Carey L. Biron
WASHINGTON, Apr 1 2014 (IPS)

The World Bank is aiming to double its lending to middle-income countries over the coming decade, in addition to expanding its overall commitments to some 70 billion dollars a year.

As part of a broad reform agenda unveiled last year by World Bank President Jim Yong Kim, the world’s largest development lender now sees a niche for itself, in part, in responding to the massive infrastructural needs in rising middle-income economies. On Tuesday, Kim lauded this expanded financing “firepower”.“More lending by the bank should not further entrench a culture that measures staff performance on the basis of money out of the door.” -- Nicolas Mombrial

“We now have the capacity to nearly double our annual lending to middle-income countries, from 15 billion dollars to as much as 28 billion dollars a year,” Kim said in a speech to the Council on Foreign Relations, a think tank here.

“This means that the World Bank’s lending capacity, or the amount of loans we can carry on our balance sheet, will increase by 100 billion dollars in the next decade, to roughly 300 billion dollars.”

Kim characterises the prospects as “unprecedented growth” for the bank, based in Washington. The announcements came just ahead of semi-annual meetings between the bank and its sister organisation, the International Monetary Fund (IMF), slated to take place next week here in Washington.

While middle-income countries are expected to require less development assistance, Kim suggests that they will still be interested in accessing the bank’s low-rate loan options, particularly for infrastructure. Kim said infrastructure-related costs for the so-called BRICS middle-income countries alone are around a trillion dollars a year, whereas total global foreign assistance stands at just over a tenth of that figure

This gap, coupled with a new pledge to eliminate extreme poverty by 2030, will now lead the bank to focus in particular on 10 countries. These will include Bangladesh, China, Congo, India and Nigeria, where some two-thirds of the world’s extreme poor are located.

This focus will also take in an additional five countries – Ethiopia, Kenya, Indonesia, Pakistan and Tanzania. Together, these 10 nations house some 80 percent of the world’s poorest people.

“The bank is making use of existing resources more effectively to do not just a little more but a lot more. It’s hard to look at this and not be impressed with what they’re trying to pull off here,” Scott Morris, a senior associate at the Center for Global Development (CDG), a think tank here, told IPS.

“I give them credit both for having some degree of creativity and for navigating the politics with shareholders to pull these elements off. The issue of loan pricing is always very sensitive with borrowers.”

Questionable rejiggering

The new capacity comes on top of a record top-up for the World Bank’s fund for the world’s poorest countries, known as the International Development Association (IDA), which last year took in close to 52 billion dollars from its membership.

Yet unlike the IDA replenishment, the newly announced boosts will come largely from rejiggering the bank’s own lending rules, as well as from strengthening efficiency within its operations. “We are not getting a capital increase … we’re stretching our balance sheet as much as we possibly can,” Kim said Tuesday.

For instance, the bank will raise the limit imposed on the size of loans that each middle-income country is able to take out, by another 2.5 billion dollars. It will also be slightly increasing the interest rate imposed on those loans, as well as certain other fees.

Alongside these changes, Kim on Tuesday reiterated a new goal of saving 400 million dollars over three years through increased efficiency within the organisation, details of which are to be publicised in coming days.

CGD’s Morris, who previously oversaw engagement between the U.S. Treasury and the World Bank, says this plan is impressively inventive but could also be dangerous in the longer term.

“The bank is now sending a clear signal that they don’t feel the need to ask for more money from their shareholders, particularly from the United States and Europe,” he says.

“But this is an institution owned by country shareholders, and an important measure of their engagement with and attachment to the institution is its financial flows. If, for instance, U.S. financing continues on a steady decline, I think the relationship itself could also be on that kind of trajectory – and that would be unfortunate.”

The changes to the borrower limit and the new surcharge for large countries raise questions about how some of the smaller countries will fare, Morris worries. He also notes that much will depend on how the new budget cuts take place.

“If they’re pursuing budget cuts first and foremost to address the problem of budget bloat, then that’s absolutely necessary,” he says. “But if the starting point is to figure out how to find 400 million dollars to put towards increased lending, then you have to worry that they’re going to be cutting in areas that they shouldn’t be.”

Added responsibility

Others, too, are calling for the World Bank to use the new reforms and goals as an opportunity to strengthen the criteria by which it rates the effectiveness of its own lending. The bank has long been criticised for focusing too much on the size of its lending rather than on the ultimate impact of that spending on reducing poverty.

“More lending by the bank should not further entrench a culture that measures staff performance on the basis of money out of the door,” Nicolas Mombrial, head of the Washington office of Oxfam International, an anti-poverty group, said Tuesday. “Development impact should be front and centre for the bank.”

Mombrial also notes that expanded development lending will require a strengthening of guidelines covering World Bank lending, in order to ensure that those programmes do not negatively impact on local communities and the environment.

“More money for development is good but the quality of World Bank lending needs to improve. This will be bad news for poor people if World Bank social and environmental standards are not improved,” he says.

“The bank’s private sector arm, the IFC, must be reformed if it wants to spend more and increase its development impact. More resources must be tied to better consultation and protection of communities affected by IFC investments.”

Worrying for some in this regard will be strongly positive comments Kim made Tuesday regarding new World Bank funding for a controversial hydroelectric dam on the Congo River, known as Inga III. Civil society groups have fiercely opposed the megaproject, but Kim lauded it as a prime example of the bank’s “bold” future plans.

Biomass is the basic source of fuel for many in the southern Mexican state of Chiapas. Credit: Mauricio Ramos/IPS

By Carey L. Biron
WASHINGTON, Mar 13 2014 (IPS)

The International Monetary Fund (IMF) is wading strongly into the global debate over the impact of growing income inequality, offering a series of controversial findings that push back on long-held economic orthodoxy – of which the fund itself has long been a key proponent.

The IMF, arguably the world’s premiere financial institution, is stating unequivocally that income inequality “tends to reduce the pace and durability” of economic growth. In a paper released Thursday, the fund also suggests that a spectrum of approaches to “progressive” redistribution – national tax and spending policies that are purposefully tilted in favour of the poor – would decrease inequality and hence “is overall pro-growth”.“This is the final judgment on inequality being bad for growth.” -- Nicolas Mombrial

“This is the final judgment on inequality being bad for growth,” Nicolas Mombrial, a spokesperson for Oxfam, a humanitarian group, told IPS in a statement.

“The IMF’s evidence is clear: The solutions to fighting inequality are investing in health care and education, and progressive taxation. Austerity policies do the opposite, they worsen inequality … We hope this signals a long-term change in IMF policy advice to countries – to invest in health and education and more progressive fiscal policies.”

For the past half-century, the Washington-based IMF has operated as the world’s “lender of last resort” for failing economies. In return for offering short-term loans to governments in economic crisis, the fund typically demands the imposition of a range of often stringent austerity measures aimed at solidifying the country’s finances.

