African Extractive Industries: PRC Neocolonialism

♠ Posted by Emmanuel in Africa,China,Development at 5/30/2024 01:12:00 PM

That the slow development of the African continent can be traced to Western colonialism is an archetype of this field of study: Mainly interested in extracting natural resources for manufacturing industries sited elsewhere (e.g., Europe), foreigners have come for valuable minerals... and not much more. It would be neat if this story was confined to the history books, but we keep being reminded that it is instead very much a story of the 21st century still. 

Of note in this respect are the Chinese. The stereotype of Chinese industrialists enticing corrupt regimes all over the continent with easy money in exchange for mineral access is a story told over and over. Stung by this criticism, the PRC decided to change tack in characterizing their activities as developmental win-win situations: In exchange for being granted access to mineral resources, the Chinese would help improve the infrastructure of the countries they operated in to accommodate the influx of wealth brought by extractive industries. That is, improved ports, roads, power stations and so forth would better facilitate trade and development for all concerned. Well, that was supposed to be the story of the Belt and Road initiative:

China's engagement in Africa, a focus of the Belt and Road Initiative (BRI), grew rapidly in the two decades before the COVID-19 pandemic. Chinese companies built ports, hydropower plants and railways across the continent, financed mainly through sovereign loans. Annual lending commitments peaked at $28.4 billion in 2016, according to the Global China Initiative at Boston University.

But many projects proved unprofitable. As some governments struggled to repay loans, China cut lending. COVID-19 then pushed it to turn inward, and Chinese construction projects in Africa fell.

The chart above indicates what's happened to the much-touted Belt and Road Initiative. Of course lending without conducting substantive due diligence to regimes with questionable governance records was not conducive to being paid back on time! Post-COVID and all these post-non-performing loans, the Chinese are back in Africa. However, the pretense of mutual benefit is largely gone, replaced by a massive focus on extracting more than Westerners can. Yes, it's neocolonialism at its crudest, but it is what it is:

Worse still, lots of Chinese goods are flooding these African countries at low prices, creating substantive trade deficits with China all over the continent. In trade terms, it's likely a case of "dumping":

With one of Africa's largest trade deficits to China, Kenya has been pushing to increase access to the world's second-largest consumer market, recently gaining it for avocados and seafood. But cumbersome health and hygiene regulations mean Chinese consumers remain out of reach for many producers...

But Chinese manufactured goods kept coming. That's not sustainable, said Francis Mangeni, an advisor at the Secretariat of the African Continental Free Trade Area. Unless African nations can add value to their exports through increased processing and manufacturing, he said, "we are just exporting raw minerals to fuel their economy."

The story never changes of foreigners exploiting natural resources and then profiting by selling higher value-added goods in these African nations, thereby stifling indigenous development that would occur by garnering capabilities to produce more sophisticated products. The Chinese can keep repeating holier-than-thou rhetoric about not being like those Western imperialists exploiting Africa with naked greed, but it's what they do and not what they say that ultimately counts.

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Trump Infests USAID With Right-Wing Ideologues

♠ Posted by Emmanuel in Americana,Development,Gender Equality,Religion,United Nations at 6/16/2020 09:53:00 PM

Truth in advertising should be applied to USAID given the similarly bigoted beliefs of Trump's new appointees. 

Although foreign aid provision features much lofty rhetoric—giving the rest of humanity a helping hand—its reality is much more mundane. Like a lot of things in life, a mixture of altruistic and self-interested motives drive official development assistance or ODA provided by the likes of the American government through its US Agency for International Development (USAID). Being a practical sort, I do not believe this situation is necessarily wrong. For instance, the George W. Bush administration spearheaded the highly effective HIV/AIDS initiative PEPFAR in Africa, partly out of the conviction that stopping its spread there would benefit the rest of the world—including the US. Who led that effort? None other than one Anthony Fauci.

That’s why I am exasperated when ideologues are put in charge at USAID. Their agendas can be quirky, driven more by loopy thinking than practical ideas about how to improve the well-being of people in poor countries. To begin with, Trump regards aid as a waste of money, and has tried to cut it ever since. After all, there’s no redeeming what he calls “shithole countries,” right? So now Trump has decided that if he cannot singlehandedly stop aid provision—Congress decides that—he might as well put in those harboring—how do I put this—unusual ideas.

Instead of being attuned to evolving understandings about gender and championing democratic principles as USAID traditionally does, Trump has appointed some nutter blathering about "homo empires" and the genius of Hungarian strongman Viktor Orban. I did not make this stuff up:

A new White House staffer appointed by President Donald Trump once suggested America was a “homo-empire” ruled by a “tyrannical LGBT agenda” in a slew of writings that have since come back to haunt her.

Merritt Corrigan, White House deputy liaison at the US Agency for International Development (USAID), wrote that “our homo-empire couldn’t tolerate even one commercial enterprise not in full submission to the tyrannical LGBT agenda” in a tweet posted to her personal account, Politico reported, which has since been made private.

Ms Corrigan, who previously worked at the Hungarian embassy in Washington, has also claimed the country’s leader Viktor Orbán “is the shining champion of Western civilization” in a separate post.

But wait, it get worse. USAID's new appointee on religious freedom is an unapologetic Islamophobe. What a guy to get for reaching out to nearly a quarter of the world's population of Muslim faith:

USAID officials confirmed to me that [acting USAID administrator John] Barsa chose Mark Kevin Lloyd to be USAID’s new “religious freedom adviser.” His first day was Tuesday. In 2016, the Associated Press reported that Lloyd (then the Trump campaign’s Virginia field director) had made and shared several Islamophobic posts on his personal social media accounts. On June 30 of that year, he shared a post on Facebook that called Islam “a barbaric cult,” the AP reported.

Four days after the Orlando terrorist attack that same June, he shared a meme saying potential gun buyers should be forced to eat bacon. In another post, Lloyd wrote that “those who understand Islam for what it is are gearing up for the fight,” the AP reported. Those post are no longer public, but Lloyd’s Facebook account as of Tuesday still shows public posts where he accuses Barack Obama of ties to the Muslim Brotherhood and says people who believe Islam is a peaceful religion don’t understand history.

If these very fine people weren't enough, USAID's deputy deputy chief of staff is an anti-transgender activist. Apparently you can't get a job there nowadays without being controversially offensive.

The honest truth is that, inside the Beltway and in much of the rest of the world, serving as a Trump appointee is a stain on your CV akin to being the nightwatchman on the Titanic or the navigator of the Hindenburg. Given this talent pool [sic], Trump is forced to hire assorted right-wing nutters who are oftentimes the only ones desperate enough to serve a madman hellbent on loyalty oaths.

As with most things, USAID's rot starts at the top, with its current head viewing the post as a springboard to some future right-wing career [away from these developing country shitholes, too!] The more outrageously right-wing you are, the more attention you get from Uncle Donnie:

The White House named Barsa acting administrator last month without even consulting the State Department, reaching down to elevate him over more qualified senior officials. In the brief period since his appointment, Barsa has already gotten into hot water by writing a harshly worded letter to U.N. Secretary-General António Guterres demanding the removal of references to “sexual and reproductive health” from a recent U.N. pandemic response plan, and insisting that no funding be allowed to go to abortions.

