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Foreign direct investment, financial flows, private-sector development, humanitarian assistance, Africa
Vijaya Ramachandran is a senior fellow at the Center for Global Development. She works on the impact of the business environment on the productivity of firms in developing countries, and is the coauthor of an essay titled "Development as Diffusion: Manufacturing Productivity and Africa's Missing Middle,” published in the Oxford Handbook on Economics and Africa. Vijaya is also studying the unintended consequences of rich countries’ anti-money laundering policies on financial inclusion in poor countries. She has published her research in journals such as World Development, Development Policy Review, Governance, Prism, and AIDS and is the author of a CGD book, Africa’s Private Sector: What’s Wrong with the Business Environment and What to Do About It. Prior to joining CGD, Vijaya worked at the World Bank and in the Executive Office of the Secretary-General of the United Nations. She also served on the faculties of Georgetown University and Duke University. Her work has appeared in several media outlets including the Economist, Financial Times, Guardian, Washington Post, New York Times, National Public Radio, and Vox.
Taxation, which has been a Cinderella subject in development, has finally been invited to the ball, but the arguments that have helped to push taxation up the finance-for-development agenda may also be in need of clarification.
Rich countries’ anti-money laundering rules are “causing a great deal of hardship” by making it very costly for migrants to send money home. So testified Federal Reserve Chair Janet Yellen before lawmakers on the House Financial Services Committee in Washington this week. It’s a problem a CGD Working Group is looking at right now: the de-banking of remittance organizations by many banks that cite burdensome compliance requirements.
It’s a worry for manypeople that legitimate cross-border transactions - including vital remittances sent home by migrant workers - are becoming prohibitively expensive and burdensome because of over-zealous enforcement of anti-money laundering rules. Would cryptocurrencies such as bitcoin be able to help with this problem?
Agglomeration theory holds that clustering firms together allows them to share of knowledge and ideas, access a larger labor pool, and benefit from lower costs of production and transportation. How does that hold up in the real world?
De-banking is an ugly word, but it’s the focus of a new working group launched by CGD in Europe. Banks in rich countries, under pressure from anti–money laundering and counterterrorism enforcement efforts, are increasingly “de-banking” money transfer organizations that operate in poor countries. In other words, to prevent criminals transferring their ill-gotten gains around the world electronically, they are denying banking services to legitimate companies that are a vital route for millions of people and businesses. And we are talking huge sums of money.
In Burkina Faso, where most live on less than $2 a day, people want better infrastructure even more than they want jobs. In Benin, Guinea, Liberia, Mozambique, Tanzania – some of Africa’s poorest nations – it is the same. In fact, the cry for more and better basic services is heard in nearly every African country.
IFC’s portfolio is not focused where it could make the most difference. Low income countries are where IFC has the scale to make a considerable difference to development outcomes. While an excessive portfolio shift might imperil IFC’s credit rating, the evidence suggests that there is considerable scope for increasing commitments to low income countries without significant impact to IFC’s credit scores.
The first-ever National Business Census began in Haiti this month. A census of formal and informal businesses has never been conducted and there is no comprehensive business database. Although a daunting task, the census will likely help to strengthen small and medium enterprises and increase local procurement.
The survey began September 3rd and will be conducted by 500 interviewers recruited by 42 supervisors from across the country – at a cost of 26 million gourdes (around $600,000). Wilson Laleau, the Minister of Trade and Industry, explained that this survey will enable the government to assist entrepreneurs with access to credit, help meeting standards, and entering new markets. Maintaining crops, inventories, and production is notoriously difficult with disasters such as Hurricane Isaac. A comprehensive census could improve access to credit and insurance coverage for natural disasters. Prime Minister Laurent Lamothe said: “Everyone recognizes the importance of such an activity… [a census is a] prerequisite to any policy to support the development of entrepreneurship in Haiti.”
In 2012, the Center for Global Development (CGD) convened the Working Group on Food Security, bringing together 22 experts in food policy, nutrition, agriculture, and economic development from around the world. The group’s task was to review pressing challenges to agricultural development and food security and take stock of the Rome-based United Nations food agencies charged with addressing them. The working group decided to focus on the largest of those agencies—the Food and Agriculture Organization (FAO)—and has two key recommendations.
How do employers decide whether to provide their employees with HIV/AIDS prevention services? CGD Visiting Fellow Vijaya Ramachandran's data from 860 firms and 4,955 workers in Uganda, Tanzania, and Kenya shows that larger firms, and those with more highly skilled workers, invest more in HIV/AIDS prevention. Firms in which more than 50 percent of workers are unionized also are more likely to provide more prevention services.
Lifting the trade and investment embargo on Cuba is a laudable policy objective that would allow Cubans better access to American goods and services. It might also give American businesses a boost, including from places that could do with one, like rural Louisiana. Changing the law will be an uphill struggle unless November’s elections transform Congress. But even if Congress can agree, changes to the law might not be sufficient to convince investors to go to Cuba.
The IFC is designed to catalyze investments in countries that investors might consider too risky to invest in alone. But our recent analysis of IFC’s portfolio found that it is shying away from risky investments, raising serious questions about whether the IFC is focusing on the places where it can make the most difference.