After years of frustration over these conditions by anti-poverty campaigners, the IMF has recently engaged in a broad reappraisal of this approach. In November, the fund proposed an overhaul of its debt-restructuring guidance, though formal introduction of this proposal has now been pushed back to June, following pushback.

“Although the main points are not new, the IMF paper is nonetheless significant because the organisation has typically been at the more conservative end in its policy advice – from being seen to restrict measures that would ameliorate the worst impacts of crises on those in deepest poverty, for example, to promoting quite damagingly regressive changes to tax systems in their country advice,” Alex Cobham, a research fellow with the London office of the Center for Global Development (CGD), a think tank based here, told IPS.

“Nonetheless, we should not expect massive or immediate changes in IMF policy. The situation of tax policy demonstrates very well how the organisation can continue to promote in-country the same approaches that their own research has discredited.”

Hot subject

The new advice on income inequality will likely be received sceptically in many corners, though the fund is giving the findings its full backing. While Thursday’s release came in the form of a staff paper, the report was given a high-profile rollout here, including an introduction from the fund’s second-highest official, David Lipton.

“Some may be surprised that the fund is engaging in this debate on the design of redistributive policies … [but] one reason why we are discussing this issue today is it’s becoming a hot subject,” Lipton, the fund’s first deputy managing director, said Thursday at the report’s unveiling.

“The interest in redistribution, as reflected in public surveys and our discussions with our members, shows that interest is higher than in the past. Our members want to explore with us how they can pursue distributive policies in an efficient manner.”

The IMF is quick to note that the new paper, which builds on a research note released last month, constitutes not recommendations but rather advice to its 188-country membership, while country-specific design for any redistributive mechanism remains of paramount importance. Nonetheless, the “efficient” options it is offering to both developing and developed governments consider are striking.

These include placing higher taxes on the rich than on other segments of society, as well as strengthening property taxes, potential for which the fund says is particularly significant in developing countries. It also suggests considering increasing the age at which citizens become eligible for pensions and other state old-age programmes.

Many of these suggestions have long been pushed by development advocates as well as global labour-rights activists.

“We’re pleased that the IMF has finally caught up with what the global union movement has been saying for years – that inequality is the number one threat to the economic recovery,” Philip Jennings, the general secretary of UNI Global Union, said in a statement. “The only way out of this crisis is inclusive, sustainable economic growth with a living wage for all.”

CGD’s Cobham says the paper will give support to policymakers who want to tackle inequality, and could serve as the basis for a broader global agreement on the issue.

“It may in fact mark an important moment in establishing the breadth of the consensus that reducing income inequality should be one of the targets of the post-2015 framework that will succeed the Millennium Development Goals,” he says.

Greatest risk

A half-decade since the start of the global economic crisis, inequality has risen to the top of global agendas.

In January, the World Economic Forum warned that the growing gap between rich and poor, brought about by globalisation, constituted “the most likely risk to cause an impact on a global scale in the next decade”. The previous month, President Barack Obama likewise stated that income inequality is “the defining challenge of our time”.

Much of this new focus is because the global concentration of wealth that has taken place over the past three decades has increased in recent years, and today stands at modern record levels. According to analysis by Credit Suisse, just one percent of the global population owns around half of the world’s wealth.

According to the new IMF paper, this trend is particularly pronounced in the West, especially in the United States. In developing countries, income inequality has been growing in the Middle East and North Africa, though recently it has begun to decrease in sub-Saharan Africa and, particularly, in Latin America.

Despite this recent downward trend, however, Latin America retains one of the highest levels of inequality of any region.

While the fund points to a variety of social spending as a key way to reduce these levels, the IMF’s Lipton warns that such spending needs to be better designed or risk increasing inequality.

“Fiscal policy has played a major role in reducing inequality in the past and is the primary tool available for governments to affect income distribution,” he said Thursday. “Whether these policies help, or hurt growth, is all a matter of design.”

Students at the Afghanistan National Institute of Music. Credit: Shelly Kittleson/IPS

By Bryant Harris
WASHINGTON, Feb 13 2014 (IPS)

Even as most international military forces are slated to leave Afghanistan by the end of 2014, USAID, the foreign aid arm of the U.S. government, is emphasising its sustained commitment to developing Afghanistan’s economy after the withdrawal.

This week, USAID unveiled three new development initiatives for Afghanistan, which the agency will be focusing on for the next five years.“There are real questions around the data – it’s hard to do in any country, especially in a country like [Afghanistan].” -- Justin Sandefur

The United States has cut civilian assistance to Afghanistan by 50 percent for the current fiscal year, due to frustrations over Afghan President Hamid Karzai’s continued refusal to sign a security pact ensuring a post-2014 presence of U.S. troops in the country. Nonetheless, this disagreement will not have an impact on USAID’s new initiatives, as they are financed entirely with funds from the 2012 and 2013 fiscal years.

The three new USAID initiatives will focus on trade, agriculture, upper-level education and workforce development.

Afghans engaged in development work hope that the new initiatives will compliment their efforts on the ground. Aziz R. Qarghah, the president of Afghan Health & Development Services, a non-profit organisation that provides health care to local Afghans and relies partially on USAID funding, hopes that the University Support and Workforce Development Programme will train more high-level, Afghan health-care professionals.

“A shortage with the low-level health providers it is okay, we can manage,” Qarghah told IPS. “But the high-level providers, like medical doctors, especially female doctors, are really a problem for us. I hope that a result of [the Workforce Development Programme], among other things, is that they are training health providers.”

Another Trade and Revenue Project seeks to generate revenue for Afghanistan and reduce its dependency on foreign aid by bolstering international trade through customs reforms, regional trade agreements and facilitating the country’s entry into the World Trade Organisation (WTO).

Woman and her children who live amid bomb rubble on Kabul’s outskirts. Credit: Anand Gopal/IPS

“Studies have shown that countries like Afghanistan that make the hard decisions and the regulatory changes required for WTO accession see a four to five percent annual bump in [gross domestic product] over four to five years,” Donald Sampler, Jr, a USAID official working on Afghanistan and Pakistan, said Monday at a discussion at the New America Foundation, a think tank here.

Next, in order to boost agricultural capability, a Regional Agriculture Development Project will attempt to increase agricultural output and move Afghanistan beyond subsistence farming. USAID anticipates the programme will reach some 400,000 farmers, creating 10,000 new jobs and a 20 percent increase in yields from wheat and other crops.

Finally, a University Support and Workforce Development Programme partners three U.S. universities with Afghan universities and businesses to develop seven new undergraduate degrees in fields necessary to Afghanistan’s long-term viability.