That brought him rebukes both from Democrats in Congress, who took issue with Barsa’s characterization of the U.N. plan, as well as the Trump administration’s own U.N. ambassador, Kelly Knight Craft, who called Barsa to dress him down for not clearing the letter with top State Department and U.S. Mission to the United Nations officials in advance.

Barsa’s brazenness is fueling suspicion inside the administration that he is auditioning publicly for his next administration job, perhaps in the leadership of the Department of Homeland Security, where he worked during the first year of the Trump administration.

Let's see, USAID now prefers hiring those openly hating homosexuals, transgenders, Muslims, the idea of "reproductive health," and so on. Using Trump's language, I think the rest of the world would benefit if he kept these folks in America where they can do their best to f--k s--t up to impress the American president instead of inflicting their radically intolerant views abroad. If you just hate everybody unlike you, why even get into the business of claiming to help improve their well-being?

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Trump on LDCs: Give Shitholes Food Aid

♠ Posted by Emmanuel in Americana,China,Development,Trade at 5/13/2019 04:37:00 PM

Feed Shithole Countries Program [FSCP]--a forthcoming American "gift" to the world?

Sometime ago, precisely zero people were surprised when US President Donald Trump characterized what were understood to be poor, migrant-sending countries as "shitholes." Rising to political prominence on a false, racist claim--the Obama "birther" conspiracy--displaying such verbal animus was to be expected. More recently, though, Trump has been toying with the idea that all the agricultural products which would have been sold to China can instead be purchased by the US government and distributed to these "shithole" countries as food aid. This action is to be done to help farmers who voted by and large for this obese racist (who probably doesn't need more food anywaygoing by his portly physique).

Leaving aside the intent here--Trump does not have a charitable or well-meaning bone in his body (remember that his "foundation" was a scam that's since been shut down)--there are several salient points which suggest it will help neither American farmers nor citizens of poor countries if Trump's latest harebrained idea was to be implemented. Bloomberg explains.

First, this idea has already been tried before during the Carter administration, and it didn't quite work as planned:

In the 1980s, crops expanded just as the export ban caused Soviet Union countries to start buying grain elsewhere. At the time, growers could deliver supplies to the Commodity Credit Corporation below certain loan rates...

The purchases aren’t a “very effective” way to deal with overhang, “and that’s what the government eventually realized," said Arlan Suderman, chief commodities economist at brokerage INTL FCStone Inc. “It does help support cash prices, but it limits rallies in the market because the market knows if it rallies too much, there are all those bushels still in the bin that will come out.”

Second, much of what China bought was not for human consumption but rather feed for livestock. What's more, LDCs are ill-positioned to receive a deluge of food anyway:

Aid programs are also too small. The U.S. government’s Food for Peace program usually buys and ships about $1.5 billion worth of goods a year to other countries. On top of that, the nations in need are usually seeking food-grade commodities, such as rice and wheat, said Joseph Glauber, former chief economist at the U.S. Department of Agriculture. The vast majority of U.S. corn and soy production is for use in animal feed or biofuel.

Many poor countries may also not have the facilities needed to process soybeans, which can also yield cooking oil. Some countries may also be opposed to large amounts of aid because it could hurt their farmers.

Third, dumping government-subsidized foodstuffs in the developing world would constitute a flagrant violation of WTO rules specifically meant to protect poor countries' farmers from such dumping:

Trump’s move could also generate disputes in the World Trade Organization as the measures can be seen as market distorting. The aid could send prices lower, hurting countries like Brazil and Argentina, which are also major corn and soybean exporters. “You can’t just dump grain at concessional prices,” Glauber said. “That would constitute an export subsidy. That is something the WTO members agreed not to do.”

Memo to Trump: the developing world doesn't need your racism or your country's food aid. 

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Development Debacle: Malpass for World Bank President

♠ Posted by Emmanuel in Development,World Bank at 2/11/2019 09:38:00 AM

Alumni of long-gone Bear Stearns and global financial crisis denier circa 2007: Meet David Malpass.

The abrupt resignation of Jim Yong Kim as World Bank president has opened up a lot of old wounds, especially now in the Trump era. If you will recall, there was a big brouhaha over the United States still getting to nominate its president. In an arrangement that's a throwback to when Western countries dominated the global political economy, the US still gets the right to select the World Bank's leader, while the Europeans still do so for the IMF's leader. The Obama administration's choice of the departed Kim was meant to be a partial appeasement to developing countries wanting more say in a body whose activities do affect them. Sure, he was an American, but he was a Korean-American immigrant.

Let's just say that Trump is the least international and the most US-centric American leader in a long time. So, he's unsurprisingly scotched any attempts to appoint a non-white or non-American to lead the World Bank despite his suspicion of all multilateral institutions:

Kim’s abrupt resignation leaves Donald Trump with the opportunity to appoint a successor. He could turn to Bulgarian national Kristalina Georgieva, the bank’s chief executive, who will take over as interim president when Kim leaves. The much-respected official was a European commissioner and EU finance chief before moving to Washington.

Before Kim took over, the bank laid down criteria for appointing future presidents, which were designed to exclude officials with little experience of running large organisations or who lacked relevant experience, especially in the developing world. However, Trump is expected to use his effective power of veto to make sure a close adviser or a sympathetic political figure takes over.

So Trump is going ahead and contravening new World Bank presidential selection criteria by nominating someone, er, unfamiliar with running large international organizations and development work in David Malpass. This fellow is a proud America-firster like Trump:

Donald Trump confirmed his choice on Wednesday that the World Bank should be led by the US treasury official David Malpass, a Trump loyalist and critic of such multilateral institutions who has vowed to pursue “pro-growth” reforms at the global lender.

Trump’s nomination of Malpass, the treasury department’s top diplomat, is subject to a vote by the World Bank’s executive board and could draw challengers from some of the bank’s 188 other shareholding countries...

Malpass, treasury undersecretary for international affairs, has criticized the World Bank and other multilateral institutions for growing larger, and becoming more “intrusive” and “entrenched”, and targeted the bank for its continued lending to China, a country he sees as too wealthy for such aid.

Recall the last time an American president chose a controversial conservative figure to head the World Bank: George W. Bush selected the short-tenured Paul Wolfowitz, an architect of the ill-fated 2003 invasion of Iraq. Instead of blowing up other countries for no good reason, Malpass to his credit only failed to see how the Bush administration was blowing up the world economy. Malpass is a another conservative with extreme views, having been a chief economist at the ill-fated Bear Stearns who declared in so many words that there was no financial crisis brewing Stateside right before ti hit:

"Housing and debt markets are not that big a part of the US economy, or of job creation," Mr Malpass wrote before the impending economic crisis. "It's more likely the economy is sturdy and will grow solidly in coming months, and perhaps years."

The New York Times also criticised Mr Malpass for that and other Wall Street Journal articles, saying partisan bias towards Republican policy by economists had "unquestionably contributed to their forecast errors".

