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Arab World: A New Social Contract

March 2009

Keynesian multipliers and market economies with a human face

Gearing up for the G20 summit on April 2, World Bank President Robert Zoellick made a speech this morning in London on the growth outlook for the developing world and what the G20 can do about it. Prospects look dim - newly released forecasts from the World Bank project growth of 2.1 percent in the developing world in 2009.

So what can be done about it? Among many other things, Zoellick has been calling for the creation of a Vulnerability Fund. Rich countries would place 0.7% of any stimulus package into this fund to support social safety net programs, infrastructure, SMEs, and the like in developing countries. This proposal has not gone without criticism - the most scathing (that I am aware of) comes from Bill Easterly:

President Zoellick does mention briefly the critical issue in both the NYT and FT: some “safeguards to ensure that the money is well spent,” which don’t currently exist. In the FT, he makes the inspirational call for an “Age of Responsibility,” but the Responsibility seems to apply only to rich donors, there is nothing about holding the World Bank responsible.

Remittances to East Asia & Pacific expected to fall by 4 to 7.4 percent in 2009

As jobs become fewer and income harder to come by for immigrants in developed countries, the amount of money they send back home, known as remittances, is expected to fall this year more than previously expected. The Bank's Migration and Remittances team announced the latest outlook last week on its People Move blog: "We now expect a sharper decline of 5-8 percent in 2009 ... compared to our earlier projections," wrote economist Dilip Ratha, who leads the team.

While the steepest drops in remittances are expected for Europe and Central Asia – down 10-12 percent – countries in the East Asia and Pacific region are also forecasted to fall by 4-7.5 percent in 2009. Two of the world's biggest recipients of remittances are China, which received $34 billion in 2008, and the Philippines, which saw $18 billion last year. Other big receipients in East Asia include Indonesia, Vietnam and Thailand, according to the Bank's Migration & Remittances Factbook 2008.

Quote of the Week

'There can be no public without full publicity in respect to all consequences which concern it.  Whatever obstructs and restricts publicity, limits and distorts public opinion and checks and distorts thinking on social affairs.  Without freedom of expression, not even methods of social inquiry can be developed.  For tools can be evolved and perfected only in operation; in application to observing, reporting and organizing actual subject-matter; and this application cannot occur save through free and systematic communication.'

John Dewey, The Public & its problems (1954)

South Asia Regional DM Grant Competition - Deadline Extended

 

The closing date for submission of proposals for the SAR Development Marketplace on Nutrition has been EXTENDED UNTIL APRIL 14, 2009!
 
Note that proposals must be submitted online. For more information about the competition, visit the SAR DM on the web at http://www.worldbank.org/nutritiondm2009.

African bloggers make some noise

Can blogging transform societies? More provocatively, can it speed up the process of development? We're about to find out: the African Bloggers Conference will be taking place in Nairobi this August. This will be the first of what the organizers are hoping will become an annual event. And they're looking for sponsors. Hello, Bill Gates? Are you listening? The antics at the TED2009 conference were fun, but this is your chance to support homegrown change.

(Thanks to Giulio Quaggiotto for the pointer.)  

If Force and Incentives Fail...Then What?

As one observes the practice of policy in many contexts - including policy responses to the current global financial crisis - it is amazing to see how many expert advisers still see policy making and policy execution as a matter of command or the crude manipulation of incentives. Force relies on the coercive powers of the state: if you want citizens or groups of them to do something simply insist on compliance, and deploy the full apparatus of state power. Failing that, you manipulate incentives, especially financial incentives and citizens will fall in line. Expert systems are comfortable with either approach because each is something they understand and can easily deploy. And, to be fair, you can make and introduce policies by using force or manipulating incentives. Then you wait and see how far those approaches take you. But there is one big lesson coming out of policy studies: force and the manipulation of incentives can only take you so far.

Ask the World Bank President

Mr. Robert Zoellick, The World Bank President, is delivering a Reuters NewsMaker speech tommorrow, Tuesday at 10 a.m. in London. The event will be streamed live from the World Bank's homepage, where also a transcript will also be posted.

As part of the event, Mr. Zoellick will take questions from online readers. To participate, you can submit a question on Reuters' website.

Ask the World Bank President

Tomorrow Tuesday Robert Zoellick will be speaking and taking questions about the financial crisis and its effects on the poor, ahead of the G20 summit in London. You can send your questions using the comments section of Reuters’ blog The Great Debate, or using the #askwb tag on Twitter.

Update
You can now watch the video of Robert Zoellick’s speech and access related information, including his answers to some of the blogger’s questions.

Short video clip on the impact of a nickel mine in Tanjung Buli, Indonesia

On the trip back to the base of PT Weda Bay Nickel after our two days in the Aketajawe-Lolobata National Park, we flew over the operating nickel mine at Tanjung Buli owned by publicly listed PT Aneka Tambang, but which has been operated since the opening in 2001 by a subcontractor.