Sampler indicated that USAID has more programmes in development aside from the three initiatives, but noted that he “can’t talk about with any specificity that also reflects the shift from a wartime focus to a post-war transitional period.”

Improving health-care accessibility for Afghans has been a focus of other USAID programmes.

Credit: The Asia Foundation

“At the time [of the Taliban] less than nine percent of Afghans had access to health care within an hour of their home,” USAID’s Sampler said Monday. “Today that number is over 60 percent. USAID has worked with the Afghans to train over 22,000 health workers. A cumulative result of all this investment in health is that in Afghanistan over the past 12 years life expectancy has increased 20 years.”

While some have questioned the reliability of this data and USAID’s role in the results, Justin Sandefur, a fellow at the Centre for Global Development, a Washington-based think tank, believes a solid argument can be made that USAID has helped increase Afghan life expectancy.

“There are real questions around the data – it’s hard to do in any country, especially in a country like [Afghanistan],” Sandefur told IPS. “So we’ve taken the best numbers we can find.”

He continued: “There’s also the question of distribution. Child mortality has fallen in a lot of countries, but I think there’s a strong case to be made that the improvements have resulted from USAID funding.”

Aid efficiency

Other longstanding concerns over USAID’s ability to function with efficiency and impact also remain.

“The reality is, according to a Special Inspector General for Afghan Reconstruction (SIGAR) auditor, that 70-80 percent of the money is siphoned off by contractors as overhead,” Peter Van Buren, a former Foreign Service Officer with the State Department, wrote this week.

Indeed, some of the most recent reporting by SIGAR, an oversight agency created by the U.S. Congress to monitor Afghanistan relief and reconstruction funding, has found potential financial risks in USAID’s partnership with the Afghan government.

In order to implement its health programmes, USAID has collaborated extensively with the Afghan Ministry of Public Health (MOPH), a ministry that SIGAR indicates could put U.S. taxpayer dollars at risk for fraud.

“Due to the pervasive nature of the internal control weaknesses, MOPH is unable to adequately manage and safeguard donor funds against loss or misappropriations,” SIGAR wrote last month.

SIGAR called into question the efficacy of USAID’s partnership with MOPH, arguing that it puts taxpayer dollars at risk.

For his part, USAID’s Sampler points out that the SIGAR report relied largely on data collected by USAID risk assessments, and that his agency is taking steps to ameliorate the challenges that each ministry faces.

Another report released this week, by the humanitarian agency Oxfam, finds that USAID projects have at times engendered resentment from local Afghan communities. Erin Blankenship, the briefing’s author, highlights how physical distances and poor communication between aid organisations and local communities can make aid coordination extremely difficult.

For instance, Blankenship writes, a man in Nangarhar mistakenly believed that a USAID subcontractor had awarded him a grant to build flood-protection walls in his province.

Although he and his workers had already completed the first phase of the work, the presumed subcontractor had not actually awarded him a contract, prompting the man to appeal to the agency for 420,000 dollars, a request it denied.

“The result was widespread conflict in all of the communities where there had been work, as the man was unable to pay his employees,” Blankenship notes. “According to community elders, this led to several months of violent attacks, until the man was forced to sell all of his properties to make the payments.”

Rosemie Durandisse stands with one of her children in front of her temporary home. Credit: Fritznelson Fortuné/IPS

By Bryant Harris
WASHINGTON, Jan 10 2014 (IPS)

As the fourth anniversary of the devastating earthquake in Haiti approaches on Jan. 12, development analysts are decrying an ongoing lack of transparency in U.S. foreign aid to the country, even as those assistance streams are drying up.

From what is known of U.S. post-earthquake funding to Haiti, it appears that a notably small proportion of money from USAID, the county’s main foreign aid arm, is going directly to local Haitian businesses, institutions and organisations.“Sixty percent [of USAID funds] goes to firms operating inside the beltway, disappearing in a black box.” -- Jake Johnson

“Sixty percent [of USAID funds] goes to firms operating inside the beltway, disappearing in a black box,” Jake Johnson of the Centre for Economic and Policy Research (CEPR), a Washington think tank, told IPS. “That makes it very hard to determine how and when the funds reach the ground.”

Even though the United States offered three billion dollars in aid for Haiti after the earthquake, less than one percent of the 1.3 billion dollars in obligated USAID funds – money designated specifically for Haitian recovery efforts – has gone directly to local Haitian groups.

“When so little of the funding reaches Haitians themselves, it takes them out of the decision-making process and ensures that aid programmes are not actually responsive to the needs of people on the ground,” Johnson says.

He believes that aid money can often be better utilised in post-emergency situations if donor governments ensure a high level of transparency around those assistance flows, and if they direct as much of these funds as possible towards developing new industries.

A USAID official accounts for these apparent discrepancies by noting that “part of the challenge of making more awards directly to Haitian entities – public and private – has been that few of them have the internal financial controls in place to ensure compliance with U.S. government terms and conditions.”

The official told IPS the agency is trying to address this impediment by working directly with Haitian organisations to build their “financial control capabilities”, as well as to educate them about USAID procurement procedures and provide them with financial services.

“Many USAID-funded partners already work with numerous Haitian NGOs – more than 400 – through contractor and grantee sub-awards as well as arrangements with local vendors.”

Half of the data is missing

So if less than one percent of USAID funding has gone to Haitian groups, where has the rest of this money been directed? The lack of funding transparency makes it impossible to know for sure.

“Reports on contractors are not actually done according to the Office of Inspector General for USAID,” says Johnson.

USAID’s primary contractors are required to report on their subcontractors’ activities, and this data in turn is supposed to be made public. “But this information is nowhere to be found,” Vijaya Ramachandran, a senior fellow with the Centre for Global Development (CGD), a Washington think tank, wrote this week.

The USAID official told IPS that “all reported subcontract and sub-award information is published publicly” through a government website. But Ramachandran asserts that “almost half of the transactions data” are missing important data that identify individual vendors.

Lawmakers have noticed similar problems. Legislation passed the U.S. House of Representatives in mid-December that would require a government audit of U.S. assistance in Haiti. (That bill is currently awaiting a vote in the Senate.)

USAID gave seven of the 10 largest contracts for operations in Haiti to Chemonics International, a for-profit provider that Johnson says is the largest USAID contractor in the world. Chemonics’s two largest projects in Haiti include the WINNER Project and the Office of Transitions Initiative, which Johnson describes as “the more political arm of USAID”.

The project was designed to provide aid to countries afflicted by natural disasters or political turmoil, and following the earthquake it immediately provided disaster relief for displaced Haitians.

Nonetheless, the public is unable to ascertain how Chemonics spent the vast majority of its multi-million-dollar contracts in Haiti due to USAID’s lack of oversight reports.