While it's true that other nominees may be put forward by other countries--especially developing ones--there is some doubt as to whether they would have meaningful chances at obtaining the World Bank's top job absent the support of the United States given its historical dominance of the institution. I also don't see much of a rallying cry to appoint a leader from the developing world this time. Perhaps we've become disenchanted with the whole process after what happened with Kim's victory under a far more progressive American president in Barack Obama.

Trump's worldview is prehistoric and his candidate is positively Neanderthal, but if everyone's fed up with the World Bank presidential selection process, it's going to be the same old story all over again.

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Small Island States & Climate Survival

♠ Posted by Emmanuel in Development,Environment at 12/14/2018 12:21:00 PM

Trying not to go underwater: Kiribati and company.

You sometimes have difficulty finding "good guys" at year-end UN climate negotiations. On one hand you have rich countries unwilling to cut emissions despite already being wealthy like the United States. They are largely indifferent to worsening the plight of poor countries which must bear the brunt of climate change, like those in sub-Saharan Africa. On the other hand, you also have developing countries that do not want to sacrifice anything to economic growth despite having among the world's most polluted cities on the face of the Earth. I'm talking about you, China and India.

But there are "good guys" here: Out of the sheer necessity of survival, small island nations at risk of being submerged by higher sea levels worldwide are leading the charge at climate negotiations to save them from literally disappearing off the map. Let's say their work is cut out against the likes of the United States--promoting coal at a climate conference, what a joke--and China and India who are quite callous to the plight of fellow developing countries. So much for third world solidarity...

The ongoing negotiations on how to implement the Paris Agreement aren’t going well. The world’s largest economies and top greenhouse emitters remain mired in decades-old arguments about who is responsible for addressing climate change and its impacts.

Now, a group of small island nations have stepped in to save themselves. Countries like Kiribati, Vanuatu and the Marshall Islands aren’t your typical geopolitical movers and shakers, but here at the United Nations climate change conference in Katowice, Poland these highly vulnerable countries have managed to reshape discussions with a simple but poignant reminder: if the world fails to halt global warming they may disappear for good.

“We are not prepared to die, and the Maldives have no intention of dying,” Mohamed Nasheed, the former president of the Maldives told reporters in Poland. “We are going to do everything in our power to keep our heads above the water.”

They try, but the message sometimes falls on deaf ears:

To do that, these countries have launched a last-minute blitz to rouse higher-emitting and slower-moving countries to action. They are pushing their counterparts to demand a more aggressive agreement in a series of closed-door bilateral discussions. And they’ve launched a messaging campaign to signal that they will not let other countries off the hook if they hold back.

I am obviously sympathetic to small island states, but I do have to scratch my head about what kind of political leverage they can apply to get what they want achieved during these international talks. Literally, they are the smallest of fishes in a very big pond.

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Get Out! Malaysia's Mahathir Spurns PRC Infrastructure

♠ Posted by Emmanuel in China,Development,Southeast Asia at 9/03/2018 04:58:00 PM

Behold, Mahathir's "hit list" of PRC-supported Malaysian infrastructure projects.

 A standard narrative you'll hear in developing countries is that China butters up their leaders by offering infrastructure development projects. These projects are usually funded by the Chinese extending loans without much regard for Westerner's usual concerns about good governance, human rights, or the rest of that white man's phooey.

Well, perhaps that's the story in most instances. Consider the nonagenarian Mahathir Mohamed regaining power in Malaysia. Politically speaking, he has every incentive in the world to disown the China-sourced mega-projects that disgraced former PM Najib Razak signed up for. The explanation for doing so on his part would be simple: Razak was corrupt. These projects with the Chinese were arranged via opaque means. Therefore, reducing corruption means discontinuing PRC projects in Malaysia.

Indeed, that appears to be Mahathir's line of argument nowadays as Chinese infrastructure deals come under fire from him:

But where Malaysia once led the pack in courting Chinese investment, it is now on the front edge of a new phenomenon: a pushback against Beijing as nations fear becoming overly indebted for projects that are neither viable nor necessary — except in their strategic value to China or use in propping up friendly strongmen.

At the end of a five-day visit in Beijing, Malaysia’s new leader, Mahathir Mohamad, said on Tuesday that he was halting two major Chinese-linked projects, worth more than $22 billion, amid accusations that his predecessor’s government knowingly signed bad deals with China to bail out a graft-plagued state investment fund and bankroll his continuing grip on power.

His message throughout his meetings with officials, and in public comments, has been unambiguous. “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries,” Mr. Mahathir said on Monday at the Great Hall of the People in Beijing after meeting with Premier Li Keqiang.

What you have to remember is that, during the Eighties and Nineties, Mahathir was actually one of the Asian leaders at the forefront of welcoming China to participate in regional affairs. To counterbalance Western influence, "non-alignment" meant grooming alternative champions...like China. Fast-forward to the present time and you now have concerns that their engagement with the rest of the world--no longer just Asia--is too lopsided in their favor. That is, China has become too influential for its own good in using it to corrupt others:

Chinese infrastructure projects could be axed amid concerns over economic viability, suffocating debt (US$250 billion), transparency of the contracts and domestic political pressure. As a result, Malaysia, a top trading and investment partner of China, has surprisingly emerged as a new vortex of scepticism and resistance against Beijing’s growing influence in Southeast Asia.

Initially, many thought that Mahathir’s tough statements on Chinese investments were either election sloganeering to besmirch his China-friendly predecessor or part of a deliberate strategy to renegotiate large-scale infrastructure projects with Beijing for more favourable terms.

What’s becoming increasingly clear, however, is that Malaysia’s new government is revisiting the whole development blueprint of its predecessor and is intent on reconfiguring overall relations with China.

Mahathir appears to have left behind his PRC-accommodating days long behind after seeing the true costs of letting the PRC run rampant. They hardly show signs of being better than the Westerners that preceded them for all their talk about mutual development. Leave lackey-ism for gullible clowns like the Philippines' Rodrigo Duterte; Mahathir's done with that sycophancy act--or at least that's what he wishes to convey.

Having set the trend of sucking up to China, will Mahathir's budding apostasy signal a newer trend of quitting it?

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Does Trade War Slow PRC Global Ambitions?

♠ Posted by Emmanuel in China,Development,Trade at 7/05/2018 08:39:00 PM

How much should Indonesia and others the Chinese are providing infrastructure to fear its ambitions in this trade war era?

Here's a thoughtful rejoinder to a previous post in which it was opined that the Chinese are lending to various infrastructure projects worldwide--with less regard to their borrowers' financial conditions or the viability of these projects--for as long as the PRC can ultimately benefit. So what if the borrowers can't repay? They might be able to obtain prime infrastructure on favorable terms in strategic locations when the fools default.

Or, is that cynical viewpoint not really how the Chinese go about things? Certainly they'd want to rebut such characterizations. Apropos for the times we find ourselves in, the eve of global trade war--US tariffs kick in on $34B worth of Chinese goods on Friday, July 6--may mean the Chinese need to scale back grand ambitions. Delusions of grandeur forestalled and all that...

The value of the deals that Chinese companies are striking under the country’s big global plan — called the Belt and Road Initiative — is smaller than a year ago, according to new data. Chinese officials themselves are sounding a cautious note, voicing worries that Chinese institutions need to be careful how much they lend under the program — and make sure their international borrowers can pay it back.

