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CGD in the News

December 2, 2018

Africa must manufacture its way to a ‘lion economy’ (Asia Times)

By Joseph Dana

From the article:

Despite a recent downturn in the global economy, an unprecedented shift is underway throughout the so-called non-West. From Southeast Asia to Latin America, these economies have seen explosive urbanization and the emergence of a new middle class. Manufacturing remains the engine behind the re-emergence of non-Western economic power. Robust manufacturing sectors have created millions of jobs in countries such as China and India, which have in turn put these economies on impressive growth trajectories.

Africa remains an anomaly in this transformative story. With one of the world’s fastest-growing populations, Africa’s urbanization rates are also exploding. Yet its economies are not meeting their potential. While the continent has benefited from the internet to create new industries, its manufacturing sector has lagged woefully behind those of the rest of the world. Poor governance (a lack of trade-friendly legislation), a lack of investment in local and regional infrastructure (a paucity of efficient ports) and high costs are all factors behind the abysmal state of the sector.

Yet, more generally, the road is going to be long and hard for Africa’s manufacturing sector. Opening a factory remains an expensive and bureaucratic process. According to a 2017 report by the Center for Global Development, small African manufacturing plants were 39 percent more expensive than similar facilities elsewhere. Medium-sized and large factories were a staggering 50 percent more expensive. Despite high levels of unemployment, labor costs were found to be high in countries from South Africa to Tanzania. All this makes little sense, given that countries on the continent remain among the world’s poorest. The reason, in one word, is corruption. It exists on a massive scale through the accumulation of a multitude of small payoffs — almost like a differential calculus of graft. 

Read the full article here.

 

August 15, 2018

East Africa tops investment hubs in Africa (The Exchange)

By Joshua Masinde 

East African nations have maintained their attractiveness to foreign investments, taking the shine from Africa’s largest economies such as South Africa and Nigeria, which continue to falter economically.

Bolstered by increasing investments in infrastructure such as roads, rail, energy, ports and airports, the East African nations of Kenya, Tanzania, Uganda and Ethiopia have enjoyed growth rates of at least 5 per cent over the past decade. Findings in oil and gas have added an impetus to their growth prospects. 

... 

A recent Working Paper by The Centre for Global Development (CGD), noted that the “general level of prices in Ethiopia is below the level in India and comparable to that of in Bangladesh.” With labour costs rising at a faster pace in countries such as China, large industrial firms are increasingly exploring opportunities for production outside their own territory or even Asia. This has made the East African nations a sweet spot for investment flows. 

Read the full article here.

July 12, 2018

The Coming Split in NATO (The Atlantic)

One of President Donald Trump’s chief complaints about America’s European allies is that they don’t spend nearly enough on defense; he has again raised the issue on Wednesday at the nato summit. Granted, Trump is hardly the first American president to point to miserly military spending on the part of fellow nato member states. This has been a sore spot in transatlantic relations since at least the 1970s. But the vociferousness of his complaints, and his transactional approach to alliances writ large, appears to have had an effect all the same. European powers are thinking harder about how to build their military strength and how they might use it in concert, even in—especially in—cases where the United States won’t be there to lend a hand. 

... 

Yet the alternatives to opening Europe’s borders will be daunting in their own right. Last year, researchers at the Center for Global Development released a working paper on the prospects for manufacturing in Africa, and their findings were sobering. With the important exception of Ethiopia, they found that industrial labor costs in most African states were far higher than one would expect when judging by their overall level of development. The upshot is that while export-oriented manufacturing has greatly reduced poverty in much of East Asia, Ethiopia might be the only country in sub-Saharan Africa suited to that development path. Other African states will have to make use of their labor abundance in other ways—for example, by developing their tourism sectors and by transforming themselves into destinations for wealthy expatriates. In other words, either Africans will come to Europe in search of employment, and Europeans will remake their societies to accommodate them, or Europeans will come to thriving African states in search of a higher quality of life, fueling the expansion of the local service-sector workforce in the process. 

Read the full article here.

June 7, 2018

East African countries have become the investment haven in Africa (Africa.com)

With the giants of Africa, Nigeria and South Africa, faced with a crisis at home, East African countries are increasingly becoming a suitable alternative for foreign investors and large consumer companies. Both of Africa’s largest economies have experienced growth at below 2%, hit hard by fall in global commodity prices in 2016. While East African countries’ led by Ethiopia, Kenya, Tanzania and Rwanda have been enjoying growth rates not less than 5% since then.

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Countries like Kenya, Ethiopia and Tanzania have also benefitted from generally low labour costs. In a recent Working Paper by The Center for Global Development (CGD), it said the “general level of prices in Ethiopia is below the level in India and comparable to that of in Bangladesh.” Kenya and Tanzania have also been identified as countries with low wages but not as low as Ethiopia. With labor costs now rising faster in places like China, large manufacturing firms are exploring opportunities for production outside Asia. These East African countries have become a sweet spot.

Read the full article here.

May 17, 2018

Ethiopia, The Economic Miracle Of Africa (Prensa Latina)

Addis Ababa, May 7 (Prensa Latina) The Ethiopian economy is valued as the largest in the region and a miracle in Africa, considering that only 18 years ago the country had one of the highest poverty rates in the world.
 
According to a report recently released by the International Monetary Fund (IMF), the figures amounting to 8.5 percent indicate a continuous expansion after a decade.
 
...The specialists considered that in order to guarantee stability, the authorities should give top priority to frequent power interruptions and improve road, rail and air connectivity.
 