“The [USAID] inspector-general found that Chemonics regularly runs short of its goals and over its budget,” CEPR’s Johnson says. “This is typical, but it’s become particularly evident in Haiti because of the earthquake.”

Trade burden

In addition to development and reconstruction aid, Washington is also seeking to assist Haitian recovery efforts by strengthening the country’s garments industry. Doing so, however, has presented a different set of challenges.

Following the earthquake, USAID partnered with the Clinton Foundation, the Inter-American Bank and Sae-A Trading, a Korean textile manufacturer, to construct the Caracol Industrial Park. Although the agency predicted that the complex would create up to 65,000 jobs, media reports suggest that as of last September the park had created fewer than 1,500 jobs.

Furthermore, although the project’s financers gave hundreds of small-scale farmers 3,200 dollars each to vacate their land for the complex, 95 percent of that land today reportedly remains inactive. Meanwhile, Haitian garment factories, including Caracol Park, are said to be openly flaunting minimum wage laws by paying their employees a mere 4.56 dollars a day, rather than the 6.85 dollars per day stipulated by the government.

Other U.S. attempts to bolster the textiles sector have started out more strongly, but been beset by pre-existing measures.

In the aftermath of the 2010 earthquake, the U.S. Congress passed the Haiti Economic Lift Programme (HELP) Act in the hopes of stimulating the country’s economy by boosting apparels exports, long a cornerstone of Haitian industry. Haiti’s clothing exports to the U.S. have indeed risen by 25 percent since 2009, creating 30,000 jobs, a number that is expected to double by 2016.

Because Haitian apparel imports into the United States are restricted based on a rule of origin, however, certain types of clothing imports over a certain quota must be produced using U.S. materials. These measures are designed to benefit the U.S. textile industry.

Although the HELP Act partially ameliorated these complex trade restrictions, the quotas and tariffs that the United States places on the Haitian apparel industry continue to inhibit trade-based economic growth.

The CGD’s Kimberly Elliot told IPS that U.S. red tape on Haitian imports today consists of a “complex maze of caps and rules of origins. That’s unlike the European Union, Canada and Japan, all of which have simplified restrictions on rules of origins for states that the U.N. designates as least-developed countries.”

She calls the rule of origin a “burden” for Haiti and argues that if U.S. trade restrictions were less complex, post-earthquake Haitian trade would have a greater potential for growth.

A woman sits in front of a camp after receiving oil and wheat from a U.N. distribution centre in Peshawar. Sixty percent of Pakistan’s population lives below the poverty line. Credit: Ashfaq Yusufzai/IPS

By Carey L. Biron
WASHINGTON, Dec 18 2013 (IPS)

The World Bank has raised some 52 billion dollars, a record amount, for its fund for development in the world’s poorest countries, though some are expressing concerns over the terms under which some of this money is being offered by donor governments.

The bank made the announcement Tuesday in Moscow, where donors wrapped up a two-day pledging summit to top up funding for the International Development Association (IDA), the arm of the Washington-based development institution that focuses on boosting development among the poorest of the poor in 82 countries.“Global cuts to aid are costing lives, so the news that donors have made generous contributions to this fund for the world’s poorest is very welcome news." -- Nicolas Mombrial of Oxfam

World Bank Group President Jim Yong Kim called the effort a “success for the global community”, with the amount constituting around the midpoint of what bank officials had hoped to raise.

“The World Bank continues to show that it is very good at fundraising for IDA,” Scott Morris, a former U.S. Treasury official coordinating U.S. engagement with the World Bank and currently a visiting fellow at the Centre for Global Development, a think tank here, told IPS.

“The dollar amount is a big one and represents a strikingly positive outcome for such a tough budgetary environment for the largest donors.”

Because of the types of countries with which it works, IDA gives out around 20 percent of its funding in grants, with the rest reserved for low-interest loans. As such, the programme’s funding is used up and must be replenished by donor countries every few years.

The Moscow summit this week was the 17th such replenishment, and the funding raised during this round is expected to last for three years, after it is phased in around mid-2014. This timeframe will include the post-2015 period, when the world is slated to set new aims for global development in the aftermath of the Millennium Development Goals (MDGs).

The World Bank says the current replenishment will be used to increase focus on climate change and gender equality, as well as to boost efforts to ensure equitable growth.

The money should go for “electricity for an estimated 15-20 million people, life-saving vaccines for 200 million children, microfinance loans for more than one million women, and basic health services for 65 million people,” the bank says. “Some 32 million people will benefit from access to clean water and another 5.6 million from better sanitation facilities.”

Exceptional circumstances

IDA will now be at the vanguard of the World Bank’s new plan to end extreme poverty by 2030, as unveiled by Kim earlier this year.

Yet with the after-effects of the global economic crisis continuing to roil traditional donor governments, it was unclear whether they would meet bank expectations. Just 46 countries pledged funding in Moscow, for instance, down from 51 during the last replenishment, in 2010 (though this could change slightly in coming months).

In anticipation of constricted purse strings, bank officials this year tweaked traditional guidelines. While in the past donor governments have contributed to IDA only through grants, this year they were offered the option of making contributions through concessional loans.

A bank spokesperson told IPS this option was offered “to provide contributing countries a way to increase their contributions to IDA, and ultimately for IDA to increase its ability to finance more investments in the poorest countries.”

The spokesperson, who noted the decision was taken only due to current “exceptional circumstances”, said a bit more than four billion dollars was pledged as loans, which will eventually have to be paid back. Given that donors typically make up only around half of the total replenishment (other arms of the World Bank Group and repayment of previous IDA loans make up the rest), this four billion dollars is thus a significant portion of the new replenishment.

“Global cuts to aid are costing lives, so the news that donors have made generous contributions to this fund for the world’s poorest is very welcome,” Nicolas Mombrial, who heads the Washington office of Oxfam, a humanitarian group, said Tuesday. But he cautioned that the new funding approach “is acceptable in a context of economic crisis, it should be a temporary fix and not a permanent way of operating.”

The bank notes that concessional lending has always played an important part of its financing structure.

“IDA has traditionally offered countries both loans on highly concessional terms as well as grants,” the spokesperson said.

“The low interest rate charged, the long maturities, and use of a ‘grace period’ amount to a large subsidy from donors to IDA. Increasing the pool of available financing actually increases our ability to have a stronger impact in poor communities.”

Further, CGD’s Morris notes that donor governments have been “very attentive” that loans do not supplant the grants that continue to make up most of IDA’s funding. He also says that the new funding structure will allow for a balance in terms of the varying dynamics among the countries IDA is assisting, particularly in the context of growing middle-income economies.

“They’re at a point in time where they have a large group of low-income countries with compelling financing needs, but over the medium term we’ll also see graduations of some of these countries – for instance, India – that implies less need over time,” he says.