“Current international conditions are very uncertain, with lots of economic risks and large fluctuations for interest rates in newly emerged markets,” said Hu Xiaolian, the chairwoman of the Export-Import Bank of China, a state-controlled lender that plays a big role in financing the projects, at a forum this month in Shanghai. “Our enterprises and Belt and Road Initiative countries will face financing difficulties.”

China has begun a broad, interagency review of how many deals have already been done, on what financial terms and with which countries, say people close to Chinese economic policymaking, who asked to speak on the condition of anonymity because the effort has not been made public.

The gist of the argument here contains the following: (a) foreign expansionism may be curbed by difficulties at home brought on by Trump's global trade war; and (b) foreign partners do not have infinite patience with being exploited for China's gain:

Under the initiative, Chinese government-controlled lenders offer big chunks of money — usually through loans or financial guarantees — to other countries to build big infrastructure projects like highways, rail lines and power plants. That money often comes with the requirement that Chinese companies be heavily involved in the planning and construction, throwing them a lot of business.

But even with its financial firepower, China has its limits. Its economy is showing signs of slowing, and it is in the middle of a trade war with the United States. Beijing is struggling to tame domestic debt problems — problems an international lending spree certainly hasn’t helped. Too much overseas activity risks creating wasteful white elephants that can drag down Chinese companies and local partners alike.

Which version of events is correct, of the PRC as the new imperialists or that of co-suffering developing countries on the eve of trade war? As with most things, reality probably lies somewhere in between. However, I veer more toward the version described above in that the PRC needs to maintain the trust of other countries as it seeks to build up its international relations, and failed projects cannot always be redeemed by the Chinese if their foreign partners fold.

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Should the World Bank Still Lend to China?

♠ Posted by Emmanuel in Bretton Woods Twins,Development at 4/16/2018 01:17:00 PM

There's an interesting behind-the-scenes discussion going on at the World Bank about the Chinese still receiving loans from the development lender. Not only is a country well on its way to becoming the world's largest economy still borrowing, but it's actually the largest borrower at its International Bank for Reconstruction and Development (IBRD) arm, which charges at market rates plus a relatively small spread. From the Financial Times:

China was the IBRD’s top borrower last year, according to the World Bank, with $2.4bn in funds committed. That was 11 per cent of the IBRD’s lending and more than it committed to education and health programmes worldwide.

Things get a more interesting when politics enter the fray. While the US wants to involve China in the workings of the World Bank, it does not want China to begin rivaling American influence at the development lender at a time when the World Bank requires more funding to become self-sustaining in its lending activities. Hence, Americans have to juggle four hard-to-reconcile objectives:

• Maintain Chinese interest in participating at the World Bank as a contributor
• Limit Chinese borrowing at the World Bank as an IBRD borrower
• Keep American influence at the World Bank despite Trump's "America First" (isolationist) inclinations
• Encourage lending to truly lower-income countries, not middle-income ones like China

The compromise being worked on to meet these disparate objectives is somewhat elaborate:

The increase in paid-in capital will be split into two with $7.5bn going to the International Bank for Reconstruction and Development, the bank’s main arm, and $5.5bn to the International Finance Corporation, its private sector lender, the official confirmed. The US is set to provide $1.3bn to the IBRD capital increase, the official added, but has not yet decided whether it will inject new capital into the IFC.

As part of the deal China will see its voting power in the IBRD rise from 4.45 per cent to around 5.7 per cent, people familiar with the matter said. The deal is expected to be endorsed in principle by World Bank shareholders at the spring meetings, according to people familiar with the discussions. Final approval is expected before this year’s autumn meetings. 

Then there is the US love-hate relationship with China:

The US has been concerned about the World Bank lending to a rival power that has been sitting on trillions of dollars in foreign currency reserves since Barack Obama was president. But Mr Kim has long argued that lending to a rising China helps to solidify a future for the World Bank and gives it a voice in Chinese economic reforms.

The Trump administration’s push to get the World Bank to stop lending to countries such as China is likely to take time to take effect. Some people familiar with the discussions said Beijing’s cost of capital at the bank would not rise immediately, as the new band for countries in its situation was established. Instead, they said, the interest charged to countries such as India in lower bands could be reduced. 

It's a fine line to thread in dealing with China that the Americans face, divided as they are among themselves to begin with. The Obama-era appointee Kim wants to engage with China, while the Trump administration alternately wants to leave the World Bank alone or limit China's role if it does choose to engage with the development lender. Why a country with historically unprecedented foreign exchange reserves [China] needs to borrow from the World Bank is also puzzling: Maybe it's more for gathering technical assistance-style knowledge than funding per se.

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Of Sh--holes & Trump-Era USAID

♠ Posted by Emmanuel in Americana,Development at 1/15/2018 02:08:00 PM

No matter how offensive Trump's opinions of developing countries is, it's probably for the best that the developing world understand the viewpoint held by the leader of the United States. Let's face it: racism is the reason why many Americans voted for Trump in the first place. Trump may claim not to have said the term, but few believe him. So, what's the American institution that's supposedly dedicated to help other countries develop do? The United States' reputation worldwide is going to receive a Trump-sourced battering. The impression made is that Americans pretend to help, but actually couldn't care less if you rot in hell. (Just don't send anyone over.)

Given his druthers and, by extension, most of his supporters, Trump would rather defund the US Agency for International Development (USAID). Actually, he's been trying to do exactly that as his more sane advisers warn him against doing so. The likely result of this tug-of-war is that USAID will remain in existence, but by significantly smaller funding. While they're at it, Trump's reluctance at giving money away to these hopeless countries can perhaps better match his internal conflicts. On one hand, his white supremacist leanings (and base) have no intention of giving white people's money to colored people. Even if the amounts which actually go to American aid are very small compared to what most these ignoramuses believe, the very idea goes against their way of thinking. On the other hand, even Trump needs to maintain a veneer of international respectability by trying to "help" less fortunate countries. He even claims to be a "Christian," after all [more laughter].

What's the solution for Trump playing to both racist and internationalist views? The above is the best guess. It's just too bad they're probably not honest enough to adopt such Trumpian wording reflecting how the American leader views the rest of the world and, by extension, the executive agencies he leads like USAID.

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Can Ivanka Trump Stop Pop From Cutting US Aid?

♠ Posted by Emmanuel in Africa,Development,Middle East at 6/28/2017 04:47:00 PM

Would Ivanka Trump be complicit if tens of thousands died due to starvation arising from US foreign aid cuts?

To say Donald Trump hates poor foreigners is an understatement. He's definitely bigoted, but apparently it matters less if you're a Muslim [a] from a wealthy nation with [b] Trump-linked business interests. After all, the 9/11 attackers were mostly from Saudi Arabia and the UAE, but they go off scot-free in a world where, well, money talks. Although the world is fixated on the fate of his travel ban on folks from Iran, Libya, Somalia, Sudan, Syria and Yemen (countries which account for a grand total of zero terrorist fatalities in the US) less is said about the ongoing famines in many of these countries and their near-neighbors.