In addition, they called on the private sector to form a reciprocal relationship with the public and invest in technology transfer, generation and employment management, as well as in market research and addressing the scarcity of currency.
 
The country's large investment in infrastructure facilities, including the expansion of industrial parks, hydroelectric power stations and other basic services, together with the devaluation of Birr (Ethiopian currency) and the rebound of agricultural production, can be attributed to the estimated economic growth.
 
They highlighted documents from international organizations, such as the World Bank. A recent study conducted by the Center for Global Development and quoted by the portal Quartz notes that Ethiopia can become the 'new China' of the African continent.
 
 
May 16, 2018

Deeply Talks: Are Biometric ID Systems Good For Women? (News Deeply)

From the article:

Around the world, 42 percent of women do not have access to their own bank account, often because they don’t have the necessary identification documents to open one, because they don’t have the minimum amount of money required to do so or because it’s too difficult for them to physically get to a bank.

...In this episode of Deeply Talks, we discuss the role national ID systems can play in advancing financial inclusion for women, as well as the potential pitfalls.

In the first segment, the Center for Global Development’s Alan Gelb – author of Identification Revolution: Can Digital ID be Harnessed for Development? – explains how biometric ID systems work and the factors that influence how inclusive they are for women.
 

Continue reading and listen to the episode here

March 15, 2018

Why Africa’s Poor Pay High Prices (The Economist)

From the article: 

“WE FEEL so hungry,” says Agatha Khasiala, a Kenyan housekeeper, grumbling about the price of meat and fish. She has recently moved in with her daughter because “the cost of everything is very high”. The data back her up. The World Bank publishes rough estimates of price levels in different countries, showing how far a dollar would stretch if converted into local currency. On this measure, Kenya is more expensive than Poland.
 
This is surprising. The cost of living is generally higher in richer places, a phenomenon best explained by the economists Bela Balassa and Paul Samuelson. They distinguished between goods that can be traded internationally and many services, like hairdressing, that cannot. In rich countries, manufacturing is highly productive, allowing firms to pay high wages and still charge internationally competitive prices. Those high wages also drive up pay in services, which must compete for workers. Since productivity is low in services, high pay translates into high prices, pushing up the overall cost of living.
 
Among developing economies, however, the relationship between prices and prosperity is less clear-cut. Prices in Chad, for instance, are comparable to those in Malaysia, where incomes are 14 times higher. Fadi Hassan of Trinity College Dublin finds that in the poorest fifth of countries, most of them in Africa, the relationship goes into reverse: penniless places cost more than slightly richer ones. A paper in 2015 from the Centre for Global Development (CGD), an American think-tank, accounts for various factors which could explain differences in prices, including state subsidies, geography and the effects of foreign aid. Even then, African countries are puzzlingly expensive.
 
One explanation is dodgy statistics. African countries may be richer than they seem. When Nigeria revised its figures in 2014 to start counting industries such as mobile phones, GDP almost doubled. They may also be less pricey than economists reckon, because poor people buy second-hand clothes or grow their own food.
 
A more intriguing explanation comes from food prices. The relative cost of food, compared with other goods, is higher in poor countries.
 

 

February 20, 2018

Deeply Talks: Are Biometric ID Systems Good For Women? (News Deeply)

From the article: 

Around the world, 42 percent of women do not have access to their own bank account, often because they don’t have the necessary identification documents to open one, because they don’t have the minimum amount of money required to do so or because it’s too difficult for them to physically get to a bank.

...In this episode of Deeply Talks, we discuss the role national ID systems can play in advancing financial inclusion for women, as well as the potential pitfalls.

In the first segment, the Center for Global Development’s Alan Gelb – author of Identification Revolution: Can Digital ID be Harnessed for Development? – explains how biometric ID systems work and the factors that influence how inclusive they are for women.
 
Listen to the discussion here.
 
December 6, 2017

East African Countries Need To Embrace Biometrics In Anti-Poverty Schemes (The East African)

From the article: 

East African countries need biometrics and better record-keeping for any meaningful gains from anti-poverty schemes.
 
According to the Centre for Global Development (CGD), a think-tank in Washington, the absence of proper identification tools inhibits citizens’ access to basic rights and services.
 
“Under-documentation is pervasive in the developing world, and the identity gap is increasingly recognised as not only a symptom of underdevelopment but as a factor that makes development more difficult and less inclusive,” says a study by CGD.
 

Read the full article here

November 9, 2017

Technology Cannot Solve All Of Africa’s Problems, But It Can Help With Many (The Economist)

From the article:

Asian countries such as Japan and later Taiwan, South Korea and China embraced many of the world’s latest technologies to build formidable manufacturing economies. But Africa was largely left out of the most recent waves of globalisation, in which labour-intensive manufacturing moved out of Europe and America and into Asia. In 1990 African countries accounted for about 9% of the developing world’s manufacturing output. By 2014 that share had slumped to 4%.

One reason was pinpointed in a recent study by economists at the Centre for Global Development in Washington, DC. It found that labour costs in Africa are about 60% higher than in comparable countries such as Bangladesh. More striking still, the capital cost of employing a worker in Kenya, at $10,000, is about nine times as much as in Bangladesh. This is partly because indirect costs caused by unreliable infrastructure, crime, corruption and poor regulation, among other things, can account for 20-30% of the total costs incurred by firms in Africa...

So can technology help change the fortunes of Africa, or should the region’s governments focus on getting ports and power to work? 

Read full article here.

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