“In this way, they’re able to keep things roughly in balance for IDA. While on the one hand they’re mortgaging their future to some degree, they’re doing it smartly.”

Jim Kim has suggested that middle-income countries made up a significant portion of IDA’s new replenishment.

Civil society monitoring

Others are focusing new attention on how exactly the bank is planning on using some of this new funding. Ahead of the Moscow summit, civil society groups in several major donor countries warned that recent policy documents have suggested that the bank is planning to increase its focus on major energy infrastructure, including large-scale dams.

This runs in the face of strengthening calls by some development experts for multilateral funders to focus instead on alleviating poverty and increasing resilience through small, local energy-generation options.

“We will monitor closely whether the World Bank invests its IDA funds into projects that can reduce poverty, or in mega-dams and fossil fuel projects that destroy the environment and don’t benefit poor people,” Peter Bosshard, policy director at International Rivers, an advocacy group, told IPS.

“We will encourage national parliaments to hold the World Bank to account for its lending decisions under IDA 17, and to shift resources to institutions better placed to reduce poverty if the Bank continues to support destructive energy projects.”

A local woman returns to her home with a new shelter kit. While the destruction is widespread, local rebuilding efforts are already underway. Credit: Simon Davis/DFID/cc by 2.0

By Ramy Srour
WASHINGTON, Nov 21 2013 (IPS)

Nearly two weeks after Typhoon Haiyan devastated parts of the central Philippines, experts and activists here are warning that post-disaster reconstruction needs to be more transparent than past such efforts, while also focusing on a long-term assistance strategy that goes beyond immediate emergency relief.

In recent days, academics and civil society experts have also urged the international community to learn from some of the mistakes made during the disaster responses following the 2010 earthquake in Haiti."When the funding dries up, the rebuilding effort still needs to be taken care of." -- Prof. Jesse Anttila-Hughes

“I think there is a big myth that emergency response is split in different stages, with emergency relief coming first, followed by reconstruction and then rebuilding,” Jake Johnston, a research associate at the Centre for Economic and Policy Research (CEPR), a think tank here, told IPS. “But what you actually need is a more comprehensive view, from the very beginning.”

Johnston has closely followed reconstruction efforts in Haiti following the earthquake that left an estimated 316,000 people dead and 300,000 injured, and displaced almost 1.5 million people. He says there are several lessons learned from the Haitian disaster that can be applied to the current crisis in the Philippines.

Keeping locals in the loop

“One thing that, unfortunately, didn’t go very well in Haiti was that the local government and civil society were largely bypassed by foreign organisations,” he says. “For instance, you saw USAID” – the U.S. government’s primary foreign aid agency – “spending almost 1.3 billion dollars in awards to contractors and NGOs that were mostly based in the U.S., with less than one percent of that money actually going to Haitian organisations.”

In the Philippines, he notes, international organisations should keep the Manila government in the lead, making sure that it is a prominent part of the coordination of the entire reconstruction mechanism.

Transparency and accountability can also be vastly improved over past efforts. Experts say doing so would ensure that the organisations working on the ground meet local needs and are effective in doing so.

“Nongovernmental organizations and private contractors have been the intermediate recipients of most of these funds,” Vijaya Ramachandran and Owen Barder, two senior fellows at the Center for Global Development (CGD), a think tank here, wrote last week. “But despite the fact that these organizations are beneficiaries of public funds, there are few publicly available evaluations of services delivered, lives saved, or mistakes made.”

The analysts note that this lack of transparency and accountability has led to growing disillusionment among the local population in Haiti. Perhaps more important, lack of transparency can also end up affecting the relief’s efficiency itself.

“In Haiti, we saw that the groups on the ground weren’t actually communicating with each other, leading to a situation in which different groups simply duplicated the same things,” CEPR’s Johnston says. “That’s a clear indicator telling us that there wasn’t enough transparency and accountability around the aid that was being provided.”

Greater communication between groups would enable them to be more effective with their work, while also increasing their accountability to donors, he says.

Still, some NGOs currently working in the Philippines are stressing that transparency and communication are already at the core of what they do.

“We try to be very transparent about our finances, and we make sure that everyone sees where all of our money is going,” Rachel Sawyer, a member of the communications staff at All Hands Volunteers, a non-profit that works in disaster-stricken areas both in the U.S. and internationally, told IPS.

“We are also constantly communicating with other organisations. When we see one, we either partner with them or we try to meet the unmet needs somewhere else.”

She warns that “‘disaster relief’ is obviously a very broad term.”

Long-term funding

One other major issue experts point to is the problem of ensuring that the outpouring of funds raised in the immediate aftermath of a disaster is maintained over time, which is what long-term reconstruction requires.

“While media, funders and emergency responders spend a short amount of time dealing with immediate needs,” Lori Bertman, the president and CEO of the Louisiana-based Pennington Family Foundation, a grant-making institution, wrote on Monday, “this does not create the infrastructure to mitigate future risk, and leaves long-term needs such as resettlement, mental and public health, as well as fiscal viability, unfunded and unattended.”

Bertman’s article was later endorsed by the Centre for Strategic and International Studies, a think tank here.

Some have suggested that this short-term response may be partially due to the cyclical nature of media coverage, which tends to shift the public’s attention quickly.

“Obviously the news cycle is a cycle, and trying to get people to give more attention is not really going to work,” Jesse Anttila-Hughes, a development economics professor at the University of San Francisco, told IPS.

He notes, however, that the current strategy can be improved.

“Funding in these situations is very much focused on shelter and food. But then when the funding dries up, the rebuilding effort still needs to be taken care of,” he said. “What really needs to be done in these situations is to ensure that funding calls are specifically tied to clear, long-term reconstruction.”

According to the latest information released by the National Disaster Risk Reduction Management Council, the Philippine government’s agency monitoring the current crisis, Typhoon Haiyan has so far killed over 4,000 people, leaving almost 4.5 million people without a home.

Earlier this week, the Washington-based World Bank announced that it would release 500 million dollars in funding to support the Philippines’ effort in recovery and rebuilding. The funds, which are a loan, came in response to a request by the government in Manila, and Bank officials are already looking to see how this money can be stretched for the long term – and how it can be used to sidestep some of the problems that have beset previous reconstructions.

“Given the scale of this disaster, the country will need a long-term reconstruction plan,” Axel van Trotsenburg, the World Bank’s vice president for East Asia said on Monday. “We can bring lessons learned from our work in reconstruction after disasters hit Aceh, Haiti and other areas that might be helpful in the Philippines.”

Twelve-year-old Maruf lives in a shanty in Nayanagar, close to a Dhaka suburb. He works at a nearby car workshop, fixing luxury car engines for about six dollars a month. He shares this meagre income with his family of four. Credit: Naimul Haq/IPS

By Ramy Srour
WASHINGTON, Nov 20 2013 (IPS)

Growing income inequality will pose a major threat to social stability in countries around the globe, according to a new report by the World Economic Forum.

