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Vulnerable yet invaluable: Protecting our patrimony by safeguarding art, artifacts, archaeology and assets

Christopher Colford's picture

The spectacular recovery of a long-missing painting by Pablo Picasso – a canvas that had been stolen more than a decade ago, in a daring museum theft in Paris – offers a vivid reminder of the illicit worldwide trade in stolen assets, artworks and archeological artifacts. Preventing the cross-border smuggling of stolen money, art and natural treasures poses a stern challenge to law-enforcement authorities. Yet the vigilance of the international network of corruption-hunters and asset-trackers can often result in a triumph, as illustrated by the case of the now-recovered Picasso.

The art world hailed last week’s revelation that “La Coiffeuse,” painted by Picasso in 1911, had been intercepted in December by U.S. Customs and Border Protection officials. The painting was identified during its shipment to a climate-controlled warehouse in Long Island City, New York, and it was then seized while it was in transit at Port Newark, New Jersey. The work – unseen since its 2001 theft from the Centre Georges Pompidou in Paris – had been shipped on December 17 from Belgium to the United States in an innocent-looking FedEx container, adorned with a holiday-season tag marked, “Joyeux Noel.” Its shipping registration papers falsely described it as an “art craft/toy” valued at $37. The legal process that began last week in New York should soon have the canvas on its way back to France, where it is owned by the nation.

The Picasso had been assigned an estimated value of about 2 million euros at the time of its theft in 2001 – suggesting how lucrative the underground market for stolen art may be. Despite any such theoretical valuation, however, such cultural riches are truly beyond price: They belong to humanity’s shared patrimony, and thus their theft is an immeasurable crime against history.



"La Coiffeuse" by Pablo Picasso. Photograph via the U.S. Department of Justice.

The sudden recovery of the Picasso has reminded art-watchers – and law-enforcement officials – that the 25th anniversary of a still-baffling crime is fast approaching: the March 18, 1990 theft of $500 million in artworks from the Isabella Stewart Gardner Museum in Boston. That theft deprived the world of, among other masterpieces, Rembrandt’s “Christ in the Storm on the Sea of Galilee,” painted in 1633. Despite occasional rumors that some of the stolen works might be available somewhere on the global black market, that crime remains unsolved – and the criminals, part of the vast international network of art thieves and smugglers, remain at large.

Police agencies and global asset-trackers certainly face a herculean task. International plunder takes many forms – from the “grand-scale corruption” that infects fraudulent banking transactions to the looting of countries’ wealth by dictators and kleptocrats. Cracking down on the illicit flows of funds worldwide – which are sometimes abetted by corruptible accountants and pliant lawyers, who help steer loot to safe havens and stash money in offshore tax-dodging accounts – requires persistent detective work and meticulous forensic accounting. In the case of stolen art treasures, the art world must appeal to the conscience of connoisseurs and dealers – and must rely on the integrity of curators at museums large and small, who surely know better than to traffic in property whose provenance might be even slightly suspicious.

Units like the Stolen Assets Recovery (StAR) Initiative – a joint effort by the World Bank and the United Nations Office of Drugs and Crime – patiently promote cooperation among transnational, national and local law-enforcement bodies. That task requires a commitment for the long haul, as they steadily pursue capacity-building among governments and private-sector watchdog agencies that are determined to build their anticorruption capabilities. Closer legal, technical and financial coordination sans frontières is an indispensable tool in hunting down and repatriating looted lucre.

As in the case of the now-recovered Picasso, the effort to protect priceless artworks sometimes ends in a law-enforcement success. In a just-opened art exhibition in Washington, art-watchers can now get an up-close look at an inspiring example of how a strong national commitment to fighting crime – backed by methodical investigative work and tenacious legal processes – can achieve enduring results.

The Embassy of Italy last week opened an exhibition of irreplaceable artworks that might have forever vanished onto the international black market, had it not been for the work of one of the country's specialized military units: the Guardia di Finanza, which since 1916 has protected Italy from smuggling, drug trafficking and financial crimes. Its specialized art-investigations team, the Gruppo Tutela Patrimonio Archeologico, has successfully prevented the theft of many works of art, some of which can now be seen (by appointment) at the Embassy on Whitehaven Street. Treasures such as these are integral to Italy’s culture and the West's heritage.

In opening the exhibition, Ambassador Claudio Bisogniero noted that “the trafficking of archaeological works is a growing phenomenon that in recent years has spiraled upwards at an alarming rate” – with Italy ranking “first among the countries [that are] victims of this crime. . . . These treasures belong to Italy. But they also belong to European identity and, by extension, to all mankind.”

With the Picasso canvas soon headed back to Paris, and with the recovered art and archaeological treasures now being celebrated at the Embassy, arts-watchers can breathe easier, knowing that these masterworks are secure. But protecting the global patrimony requires the constant vigilance of corruption-hunters and asset-trackers – like the Guardia di Finanza, the StAR unit and their law-enforcement allies worldwide – who stand guard against the plunder of the vulnerable yet invaluable assets that comprise the common heritage of humanity.


Broadening the Discussion of Microcredit Impact

Erin Scronce's picture



On Friday, February 27, CGAP, IPA, JPAL and the World Bank will host a full-day event to share the latest evidence from six randomized controlled trials across six countries. The event will feature the results presented by the researchers themselves, followed by a discussion on what this evidence means for policy and practice.

