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CGD in the News

December 31, 2018

Are the wheels coming off China's Belt and Road megaproject? (CNN)

From the article:

Many countries that were initially willing to take Beijing's money have expressed concern over what could happen should they default on debt payments, particularly after the Sri Lanka deal.

Part of the problem stems from Beijing's "ad hoc approach" to settling debt issues, according to a report by the Center for Global Development (CDG), which pointed to a lack of consistency in dealing with defaulting nations. In the past, China has been willing to write off or restructure debts and extend further lines of credit, while at other times it has demanded assets to service the loans.

"Without a guiding multilateral or other framework to define China's approach to debt sustainability problems, we only have anecdotal evidence of ad hoc actions taken by China as the basis for characterizing the country's policy approach," the CDG report said.

This creates significant uncertainty, and forces governments borrowing from China to rely on maintaining strong bilateral ties above all else to ensure future lending policies.

December 28, 2018

From Asia to Africa, China’s “debt-trap diplomacy” was under siege in 2018 (Quartz)

From the article:

On the eve of his first (and only) official visit to Africa, former US Secretary of State Rex Tillerson drew a sharp contrast between US aid and lending in Africa, and China’s—one of many warnings from the US on the topic this year.

“The United States pursues, develops sustainable growth that bolsters institutions, strengthens rule of law, and builds the capacity of African countries to stand on their own two feet,” Tillerson said, speaking at George Mason University ahead of a trip that would take him to Ethiopia, Kenya, Chad, and Nigeria. “This stands in stark contrast to China’s approach, which encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty.”

That warning came just days after a report by the Center for Global Development, a US-based research nonprofit, warned that eight countries were at serious risk of above-average debt because of Chinese lending. The only African nation among the eight—Djibouti—is a worrying inclusion for the US, given it’s home to a major US military base, and as of last year, China’s first overseas military base as well. Djibouti government debt went from 50% of GDP (pdf, p. 1) five years ago to over 80% (pdf, p. 14). The US is concerned that like in Sri Lanka, China could eventually take control of a key port in Djibouti.

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.

October 27, 2017

Why Do Nations Invest In International Aid? Ask Norway. And China (Washington Post)

From the article:

How much are acts of generosity worth in international relations? For affluent countries, foreign aid has helped spread power and influence. Donors give foreign aid in part because it will benefit them. For example, political scientist Carol Lancasterfinds that domestic politics and international pressures combine to shape how and why donor governments give aid, and that aid was initially based on “hard-headed, diplomatic realism.”

The Trump administration’s proposal to slash foreign aid by more than one-third (including drastic cuts to global health and humanitarian aid) represents a major shift away from the goal of using aid to attain “smart power,” a strategy that supplements the ability to exercise brute force with efforts to win hearts and minds in far-off places. At the other end of the spectrum is Norway, a small but wealthy country, which has consistently tried to bolster its “soft power” ever since it helped broker a peace agreement between Israel and Palestine in the 1990s. Between these two extremes is China, which is using foreign aid to acquire greater soft power as it gears up for a more active role in world affairs...

As it struggles to better integrate foreign aid and national interests, Norway has been falling in the Center for Global Development’s rankings of countries committed to development — one of the most cited indexes among aid advocates and civil society organizations. Such results directly undermine its carefully cultivated image of being a humanitarian superpower.

Read full article here.

October 27, 2017

Kenya Can't Imitate China's Economic Model, As Things Stand (Daily Nation)

From the article:

My bet is that, Kenya specifically, and other developing countries, will need to be far more nimble than China was in negotiating manufacturing success.

report by the Centre for Global Development finds that only a few countries in Africa have the advantage in labour costs that would predict their ability to become manufacturing hubs.

Kenya, which has a comparatively diverse, large sector, is not among them, despite the fact that Kenya's long term growth prospects depend on the country's ability to unlock manufacturing efficiencies. The report appears to pour cold water on the wisdom informing Kenya’s industrial strategy.

Policy choices incompatible with being a regional manufacturing hub undermine the structural changes Kenya requires. If you agree with the report's conclusions, you may realise that Kenya’s overall development strategy is incoherent.

Read full article here.