Based on a worldwide survey of experts from academia, government and the non-profit sector, the report finds that income inequality is the second most important trend in the top 10 that are likely to impact social stability over the next year.“People see that there is that one percent of the population that is at the very top of the system and keeps on accumulating wealth." -- Christian Meyer

It cites rising tensions in the Middle East and persistent structural unemployment as other major global threats.

But while the findings are primarily geared toward highlighting income inequality within countries, experts suggest that there is also a global picture that needs emphasis, one where national borders are less of a factor.

“Looking at income inequality within a given country makes perfect sense, because government policies will affect the way people live there,” Christian Meyer, a research associate at the Centre for Global Development (CGD), a think tank here, told IPS.

“But there’s also an international perspective, one that goes beyond the national level, where if we take people and compare their income levels, without thinking about national borders, we will find that income inequality is incredibly high, much higher.”

The report is based on responses offered by the nearly 1,600 experts that make up the Network of Global Agenda Councils (NGAC), a global community of over 80 councils representing “thought leaders” around the world. The World Economic Forum describes itself as an independent international organisation that gathers world leaders from business, academia and the non-profit sector to try to shape the global social and economic agenda. Its members come primarily from companies and industries from the developed world. 

“Widening wealth disparity affects every part of our lives,” the report notes. “It’s impacting social stability within countries and threatening security on a global scale, and looking ahead to 2014, it’s essential that we devise innovative solutions to the causes and consequences of a world becoming ever more unequal.”

According to this new body of research, growing income inequality has become a major threat in both the developing and developed world, including North America, where the survey reveals that income inequality is the number one challenge.

The “incredible wealth created over the last decade in the [United States] has gone to a smaller and smaller portion of the population,” the report warns, “and the disparity stems from many of the same roots as in developing countries.”

According to the WEF survey, nearly two-thirds of U.S. citizens think that the current economic system favours the wealthy. But in some European countries, where people are still recovering from the global economic crisis that has left thousands of people out of work, the percentage is much higher.

Elite capture

As the gap between rich and poor widens according to both national and international metrics, analysts worry that people will be more likely to take the streets to voice their frustrations with a system that paves the way for the privileged few. This scenario, the report notes, is likely to lead to greater social instability and may threaten global security.

“Unrest cloaked in a desire to change from one political leader to another is a manifestation of people’s concerns about their basic needs,” the report notes. It also stresses that it is usually the young who are most willing to do so, as they feel “they have nothing else to lose.”

“People see that there is that one percent of the population that is at the very top of the system and keeps on accumulating wealth,” the CGD’s Meyer says. “So they realise that there must be something wrong going on at the top, that this is a form of ‘elite capture’.”

Indeed, the perception of elite capture, or the lack of social mobility, is what seems to be at the root of much of this widespread disaffection.

“The problem with this concentration of income is that it self-perpetuates from one generation to the other through a series of mechanisms, such as good education, but also through the access to good networks,” Ricardo Fuentes, head of research at Oxfam Great Britain, a humanitarian group, told IPS.

“This self-perpetuation means that the whole idea of equality of opportunity and that ‘all men are created equal’ is seriously undermined.”

This phenomenon, Fuentes notes, has led to people increasingly believing that personal effort and merit will not bring them anywhere, and that their government will only listen to the voices of the rich.

“Even in countries where governments are elected democratically,” he says, “we are increasingly seeing that the rich use their money to influence the government and the media through lobbies and other mechanisms that make them particularly influential.”

Reversing the trend

The report’s release comes as the NGAC’s leaders are gathered in Abu Dhabi Nov. 18-20 for the 2013 Summit on the Global Agenda, where they plan to discuss the topics that will be part of the yearly summit the WEF will hold in Davos, Switzerland, in January.

At the summit’s opening, WEF founder and chairman Klaus Schwab noted that the “biggest challenge we have today is the incapability of the system of global governance to take the necessary time and devote the necessary attention to construct our future.”

As leaders seek to come up with solutions to income inequality, some suggest that the recent growth witnessed by some Latin American countries may be one way to tackle the issue elsewhere.

“We know from history that having a more equal society is not a utopian objective,” Fuentes says. “Up until the 1980s, there was more investment in public education, a conscious effort by the state to strengthen safety nets, and a growing standard of living for workers.”

More countries, particularly in Latin America, are taking fiscal measures that reflect these policies, he says, at least according to certain indicators. “And now, they have actually started to reverse inequality.”

Textiles are one of the key sectors to benefit from the African Growth and Opportunity Act (AGOA). Credit: Kristin Palitza/IPS

By Ramy Srour
WASHINGTON, Oct 1 2013 (IPS)

With a key U.S.-Africa trade agreement up for renewal in 2015, advocates on all sides of the issue say current policies are rife with shortcomings that leave many African businesses out in the cold.

Since its enactment in 2000, the African Growth and Opportunity Act (AGOA) has sought to create trade opportunities for small- and medium-sized African businesses by helping them export their products to the U.S. market.“The greater challenge is to get those key commodities such as sugar and cocoa products to access the U.S. market.” -- Kimberly Elliott of the Centre for Global Development

But policymakers and activists alike are currently increasing focus on AGOA’s failures at empowering Africa’s poorer communities, and whether the act can be tweaked by 2015.

“AGOA has been successful, but only within its limited parametres,” Kimberly Elliott, a senior fellow and expert on trade policy and globalisation at the Centre for Global Development (CGD), a think tank here, told IPS. “The bill has been relatively effective in removing U.S. barriers to African trade, but it hasn’t addressed the fundamental competitiveness issue in Africa.”

And while U.S. exports to Africa have tripled over the last decade, “only as little as 1.3 million jobs have been created on the African continent since the enactment of AGOA,” Ambassador Michael Froman, the U.S. trade representative, recently warned.

According to the U.S. Department of State, “African exports under AGOA have more than quadrupled since the programme’s inception. In 2012, AGOA-eligible countries exported nearly 35 billion dollars in products to the United States duty free under AGOA.”

Limited reach

One of the obstacles to a truly successful outcome for AGOA has been its focus on only some sectors of the economy – including oil exports – to the detriment of those sectors with a more immediate impact on poorer segments of society. That includes the agricultural sector, the single most important for African communities.

“Outside of clothing and other few sectors, U.S. tariffs were already quite low prior to AGOA,” Elliott says. “The greater challenge is to get those key commodities such as sugar and cocoa products to access the U.S. market.”

So far, agricultural products have been excluded from the AGOA framework because of U.S. domestic regulations. This seems to be the biggest bump on AGOA’s road to decreasing poverty in Africa.