You see, the Trump administration has been mulling drastic cuts to US foreign aid going to all these poor, ungrateful, Trump-hating coloreds (or is their hatred partly due to the US planning to cut so much aid?) to spend on things like a multi-billion military expansion and a Great Wall of Trump on the US-Mexico border. However, note that Congress ultimately decides what to spend on the US federal budget and not the president.

Meanwhile, some hope that his moderate[-ish] daughter/adviser Ivanka Trump will persuade The Donald to not make such drastic aid cuts--at least that's what some aid agency officials think in the face of massive ongoing famines elsewhere:

The head of the UN World Food Programme has said he is hopeful Ivanka Trump will lobby her father into a U-turn on cuts to humanitarian aid in the face of an urgent cash crisis that is imperilling hundreds of thousands of lives.

David Beasley, a former Republican governor of South Carolina who supported Donald Trump’s campaign for the presidency, said Congress and the Senate had already defied the new president to ringfence $980m (£764m) for famine relief this year.

Beasley said he believed Trump would now rethink his policy of stripping down funding of peacekeeping and humanitarian aid for 2018, due in part to the president’s “savvy” daughter, with whom he posed for photographs following a meeting earlier this month.

Even now, the US is the biggest UN contributor, even if its aid contribution is among the least in GDP percentage terms for OECD nations:

The US is the biggest contributor to the UN, paying 22% of its $5.4bn core budget and 28.5% of the $7.9bn dedicated to peacekeeping. Trump has said that such contributions are unfair, and has been seeking to cut spending on US diplomatic and humanitarian efforts by a third...

In relative terms the US is one of the least generous countries when it comes to foreign aid: spending for 2015 stood at just 0.17% of gross national income, compared with Britain’s 0.7%.

The projected aid requirements this year are certainly staggering:

Speaking on a visit to Brussels, where he met leaders of the EU and the Belgian government, Beasley said he needed an injection of $1bn in the coming months to save the lives of 600,000 children. “While the European Union and Belgium have been tremendous supporters, the needs at this time are just extraordinary,” he said. “We are facing the worst humanitarian crisis since the second world war.

“Some 30 million people don’t know where their next meal is going to come from in just four of the countries facing famine, and 1.4 million are literally on the brink of starvation as we speak. “If we do not receive the resources, the food that we need in the next few months we are talking about the possibility of 600,000 dying. If we receive the funds, we can avert famine and minimise the chance of death.”

What does Trump care? More to the point, why would Trump care about colored people unable to afford Trump-branded gold courses or hotels who hate his guts? My guess is that aid proponents are wasting their time lobbying Trump. Besides, Trump can propose the most vicious cuts to US foreign aid, but it's ultimately the congress that decides how much to allocate in the federal budget. Given that fact, I'd be lobbying congresspersons instead of this guy. It's a waste of time IMHO.

And yes, Ivanka Trump does not escape responsibility, try as she might to portray herself as a "non-political" actor.

UPDATE: Don't forget her futile attempt to get The Donald to stay in the Paris Agreement. Progressive causes are lost on him...even if his daughter tries to persuade him.

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Will Automation End Asia's 'Old' Development Path?

♠ Posted by Emmanuel in Development at 6/22/2017 12:33:00 PM

Is this an endangered scene for countries like Bangladesh? What would its consequences be?

There is much hand-wringing going on about automation lessening the need for human workers and the unemployment that may occur as a result. In the West, scare stories about robots making humans redundant in any number of industries are all the rage as even skilled work that relies on think power becomes vulnerable to the rise of machines. This may or may not occur in the future, but whatever it holds for us, it's a narrative that's helping sell scare stories in the meantime.

Now, a Bloomberg article argues that it's not just folks in rich countries who should be worried, but also those in developing countries such as those in Asia. Given the rate at which automation is progressing, it may not be very long until even those at the bottom of the wage ladder will become increasingly redundant too. That is, previous technological advances were not so great as to overturn what we will call the 'Asian development model' here of gradually progressing the value-added ladder by starting with the manufacture of the most labor-intensive goods. In short, machines (capital) could not compete with lowest-paid labor in generating cost efficiencies...until now.

Take, they say, the example of the newest Chinese factories relying more on automation than on sweat:

Jinsheng’s factory covers almost 15 million square feet, more than five times the floor area of the Empire State Building, but it needs only a few hundred production workers for each shift. “Textiles used to be a labor-intensive industry,” said Pan Xueping, the chairman and chief executive officer, in a September speech in Urumqi, Xinjiang’s capital. “We are at a turning point.” Instead of moving production to whatever nearby country has the lowest wages, he added in an interview a day after the speech, “the industry can achieve a human-free factory.”

Pan’s company is at the vanguard of a trend that could have devastating consequences for Asia’s poorest nations. Low-cost manufacturing of clothes, shoes, and the like was the first rung on the economic ladder that Japan, South Korea, China, and other countries used to climb out of poverty after World War II. For decades that process followed a familiar pattern...

Even the nuances of garment manufacture requiring a human eye and touch may no longer forestall the move to more automation, with potentially dire political-economic consequences for Asia's developing countries at the bottom rung of progress:

The transformation looks like it will happen fast. The International Labor Organization (ILO) estimates that mass replacement of less-skilled workers by robots could be only two years away. Overall, more than 80 percent of garment industry workers in Southeast Asia face a high risk of losing their jobs to automation, according to Chang Jaehee, an ILO researcher who studies advanced manufacturing. Chang recalls presenting her findings to a government official in a country in the region that she declines to name. The official’s response? If she’s right, the result could be civil unrest.

If this story is true, then why stop at setting up highly automated factories in Asia? Why not move them back to the West or 'reshore' in contemporary parlance if labor costs become an insignificant factor?

As automation accelerates, it’s not just Asia that could see its industrial trajectory affected. If the cost of labor is no longer a major factor, there’s no reason manufacturers can’t relocate production to where the bulk of their customers are: North America and Europe, where wages for decades have been too high to support textile production. Remove most of the workers from the equation, along with the costs and delays of round-the-world shipping, and making clothes or shoes in Dallas or Düsseldorf instead of Dhaka starts to look like a compelling idea.

I don't necessarily buy this story since automation has been in progress for centuries. Do we expect a quantum leap in the near future? The real (narrower) question here is whether technological advances can overcome advantages of low-cost labor combined with human intuition in garments manufacture.The answer will have significant implications, obviously.

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Hong Kong, London Vie to Fund One Belt, One Road

♠ Posted by Emmanuel in China,Development,Europe at 5/17/2017 04:12:00 PM

Xi Jinping hawks OBOR to Filipino flunkies. Apparently, there are many of these sorts all over the world.

So we may have expressed some doubts about the now-legendary PRC "One Belt, One Road" project--otherwise known as the "New Silk Road"--coming true. However, there is an interesting corollary to the story. What if China's erstwhile economic rivals buy into the hype? The Americans, for instance, are comparing the decrepit state of US infrastructure and the beleaguered Donald Trump's ever-doubtful intentions to fix it with such a massive-scale, global effort:

China excels at spectacle, and the Belt & Road Forum was as much PR stunt as anything. But the vast scale of the plan and the national ambition behind it dwarfs anything leaders are contemplating in Washington, or European capitals. “If you compare this to what the United States is doing—trying to rescue the steel and aluminum sectors and open a few markets for its goods—we’re pretty small potatoes,” says Scott Kennedy, an expert on the Chinese economy at the Center for Strategic and International Studies. “China is more organized and they’re planning more strategically than the United States.”

