December 2008

I finally found the time to pick up a copy of Economic Gangsters and find out exactly how coauthors Raymond Fisman and Edward Miguel propose to defeat witchcraft. (See my earlier post on Fisman's presentation at the World Bank for background):

[W]e think more foreign aid should explicitly play an insurance role for poor countries. We call this new type of aid Rapid Conflict Prevention Support (RCPS). RCPS aid would kick in for countries experiencing temporary income drops, in much the same way that it's better to see a doctor when you start getting sick rather than waiting for the infection to spread. By the time you've got pneumonia, it's already too late...

...Since sharp and unexpected income drops are the symptoms of conflict vulnerability, donors should time foreign aid to provide relief when these circumstances arise. And this is when RCPS aid would kick in. When underlying economic factors return to normal—for example, when the rains improve the following year, or world coffee prices rebound—RCPS aid could quickly be scaled back as the state's own revenues pick up...

The direct financial effects of the global financial crisis have so far been limited due to Zambia’s reliance in domestic funding and limited exposure to external credit lines. However, the central bank has increased interest rates sharply as a result of portfolio outflows.

The largest affect has been the sharp fall in global copper prices. Copper exports, which accounted for almost 80 percent of total exports in 2007, have played a major role in sustaining Zambia’s growth, averaging close to 6 percent in the last five years. The fall of copper prices has already resulted in a significant depreciation of the domestic currency and more than doubled the external current account deficit in 2008. Lower copper prices have also contributed to weakening the fiscal position due to the government relying heavily on increased tax revenues (including a windfall tax) introduced in April.

As the economy slows down, second round effects are expected to negatively impact not only the financial sector but also the rest of the economy. Lack of infrastructure development (roads and energy) is likely to reduce growth of non-traditional export sectors in agriculture which could benefit from the exchange rate depreciation.

The hall was large and chilly. But it was also full. Nearly 80 people had come to listen to a presentation on Mongolia’s ratings in the 2009 Doing Business survey. I was happy to see a healthy mix of government officials, private firms, developmental organizations, NGOs and journalists there.

The Doing Business project looks at the business environment in 181 economies using ten indicators that reflect the life cycle of businesses. Then it ranks them. Governments can use the rankings to compare themselves to other countries, or to measure their own progress in business reforms over time.

Mongolia is currently at 58, a slight drop from last year. It is 7th in the East Asia & Pacific Region, well ahead of China (83) and Vietnam (92). Mongolia also outperformed most countries of the former Soviet Union, including Russia (120) and Kazakhstan (70). Quite an achievement!

The main impact of the global financial crisis on the DRC economy is the slowdown in overall economic growth, which is projected to be 6 percent in 2009. With the crisis going on, the situation is likely to deteriorate. Two of the major sectors expected to drive DRC growth in 2009, i.e. infrastructure and mostly mining, have already been severely affected by the crisis.

The fall in global prices for key DRC commodity exports (including copper which declined by half within a few weeks) is at the foundation of the problem. As a result, a number of mining companies are scaling down activities until commodity markets stabilize. This also poses a great threat on employment. Most of the investment in infrastructure for the coming years is expected to be financed through the Chinese deal “Infrastructure against Mining”. Given the sharp decline in mineral prices, infrastructure investment at this scale can no longer be achieved or will have to be postponed. Export revenues will decline significantly due to lower commodity prices, and the current account surplus, sustained by booming commodity prices, is projected to turn into a deficit in 2009-10. International reserves are also expected to decrease significantly, and debt service payments are to be delayed. In the domestic financial system, there is risk of bank deposits and credits shrinking. Foreign aid is likely to be affected as well.

The physical reconstruction of Aceh is amazing, but more importantly, livelihoods have been restored.

I had the fortune to visit Aceh last week. It had been three years since my last visit, when I vividly recalled the day my country cried – Dec. 26, 2004. Four years ago today, the coast lines of Indonesia’s westernmost province were swept by the Indian Ocean Tsunami. Over 200,000 people perished in the havoc wreaked by one of the worst natural disasters in recorded history. Indonesians and the world responded generously to address the humanitarian needs and reconstruction effort that followed.

Four years on, when I stepped foot on Aceh’s newly restored Sultan Iskandarmuda Airport, the results of rebuilding were very much evident. I drove through the streets of Banda Aceh without blinking my eyes that much. The first thing that came to mind was the scale of it all: Aceh is indeed one of the biggest reconstruction efforts since post-World War II Europe.

