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May 2013

From mineral resources to cash

Maniza Naqvi's picture

It's a place of darkness. People are poor and hail from tribes and clans. They live in basic shelters in remote villages, with no running water or electricity, and no access to clinics. Subsisting on seasonal work, hunting and fishing to stock up food for the lean months, they worship nature's beauty. They consider themselves hardy, descendants of those who suffered war, famine, and religious persecution. They resent that their part of the earth gets attention only through the prism of movies or when natural or manmade disasters strike. Then oil is found and they are blessed.

Nope, this isn't one of the many countries we all associate with poverty. It is not a "fragile state" the term often used for the richest in oil and gas and other mineral resources countries in Africa with the poorest citizens affected by the curse of resources: foreign meddling, conflict, war, corruption and autocratic dictators. This is Prudhoe Bay, Alaska, in the 1970s.

In 1975 the Alaska legislature asked itself: Was it morally acceptable or ethical for the generation whose presence in Alaska coincided with the oil boom to get all the benefits, leaving the following generations to deal with the decline and fall? No said the majority who thought the Alaskans of the future should have a nest egg and be allowed to share in a temporary windfall from the finite oil resource.

Alaska set up the Alaska Permanent Fund Corporation (APF). In 1987, the APF was worth US$11 billion, and by 1997 it was US$24 billion, exceeding total state oil and gas revenues. As of March 2013 it was US$45.5 billion. The lesson is that managed professionally, a national asset can grow into the future beyond the finite resource. You can read the whole case study by Steve Cowper, a former Alaska Governor (no, not that one), in a book edited by the World Bank's Jennifer Johnson Calari. In neighboring Alberta in Canada the Alberta Heritage Fund had been set up a year earlier.

Iran's Citizen Income Scheme, along the lines of the APF, is the largest in the world providing cash transfers to all its citizens, universally from its oil revenues. Per capita $500 is transferred to over 75.3 million citizens costing about $45 billion a year and will amount to 15 percent of national income, while Alaska's average is 3-4 percent .

Will Horror and over a Thousand Dead be a Watershed Moment for Bangladesh?

Duncan Green's picture

​A huge and chaotic conversation over how to respond to the appalling Rana Plaza factory collapse in Bangladesh (where the death toll has now passed an unprecedented 1100) is producing some important initial results, in the form of the international ‘Accord on Fire and Building Safety in Bangladesh’, launched last week.

I got a glimpse of the background on Wednesday at a meeting of the Ethical Trading Initiative, which brings together big brand retailers, including garment companies, trades unions and INGOs like Oxfam to work on wages and conditions in company supply chains. The Accord got some pretty rave reviews – ‘absolutely historic’, said Ben Moxham of the UK Trades Union Congress; comparable to the 1911 Chicago factory fire, according to one of the big clothes retailers at the meeting.

So what does it say? The Accord covers independent safety inspections, publicly reported; mandatory repairs and renovations; a vital role for workers and trade unions, including a commitment to Bangladesh’s Tripartite Plan of Action on Fire Safety (a national initiative). A key, and controversial aspect is that the Accord will include a legally binding arbitration mechanism, which wins a lot of trust from civil society and trade unions, but has spooked a number of companies based in the litigation-tastic USA (not all though –  part of Tommy Hilfiger’s in there, while Abercrombie and Fitch have said it they will join).

A Paean to Reason and Empathy

Kaushik Basu's picture

The following blog post is an excerpt from my commencement address delivered at the Diploma Ceremony of Fordham University, held in New York on May 19, 2013

The first rule of reason is honesty. There are situations in life where kindness and concern for others make us hold back on certain kinds of speech. That is as it should be. Speech can hurt as much as physical violence. If the latter is wrong, so must be the former. But to ourselves, in our minds, we should practice the utmost honesty. Honesty in thought may be inconvenient but in the long-run it helps.

Consider what we are often told—that if there is a will, there is a way; with sufficient determination, we can achieve anything. But to believe in this you have to suspend reason. And my advice is don’t. There are things in life which through sufficient determination you can achieve; but there are also things which no matter how hard you try, you will never get. It is best to see this clearly and realistically and then make your own choices rationally. You will make better decisions.