What we saw seemed to be oil discharges just offshore, notable soil erosion in the coastal zone below the mine site, streams of mud coursing down the slopes, all with no apparent mitigation structures in place (see below for a short video). Such high levels of runoff have apparently been noticed before (see version translated to English by Google). When we were back in the North Maluku provincial capital of Ternate, we met with the Head of the Provincial Environment Impact Assessment Agency (BAPEDALDA) and showed him this short film. He and his staff were very concerned and explained that they had more than 100 mines in the province to attend to and felt that having this film available on the internet might make their work easier.

New Rural Livelihoods Web site!

We've launched a new Web site!  Yes, even though there are over 100 million Web sites on the Internet, we decided to add one more:

http://www.worldbank.org/rurallivelihoods

And we hope it will be quite useful to those who are interested in designing programs to support rural livelihoods.  Now, please keep in mind that this is a young Web site (just an infant, really), and it will be growing and maturing over the next several months.

Buddy, can you spare $20 billion?

How much additional foreign aid will it take to prevent the global financial crisis from becoming an economic, social, political and human crisis in Africa?

As my co-authors and I tried to point out in an earlier study of the additional aid needed to reach the Millennium Development Goals, this is not the most important question. Much more important are: (i) what developing country governments can do, and (ii) how the additional resources will be spent. Nevertheless, as world leaders gather for the G-20 summit outside London, the magnitude of additional resources to the world’s poorest continent will be discussed.

Live online discussion on April 8

After releasing the latest remittance flow forecast for developing countries this week, finding that remittances will fall more sharply in 2009 than originally projected, I am going to take part in a live online discussion on April 8, 2009 at 10:00 a.m. U.S. Eastern Time. 

If you have questions about the remittances forecast or other topics related to migration, remittances and development, feel free to submit them in advance or follow the conversation here

Fridays Academy: Urbanization and Growth

From Raj Nallari and Indira Iyer's lecture notes.

 

Urbanization and Poverty

Currently an estimated one third of all urban residents are poor, which represents one quarter of the world’s total poor. Many of these are in small cities and towns where the incidence of poverty tends to be higher than in big cities. With continued urbanization, however, the numbers of the urban poor are predicted to rise and poverty will increasingly be more an urban phenomenon.

The incidence of urban poverty, or the share of poor as a proportion of the urban population, is highest for South Asia (35 percent) and Sub Saharan Africa (40 percent) as shown in the table below. Latin America and the Caribbean (LAC) and ECA have the greatest proportion of urban poor relative to the total poor, as a result of the high urbanization rates in these regions. The urban poor account for 66 percent and 50 percent of the total poor in these two regions. Overall, MENA has the lowest incidence and share of urban poverty. Urban poverty incidence is notably lower in East Asia and the Pacific (EAP), Eastern Europe and Central Asia (ECA) and Middle East and North Africa (MENA) than the other regions reflecting initial conditions.

 

Urban Poverty Estimates 2002

(using $1.08/day and $2.15/day poverty lines in 1993 PPP values)

Source: Ravallion, Chen and Sangraula. 2007.

Note: The headcount index represents the proportion of the urban population below the poverty line. The urban share of the poor represents the proportion of the urban poor of the total poor.

 

Corporate debt in Eastern Europe

Bloomberg reports:

OAO United Aircraft Corp. will help its Finance Leasing Co. unit repay $250 million to bondholders after it became the first state-run Russian company in more than a decade to default on a foreign-currency coupon payment, Deputy Prime Minister Sergei Ivanov said.

Bloomberg also reports that Russian companies owe some $100 billion in foreign-currency debt due in 2009. Estimates for all emerging market corporations in 2009 range from $1.25 to $2 trillion.

Work with Nature, Not Against It

With more than the first hints of spring here in DC in the form of my childrens spring break holiday, daffodils and green shoots including weeds in my flower beds!  I am able to step off my busy professional schedule at IFC to read ‘The End of Poverty’ by Jeffrey Sachs, reflect and blog again. With the wonder of spring literally upon me (I need to get mulching later) I am moved to reflect on agriculture everywhere which is really a very delicate balancing act between nature and human intervention.

Q&A with World Bank President Robert Zoellick on March 31

Early next week, days before the G-20 summit, head over to the World Bank homepage for the live video stream of a speech by the Bank's president, Robert Zoellick, to be broadcast on Tuesday at 10 a.m. in London (5 a.m. in Washington, D.C.). If you can't make it for the speech, it will be posted to worldbank.org.

During the Reuters-hosted event, Zoellick will answer questions submitted by readers. You can participate by submitting your questions for Zoellick directly through the comments section of Reuters' The Great Debate blog or by using the #askwb tag on Twitter. It looks like there is already plenty of interest – with more than 130 comments posted as I write.