“There aren’t that many sectors benefiting from AGOA, apart from textiles,” Zenia Lewis, an analyst on economic development in Africa at the Brookings Institution, a Washington think tank, told IPS. “And unfortunately, the sector that has reaped most of the benefits has been the oil industry.”

According to recent estimates, oil exports cover nearly 90 percent of goods leaving African shores.

At the same time, AGOA has managed to open the U.S. market to the growing African textile industry. Many are today touting as a key AGOA success story the recent boom in Kenyan textile exports to the United States, to companies such as Victoria’s Secret and Macy’s.

According to the most recent estimates, Kenya was the United States’ 103^rd-largest supplier in 2011, with a total of 382 million dollars’ worth of imported goods, a nearly 23 percent percent increase from 2010.

“So far,” CGD’s Elliott says, “this has been AGOA’s best result when it comes to the poorer segments of African producers.”

Sheri Berenbach, president of the U.S. African Development Foundation (USADF), a federal agency, told IPS, “It is important to recognise that one of the most important constituencies of AGOA are the small local and marginalised communities. USADF has been very supportive of AGOA and trade, because a quarter of the producers that we support are small local groups that are now deeply involved with exports to the United States.”

USADF offers development grants to small African businesses seeking to access the U.S. market. Berenbach says such opportunities can have a direct impact on poverty. “Most of the work in Africa is about dealing with the weakest part of the African economy, the impoverished communities,” she says.

Deprivation

As the bill is set to expire, a broad cross-section of interests are looking to 2015 and providing recommendations on how to improve AGOA. They suggest that the bill’s ineffectiveness to date may not be entirely a result of hidden trade barriers.

“AGOA can’t reach those many African communities that aren’t involved in the production process, simply because of domestic restrictions and a lack of adequate infrastructure,” Mwangi S. Kimenyi, the director of the Africa Growth Initiative at the Brookings Institution here, told IPS.

A recent poll by Afrobarometer, an independent research organisation, finds that almost half of Africans still perceive themselves as being poor. Based on polls conducted in 34 countries, the survey shows that at least 20 percent of Africans still feel deprivation with respect to their most basic needs such as food, water and medicines.

One way to do address this, some suggest, would be to include a provision in the next version of AGOA that would provide assistance to small-scale African traders to build their skills at dealing with international trade concerns. USADF’s Berenbach calls this a “trade capacity-building”, or TCB, component.

“Including a strong TCB component would enable even the smaller producers to be more productive and trade effectively, so that we can really use trade to achieve development,” she says.

At the same time, Brookings’s Kimenyi notes that many see AGOA as doing very little for U.S. companies seeking to invest in Africa. Many corporate interests will thus be looking to the debate leading up to the 2015 renewal as an opportunity to change this aspect of the trade agreement.

Queensland declared a natural disaster Jan. 12, 2011 in Brisbane, Australia. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Sep 24 2013 (IPS)

More than a half-dozen governments on Tuesday launched a yearlong collaborative investigation into the economic benefits of taking broad action to combat global climate action.

The nine-million-dollar initiative, dubbed the New Climate Economy project, is being spearheaded by a commission chaired by former Mexican president Felipe Calderon and is backed by the governments of Colombia, Ethiopia, Indonesia, Korea, Norway, Sweden and the United Kingdom.

The research will be carried out by institutes located in most of these countries and will culminate in a report to be published in September 2014, just ahead of a major scheduled United Nations summit on climate.

In addition to an oversight panel made up of former heads of state and finance ministers, the Global Commission on the Economy and Climate is co-chaired by Nicholas Stern, the British economist who published a touchstone climate change review for the U.K. government in 2006. For this reason, the project is being seen as a direct follow-up to Stern’s previous work.

“At a time when governments throughout the world are struggling to boost growth, increase access to energy, and improve food security, it is essential that the full costs and benefits of climate policies are more clearly understood,” Stern said Tuesday, as the new project was launched on the sidelines of the U.N. General Assembly in New York.  “It cannot be a case of either achieving growth or tackling global warming. It must be both.”

Since the publication of his 2006 report, Stern has been credited with having had perhaps the most significant impact on the international public understanding of the economic threats posed by climate change. He will now formally review the New Climate Economy report.

“There is some sense that this new report will be Stern 2.0, but in fact the focus looks set to be somewhat different,” Michele de Nevers, a senior programme associate at the Centre for Global Development (CGD), a Washington think tank, told IPS.

“The Stern Review really focused on the costs of climate change, trying to make the point that the costs of halting or reversing climate change was relatively small in the global context. This new review, on the other hand, wants to focus on the benefits of climate action.”

Such a focus, she notes, could turn the conventional discussion on its head. “The global conversation needs to look at not just the costs,” she says, “but also the benefits that would accrue from climate action, in terms of economics, health and environment.”

Question of implementation

In developing and developed countries alike, a primary stumbling block in international climate discussions remains the amount of money both adaptation and mitigation efforts will require. The new United Nations-overseen Green Climate Fund, for instance, is aiming to raise 100 billion dollars a year by 2020 from industrialised countries, but even the first year’s pot of money has been slow to come together.

Similar debates are happening at national and community levels throughout the world, as well, as the impacts of growing weather extremes are becoming better understood. For the moment, much of this discussion continues to revolve around the sometimes staggering estimated costs of adaptation efforts and converting energy systems to be less carbon-intensive, and around the prospect that these efforts could raise significantly business operating costs.

In part for this reason, some are cautious in welcoming the new review, wondering whether the commission’s composition will be able to offer the innovative impetus required to guide the global climate discussion.

“A fresh focus on the economic consequences of climate change is very much needed, but this looks a bit like an exercise in rounding up the usual suspects – there’s significant overlap with previous … panels asking the same questions, which produced long reports that weren’t implemented thanks to the reluctance of industrialised countries to contribute their fair share,” Oscar Reyes, an associate fellow with the Climate Policy Programme at the Institute for Policy Studies, a Washington think tank, told IPS.

“With bank bailouts leading climate funds to dry up, we unfortunately now see those same industrialised countries pushing for a climate finance system that’s even more dependent on the financial sector. This won’t change unless governments start to rethink their economic policies in light of the urgent climate challenge.”

Still, mounting research is making it increasingly difficult for lawmakers to ignore the prospect that climate inaction could ultimately be more expensive than policy overhauls.

New research from China, for instance, suggests that a small carbon tax would have a substantive impact on greenhouse gas emissions even as it cuts down on the air pollution that has substantially driven up health costs in that country.

Likewise, the official U.S. government auditor this year added climate change to the list of issues that pose the greatest financial risk to the government and country – and warned that Washington is markedly unprepared to deal with the scope of the problem.

