Today I joined leaders and representatives from 70 countries and 20 international organizations and agencies at the Brussels Conference on Afghanistan. Together with its development partners, the World Bank Group pledged its continued support to the Afghan people and outlined a course of action to help all Afghans realize their dream of living in peace and prosperity.
Afghanistan has come a long way since 2001 and has made much progress under extremely challenging circumstances: life expectancy has increased from 44 to 60 years, maternal mortality has decreased by more than three quarters and, from almost none in 2001, the country now counts 18 million mobile phone subscribers.
Yet, enormous challenges remain as nearly 40 percent of Afghans live in poverty and almost 70 percent of the population is illiterate. This is made worse by growing insecurity and the return of 5.8 million refugees and 1.2 million internally displaced people. Much also remains to create jobs for the nearly 400,000 people entering the labor market each year.
To that end, here are five priorities we need to address to ensure a more prosperous and more secure future for all Afghans:
Private Sector Development
Of the 56 poorest countries, over half had no private investment in infrastructure in the past five years. And in 2015, only 14 energy, transport and water projects involving private investment were concluded in that whole group of 56 countries—with all of them occurring in just eight of the countries. In the past five years, only one country – Bangladesh – has seen private investment in infrastructure each year. Given that well-structured private infrastructure projects can bring a useful infusion of management (and sometimes money) to help provide better quality and access to infrastructure services, this seems like a missed opportunity. Here are five suggestions for actions that governments can take immediately to improve their chances of attracting good quality private management and financing for some infrastructure services.
Two-thirds of Egypt’s poor—about 12 million people—live in Upper Egypt, where the level of economic development lags significantly behind other regions in the country. But finding solutions to kick start private sector growth in lagging regions like these can be an intractable challenge.
The Mongolian government’s economic advisors. Photo by Steve Utterwulghe
Misunderstanding, distrust, lack of genuine consultation. These are some of the words that I hear the most from various public and private stakeholders during my regular missions to developing countries.
From Bamako to Ulan Bator, where I am writing this post, the relentless echo of grievances points to the fact that the government doesn’t understand – or want to listen to – the private sector, and therefore doesn’t trust it. And likewise, the private sector sees public authorities as often incompetent, corrupt and an impediment to competitiveness and wealth creation.
While generalizing is a dubious exercise, the similarity and recurrence of complaints across the globe warrants deeper digging.
The issue of trust in policymaking is a complex field of study. The origin of mistrust of the private sector by the government in many developing countries is embedded in the socio-political culture and economic history of the state.
That being said, it is now rare to find a government that categorically denies the contribution of the private sector to the economic development of a nation. About 90 percent of the jobs are created by the private sector in the developing world, and about 50 percent of those are created by small and medium-sized enterprises (SMEs). Furthermore, as José Juan Ruiz from the Inter-American Development Bank (IDB) has written, “Policymakers realize that they need to access the deep knowledge held by the private sector in order to learn about market failure and formulate the right policies to address them.”
On the other hand, the private sector wants a stable and transparent regulatory environment in which to operate. It doesn’t want more regulations, but better regulations that will protect its investments. For that, it needs the government to listen and act in a way that will create an enabling business environment. Building trust is hard work.
Differences between public and private stakeholders certainly exist, but so do commonalities. It never takes long for parties to acknowledge that there is a clear common ground to strive for: sustainable economic development that should lead to inclusive growth. That, in turn, will spur job creation and revenue collection for the state. That’s an irrefutable win-win scenario.
I have been looking for possible sources of investment and possible markets that would help both Syrian refugees and their host communities, and, as someone who has worked on the subject of the private sector for two decades now, one of my first questions is—“what role can the diaspora play?”
There is now a huge window of opportunity for South Asia to create more apparel jobs, as rising wages in China compel buyers to look to other sourcing destinations. Our new report – Stitches to Riches?: Apparel Employment, Trade, and Economic Development in South Asia – estimates that the region could create 1.5 million new apparel jobs, of which half a million would be for women. And these jobs would be good for development, because they employ low-skilled workers in large numbers, bring women into the workforce (which benefits their families and society), and facilitate knowledge spillovers that benefit the economy as a whole.
But for these jobs to be created, our report finds that apparel producers will need to become more competitive – chiefly by (i) strengthening links between the apparel and textile sectors; (ii) moving into design, marketing, and branding; and (iii) shifting from a concentration on cotton products to including those made from man-made fibers (MMFs) – now discouraged by high tariffs and import barriers. These suggestions recently drew strong support from panels of academics and representatives from the private sector and government when the report was launched mid-year in Colombo, Delhi, Dhaka, and Islamabad. South Asia is now moving on some of these fronts but a lot more could be done.
Moving up the apparel value chain
Stitches to Riches? finds that South Asia’s abundant low-cost labor supply makes it extremely cost competitive (except for possibly Sri Lanka). But rapidly rising living costs in apparel manufacturing hubs, coupled with international scrutiny, are increasing pressure on producers to raise wages. Plus, countries like Ethiopia and Kenya, who enjoy a similar cost advantage, are entering the fray, and some East Asian countries already pose a big challenge. The good news is that the policy reforms needed to keep the apparel sector competitive would likely benefit other export industries and transform economies (view end of the blog).
The Financial Data Team of the Development Economics Data Group (DECDG) is pleased to announce the launch of our Online Quarterly Bulletin’s second edition, an e-newsletter spotlighting debt statistics news, trends, and events. The current issue features the following:
Organizing Public Sector Debt (QPSD) statistics to maximize their analytical use and international comparability
Bond Issuance by low- and middle-income countries in 2015
- External debt trends for high-income countries in 20105
- Debt statistics-related event summaries
One highlight in this edition is the introduction of the D1-D4 matrix, a cascading approach used to present the QPSD data. The primary aim of the QPSD initiative is to institute a standardized measure for each dimension of public sector debt. The QPSD database displays country data for the same set of debt instruments such as 1. debt securities, 2. loans, 3. currency and deposits, 4. Special Drawing Rights, 5. Other accounts payable, and 6. insurance, pensions, and standardized guarantee schemes for the following institutional sectors of the economy: 1) general government, (2) central government, (3) budgetary central government, (4) non-financial public corporations (5) financial public corporations, and (6) the total consolidated public sector debt.
One of the key objectives for our research program at the Stanford Global Projects Center is to understand how the largest sources of capital in the world can be channeled into critical infrastructure and development projects most in need of it. In particular, we focus on long-term institutional investors (pension funds and sovereign wealth funds) and private development firms at one end of the spectrum, and government procurement agencies and departments at the other. We are essentially trying to assist in overcoming a number of inefficiencies that seem to be apparent in linking the original source of capital to projects on the ground. In this blog post, we would like to highlight some of the latest trends and issues confronting the institutional investor space; in subsequent blogs, we will showcase some of the work we have done at the government procurement level to facilitate investment.