Questioning the President

If you have a question for World Bank President Robert Zoellick, now is your chance to ask. Reuters is collecting questions online, and Zoellick will be responding in a speech next Tuesday. Just follow this link and add your questions to the comments section. (For the Web 2.0 savvy, you can also use the #askwb tag on Twitter.)

Sins of trade protectionism

A new collection of articles from Brookings provides policymakers some advice heading into the G20 summit on April 2. One of the articles - Tame Protectionism and Revitalize Trade - urges the G20 leaders to avoid making high-minded but empty commitments to free trade and instead take a defensive posture. Author Paul Blustein argues in particular that leaders need to avoid subsidizing industries that aren't systematically important. Or as he perhaps more colorfully puts it:

...the G-20 needs to...draw a distinction between “mortal” and “venial” sin—promising never to commit the former, while treating the latter as forgivable. To qualify for venial sin treatment, subsidies should meet a series of tests. The two most important are that 1) the industry being subsidized is systemically critical to the national economy, and 2) the subsidy being provided is clearly temporary, and will be withdrawn by a specified time period (say, two years).

Calling all proposals - DM 2009 Grant Competition on Climate Adaptation Launched!

The global 2009 Development Marketplace competition is now open! This year the DM aims to find and support innovative approaches and technologies that help us to prepare for and respond to the immediate and potential impacts of climate change. We have already begun accepting applications. For more details visit our website at www.developmentmarketplace.org. The submission period closes May 18, 2009.

This is a great opportunity to find support for your idea in Climate Adaptation. For the first time, we have also opened a special window for Indigenous Peoples – to promote Indigenous Peoples communities’ and organizations’ development of innovative ways to conserve agriculture, land, water and soil management practices. Apply now and spread the word!

ICT & Education @ TED

TEDtalk: Alan Kay (image used according to terms of CC license)  With the buzz from this year's influential TED (Technology, Entertainment, Design) conference (9-13 February) now starting to fade, I thought it might be interesting to re-visit some of the highlights from past conferences on topics related to ICT and education.  While presentations at the conference cover a wide variety of topics, some 'TEDtalks' provide quite illuminating, and sometimes quite provocative, glimpses and insights into how technology *might* be used in various innovative ways to enhance education in the future.  I am regularly amazed at the number of times that people in ministries of education all around the world ask me about something they first learned about through TED. While we were, yet again, not in attendance this year, the conference organizers have done the wonderful (and laudable!) job of making available the 'TEDtalks' through the TED web site for free.

It’s the People, Stupid.

“Effectiveness in aid is also effectiveness in governance”, said Mark Nelson, senior operations officer at the World Bank Institute (WBI) during a recent panel discussion on the progress-to-date of the Accra Agenda for Action (AAA).  The AAA reflects an international multisectoral agreement on how the delivery of development assistance might be improved “so that it can make the greatest difference in the lives of poor people around the world.” 

Your questions on China's economy answered - see the transcript

In case you weren't able to join World Bank economists and regular bloggers David Dollar and Louis Kuijs earlier today in a live online chat, a transcript from the in-depth discussion is available here. David and Louis spent an hour and a half answering more than 30 questions about the recently released China Quarterly Update economic report, as well as topics ranging from foreign trade, health care reform and the long-term impact of the financial crisis on China's economy.

Also, recently on the blog David wrote about the data behind the Bank's recent economic report in, "Reading tea leaves for signs of China's recovery," and Louis wrote about the policy choices facing the country in, "China and stimulus packages: the best way to respond to more bad news?"

Do you have any follow-up questions about the report or China's economy? Submit them in the comments section below.

On mortgages (and II)

Transmission of crisis from home mortgages to US credit freeze and global oil-price hike

By early-2007, it became clear as housing prices began to decline, losses on sub-primate mortgages originated in 2003-2006 were rising more rapidly than the assumptions used and risk-model predictions.  The deterioration in borrowing quality and other shortcomings mentioned yesterday gave little comfort to investors.  The losses were hard to estimate, especially in an environment of house-price busts, and given that the sub-prime MBS had been re-packaged into complex CDOs and CDO-conduits were financed by commercial paper and various notes.

The bursting of the housing bubbles in the United States (as reflected in a surge in defaults and foreclosures since mid-2006 in US, resulted in a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.  These financial losses have left many financial institutions with too little capital — too few assets compared with their debt (US financial firms lost over $1 trillion by Dec 2008). This problem is especially severe because households, corporations, and government took on so much debt during the bubble years (that debt cumulated to over 400% of US GDP in U.S. and about 450% of UK GDP).

Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs. (US and European banks have been raising capital of about $400 billion from oil-producing countries and China but there is still a large gap as banks continue to write-down bad loans).