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CGD in the News

August 19, 2018

Anita Käppeli: "Exclusion is expensive for the whole society" (Le Temps)

*Note: this article was translated from its original copy in French to English using Google Translate. 

By Ram Etwareea

The Center for Global Development, based in Washington, London and Brussels, tracks good and bad practices in international politics and cooperation. Switzerland's Anita Käppeli, a member of the board of directors, points out that poverty is declining in the world, but paradoxically, security and the environment are deteriorating

Since 1990, at least 1.1 billion people have emerged from poverty. But the other side of the coin is less glittering. According to Oxfam, one in ten people in the world lives below the UN's $ 1.90 per day poverty line - while 5% of the world's population share 60% of the income . The World Health Organization says half of the world does not have access to basic health services. And in the same vein, Unicef ​​deplores the fact that 60 million children do not have the slightest access to education.

Faced with this sad fact, rich countries and international organizations are not giving up. Last year, according to the OECD, they spent $ 146 billion fighting exclusion. But for Lucerne's Anita Käppeli, aid is not enough if the economic system is not inclusive. For the Director of the Research and Advocacy for Europe Division of the Center for Global Development, aid must go hand in hand with coherent economic and social policies in donor countries.

Le Temps: What do you mean by "inclusive economy"?

Anita Käppeli: It's an economic and social system that aims to end poverty not only in poor countries, but also in rich countries. Its components: a fair distribution of income, access to essential services (education, health, social protection), but also access to markets and the fight against corruption. An inclusive economy still ensures that population groups are not the losers of globalization, which is itself an awesome process of creating wealth and raising standards of living. 

Read the full article here.

August 19, 2018

Turkey crisis rattles Asian nations with rising Belt and Road debts (Nikkei Asian Review)

By: Motonao Uesugi

TOKYO -- Turkey's currency crisis is adding to the financial troubles of emerging Asian economies that have taken big loans for infrastructure projects under China's Belt and Road initiative.

The plummeting lira is forcing Asian nations to consider rate hikes to shore up their currencies (Indonesia tightened policy this week). Failure to get back on an even keel could add to heavy debt-servicing costs that undermine financial stability.

Loans from China help emerging economies pay for the infrastructure improvements they need to foster economic growth, but heavy debt-servicing costs threaten to undermine their financial stability.

The Center for Global Development, a U.S. think tank, says Laos, the Maldives, Mongolia, Pakistan and four other countries taking part in the Belt and Road initiative are already at risk.

Read the full article here.

August 18, 2018

Indo-Male Relations Going Downhill? (Sri Lanka Guardian)

By R.M. Panda 

Maldives Relation with India is going downhill and could soon be beyond repair if Yameen continues to be in power. By getting closer to China, Saudi Arabia and even Pakistan, Yameen is seen to be sending a message to hapless India that Maldives can survive and even thrive without India. There were apprehensions in Maldives when Yameen declared an emergency and put behind bars all the emerging leaders and of the judiciary that India may physically intervene. Nothing happened. Soon, without keeping Yameen guessing India declared and even informed China that it will not intervene. 

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Governor of Central Bank of Maldives Monetary Authority (MMA) Dr. Fazal Najeeb had said that Maldives is currently experiencing its most serious economic crisis of all times. Chinese Lending is putting the Maldives the risk of debt distress, a study from the Centre for Global Development Said. The study says China is heavily involved in three major projects that put together will be about $1.5 Billion and there will be repayment problems. IMF and World Bank both have predicted that Maldivians debt might reach 121% of its GDP by 2020.

Read the full article here.

August 18, 2018

African governments let too many taxpayers off the hook (Economist)

By: The Economist

The range of tax breaks can be bewildering

Tax collection in Africa resembles an exasperating fishing expedition, in which the big fish wriggle into tax havens and the tiddlers hide in the informal sector. It is made even harder by a self-inflicted problem. Governments give out a range of exemptions, thereby poking holes in their own nets.

Consider “tax expenditures”, a measure of the revenue lost by deviations from usual tax rates. Taxmen in Kenya and Uganda let about 5% of GDP slip through their fingers in this way, according to the World Bank. In the few African countries where data are available, governments forgo revenues worth a third of those they actually collect. The cost is felt in crowded classrooms and on rutted roads.

Not all that money should, or could, be recouped. The figures include concessions for items like textbooks and medicines. And not every tax expenditure is a giveaway, argues Maya Forstater of the Centre for Global Development, a think-tank. For example, firms that export goods or import capital equipment may be entitled to value-added-tax refunds, but the process can be so unworkable that some governments just grant exemptions instead.

Read the full article here.

August 18, 2018

Pakistani Prime Minister Faces ‘Weight of Expectations’ (Voice of America)

By Ayesha Tanzeem 

ISLAMABAD — Imran Khan, of international cricket fame, took the oath as Pakistan’s 22nd prime minister Saturday. He now faces tough challenges, including depleting foreign exchange reserves and growing international pressure to act against terrorist groups allegedly operating out of the country.

In his acceptance speech following his election in parliament the day before, the former cricket captain promised tough accountability against all who have “robbed the country.” 

... 