The impact of microcredit has been widely debated for the past decade, and has been both vilified and celebrated as a development tool. This new set of RCTs goes a long way toward confirming what many have suspected, but argued without much evidence, in recent years: that while microcredit can benefit some, the effects on poverty are modest, not transformational. Microcredit is but one tool in a multi-dimensional approach to addressing the multi-dimensional nature of poverty.

The Hype and Hustle of African Tech Startups

Maja Andjelkovic's picture



This article was originally published in
SXSWorld Magazine
 
Hardly a day goes by without an African tech startup being featured in the mainstream media. CNN regularly updates its special report on the topic; The Guardian covers local debates surrounding emerging ecosystems; The Financial Times tracks Africa’s mobile revolution; Forbes has extended its “Top 10” series to include African female tech founders; Vanity Fair pins its hopes of “continental lift” on entrepreneurs. Blogs, opinion pieces and social media cover the sector in even more granular detail. Judging by VC4Africa’s 2015 report on venture finance, perspectives on African incubation and funding models, and the entrepreneurship program announced by Nigeria’s investor and philanthropist Toni Elumelu, it would seem that the African tech sector is among today's most dynamic industries.

Amid the buzz, many investors are asking: “Is the hype warranted?”

According to VC4Africa, an online community of very-early-stage startups and investors, investments through the platform more than doubled in 2014, rising from $12 million to $26.9 million, while the average investment grew from $130,000 to more than $200,000. Their research shows that 49 percent of ventures start generating revenue in their first year and that 44 percent are successful in securing external investment. More than 75 percent of these are in the technology sector, with agriculture, health, finance and energy startups also represented.

Further along the growth path, a smaller number of startups have recently netted over $300 million from a very diverse set of investors, according to CBInsights. 



Recent Investments in African Tech Startups
Adapted from: https://www.cbinsights.com/blog/african-tech-startups
 
At least eight companies have acquired growth capital in Kenya in 2014, along others in Nigeria, Egypt, Ghana, Tanzania and South Africa and elsewhere

New early-stage funds and angel networks in or focused on Africa are also on the rise. Among others, three models stand out: London-based NewGenAngels a collaboration between African and European networks (GAIN, EBAN and AAN); Kenya’s Savannah Fund, a partnership between Erik Hersman (iHub, Ushahidi and BRCK founder), i/o Ventures, 500startups and Draper Associates L.P.; and RENEW, linking American and African investors and startups.
 
Many early stage investors are still learning from their own experiences and adjusting their strategies accordingly. For instance, while most are bullish on Kenya’s tech scene, 88mph, an African seed fund has put further investments in Kenya on hold, while pursuing opportunities in Nigeria’s booming tech sector.
 
African entrepreneurship ecosystems have also benefited from a large number of technology incubators, accelerators and coworking spaces, connected through networks such as AfriLabs and backed by private sources, such as MEST in Ghana, and public-interest projects, such as infoDev’s mLabs and mHubs.
 
According to VC4Africa, the increase of capital is driven by three key trends: growing interest in startups from the African diaspora, the rise of local angel investors, and an increase in cross-border investments.
 
All of these instigate a positive change beyond investment returns; they set in motion a chain of opportunities in emerging and frontier economies. As Stella Kariuki, founder of Zege Technologies, once told me: “I want to be the change I want to see. [. . .] We build solutions that could be global but also solve African challenges practically.” Many of the startups serve consumers at the Base of the Pyramid -- the three billion people globally who live on less than US$2.50 per day, a market that is still largely underserved when it comes to basic services such as energy, education, health and banking.
 
It seems clear that investors and startups in Africa are getting to know each other better and are making more and better matches possible. This is an important step in reducing "the missing middle”: the absence of financing beyond the earliest stages of a company’s growth. As enterprises enter national or regional markets, their capital requirements increase exponentially. Without private and public sources of investment, these requirements stifle all but the independently wealthy entrepreneurs and those with established business networks. A diverse resource base for early-stage firms democratizes the opportunity for growth-oriented entrepreneurs and increases the overall potential of the local creative class.
 
So is now a good time to invest in African technology startups? The answer is yes, as long as investment decisions are made with care, patience, and in partnership with local investment communities.
 
Maja Andjelkovic co-leads the Digital Entrepreneurship Program at infoDev, a global program in the World Bank Group that supports growth-oriented entrepreneurship in emerging and frontier markets in the tech, climate and agribusiness sectors. Maja is interested in the potential of entrepreneurship to contribute to economic, environmental and social development. She has spent over 13 years connecting these fields, including as product manager in a web startup. She is a PhD student at The University of Oxford’s Internet Institute.
 
infoDev / the World Bank Group is organizing two sessions at Startup Village at SXSW Interactive 2015; one on the dilemmas and questions surrounding investing in tech startups in emerging markets, and the other on scaling up and accelerating technology innovation in Africa.
 
Angel investors interested in forming or growing their own local networks can benefit from practical advice and templates in a guide for angel investor groups published by the World Bank’s infoDev program and the Kauffman Foundation.
 
Sean Ding, Angela Bekkers and Jeremy Bauman contributed to the article.