October 26, 2017

Brasil e Argentina Estão Na Lanterna Da Inclusão Financeira (Exame)

Del artículo:

Um novo estudo realizado pelo BBVA Research, e que será lançado nesta quinta-feira 26, mostrou o Brasil numa posição preocupante em relação à inclusão financeira.

O estudo avaliou as práticas regulatórias para acesso financeiro de oito países latino-americanos, e Brasil e Argentina estão na última posição.

De acordo com uma das coordenadoras da pesquisa, Liliana Rojas-Suarez, “todos os indivíduos e empresas deveriam ter acesso a serviços financeiros, independentemente de sua renda ou localização geográfica”.

October 26, 2017

The Story Of Ethiopia’s Incredible Economic Rise (Quartz)

From the article:

Ethiopia’s economy is booming, and despite the country’s current political turmoil, the IMF thinks the good times will last.

In 2000, Ethiopia, the second-most populous country in Africa, was the third-poorest country in the world. Its annual GDP per capita was only about $650. More than 50% of the population lived below the global poverty line, the highest poverty rate in the world.

What has happened since is miraculous. According to IMF estimates, from 2000 to 2016, Ethiopia was the third-fastest growing country of 10 million or more people in the world, as measured by GDP per capita. The country’s poverty rate fell to 31% by 2011 (the latest year Ethiopia’s poverty level was assessed by the World Bank)...

Ethiopia’s economy is concentrated in the services and agriculture sectors. The World Bank estimates that of the 10.8% average annual growth recorded by Ethiopia between 2004 and 2014, half came from services, like hospitality and transportation, which was mostly a result of country’s urbanization (pdf). Agriculture, meanwhile, accounted for 3.6% of the growth during the period. Improved agriculture production was mostly a result of the adaptation of improved seeds and chemical fertilizer, according to International Food Policy Research Institute. Manufacturing, though a small portion of the economy, is burgeoning, growing at more than 10% per year. A recent study by the Center for Global Development, a US think tank, concluded that Ethiopia was the most likely country in Africa to become the “New China.”

Read full article here.

October 17, 2017

Kenya Pays Factory Workers Twice As Rival Bangladesh (Business Daily)

From the article:

Workers in Kenyan factories earn more than twice the average wages that industries in Ethiopia and Bangladesh pay their labourers even as global brands favour low pay countries, a new study shows.

US-based Centre for Global Development puts the annual pay per worker in Kenyan industries at $2,118 (Sh218,154), equivalent to Sh18,179 per month.

Workers in Ethiopia’s sweatshops earn an average $909 (Sh93, 627), or Sh7,802 per month while the wage in Bangladesh, famous for its vibrant garments industry, is a paltry $835 (Sh86,005) yearly.

Tanzania factories pay an average $1,776 (Sh182,928) a year, or Sh15,244 monthly, the study shows.

“Yet taking the broader global picture their (Kenya) manufacturing labour appears costly relative to that of Bangladesh, a country with comparable income level and competitiveness rating,” the report says.

Read full article here.

October 17, 2017

Why Ethiopia Is Overtaking Kenya In The Race To Become The 'New China' (The Star)

From the article:

It is expensive to start and run a manufacturing factory in Kenya compared to at least 28 other African countries, a new study shows.

The study, by the Centre for Global Development, rates labor and capital costs per worker as top reasons for the country's unattractiveness. 

As per its findings, the labor cost per Kenyan worker is Sh218, 725 compared with Bangladesh where it is Sh86, 230 and Sh93, 872 in Ethiopia.

The researchers have found out that Ethiopia, already leading the way as Africa's 21st century center for manufacturing, has the best likelihood of being the "New China".

Read full article here.

October 15, 2017

Even Africa’s Poorest Countries Are Too Expensive To Be The World’s Next Manufacturing Hub (Quartz)

From the article:

Even though the global economy has evolved significantly in the last few decades away from the industrial revolution—which transformed many of the world’s advanced countries—there’s still much hope tied to the idea that manufacturing will play a key transformative role in developing countries in Africa today.

Yet, it may be foolish to place too big a bet on manufacturing in Africa, according to a new research paper from US think tank, Center for Global Development.

The researchers used World Bank data to look at 5,500 firms in 29 countries. They compared labor and capital costs, and productivity and efficiency of manufacturing in sub Saharan Africa with similar countries outside Africa, in particular Bangladesh. They did not have good news for most of the region.

Read full article here.