Apparently, there is some kind of nascent Western inferiority complex when it comes to infrastructure. The Americans aside, the British want in on a piece of the action. However, they will have to duke it out with the PRC's erstwhile Hong Konger compatriots to help finance the enormous project if a South China Morning Post article is to be believed:

Hong Kong and London have locked horns at a two-day high-level forum in Beijing over which city is best placed to act as the ­finance hub for China’s global trade and commerce strategy. At the first day of the Belt and Road Forum for International ­Cooperation, Hong Kong Chief Executive Leung Chun-ying ­insisted the city was “the preferred destination” for capital flows from the mainland. Leung cited the city’s status as the largest offshore settlement centre for yuan trade and its title as the world’s No 1 stock market for new listings in 2016.

C.Y. Leung may not exactly be an authoritative source on the matter at this point in time since he's the lame duck chief executive of Hong Kong. His British counterpart's place in the political space may be more secure since his Conservatives look set to win an overwhelming majority against the decrepit Labour Party:

However, [Leung's] bid was swiftly challenged by British Chancellor of the Exchequer, Philip Hammond. Referring to the sheer scale of funding required for China’s “Belt and Road Initiative”, which promises to be in the trillions of US ­dollars and would require mobilising the world’s capital markets, Hammond said Leung’s pitch was “elegantly made”, but “London is not an alternative to Hong Kong”.

Aside from the question of whether OBOR will be realized anywhere close to the scale of the PRC vision, it is amusing to find financial centers vying to be locales for where the fundraising will be conducted. That is, OBOR may be more smoke and mirrors  and vaporware more than anything, ah, concrete, but that's not stopping folks from bending over backwards to court the favor of the Chinese Communist Party.

At the very least, then, consider it a well-done PR job. 

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One Belt, One Baloney? PRC's Silk Road Revival Doubts

♠ Posted by Emmanuel in China,Development,South Asia,Southeast Asia at 5/14/2017 04:15:00 PM

Over the weekend, Chinese President Xi Jinping hosted an elaborate event in Beijing concerning the PRC's idea of reviving the historical Silk Road. Spanning much of Asia and the Middle East besides, this trade route epitomized many of the things China wants to be today: (1) at the center of world trade, (2) involved in infrastructure, and (3) a prime mover of international relations. This, of course, stands in contrast to the retrograde "America First" stylings of the racist-protectionist-isolationist American president, Donald Trump.

Some hackles were raised about the invitation being extended to North Korea, of all nations, but certainly we'd rather have it peacefully trading with the rest of us than firing missiles to draw attention to itself?

More to the point, though, how realistic is this plan? A few months ago, an op-ed appeared in the Hong Kong-based South China Morning Post (usually a Communist Party-friendly outlet) placing the "One Belt, One Road" project's viability in question by way of Japan's example from only a few years back of doing something similar: using infrastructural might to extend not only diplomacy but also trade with its neighbors:

Facing a deep slowdown after years of investment-fuelled growth that culminated in a huge property and stock market bubble, the leaders of Asia’s largest economy [China] come up with a cunning plan. By launching an initiative to fund and construct infrastructure projects across Asia, they will kill four birds with one stone.

They will generate enough demand abroad to keep their excess steel mills, cement plants and construction companies in business, so preserving jobs at home. They will tie neighbouring countries more closely into their own economic orbit, so enhancing both their hard and soft power around the region. They will further their long term plan to promote their own currency as an international alternative to the US dollar. And to finance it all, they will set up a new multi-lateral infrastructure bank, which will undermine the influence of the existing Washington-based institutions, with all their tedious insistence on transparency and best practice, by making more “culturally sensitive” soft loans. The result will be the regional hegemony they regard as their right as Asia’s leading economic and political power.

However, the author Tom Holland delivers the punch line that, actually, the Japanese tried all this stuff before and failed:

[I]t’s actually a description of a strikingly similar plan rolled out by Japanese prime minister Keizo Obuchi in the 1990s. That too promised to provide work for Japan’s recession-hit construction sector by building Japanese-funded infrastructure projects around Asia. And it even included a proposal – never realised – to establish an Asian Monetary Fund to lend to regional governments on easier terms than either the IMF or World Bank.
Unfortunately for Beijing, the precedent is hardly encouraging. From the start the scheme was plagued by bickering over conditions and allegations of corruption. A handful of infrastructure projects did get built, but the reality fell woefully short of Tokyo’s grandiose dreams. Far from cementing Japan’s economic ascendancy across Asia, the project left a legacy of bad blood, and marked the beginning of a financial retreat from around the region that Japan has only recently begun to reverse.

The rest of the editorial notes that rampant corruption elsewhere siphoned funds away from projects, and those bits that actually did get built ended up as "white elephant" projects: transport initiatives that cost so much to maintain that they could not be sustained and were eventually shelved. Certainly, the OBOR and New Silk Road tags characterize some grandiose initiative. (See the map pabove.) Whether the Chinese have the actual sense to scale these to reality-based bits is another question since linking the Middle East all the way to the Far East is not a vision based on modesty. 

Scaling it appropriately to meet local needs of the countries involved is key. That is, participating countries will plump for maintaining infrastructure built (with Chinese support) insofar as they can benefit from it going forward. However, if benefits are not evident--or mainly serve the purpose of transit through a country instead of serving the citizens of the countries in question first and foremost--the Japanese example provides ample cautions.

UPDATE: A warning is that investment in OBOR countries has, actually, dropped off in recent times, though there are caveats associated with this as a gauge:

Foreign direct investment from China to countries identified as part of the BRI fell 2 per cent in 2016 year on year and has dropped an additional 18 per cent so far in 2017, according to commerce ministry data. Non-financial FDI to 53 BRI countries totalled $14.5bn last year, comprising only 9 per cent of overall outbound FDI...

Chinese experts counter that published figures do not paint a complete story. Jia Jinjing, chief researcher at the Renmin University’s Chongyang Institute for Financial Studies in Beijing, said much outbound FDI passes from China through an intermediate country before reaching its final destination, making the commerce data an unreliable gauge of total BRI investment.

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See? Even Trump Recognizes Ex-Im Bank's Worth

♠ Posted by Emmanuel in Development,Trade at 4/15/2017 04:46:00 PM

Back in business thanks to Trump...of all people.

When you think of a person of no conviction, the name "Donald Trump" comes to mind. Mind you, the lack of core beliefs is not always a drawback when you are (rather regrettably) [a] the most powerful person in the world and [b] have a fondness for conspiracy theories and extremist ideologies. So it was perhaps inevitable that the reality of actually governing would lead him to recognize that many of his views are, well, economically untenable. Think of it: in the past few days...

President Donald Trump’s declaration that he won’t label China a currency manipulator stands as the clearest example of the difficulty he’s having delivering on big campaign promises.