The Government Accountability Office reported that disaster declarations in the United States increased to a record 98 in 2011, compared with 65 in 2004, requiring a total 80 billion dollars during that period. Further, this figure was nearly equalled by the single request, late last year, for more than 60 billion dollars in response to Superstorm Sandy, the hurricane that ravaged much of the country’s northeast.

“The launching of this new commission is extremely timely, in part because this country and other countries have finally started coming to terms with the increase in extreme weather events,” Nathaniel Keohane, vice-president of international climate at the Environmental Defence Fund, told IPS after attending the commission’s formal launch.

“That makes this kind of deep dive into the positive stories around the economies of climate change very timely. We need to move away from the old debate about what this will cost to recognise not only the price of inaction but also the opportunities that climate action will have for economies, jobs and innovation.”

Environmentalists and policy advocates say they will now be looking forward to the commission’s recommendations, as well as the potential impact the initiative’s report could have on the global negotiations to agree on a new international agreement on climate action, due the following year.

“One would hope that the report could put new energy and momentum into those talks,” CGD’s de Nevers says. “The process towards 2015 is for governments to identify their country-specific goals, but understanding that there are other economic, health and environmental benefits in play could put momentum toward being a bit more ambitious.”

Relatively cleaner-burning natural gas continues to be seen as an important “bridge” fuel for the foreseeable future. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Sep 13 2013 (IPS)

A debate is heating up here over the extent to which U.S. government-facilitated private-sector development investments should be required to take into account how those ventures impact on climate change.

The discussions focus on a small and relatively little-known federal agency, the Overseas Private Investment Corporation (OPIC), the government office in charge of mobilising private capital in pursuit of international development priorities. While OPIC generally receives high marks, in recent years some groups have been particularly impressed by the agency’s focus on investments in small-scale, de-centralised renewable energy projects."The world has completely changed, and we already have cheap, nimble, profitable micro-grids specifically serving poor populations." -- Justin Guay of the Sierra Club

“Outside of USAID” – the government’s main foreign aid arm – “OPIC is investing pretty much the only U.S. [government] money specifically for off-grid clean energy that directly supports clean energy access for the poor,” Justin Guay, a Washington representative for the Sierra Club, a conservation and advocacy group, told IPS.

“Any energy investment today by most agencies is about ‘energy access’, but this is disingenuous because that energy goes into the grid and the vast majority is then consumed by the rich and by large companies. Without associated infrastructure to rural areas or to make energy affordable for the poor, most of these investments are just increasing the general supply.”

OPIC’s mandate is set to run out soon, and Congress is currently tasked with figuring out the details of its re-authorisation. The Sierra Club and some other groups are warning that new legislation could undermine the agency’s unique coupling of climate-related and anti-poverty aims.

Capping the cap

Since its establishment in the early 1970s, OPIC has mobilised and insured some 400 billion dollars in investments in more than 4,000 projects in 150 countries. The agency says its renewable portfolio today stands at around one billion dollars.

Last week, OPIC and 14 other development institutions agreed for the first time to “substantially scale up” their green investments in developing countries, with the aim of collecting 100 billion dollars a year for the effort by 2020.

“The challenges of transitioning to a green economy are far outweighed by benefits of job creation, innovation and poverty alleviation,” Elizabeth Littlefield, OPIC’s president, said following the meeting.

In addition to Littlefield’s reported personal commitment to these issues, OPIC’s focus on investment in green energy was motivated by a 2009 court decision that forced the agency to pay attention to the carbon emissions of its investments. The result was a binding policy to reduce the greenhouse gas emissions of its projects by 30 percent by 2018 and by 50 percent by 2023.

It is this emissions “cap” that is now the focus of debate in the U.S. Congress. While some are demanding that the regulation be maintained or even extended to other agencies, others are urging that it be tweaked or done away with entirely.

Some among this latter group represent oil-and-gas interests with a clear business stake in weakening the emissions cap. Yet a more nuanced view is also being offered by development scholars and advocacy groups worried about an imbalance between long-term international aims and immediate human development issues.

“There’s broad recognition that to really have a transformative impact and to reach billions of people there’s going to need to be a mix of renewables and non-renewables, but for some countries natural gas is a more viable model to provide access to citizens and unleash private business activity,” Ben Leo, a senior fellow at the Centre for Global Development, a Washington think tank, told IPS.

“My sincere hope is that a compromise can be found amongst environmental and development groups. One could imagine, for instance, a very limited exception to the OPIC greenhouse gas cap for a small subset of countries – those that are very poor and very low emitters of carbon dioxide. Niger, for instance, has basically zero emissions.”

Access vs resilience

Much of the impetus for the current discussion around the greenhouse gas cap is centred on energy access in Africa. In part this is due to President Barack Obama’s new Power Africa initiative, proposed during his trip to the continent in June, which aims to double energy access in sub-Saharan countries through a mix of public and private investment.

As part of the proposal, OPIC would commit around 1.5 billion dollars in energy project funding and insurance, which recent experience would suggest would be largely earmarked for renewable and decentralised projects.

As part of a related bill currently pending in the House of Representatives, however, Congress would require that OPIC issue new guidance that could weaken the emissions cap. Similar talks are now taking place in the Senate. (OPIC was unable to offer comment on these legislative proposals by deadline.)

“We’re concerned that there are some folks who think we need to loosen the cap in order to make room for natural gas and fossil fuels, because those energy sources are cheap,” Janet Redman, director of the Climate Policy Programme at the Institute for Policy Studies, a Washington think tank, told IPS.

“But the role of development finance institutions is to take into account both pieces of the formula – we can’t look at energy decisions without looking at their impacts. Similarly, it’s worth examining who would really benefit from lifting this cap – local communities or the companies that would be investing in massive natural gas infrastructure?”

Multilateral funders have increasingly run up against the tension between energy access and climate concerns. The past year has seen increasing movement away from certain very dirty forms of energy – both the World Bank and the United States, for instance, largely banned the overseas funding of new coal-fired power plants.

Nonetheless, relatively cleaner-burning natural gas continues to be seen as an important “bridge” fuel for the foreseeable future, in part because U.S. supplies have made it both plentiful and cheap.

Those now advocating for OPIC’s greenhouse gas cap note that other foreign aid funders – including within the U.S. government – will continue to focus on non-renewable energy investments. But they also view the resilience of green, decentralised energy production to be an important anti-poverty goal in and of itself.

“To a great extent our stance is not really based on climate concerns – this is just the right tool for the job,” Sierra Club’s Guay says.

“The debate is centred on an outmoded debate on clean energy, that it’s expensive. But the world has completely changed, and we already have cheap, nimble, profitable micro-grids specifically serving poor populations. It would be a tragedy if this debate gets focused through a prism that’s decades old.”