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In an earlier blog post, we explained why we think that donors and development finance institutions are getting it wrong by issuing guarantees and cheap loans to the private sector. We argue they should instead be increasing the returns for firms when they succeed. Today, a former CGD Visiting Fellow, John Simon, disagrees.
We are enthusiastic about the growing interest in supporting private investment in developing countries, but it matters a lot how this is done. The sorry history of failed and distortionary partnerships should tell us something about how donor countries can do a better job of working with the private sector.
Energy access is getting a lot of attention lately from the development community. The ONE Campaign has been pushing for aggressive action to fight energy poverty. President Obama launched Power Africa in June 2013 as his signature development initiative of the second term (and the effort with the greatest potential to be his Africa policy legacy).
Countries have traditionally invested their sovereign wealth in securities of major markets able to provide dependable returns and macroeconomic stability, but some are now investing more sovereign wealth domestically because of diminished returns in major markets and new investment opportunities at home.
This piece originally appeared in the Financial Times on September 23, 2012 (gated) and is posted here with permission.
The Indian government’s recent reforms to reduce government subsidies and embrace greater foreign direct investment were unexpected and bold. Markets have rewarded them with surging stock prices and a rebound in the value of the rupee. The reforms may yet be reversed or diluted because of the political backlash. Their impact may be more symbolic than substantive. Nevertheless, they are significant in that they reflect changes in the operating assumptions of Indian politics.
“Innovation” is popping up everywhere you turn these days. In her recent speech at the Center for Global Development, Secretary Clinton cited “innovation” as one of the priorities of U.S. development policy. Both the White House Office of Science and Technology Policy and the Department of Treasury are exploring ways to more systematically include “innovation” in the development agenda. The G8 is rumored to be launching an “innovation and development” initiative for Africa at its next meeting.
We tend to think of globalization in the following way: the rich world exports financial capital, technology, sophisticated goods, and entrepreneurial and managerial skills in the form of foreign direct investment (FDI) to developing countries; the latter, in turn, export people, resources, and low-skilled goods to the rich world.
Every developed country was once a developing country; every rich country was once poor. In other words, we can relate to the experience of today’s poor countries because we’ve been there, done that. The better we understand what Americans needed back then, the better we will understand what citizens of today’s poor countries need from us now.
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