The currency decision is one among many instances of Trump reversing course since taking office a little less than three months ago. Within the space of a few hours on Wednesday, Trump changed previously critical stances on the U.S. Export-Import Bank, the value of NATO, interest rates, and Federal Reserve Chair Janet Yellen. 

For this post, the item of interest is the US Export-Import Bank. For a number of months, it's been unable to provide credit to foreign buyers of US-made goods since the Republican-dominated Congress has slowed down the process of fully appointing its membership. The absence of a full slate has meant it has limits on how much in loans it can disburse. But wonders of wonders, Trump of all people has now restored it to full functioning. To be sure, his picks will need congressional approval, but it's unlikely that he will be waylaid by fellow Republicans on this at least:

President Donald Trump nominated former Republican lawmaker Scott Garrett as president of the Export-Import Bank of the United States on Friday, completing an about-face over an institution he had denounced as "featherbedding" for big business.
A White House statement also named Spencer Bachus, another Republican former congressman, to be a member of the board of directors of the bank. Both were named for four-year terms.

Trump told the Wall Street Journal on Wednesday he would fill the two vacancies on the bank's five-member board that have prevented it from having a quorum and being able to act on loans over $10 million.

His picks must gain approval from the Senate, which blocked nominees by former President Barack Obama.

When it comes to sheer economic ignorance, you will probably find it very hard to beat Donald Trump. In this case, however, you will have to give that designation to Congressional "small government" nutters who think that Ex-Im Bank is a little more than a subsidy provider. Those guys have both blocked efforts to get Ex-Im Bank from being fully functional and have delayed Obama's efforts to get it going despite bipartisan consensus to do so:

The bank has become a popular target for conservatives, who worked in Congress to kill the institution, arguing that it perpetuates cronyism and does little to create American jobs.

Trump's backing of the bank represents a victory for manufacturers like Boeing and General Electric Co (GE.N), which have overseas customers that use the agency's government-backed loans to purchase their products.

Trump told the Journal the bank benefits small businesses and creates jobs, a reversal of his earlier criticism of the bank as being "featherbedding" for wealthy corporations.

The truth of the matter is that most other countries--especially major exporters of manufactures like China (China Exim Bank) and Japan (Nippon Export and Investment Insurance) have export credit providers. Virtually all OECD nations have such institutions. So what the right-wing nutters were effectively doing was uniquely handicapping US exports in the face of international competition. The whole point is that the financial systems of many prospective buyers--especially in developing countries--may be unable to provide [a] larger-sized loans at [b] reasonable enough rates for [c] a long enough time. Those risks--amount, repayment and duration--usually entail official international credit.

As such, credit provided by export-import entities can be "developmental" in enabling purchases of capital equipment useful to fostering economic growth--especially in poorer countries whose financial systems are less sophisticated by definition. 

If even Trump can recognize that, what does it says about those who don't?

UPDATE: It is fair to reiterate that among the nominees of Trump, the putative president Scott Garrett was an Ex-Im Bank doubter who used to vote down re-authorization while a congressperson. However, it's counterbalanced by the other person proposed as a director, Spencer Bachus, being a proponent of getting it going again.

They cancel each other out, IMHO, and the bank will be back in business. After all, why activate it if you're not going to grant any financing to help US firms?

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Did Trump Finish Off Asian Export-Led Development?

♠ Posted by Emmanuel in Development,Southeast Asia,Trade at 2/03/2017 06:06:00 PM

Is it really a whole new world? If there's any such thing as a premature call, then it's probably to label Asian export-led development "dead" because of anticipated Trump-led US protectionism. As goes America, so goes the world, some think: When the US shuts its borders to trade, that's all she wrote. However, I would argue that saying that a process that's made any number of Asian countries immeasurably better off is over is way too early. To make a baseball analogy, we're only in the first inning of the Trump horror show.

Consider the following:

• Trump hasn't even hit Asian countries with massive tariffs yet;
• Even if he did, it's unlikely for these to stick once disputed at the WTO;
• Trump will not remain in office forever; 
• There are several other export markets other than the United States; and 
• No alternative Asian development model has been mooted.

At any rate, Bloomberg has some commentary to the effect that the next generation of would-be Asian export-led developers are reconsidering following the path of their predecessors. Consider populous (and largely Muslim) Indonesia:

At stake for less developed but relatively open economies is the ability to sustain economic growth rates that for Indonesia at least have hovered around 5 percent, helping lift more of its people into the middle class and giving a large youth population access to jobs. Trade and investment from the U.S. and China, alongside Japan, has helped propel that.

"In the past, emerging markets could have relatively high growth because they could focus their strategy on industrialization and trade,” said Basri, who was finance minister from 2013-2014 and a former chairman of the country’s Investment Coordinating Board. “Now, with the Trump protectionism, they cannot go with trade again.”

Japan, China, Korea, Taiwan and Singapore were aided in becoming industrialized nations as the global economy was open at the time, Basri added. "The rest of the emerging markets probably cannot repeat the success story.”

Glum they are:

Emerging economies generally will struggle in the face of Trump’s policy shifts, with Russia likely one of the few beneficiaries, according to a report from Nomura Holdings Inc. It warned that U.S. protectionism and possible retaliatory measures could intersect with geopolitical tensions, with “no shortage of potential flash points” including the South China Sea and the Korean peninsula.

To paraphrase Albert Hirschman, I'd probably agree that going with a highly unbalanced growth strategy reliant on exports for the most part for generating growth is increasingly unviable. Perhaps a more balanced strategy giving domestic consumption and market development equal billing makes better sense at the current time. With large populations, Indonesia, the Philippines, India, etc. are better placed to substitute some international with domestic demand.

That said, the rigors of international competition are probably not to be dealt away  with so easily if development is the overarching objective.

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Will MSCI Demote Peru From Emerging to Frontier Market?

♠ Posted by Emmanuel in Development,Latin America at 6/14/2016 06:39:00 PM

Stock market "trading"--something of a Peruvian novelty.

Later today, the market indexing firm MSCI will issue guidance on whether to include Chinese equities in their emerging market indices. While that decision obviously has huge implications--China is the world's second largest economy, so it rankles not to be included in a simple index of EMs--there is another pending decision you should watch for if development is an area of interest. As China vies for inclusion, Peru is trying to stave off the capital markets equivalent of "relegation." (See MSCI's classification scheme here.)

To be exact, Peru does not appear to have enough freely traded listings to qualify for inclusion in the MSCI Emerging Markets index according to free float and liquidity criteria. That is, interested foreign investors should have the means necessary to purchase such stocks without undue difficulty. How many listings should qualify? Well, it's, er, three. Even by that measure, though, Peru is coming up short. Despite Peru's thin volumes, there would still be consequences for the global universe of equity investments:

The Peruvian stock exchange fears that the move would drive foreign investment away from its $67bn bourse. Moreover, the move would further unbalance the MSCI Frontier index and potentially divert much-needed foreign investment from countries such as Nigeria, Argentina and Pakistan. “It may seem like linguistics, but the index designation is important in terms of retaining and attracting foreign investor assets,” says Mark Mobius, executive chairman of the Templeton Emerging Markets Group, who believes foreign investors are responsible for roughly a third of Peru’s trading volume.