However, Western nations, particularly the U.S., have warned that countries participating in the project may find themselves in a debt trap. A study by the U.S.-based think tank The Center for Global Development listed eight countries, including Pakistan, that are at elevated risk of finding themselves under hefty Chinese debt. 

Read the full article here.

August 18, 2018

Debt weapon of choice for China to penetrate developing countries (Daily Nation)

By Eric Wamanji 

Alarm bells are ringing in Asia and Pacific countries. Chinese loans advanced under the Bridge and Rail Initiative (BRI) have started to sting.

That is why recently, Myanmar announced that it was scaling down on Chinese loans for its Kyaukpyu deep water port, noting that the project could be unviable and could trap the country in unsustainable debt. 

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In March, the think tank, Centre for Global Development (CGD), in a report, Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective, determined that eight countries (Laos, Mongolia, Pakistan, Djibouti, Kyrgyzstan, Montenegro, Tajikistan and Mongolia) were likely to default on their obligations to China. 

This will have far-reaching political and economic consequences, likely to change their histories in the process. 

Read the full article here.

 

August 14, 2018

Why the U.S. and Others Are Casting a Wary Eye on Foreign Investment From China (World Politics Review)

By Kimberly Ann Elliott 

While the U.S.-China trade war has been getting the headlines, investors from China are running into resistance in countries around the world, including the United States. Typically, governments welcome foreign investment, especially local governments, as a mechanism to create—or save—jobs, reinvigorate their economies and gain access to new technologies. Growing investment outflows from China, however, are pushing some national governments to take a more skeptical look at Chinese money.

In a measure aimed primarily at China, Congress strengthened the ability of the Committee on Foreign Investment in the United States, known as CFIUS, to review and block transactions that might threaten national security. Canada, Australia, the United Kingdom and other European countries are mulling similar measures to increase scrutiny of Chinese investors. While protecting national security is the nominal excuse for these actions, other concerns lurk behind the scenes. 

Read the full article here.

August 14, 2018

How Debt Traps From China’s Belt and Road Initiative Could Upend the IMF (World Politics Review)

By Daniel McDowell 

No stranger to political controversy, the International Monetary Fund may soon find itself embroiled in one that pits China’s interests against those of the United States. Beijing’s hugely ambitious international development project, known as the Belt and Road Initiative, is raising fears of debt crises in the developing world, and the IMF may be called in to clean up the mess. 

The U.S. is poised to oppose any IMF deal providing funds that would ultimately go to pay off Belt and Road-related tabs. How the IMF handles this situation could give clues about how the institution will deal with competing American and Chinese interests in an increasingly multipolar world. 

... 

Sri Lanka is not alone in its struggles. Earlier this year, a troubling report from the Center for Global Development identified eight countries where Chinese financing of Belt and Road projects will “significantly add to the risk of debt distress.” Of these eight countries, two—Sri Lanka and Mongolia—are currently under an IMF assistance program, and one—Pakistan—is reportedly mulling a request for economic aid from the IMF. Over the next several years, more countries could follow, and this could put the fund in a tricky spot. 

Read the full article here.

August 14, 2018

‘Debt colonialism’ accusations on B&R ring false (Global Times)

By Wu Dongxu 

In recent years, there has been an avalanche of negative reports about the Belt and Road (B&R) initiative, many of which are focused on the debt implications for countries involved. Some Western and Indian politicians and commentators have begun using the term "debt colonialism" to describe China's lending practices in Africa. However, the debt issue should be viewed objectively, rather than through a political agenda. 

Trade between two free parties must be mutually beneficial. Otherwise, one or both parties would not enter into the agreement. There are no reports of China forcing countries to take loans. Quite the opposite, African leaders have praised China's B&R initiative as a tremendous opportunity. The former Ethiopian prime minister Hailemariam Desalegn said the B&R falls perfectly in line with Africa's vision to achieve industrialization and sustainable development. Uganda hailed the initiative as empowering and liberating. Even the IMF has supported the B&R initiative, with the opening of the China-IMF Capacity Development Center. The countries taking the loans believe they will benefit from them.  

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China only owns a small proportion of total African debt. According to the Center for Global Development, private creditors - not the Paris Club or China - hold much of Africa's debt. According to S&P, roughly $325 billion of sub-Saharan Africa's total $450 billion in debt is private.

Read the full article here.

August 13, 2018

US puts new limits on foreign aid funded through the UN (IRIN)

By Samuel Oakford 

US President Donald Trump’s administration has introduced new conditions on billions of dollars in foreign aid spent through the UN and other multinational agencies, according to official documents examined by IRIN.

The rule change, previously unreported, takes aim at USAID’s funding for Public International Organizations (PIOs), a category that includes UN agencies like UNICEF as well as the World Bank and the African Union.

According to the new rules, any PIO grant over $5 million must now be vetted at the very top, in the office of USAID Administrator Mark Green. The threshold for Green to have to vet any other types of grant is $40 million. Former USAID officials say the low limit for PIOs will slow approval of UN financing, could create backlogs, and may leave funding more vulnerable to political interference. 

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“I don’t see a way that this does not result in the UN getting less money,” said Jeremy Konyndyk, a senior policy fellow at the Center For Global Development think tank and the former director of USAID’s Office of US Foreign Disaster Assistance

Read the full article here

 

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