At the FCV Forum, a focus on jump-starting job creation: Boosting SMEs amid woes of Fragility, Conflict and Violence

Christopher Colford's picture



Jump-starting job growth is difficult enough when a country’s investment climate is supportive, when its government has clear goals and competent capabilities, and when its business leaders can make far-sighted plans. When an economy is riven by the chaos of war, or when it is newly emerging from a severe social trauma, channeling capital toward private-sector job creation is even harder.

Amid this year’s FCV Forum at the World Bank Group – focusing on economies gripped by fragility, conflict and violence (FCV) – a seminar combining Financial Sector and Private Sector priorities heard a sobering picture from expert practitioners who have been on the front lines of promoting job growth in economies that are in turmoil. Moderated by John Speakman, the Lead PSD Specialist in the Bank Group’s practice on Trade and Competitiveness – who is the author of a new book on small-scale entrepreneurs in FCV situations – a panel explored the daunting challenges of promoting private-sector growth when countries are in turmoil.

Would-be job creators confront an enormously complex task in FCV situations. Yet the panelists agreed that there is reason for hope – even in the most tumultuous FCV conditions – if financing can be targeted toward promising startup companies, and especially toward potential “gazelle” firms that can energize new sectors of the economy.

“Ultimately, it’s all about money: Poor people are poor because they don’t have money,” said Hugh Scott of KPMG, whothe Africa Enterprise Challenge Fund (AECF). “It’s the delivery channel – the financing mechanism – that’s making the difference” in the 23 African countries where the ACF has offered grants and interest-free loans to about 800 private-sector firms, producing a net development impact of about $66 billion.

The difficult business environment and increased risk profile in FCV countries means that traditional lenders (primarily banks) are all the more hesitant to lend, said Scott – making such vehicles as “challenge funds,” which focus on promising small and startup firms, even more important. As co-founder of invest2innovate (and current World Bank Group consultant) Sadaf Lakhani noted, the “ecosystem problem” for Small and Medium-sized Enterprises (SMEs) and startups is all the more complex when countries face “a political economy of war.” As she had observed during her work with invest2innovate -- a nonprofit angel investing and accelerator organization -- such frequent FCV afflictions as corruption, patronage, fragmented markets and capital flight make it even more difficult for managers and lenders to identify, evaluate and accelerate startups.     

Bank financing, in fact, is not always a ready source of funds for startup ventures, as noted by Simon Bell, the Global Lead on SME Finance at the Bank Group. Banks weigh the historical profit-and-loss performance of would-be borrowers – yet the entrepreneurs who are behind the “small sub-set of firms,” like the so-called “gazelles,” that are destined to create jobs quickly have little or no financial track record. Startups are thus often viewed warily by risk-averse bankers. Drawing on his long experience in the MENA region, Bell underscored that a priority in FCV states is ensuring that there is “a continuum of financial institutions and services” – like early-stage financing, private equity, venture capital and angel financing – that can provide critically important financing at various stages of a dynamic company’s growth.

To help give a boost to startups and young firms, the International Finance Corporation has created several financing mechanisms that are having a positive impact on job growth. The SME Ventures Program, created in 2008 with a $100 million allocation from IFC, has aimed to reach businesses in the poorest of the poor countries, often in FCV situations, said its Program Manager, Tracy Washington. Having financed about 60 SMEs, and having already supported the creation of about 1,000 direct jobs and many more indirect jobs, the SME Ventures Program has had a positive “demonstration effect,” inspiring new entrants to serve the marketplace once they have witnessed IFC’s strong performance. In addition, IFC's Global SME Finance Facility, described by Senior Investment Officer Florence Boupda, has provided investment capital and advisory services to 27 financial institutions in 18 countries since 2007 – including 17 projects in seven FCV countries.

The challenge for the future, agreed Boupda and Washington, will be to find additional ways to combine Bank Group interventions in ways that continue to choose companies with the greatest potential and that maximize the impact of Bank Group support. Their insights were underscored by Bell, who emphasized that “globally, employment is our issue” – and who asserted that “there are points of light all around” in this “very exciting” area, as various arms of the Bank Group focus on “the employment imperative.”

Finding ways “to apply the most innovative solutions to the most challenging situations,” especially in FCV and other traumatized countries, remains the grand challenge for international financial institutions, concluded Michael Botzung, IFC’s manager for fragile and conflict-affected countries in Sub-Saharan Africa. Yet the determination of the energetic practitioners on the SME financing panel reminded the FCV Forum audience why there is cause for hope – and why, in Speakman’s words, the intensive WBG-wide efforts to promote job creation in the toughest FCV situations is “one of the things that makes us proud to be with the World Bank Group.”
 

#TakeOn Fragility Conflict and Violence

The Specter Haunting Davos – Piketty as ‘Banquo’s Ghost’: Reforming 'the Mercenary Society' via an Energetic Agenda

Christopher Colford's picture



Metaphor of the month, via a deft dispatch from Davos: Thomas “Piketty was not in attendance this year – which was like putting on ‘Hamlet’ without the Prince” of Denmark, quipped Larry Elliott, the economics editor of The Guardian, as he needled ostentatious Davos-goers for only half-heartedly living up to the Davos dictum  of being “ ‘committed to improving the state of the world,’ provided nothing much changes.” 