Index inclusion often drives investment since indexed funds are obviously required to place a proportion of their investments in the countries included. Such are China's hopes and, conversely, Peru's fears. And the bush league of the frontier market is really quite tiny:

MSCI launched a consultation on Peru’s potential ejection from its flagship EM index — tracked by an estimated $1.5tn, against just $12bn for the Frontier equivalent — in August last year. MSCI’s concern was that only three stocks in its Peru equity universe meet its liquidity and free float requirements, the minimum number to be eligible for its EM index...

Compounding the problem, MSCI has proposed switching Southern Copper, one of these three stocks, to its US equity universe, where it is listed (it is currently included in the Peruvian section for “historical and index continuity reasons” and generates 43 per cent of its revenues from Peru, with the remainder from Mexico), pushing Peru below the minimum threshold.

While the arguments for and against de-indexing Peru are interesting, the larger fact remains: without wider Peruvian development, you can hardly expect its prospects for stock market indexing to be much better. And so it finds itself in this unpromising position.

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Mission Creep: EBRD Turns Into Mideast Aid Agency

♠ Posted by Emmanuel in Development,Europe,Middle East,Migration at 2/08/2016 05:48:00 PM

You see a major Jordanian camp for Syrians refugees in Zaatari; the EBRD sees a development opportunity.

The European Bank for Reconstruction and Development (EBRD) was founded in the aftermath of WWII to rebuild a continent shattered by that conflict. It is one of four regional development banks together with those in Africa, the Americas, and Asia. Until recently, the EBRD's mission has not strayed far from providing funding for, yes, European reconstruction and development. In recent decades, it has helped transition economies from the former Soviet bloc move to capitalist systems.

Now, though, comes an element of "mission creep": with Middle East turmoil driving millions upon millions of refugees to European shores, the EBRD is now tasked with helping staunch this massive flow of humanity. How? By promoting economic development in Middle Eastern countries that are currently hosting large numbers of refugees:

This realization has prompted the European Bank of Reconstruction and Development to find a new calling: crisis development. Created after the fall of the Berlin Wall to help Europe's ex-communist nations become market economies, the EBRD controversially moved on to Egypt, Jordan, Morocco and Tunisia after the Arab Spring. Last summer, as he watched TV coverage of refugees coming to Europe, the bank's president, Suma Chakrabarti, told me he saw "an opportunity to show we are relevant to crisis situations." Now Lebanon has applied for EBRD membership.

Thus went the call for funding for Middle East projects:

In October, Chakrabarti says he got the EBRD's board to agree to a new approach. It would help stabilize refugee host countries by corralling funds and private investors to deal with the consequences of sudden population explosions and treat them as a development opportunity. On Wednesday, he announced a 900-million euro program. "We're ready to go," says Chakrabarti. All that's required is for donor countries to provide 400 million euros, and for the host countries to cooperate.

Jordan is currently one of the targeted nations given its massive population surge from refugees settling there:

In 2010, the population of Lebanon was around 4.3 million. By last summer the CIA estimated that figure at 6.2 million, mostly because of refugees from Syria. It is, said Lebanon's education minister Elias Bou Saab, as though 32 million people had suddenly descended on Britain...

Start with sewage. Already straining, Jordan's system can't cope with 1.4 million extra Syrians, so the first EBRD project would strengthen the network in the Zarqa River area, north of Amman. Then landfills - they're full. New ones have to be built.

Jordan, the second most water-poor country on earth, has had to halve cistern deliveries in some areas. Leaking water pipes need repair. Four hundred schools are running double shifts -- local kids in the morning, Syrians in the afternoon. More schools need to be built. Hospitals are overwhelmed. Transportation systems are overrun. Digging landfills and laying pipes is labor intensive, as is building schools and hospitals -- which is good. The work can employ both locals and Syrians.

Maybe it should now be called the EMEBRD--the European and Middle Eastern Bank for Reconstruction and Development.

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Pol Eco of Stats: World Bank's New $1.90 Poverty Line

♠ Posted by Emmanuel in Development,World Bank at 9/25/2015 08:17:00 PM

New targets require new measures of poverty, right?

There has been, in the memorable characterization of Robert Wade, a "political economy of statistics" concerning poverty and inequality. As standard-bearers of neoliberal, market-led globalization, the World Bank would of course claim that the world's decades-long towards putting faith in market mechanisms has resulted in a global reduction of both. Robert Wade begs to differ. Needless to say, methods of measuring these "bads" remain contentious.

There are of course all sorts of ways to measure poverty. For quite some time now, the World Bank has kept an easily-remembered shorthand of expenditures of less than $1.25 on a PPP basis. This, of course, was preceded by the famous $1/day standard before 2008. There are thus many complaints about this standard: sure $1 is a nice round number, but can such inter-country comparisons really be made even after adjusting for purchasing power?

Well, guess what: just as people were still arguing about the $1/day standard when the $1.25/day standard came along, the World Bank is now about to introduce a $1.90/day standard. As we transition from the Millennium Development Goals (MDGs) anchored on the $1.25 standard to the Sustainable Development Goals (SDGs) which replace the MDGs this year, I suppose the development experts came to the conclusion that we need a new international poverty line as well:

The World Bank is to make the most dramatic change to its global poverty line for 25 years — raising its measure by a half to about $1.90 per day — in a move likely to swell the statistical ranks of the world’s poor by tens of millions. The move from $1.25 would be the biggest revision since the World Bank introduced its $1 a day yardstick of global poverty in 1990...

The bank is expected to follow the event by shifting its poverty line to about $1.90 ahead of its annual meetings in Lima, Peru, in early October — a move likely to result in significant shifts in the estimated size and distribution of the planet’s poor. It is difficult to predict exactly how many more people will be defined as poor. However, when researchers at the bank tested a notional poverty line of $1.92 earlier this year, it led to a surge of 148m.

Most of the difference came in east Asia where the ranks of those falling below the poverty line almost doubled from 157m at the old $1.25/day measure to 293m. In Latin America, the result was an increase of 8m, or more than 25 per cent, in the number of poor to 37m, while in south Asia the ranks of the poor grew by 7m to 407m. Under that line, sub-Saharan Africa remained steady at some 416m.

Interestingly, there are now complaints coming from the right. If you assume that globalization has reduced inequality in recent years--and most orthodox economists would say it did--then why change the standard? The new accusation is that the World Bank would not have any work otherwise "helping" the newly (re-)classified folks qualifying as poor as per its mission of helping to eradicate poverty:

Angus Deaton, the Princeton economist and persistent critic of a poverty line that he argues has been misleading for years. “You’ve got a line that no one knows where to put it, PPPs that change, and underlying data that is bad,” he said. “It is sort of a statistical problem from hell.” The World Bank’s administering of the poverty line also carried a hint of conflict of interest, he said, as the bank’s main task was fighting poverty, and its very existence depended on its own poverty measures.

Mr Deaton added: “I think they have some institutional bias towards finding more poverty rather than less.” 

Talk about the political economy of statistics: from the left you have folks like Wade saying these measurements are bogus. On the right they say these statistics and bogus and self-serving.  There's just no pleasing some people.

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