Africa needs more knowledge not just more money and projects

Sudharshan Canagarajah's picture

It is now widely understood that achieving a sustained acceleration of GDP growth over the long term is a prerequisite for eradicating mass poverty. In most developing countries, fiscal policies, including expenditure and tax policies, provide some of the most feasible tools available to governments for achieving their development objectives. Hence the role of fiscal policies as instruments for promoting long term sustainable economic growth is of great importance, an issue that was discussed at the “Fiscal Policy, Equity and Long Term Growth” conference which took place at the IMF on April 21-22, 2013. What matters in this context is how fiscal policies are designed and implemented such that they affect the long term growth of the supply side of the economy, rather than as a tool of short run demand management. The quality of fiscal policy is of critical importance in this regard.

There is a large volume of academic research, both theoretical and empirical, on the effects of different aspects of fiscal policy on economic growth (Easterly and Rebelo, 1993; Gemmel, 2001; Moreno-Dodson, 2012; World Bank, 2007, etc to cite just a few). This research has yielded broad fiscal policy advice for developing countries. For example, governments should avoid excessive fiscal deficits and public debt, allocate budgets towards human capital development and public investment in infrastructure which provides “public goods and services” and levy taxes on as broad a base as possible without distorting incentives to save and invest.

Stepping Up Efforts to Address Water Issues

Diego Juan Rodriguez's picture
As recognized by the World Economic Forum at Davos earlier this year, water insecurity is one of the greatest risks facing the world today.  Increased water demand from growing populations and economies, combined with more uncertainty in supply due to expected climate change impacts, require a radical change in the priority we give to managing our water resources and systems to supply water to people.  Over the next two decades, water will be needed to feed a planet of 9 billion people and generate energy to meet increased demand.

If I had three minutes with President Jakaya Kikwete…

Jacques Morisset's picture

Imagine that you are in an elevator. It stops to pick up the next passenger going up.  It turns out to be H.E. Jayaka Mrisho Kikwete, yes, the President of Tanzania himself, accompanied by a group of high ranking officials.  The President turns and asks you what you think is the most important thing that he could do for his country. You have less than three minutes to convince him.  What would you tell him?

I know what I would say, loud and clear: “Your Excellency, that would have to be improving the performance of the port of Dar es Salaam.”

No doubt there are plenty of issues that matter for Tanzania’s prosperity: rural development, education, energy, water, food security, roads, you name it. They are all competing for urgent attention and effort; yet it is also true that each of them involves complex solutions that would take time to produce impact on the ground, and it is hard to know where to begin and to focus priority attention.

This is not the case for the Dar es Salaam port, as most experts know what to do.

So why the port of Dar es Salaam?

The port represents a wonderful opportunity for his country. The port handles about 90%  of Tanzania’s international trade and is the potential gateway of six landlocked countries. I would tell him that almost all citizen and firms operating in Tanzania are currently affected, directly and indirectly, by the performance of this port.

A Fourth ‘R’ ?

Kevin Wagner's picture

Reduce, Reuse, Recycle…  Recover.  As the population in large cities worldwide grows, waste management becomes an even bigger challenge.  Recycling programs can divert large amounts of materials from landfills but some garbage still needs to be disposed of in landfills or Energy From Waste (EFW) sites.  EFW facilities are capable of recovering energy from garbage that would otherwise be unused in landfills.

EFW and landfill gas capture systems operate on similar principles:  produce steam to turn a turbine which generates electricity.  The difference is the fuel used to produce the steam.  Landfill gas based electricity generation relies on methane from the decomposition of organic material, while EFW facilities combust the solid waste.  Both are good options as they prevent methane gas from escaping into the atmosphere.  Methane has a global warming potential 72 times that of carbon dioxide.  Both options sound good, so which is better?  The better question is:  ‘How much land and money do you have’?

How to Upgrade Housing in Informal Settlements?

Parul Agarwala's picture

According to recent estimates, South Asia is facing a shortage of 38 million housing units, largely affecting low and middle-income households. It comes as no surprise that informal settlements, slums and squatters are growing in all major urban centers across Asia to supplement the demand from urban poor. India alone has 52,000 slums inhabited by 14 percent of its total urban population. Almost, 50 percent of total population in Karachi, i.e. 7.6 million persons, lives in Katchi-Abadis. Bangladesh has 2,100 slums and more than 2 million slum dwellers in Dhaka. Even in Afghanistan, 80 percent of residents in capital city, Kabul, live in informal settlements.

Mining in the Congo Basin: Getting to the Heart of the Challenges

Leo Bottrill's picture

Film is a powerful tool for explaining environmental issues. I first learnt this lesson while trying to enlist local communities in northern Vietnam to help protect a strange blue faced and critically endangered primate called the Tonkin Snub Nosed Monkey. After a morning spent bombarding local leaders with facts and figures, they were polite but unmoved.


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