Let’s shift the Shakespearean citation slightly, from “Hamlet” to “Macbeth”: Like Banquo’s ghost, the specter of Piketty’s analysis of inequality and injustice seemed to haunt many private-sector leaders at Davos this year – and thus the scholar from the Paris School of Economics didn’t need to be present in order to have a powerful impact at this year’s World Economic Forum.

Amid last week's self-exculpatory denialism from the unrepentant-oligarch wing of the Davos Man culture, one could almost hear the apologists for plutocracy and the free-market fatalists joining the conscience-stricken Macbeth in shrieking to Banquo's implacable apparition: “Thou canst not say I did it! Never shake thy gory locks at me!

The Davos 2015 parade of plutocrats may have been worth all the time and trouble, after all – despite its customary spectacles of self-indulgence – if the pageantry helped pique the conscience of some of the One Percenters and their courtiers, at least momentarily. “Most of the conversations between chief executives here are about Piketty-type issues. They talk about things [at Davos that] they wouldn’t be talking about back in the boardroom,” one eminent corporate leader told Elliott of The Guardian. Piketty-inspired concerns about inequality – along with fears of chronic economic stagnation and an irretrievably despoiled planetseem likely to inform this year’s top-level global policy forums, from Addis Ababa in July to the United Nations in September to Paris in December.
 
Signaling that many private-sector leaders have been awoken by, and are responding to, Piketty's landmark analysis of the intensifying concentration of capital in ever-fewer hands – which is provoking a more rigid stratification of society along hardening lines of social class – the World Economic Forum itself set the stage for Davos 2015 by publishing a 14-point agenda for promoting more inclusive growth. That analysis, searching for constructive solutions, is certainly a welcome contribution to the debate. Yet Piketty’s analysis of the widening gaps between the ultra-wealthy and everyone else – with Davos as perhaps an inadvertent self-parody of the cocooned Uber One Percent – suggests that there’s scant hope for mending a torn society unless policymakers enact policy changes on a vast scale: by (among other priorities) adopting greater progressivity in tax rates and enforcing a crackdown on cross-border tax evasion.

(An aside, regarding those who quibble with a point of Piketty-era terminology – and those who have attempted, and have conspicuously failed, to refute Piketty’s logic. Using a chicken-and-egg argument, some theorists lament the Piketty-inspired focus on the term “inequality,” insisting that inequality may be the outgrowth of, rather than the cause of, economic stagnation and social stratification. Fair enough. Yet such casuistry dwells on a distinction without a practical difference. Enacting pro-growth programs to avoid “secular stagnation” would surely be wise policymaking. Yet no serious plan would envision going back to a pre-2008-style “GDP growth at any cost” approach. The global financial crisis of 2008 revealed the recklessness of simplistic gun-the-engine, GDP-uber-alles policies that produce merely unsustainable, low-quality growthToday’s pragmatists, instead, champion a more inclusive economy that eases social divisions and sustains broader opportunity – promoting what the World Bank Group calls “shared prosperity.”)

Judging by Piketty’s esteem among Davos 2015 participants, most leaders of the private sector – all but a recalcitrant few, some of whom dwell on the free-market fundamentalist fringe – have evidently gotten the message (at last): Chronic inequality and stifled social mobility have reached a socially intolerable and perhaps politically destabilizing intensity. Yet if all but an eccentric remnant in the private sector “get it,” do public-sector policymakers – many of whom seem ever-eager to do the bidding of the most self-aggrandizing monied interests? The Davos-style ideal of “capitalism for the long term” is motivated by “enlightened self-interest,” yet many boardrooms – and those politicians who are forever at their beck and call – apparently need still more enlightenment and less self-interest.

Charting the next steps beyond Piketty's “Capital in the Twenty-First Century" – advancing from academic analysis to social action – will be the next order of business in 2015, a year with parliamentary elections in several pivotal countries. Just in time for the post-Davos and pre-election season, a newly published book seems poised to pick up where Piketty left off: emphasizing that society needs a healthier balance between private-sector dynamism and public-sector activism, undergirded by a humane sense that an economy with truly shared prosperity should prioritize social fairness.

With their appetites whetted by early excerpts published this week in The Observer, many admirers of Piketty will be eager to read “How Good We Can Be: Ending the Mercenary Society and Building a Great Country” by Will Hutton, the principal of Hertford College, Oxford. Hutton – for all his gloom about the injustices inflicted on his native United Kingdom over the past 35 years – advances an optimistic agenda that might show the way toward correcting decades’ worth of policy errors.

“Inequality has become a challenge to us as moral beings,” declares Hutton, reinforcing Piketty’s view of a society starkly stratified by social class. A callousness toward social divisions has spilled over from the economic realm into political decision-making, resulting in an “amoral deficit of integrity” – and Hutton is not shy about pointing to a specific turning point, or about naming a specific name.

“Ever since [Margaret] Thatcher’s election in 1979, Britain’s elites have relegated concerns about inequality below the existential question of how to restore our capitalist economy to economic health, a matter deemed to transcend all other considerations,” writes Hutton. “The language of the socioeconomic landscape has been commanded by words like efficiency, productivity, wealth generation, aspiration, entrepreneur, pro-business and incentives. To the extent they are significant at all, preoccupations with inequality have been seen as of second-order importance.”

The “raw trends” of the weakened power of wage-earners and the strengthened dominance of capital-owners – the outgrowth of Piketty’s iconic formula, r>g – “are then exacerbated by the reduction of taxation on capital, companies and higher earners in the name of promoting incentives and 'wealth generation.' " No wonder, Hutton asserts, that the United Kingdom has suffered “a stunning increase in inequality, the fastest in the OECD.”

Readers who were drawn to Piketty’s logic – yet who were left by "Capital" with a despairing feeling of “where do we go from here?” – are likely to warm to Hutton’s work, which extends the logic of his influential 1995 analysis, “The State We’re In.”

“Indifference to the growing gap between rich and poor, in all its multiple dimensions, is the first-order-category mistake of our times," warns Hutton. "No lasting solution to the socioeconomic crisis through which we are living is possible without addressing it.”

Recalling his years of energetic columns in The Guardian and The Observer, Hutton’s activist economic prescription in “How Good We Can Be” seems likely to include a better-focused approach to industrial policy; targeted investment in innovation capacity; pro-entrepreneurship mechanisms to sharpen competitiveness; and pro-active tax policies that ease rather than intensify the wealth divide.

Many of those who missed this year’s Davos triumph of Piketty-style reasoning are now awaiting the arrival of Hutton’s new book on this side of the Atlantic. Piketty scored the scholarly sensation of 2014 with the publication of “Capital.” My early hunch is that Hutton, with “How Good We Can Be,” just might achieve a similar agenda-setting success in 2015.
 

#TakeOn Inequality


 

Foreign Investment Policy: Encouraging news from China

Xavier Forneris's picture

The Investment Policy team of the World Bank Group’s Trade & Competitiveness (T&C) Global Practice has learned that China is about to adopt a new foreign investment law that would bring about several potentially significant improvements to the current investment regime. Although we have not yet seen an English-language version of the proposed law, and therefore have to rely for the moment on accounts by international law firms and chambers of commerce that have seen (and sometimes commented on) the draft law, I wanted to share the news with the Private Sector Development community because of the new law’s potential impact – not just in China but across East Asia.
 
China has very significant political and economic clout in the region and across the developing world. Its reforms are closely watched, and they could inspire many other developing and emerging economies to follow suit.
 
After soliciting comments on the three existing laws, China’s Ministry of Commerce (MOFCOM) issued a draft of the Foreign Investment Law on January 19, also soliciting public comment – a process that, incidentally, should also inspire many countries.
 
If passed, the new law would abrogate and ‘unify’ the three current laws that regulate foreign investment: namely, the Sino-Foreign Equity Joint Venture Law, the Wholly Foreign-Owned Enterprise Law and the Sino-Foreign Contractual Joint Venture Law. Although going from three laws to one can in itself be a positive thing – simplifying the regulatory environment usually is a good idea – what really matters to the investor community is the substantive or procedural changes that the new law would introduce.
 
A first change is that the new law would adopt a “negative list” approach, modeled on the system in place in the Shanghai Pilot Free Trade Zone (FTZ). As a reminder: Under a negative-list approach, certain sectors where foreign investment is restricted, capped or prohibited are specifically enumerated on a negative list. And foreign investment in restricted sectors can only proceed through some sort of ex ante screening and approval mechanism by a governmental authority or agency. On the other hand, under such a system, investments in sectors that are not on the negative list can usually proceed without any prior screening and approval, using, for example, the normal company registration process.
 
The negative-list approach is one that T&C’s Investment Policy Team often recommends to our client countries, because it fosters transparency and predictability and because it reduces government discretion over the admission of investors. Obviously, in this case, we would need to see the actual negative list before we can offer a more definitive assessment. But assuming that the number of sectors on the negative list is not excessive or, better, that sectors previously closed or restricted are now open to Foreign Direct Investment (FDI), the impact of this single change could be very significant.

'It’s the Trust, Stupid!' The Influence of Non-Quantifiable Factors on Policymaking

Steve Utterwulghe's picture



Should trust be something that policymakers need to worry about? I started reflecting on this question after I came across the 2015 Edelman Trust Barometer. It suggests that 80% of the people surveyed in 27 markets distrust governments, business or both (see figure 1).

A staggering number, to say the least. The year 2014 did not spare us from economic, geopolitical and environment turmoil. Nonetheless, the trend over the last few years has been a growing distrust in our leadership, despite the fact that progress has been made in the three main pillars of trust: integrity, transparency and engagement. More needs to be done, it seems.

Figure1. Trust in business and government, 2015



As Ralph Waldo Emerson, the American essayist and poet, wrote: “Our distrust is very expensive.” The lack of trust in our government affects policies and reforms, and thus damages the overall economic environment. Investors will lack confidence and shy away. Growth will stagnate, sustainable jobs won’t be created, and trust in government will erode even further. A vicious circle is being created.

Professor Dennis A. Rondinelli, lately of Duke University, argues: “What are called 'market failures' are really policy failures. The problems result from either the unwillingness or inability of governments to enact and implement policies that foster and support effective market systems.” Distrust thus influences policymakers in multiple ways: They will either adopt bad policies, or overregulate. A study published in The Quarterly Journal of Economics shows that “government regulation is strongly negatively correlated with measures of trust.”  “Distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust. . . . Individuals in low-trust countries want more government intervention even though they know the government is corrupt” (see figure 2).

Figure 2. Distrust and regulation of entry. Regulation is measured by the (ln)-number of procedures to open a firm.
Sources: World Values Survey and Djankov et al. (2002).




The evaporation of trust in government institutions requires that governments and development agencies rebuild trusted institutions. However, it also behooves all of “society’s stakeholders” to rebuild trust among themselves and “engage.”

Integrity and transparency are two of the pillars of trust that have received a lot of attention during the past decade. Indeed, tackling corruption and ensuring transparency have been at the top of the institutional and corporate development agenda. The third pillar, engagement, has been more rhetorical or grossly underestimated.

A prerequisite for inclusive and responsive policymaking is that citizens use their voice and engage constructively with government institutions. As we have seen, increasing social and political trust helps market economies function more effectively. In turn, sound economic policies foster social and political trust. In recent years, the practice of structured public-private dialogue (PPD) has helped the private sector and other stakeholders engage in an inclusive and transparent way with governments. PPD mechanisms have resulted in better identification, design and implementation of good regulations and policy reforms intended to create an improved investment climate and increase economic growth. As a result, this process has built mutual trust between institutions and business.

Confidence-building has been most critical in post-conflict and conflict-affected states where deep mistrust among stakeholders is prevalent. That topic will be discussed in greater depth at our 2015 Fragility Forum’s session on public-private and multi-stakeholder dialogue, coming up on February 13. Foreshadowing the Fragility Forum, a panel discussion in Preston Auditorium on Monday, February 2 – featuring, among others, Sarah Chayes of the Carnegie Endowment for International Peace, who is the author of  “Thieves of State: Why Corruption Threatens Global Security” – will focus on "Corruption: A Driver of Conflict."
 
In an age of distrust, this type of policy reform – through multi-stakeholder engagement – is not an obvious exercise. The economist Albert Hirschman claims that “moving from public to private involvements is very easy because any single individual can do it alone. Moving from private to public involvements is far harder because we first have to mobilize a lot of people to construct the public sphere.” But the increase of PPD platforms across the world  the WBG Trade & Competitiveness’ Global PPD Team currently supports 47 PPD projects worldwide  suggests that there is an appetite for engagement among citizens, business and governments alike.

Trust can be slowly restored by, among other things, designing adequate interventions such as PPD mechanisms. By their inherent iterative process of discovery, collaborative identification of issues and joint problem-solving, PPDs can activate favorable mental models of stakeholders. According to the 2015 World Development Report on "Mind, Society and Behavior," these “mental models can make people better off.” I would argue that these mental models drawn from their societies and shared histories can help build trust as well.
 
Trust matters for policymakers. Ultimately, it matters for all citizens. Designing interventions and offering a safe space where stakeholders can engage with governments in an inclusive and transparent fashion will go a long way toward restoring that valuable trust.
 

Davos Sees Challenges, ‘Smart Cities’ Seize Opportunities: Finding Sustainable Solutions Via Public-Private Dialogue

Christopher Colford's picture



As the world’s policymakers and business leaders converge in Davos, Switzerland for tomorrow’s opening of the World Economic Forum, there’s certainly no shortage of global threats for them to worry about during the WEF’s annual marathon of policy seminars and economic debates. A world of anxiety enshrouds this week’s conference theme of the “New Global Context,” judging by the WEF’s latest Global Risks Report: Its analysis of 28 urgent threats and 13 ominous long-term trends offers a comprehensive catalogue of extreme dangers to social stability and even human survival.

As if the Davos data isn’t worrisome enough, several just-issued scientific studies – which document worsening trends in climate change, humanity’s imminent collision with the limits of the planet’s resilience and the intensifying damage being wrought by voracious consumption-driven growth – trace a relentlessly gloomy trajectory.

Relieving some of the substantive tension, there’s also often a puckish undercurrent within each year’s Davos news coverage. Poking holes in the self-importance of Davos’ CEOs and celebrities – with varying degrees of lighthearted humor or reproachful reproof – has become a cottage industry, springing up every January to chide the mountaintop follies of “the great and the good.” Skeptics often scoff that the lofty pronouncements of Davos Deepthink have become almost a caricature of elite self-importance, and there’ll surely be plenty of the customary sniping at the insularity of Davos Man and at the insouciance of the globalized jet set as its over-refined One Percent folkways become ever more detached from the struggles of the stagnating middle class and desperate working poor.

Despite such Davos-season misgivings, it’s worth recalling the value of such frequent, fact-based knowledge-exchange events and inclusive dialogues among business leaders and thought leaders. Some of the Davos Set may revel in after-hours excess – its Lucullan cocktail-party scene is legendary – yet the substantive centerpiece of such meetings remains a valuable venue for expert-level policy debates, allowing scholars to inject their ideas straight into the bloodstream of corporate strategy-setting. The global policy debate arguably needs more, not fewer, thought-provoking symposia where decision-makers can be swayed by the latest thinking of the world’s academic and social-sector experts. Judging by the fragmented response to the chronic economic downturn by the global policymaking class, every multilateral institution ought to host continuing consultations to help shape a coherent policy agenda.

Focusing on just one area where in-depth know-how can serve the needs of decision-makers: The World Bank Group has long been tailoring world-class knowledge to deliver local solutions to client countries about one of the trends singled out in this year's WEF list of long-term concerns – the worldwide shift from “predominantly rural to urban living.” The biggest mass migration in human history has now concentrated more than 50 percent of the world’s population in cities, leading this year’s Global Risks Report to assert that the risk of failed urban planning is among the top global concerns.

“Without doubt, urbanization has increased social well-being,” commented one WEF trend-watcher. “But when cities develop too rapidly, their vulnerability increases: pandemics; breakdowns of or attacks on power, water or transport systems; and the effects of climate change are all major threats.”

Yet consider, also, the potential opportunities within the process of managing that trend toward ever-more-intense urban concentration. What if the prospect of chaotic urbanization were able to inspire greater city-management creativity – so that urban ingenuity makes successful urbanization a means to surmount other looming dangers?

For an example of the can-do determination and trademark optimism of the development community – with the world’s urbanization trend as its focus – consider the upbeat tone that pervaded a conference last week at the World Bank’s Preston Auditorium, analyzing “Smart Cities for Shared Prosperity.” With more than 850 participants in-person, and with viewers in 92 countries watching via livestream, the conference – co-sponsored by the World Resources Institute (WRI), Embarq, and the Transport and Information & Communications Technology (TICT) Global Practice of the World Bank Group – energized the world’s leading practitioners and scholars across the wide range of transportation-related, urban-focused, environment-conscious priorities.

(Thinking of the Preston gathering’s Davos-season timing and full-spectrum scope: It sometimes strikes me that – given the continuous procession of presidents, professors, poets and pundits at the Preston podium – there could be a tagline beneath Preston's entryway, suggesting that the Bank Group swirl of ideas feels like “Davos Every Day.”)

Amid its focus on building “smart cities” and strengthening urban sustainability, the annual Transforming Transportation conference took the “smart cities” concept beyond its customary focus on analyzing Big Data and deploying the latest technology-enabled metrics. By investing in “smart” urban design – and, above all, by putting people rather than automobiles at the center of city life – the scholars insisted that society can reclaim its urban destiny from the car-centric, carbon-intensive pattern that now chokes the livability of all too many cities.

The fast-forward series of “smart cities” speeches and seminars reinforced the agenda summarized by TICT Senior Director Pierre Guislain and WRI official Ani Dasgupta – formerly of the Bank Group and now the global director of WRI’s Ross Center on Sustainable Cities – in an Op-Ed commentary for Thomson Reuters: “We can either continue to build car-oriented cities that lock in unsustainable patterns, or we can scale up existing models for creating more inclusive, accessible and connected cities. Pursuing smarter urban mobility options can help growing cities leapfrog car-centric development and adopt strategies that boost inclusive economic growth and improve [the] quality of life.”

Tumbleweed rolls through West African resorts: Ebola and tourism crisis management

Hermione Nevill's picture



Jean-Marie Gaborit has been operating his beautiful wetland lodge in the Delta de Saloum in Senegal for 12 years, but he says things have never been so quiet. The European winter months are usually the high season for popular West African destinations, with the beaches, hotels and restaurants packed full of sunshine-seeking tourists. "It’s this Ebola" he sighs, and then adds "even though there is none here."
 
It’s the same story in the Gambia, and effects are even felt further afield in Kenya, Tanzania and Botswana. The Hotels Association in Tanzania (with over 200 members) says that business is down 30 to 40 percent on the year and advanced bookings, mostly for 2015, are 50 percent lower. In South Africa, some 6000 kilometers from the nearest Ebola outbreak, arrivals are down this period by as much as 30 percent. In some cases, airlines (such as Korean Air) have stopped running – even to non-affected countries like Kenya. Across the board, Share values of international tour operators have fallen, hotels have closed, and thousands of tourism-industry workers have been made redundant. 
 
The Accommodation Manager at the Baobab Hotel in Saly, Senegal admits he has laid off 160 staff in the last few months: "When we are full, we have a ratio of one employee for one room. We have 280 rooms and right now 100 of them are occupied. I have 20 extra staff that I can’t afford, but their contracts mean that I can’t let them go." About 80 percent of those staff members are from the local area, and they directly support seven to 10 dependents. For countries that rely on tourism for a large part of their GDP and foreign-exchange contributions, the loss of revenue is significant. In the Gambia, for example, where tourism accounts for 13 percent to 15 percent of GDP, the target of 7.5 percent economic growth for 2015 will be missed.
 
Misinformation lies at the heart of the problem. Although many foreign governments have declared Senegal and the Gambia to be Ebola-free, spreading this message to tourists has proved incredibly difficult. Noisier news reports of death tolls, medical-staff shortages and NGO-promoted appeals in affected countries have drowned out other voices. Moreover, those reports play to international prejudices. With the overwhelming foreign perception of Africa as one country, the problem has no boundaries.

The World Bank Group will be supporting the Government of Senegal in implementing a communications strategy with an emphasis on briefings for key tour operators and the provision of hard data. Best practice shows that such management is more effective if it is planned ahead, and if it includes the preparation of a task force involving decision-makers from both the private and public sector – including a public-relations team, a recovery marketing team, an information-coordination team and a fundraising team. Moving into crisis recovery, a series of medium-term resilience measures – such as incentives, matching grants, training and sustained promotion – may be appropriate.
 
Social media has played its part in trying to combat misunderstandings, with Twitter and grassroots campaigns pushing material such as this infographic, but there needs to be a much-better-coordinated response.



Crisis communications consultant Jeff Chatterton has been working with a number of African Tour Operators since the outbreak of the virus. He cites hard information and empathy as two of the most important tools to deploy at this stage of the crisis. According to Chatterton, prospective tourists who are hesitating over an African booking need to feel that their concerns are listened to, acknowledged and understood. Once this has been established, they will be more inclined to engage with fact-based information, which needs to be clear, transparent and accurate. He sees two big problems with tourism businesses: a reactive approach that is not reaching out and communicating to key audiences, and a downplaying of the problem that undermines and belittles consumer. "About the worst thing you can do is dismiss their reality as inconsequential," he says.
 
There is a critical role for government to play in crisis management and disaster recovery. Lessons can be learned from the outbreak of Foot and Mouth Disease in the UK in 2001. The UK’s Department for Environment, Food and Rural Affairs (DEFRA) identified the direct costs to tourism as a loss of expenditure of between £2.7 and £3.2 billion. At the national level, the tourism industry's representatives blamed the British Tourist Authority for failing to react sufficiently and effectively, without an appropriate crisis-management strategy in place before the outbreak.

For the World Bank Group and other development partners, a greater emphasis on crisis-management support at the sector level could be an important pro-active means of stepping up our engagement with client countries – before disaster strikes. With the rising threat of terrorism attacks across the world, along with their devastating impact on tourist demand, the most prepared destinations will have a competitive advantage and will be better equipped to limit the damage to the economy and to people’s livelihoods.  

For now, hotels in Senegal have slashed their prices and are concentrating on supplying the small domestic market, but operating at a loss is not sustainable for long. The booking season for 2015 is almost over, with no sign of recovery – meaning that businesses such as Jean-Marie’s face at least another 12 months of empty beds. 

The Genie in a Bottle: How Bottled Biogas Can Contribute to Reducing Kenya’s Dependence on Fossil Fuels

Edward Mungai's picture


Growing up, I always dreaded to enter my grandmother’s kitchen in the village. She used firewood to cook: There was such a dark, thick smoke in the room that I couldn’t breathe or keep my eyes open. I really don’t know how my grandmother could spend hours and hours in there, every day, for so many years. And unfortunately, my grandmother is not an isolated case. More than 90 percent of Kenya’s population uses firewood, charcoal or kerosene for their daily cooking needs.

I always dreamed that clean sources of energy would make Kenyans more independent and less exposed to the serious health risks posed by fossil fuels. In rural areas, most women like my grandmother rely on firewood; its consumption not only depletes our forests but also emits hazardous smoke that causes indoor pollution and eventually respiratory illness. In areas where firewood is scarce, women have to use cow dung as fuel, an option possibly even worse in terms of pollution. Urban areas are affected too: The poor rely mostly on charcoal, another biomass that has the same negative effects and health risks of firewood.
 
Cleaner fuel options have already been developed but are often too expensive or too difficult to transport across the country to be adopted by a large part of the population, especially by the 40 percent of people at the base of the pyramid.

So what can be done? How can we make clean fuels more affordable and accessible?
 
I first heard about bottled biogas when I visited a "green" slaughterhouse in Kiserian, Kenya. I was really impressed: My dream of a cleaner, more affordable and easily accessible fuel was right there before my eyes.

The Keekonyoike Slaughterhouse found an innovative way to produce affordable biogas and package it for distribution all around the country. Using a special bio-digester, this business can turn blood and waste from a community-based Maasai slaughterhouse into biogas for cooking. To facilitate transport, the firm stores the fuel in recycled cylinders and used tires, reducing even further the environmental impact of the operation. Just to give me a better idea of the "green" potential of his business, the manager told me that this first biogas plant is expected to cut methane emissions by more than 360,000 kilograms per year (the equivalent of almost 2,000 passenger vehicles).
 
Indeed, "bottled" biogas (biogas compressed into a cylinder) has huge potential in Kenya: Farmers can directly produce it, recycling the waste from their farms; can use it for their cooking needs; and, thanks to the bottling process, can sell the excess on the local market, generating income while saving the environment.
 
The Genie in the Bottle


Keekonyokie is a company that began operations in 1982. It runs an abattoir that slaughters about 100 cows per day to meet the meat demand in Nairobi and its environs. In 2008, with the support from GTZ, the company constructed two 20-foot-deep biogas digesters that would help manage the abattoir waste, which was becoming a menace and a health hazard. Within a short time, the biogas being produced from the digesters was more than the company could absorb. The company managers started thinking of compressing and bottling the excess biogas, but they needed support to test the technical and commercial viability of their idea.

When infoDev’s Kenya Climate Innovation Center (KCIC) opened its doors in October 2012, Keekonyokie was one of the first companies to be admitted.
 

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