Using gross figures of exports and imports to approach the contribution of trade to economic growth and a country’s resource allocation may be misleading. Products often cross borders more than once while being processed until their final use and may thus be counted multiple times. Furthermore, given the increased use of imported intermediate goods and services associated with rising global trade flows in the last decades, not only exports of goods and services carry some content of imported inputs classified in other sectors, but also some exports of intermediate products may return embedded in imported final products. Therefore, in order to gauge appropriately where and how much is the value added by a country’s employed labor and other factors of production, one has to do due accounting of those intra- and cross-sector trade in order to measure trade in value-added terms – see a thorough analysis in Mattoo et al (2013).
Getting Somalia right has huge regional and global implications and attracted $2.4 billion in support at a recent development partners meeting in Brussels.
Supporting fragile and conflict-affected countries to get back on a stable, hopeful development path is a key priority for me as Vice President for the World Bank’s Africa region. It is on my mind especially at the moment after being in Brussels several days ago to participate in the EU-hosted New Deal Conference on Somalia, and then visiting Bamako to pledge our support to Mali’s newly formed Government. As stated by the international community and many observers, the recent election of President Ibrahim Boubacar Keita will open a new era of peace and reconstruction for Mali and we will be an active partner in this immense task.
The Brussels conference marks the anniversary of last year’s political transition and culminated in the endorsement of a “Compact” against which the international community pledged $2.4 billion through 2016. The conference, hosted by the EU and the Government of Somalia led by President Hassan Sheikh Mohamud, not only helped consolidate international political support for Somalia but also generated considerable momentum for the country’s development plans and a path to international debt relief.
Migration provides a fast path to poverty reduction, perhaps a faster path than that offered by trade, capital flows and technology transfer. Yet, it remains ignored, its potential untapped by the development community.
Over 230 million international migrants send home over $400 billion in remittances, providing a stable lifeline to perhaps a billion people in poor, small and fragile countries. Remittances finance necessities, healthcare, education for children, and even small business investments. In the destination country, migrants provide labor and scarce skills for their employers, and create businesses and jobs for others. Migrants facilitate trade, skills, and technology transfers between countries. Diaspora savings are estimated to exceed $400 billion annually, and can be mobilized for financing of development goals. By some estimates, the global welfare gains from a relatively small increase in cross-border labor mobility could be larger than complete trade liberalization.
A while back, a friend and colleague here at the World Bank told me of an experience that bothered him. He had been talking to a minister in an African country where the government had been making strenuous efforts to become more open and transparent. It had passed a Freedom of Information law, made quantities of government information available, liberalized the media sector, thus creating a vibrant, even raucous public sphere…all the things people like me urge developing country governments to do. In a couple of neighboring countries, said the minister, the governments had gone in the opposite direction. They had restricted access to official information, clamped down on the press, and were generally thuggish towards the media, civil society activists and so on.
What the minister asked my colleague is roughly this:
‘Can you guess which government is being painted as corrupt and incompetent by local and international NGOs and the local and international media? Ours!’
How have China and other countries resolved the binding constraints in light manufacturing to create jobs and prosperity? This vital question is answered in a new book based on unprecedented access and detailed interviews at hundreds of Chinese firms in more than 15 cities (including the coastal regions that have fuelled the export boom), as well as visits to a dozen countries in Africa and Asia. The book, Tales from the Development Frontier: How China and Other Countries Harness Light Manufacturing to Create Jobs and Prosperity, focuses on labor-intensive manufacturing (apparel, leather goods, agribusiness, woodworking, and metal products). It is part of the Light Manufacturing in Africa Project being undertaken by a World Bank team in the Development Economics Vice Presidency. We draw from analytical reviews, case studies, and the testimony of individual entrepreneurs to show how developing countries can grow manufacturing to create jobs and foster prosperity.
These are some of the views and reports relevant to our readers that caught our attention this week.
Trading Privilege for Privation, Family Hits a Nerve in South Africa
The New York Times
“Regina Matshega was gossiping with a neighbor over a fence between their shacks in the Phomolong squatter camp last month when a very unexpected sight suddenly popped into view: two ruddy-cheeked white South Africans, a man and a woman, with two towheaded toddlers running at their heels.
‘I couldn’t believe my eyes,’ Ms. Matshega said. ‘What are white people doing here? They live in the rich places. They never come this side.’” READ MORE
The narrative on development economics—the discipline that deals with well-being in the low and middle income countries where 6 billion people on our planet live—continues to swing back and forth between optimism and pessimism. The United Nations’ High-Level Panel report on the post-2015 development agenda (for which I was the Lead Author) calls for the eradication of extreme poverty by 2030, a boldly optimistic goal. But it also emphasizes that this can only be achieved if we learn from our past mistakes; business-as-usual will not get us there because, despite massive and broad-based progress, too many people are being left behind and too many programs are failing to reach scale, points that pessimists focus on.