The PSD blog will go on a short break for the holidays, but we'll be back next Monday. Expect a report from Mongolia, where our intrepid blogger Dave Lawrence recently survived -37 degree weather, plus more on the transformative possibilities of mobile banking.

Mobile banking – everyone is talking about it, but how can we separate hype from reality? I've invited Janine Firpo, President of Sevak Solutions, to help us make sense of this potentially transformative technology. Janine was recently hired by IFC, a member of the World Bank Group, to work with IFC’s regional advisory teams to accelerate the development and large-scale roll-out of mobile money solutions in East Asia and the Pacific.

Janine brings over 24 years experience in technology, international development, and consortium building to her efforts. For the past six years, she has focused exclusively on the role of information and communications technologies in the extension of financial services. She is a pioneer in the implementation of branchless banking solutions and has worked on a range of related issues in Africa, Asia, and Latin America. Welcome!

Apparently, Moldovan police have "arrested" a Christmas tree intended for Chisinau's main square. Why, you ask? It did not have the appropriate permits:

Moldovan police have demanded that the driver of a vehicle carrying the city government’s Christmas tree to the main square, produce a license to purchase fir trees as well as a permit from the State Environmental Inspectorate... Representatives of the country’s Forest Management Association, however, say there is no need for such a permit in this case. But police detained the vehicle nonetheless and then said the fir tree is ‘under arrest’.

(Hat tip: Eternal Remont)

It was a hectic time for human rights last week here in Paris because of the many initiatives to celebrate the 60th anniversary of the Universal Declaration of Human Rights, signed on 10 December 1948 in this very town, at Palais de Chaillot. And it was hectic here at UNESCO’s HQ as well, which among many initiatives opened its doors to the last living witness of the Declaration’s drafting group, lawyer Stéphane Hessel awarded with the UNESCO/Bilbao Prize.
 
But working myself in the “Freedom of Expression, Democracy and Peace Division”, of course my focus was on the Declaration’s Article 19, the right of every individual to “freely seek, receive and impart information through any media and regardless of frontiers”. A perfect formulation by those wise drafters Mr Hessel was part of. And a forward-looking one if we think that the wording “through any media and regardless of frontiers” was conceived in the aftermath of WWII, but it is even more of appropriate nowadays in the age of the Internet. Let’s repeat it once again: “freely seek, receive and impart information” - that is to say the essential prerequisite for two-way flow of information among public sphere’s three sectors: the media, the civil society and the State.

So says the Public-Private Infrastructure Advisory Facility, which just released a note based on new data on private infrastructure projects in developing countries:

From Aug to Nov 2008, 31 PPI [public private infrastructure] projects reached financial closure involving investment commitments...for US$17.2 billion in 21 developing countries...Such [a] level of investment in new projects represents a decline of about 40% compared with the level in the same period in 2007.

So far, though, the data suggest the impact is similar to the experiences in Asia in 1997-98. Even worse is yet to come - that is, if the financial markets don't revive sometime soon:

There is a growing pipeline of PPI projects which are trying to raise funds or will do so in the next six to twelve months and could be affected if financial markets do not recover by then. Around 44 projects involving investment of US$34.7 billion, which were not able to secure financing by Nov 2008, are expected to continue looking for finance...Competition to attract financing will increase among projects as a growing number of them attempt to raise financing.

As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes.

 Impact of Globalization on Gender

Globalization is defined as the increasingly free flow of ideas, people, goods, services, and capital across countries, both North and South. It therefore deals with policies related to trade, finance, flow of information, technology, management know-how, outsourcing of jobs, and immigration and remittances. As a result of globalization, the difference between local and international markets is blurred, and this is impacting upon the structures of employment and a host of other institutions, including household structure and relationships. There are three main hypothesis as to why and when women find more employment opportunities: (i) during periods of labor shortages as during economic expansions only to be released during recessions (buffer or reserve army hypothesis), or (ii) during periods when output in the sectors in which women are over-represented could be rising more rapidly than output in rest of the economic sectors (segmented market hypothesis) or (iii) over time women gradually replace males into what until then were ‘"male jobs" (substitution hypothesis).

Transmission mechanisms

There are several transmission channels through which globalization impacts upon the living standard of both men and women. It is not possible to detail the complex interactions between all the elements of globalization and impact on women but a few observations are in order: