Tuesday, 18 December 2012

How can business help the MDGs?

By Noshua Watson

The UN High Level Panel met a few weeks ago to discuss the Post-2015 Millennium Development Goals framework. The new MDGs have been at the forefront of discussion in the UK, as Prime Minister David Cameron is co-chairing the panel with the presidents of Indonesia and Liberia. Out of the UK events, blogs and online discussion, different means of encouraging business participation in the MDGs have emerged: including business in the MDG consultation process, asking business to contribute to an enabling environment for economic growth and poverty reduction, integrating the MDGs into corporate strategic goals or even having an MDG oriented around private sector goals like FDI, employment or supply-chain inclusion.

An issue that has been assumed, but not directly addressed has been: while targeting the MDGs, how do you build local capacities? I think that those who want to engage business in the MDGs can learn from the philanthropic sector in this area. For the Bellagio Initiative on philanthropy and development, Bheki Moyo wrote that the aim of institutionalised (or vertical) philanthropy should be to support horizontal (or community/local/regional) philanthropy. The Bellagio Initiative worked this way, as the Rockefeller Foundation worked with IDS and the Resource Alliance to reach out to Southern NGOs, academics and thought leaders.

At a recent workshop on how foundations could strengthen civil society in Africa held by Oxford-based NGO INTRAC, the participants concluded that there is a trade-off between working with local organisations that have already demonstrated their capacities versus taking time and money to strengthen new partners. They found that, “There may be multiple layers between monetary input and development activities and outcomes. A typical ‘chain’ might involve private funder, intermediary international NGO, local partner NGO(s), community-based organisations and individual beneficiaries.”

The same goes for businesses, especially multinationals, that would try to achieve the MDGs. Including smallholder farmers in a global value chain might also require finding and financing local processors. The Business Innovation Facility has piloted this kind of intervention to help expand an agro-processor and local supply chains in Nigeria.

Thursday, 13 December 2012

What was all that climate change stuff people used to go on about?...

By Stephen Spratt

How the world has changed. Do you remember COP 15 in Copenhagen in 2009? For months leading up to the event coverage was everywhere. Celebrities queued up to express confidence that ‘this was the moment’ that politicians would ‘rise to the challenge’. And the politicians said much the same. John Kerry, erstwhile US Presidential candidate, summed up the attitude well:
“We can stop the climate-driven wars of the future. We can keep would-be climate refugees in their homes.  We can keep islands on the map and stop climate-fuelled droughts and storms before they ever start....we have an opportunity to realign the way nations have dealt with each other. By reaching agreement on finance, emission targets, and a transparent system for global action, we will be recognizing globally that the stewardship of the planet and our appetite for resources will be managed in a new way in a new era.”
In stark contrast, this year’s COP* in Doha, which came to an end at the weekend, was so low-key hardly anyone was even aware it was happening. If Senator Kerry’s goals were well on the way to being achieved, this would be understandable. Unfortunately, of course, the opposite is true. Not only have none of these aims been realised, but the scientific evidence, rapidly melting ice-caps, historically unprecedented weather patterns, that kind of thing, gets stronger and stronger. As the need for action grows the prospects of actually seeing any action diminishes at an ever faster rate.

How can we explain this lack of action? 
  1. There is an inevitable fatigue to interminable negotiations that go nowhere. Having marched up the hill of expectation at Copenhagen, many people are no doubt very wary of having their hopes dashed again. 
  2. The gulf between the positions of the different parties is so wide that optimism is difficult to sustain anyway. 
To take just one example, at Copenhagen developed countries promised to transfer $100 billion per year to developing countries by 2020 to fund climate change mitigation and adaptation. The original reason is a simple application of the polluter pays principle: countries that caused the problem should compensate those that suffer from its consequences. While this rationale remains ethically compelling, and developed countries have not (yet?) reneged on the longer-term goal, no progress has yet been made in actually generating this finance, or even deciding where it will come from.

Doha - COP 18 - Dec 8, 2012 009
What we had instead were various attempts to water down the commitment. Given their fiscal deficits, many developed countries are keen to avoid having to tap public coffers. The idea is to get private investment instead, but presumably the private sector will only invest where there is a good financial return, and there is no reason to think that this will be where finance is most needed. The risk is that private finance will go where it was going anyway, leaving non-commercially viable mitigation projects, and virtually all adaptation projects, struggling for resources. These need public funds, and, worryingly, developed countries seem increasingly reluctant to honour their commitments in this regard. Having actually put some money on the table at Doha, the UK remains a notable exception to this trend.

To be fair, one good outcome of Doha was the agreement to establish a mechanism to provide ‘loss and damage’ funding for countries affected by climate change. However, while this was originally described as a form of ‘compensation’ mechanism, negotiators from the EU and US insisted it be ‘rebranded’ as ‘new aid’, from fear they could be held responsible for climate change-related damage in the future, and so leave themselves open to compensation claims. But of course they are responsible, at least in part, as the original commitment to transfer climate finance funds recognised. Again, this does not bode well for the prospects of ever seeing anything like $100 billion of ‘new and additional’ resources being transferred annually from developed to developing countries.

Those seeking reasons to be cheerful are probably wise to avoid these annual jamborees, which have become increasingly depressing. I have recently started a project to understand better the drivers of renewable energy investment in China and India. Despite the intractable state of international negotiations this continues to grow. Understanding why might just provide a chink of light amongst all the doom and gloom.

*IDS has a body of research on Climate Change, much of which touches on the issues raised in this post and at the UN Climate Change Conference – COP18.

Image credit: World Resources Institute/Flickr

Friday, 30 November 2012

The World Bank’s view on inequality in Latin America: a cautionary note

By Carlos Fortin

Latin America is the region of the world with the highest level of income inequality. Until now the evidence appeared to indicate that, despite a fairly respectable performance in terms of growth in the last decade, inequality had not been decreasing and might even have been worsening.

Supporters of the neoliberal economic model that prevails in the continent have therefore enthusiastically received a recent report from the World Bank1  that seeks to show that things are not as bad as have been depicted; in doing so, however, the report confirms the fears of the critics of the model with regard to the prospects for equality.

The report’s main message is that inequality has in fact decreased in the period 2000-2010 2:
  • In 12 of the 15 countries for which there are comparable data the Gini coefficient has gone down by an average of 5 points (unweighted);
  • In the three largest economies of the region, Brazil, Argentina and Mexico, the decrease was 5, 6 and 7 points respectively.
The report attributes this to what it terms ‘sustained German-like growth rates for the top tenth of the income distribution, combined with Chinese-like growth rates for the bottom tenth, over a 10-year period’, and goes on to comment that ‘It is difficult to overstate the importance of this achievement’(p. 18).
The picture, however, is not all that benign: 
  • Even after this improvement the levels of inequality in Latin American remain ‘unacceptably high’(Ibid.): the average Gini  in 2010 for the 12 countries that are improving was 0.482, compared with 0.257 for the Scandinavian countries.
  • Furthermore, the rate of improvement over the 10 years is very modest indeed; should the tendency be maintained it would take the 12 countries 50 years to reach the level of equality of Scandinavia.
More worrying is the fact, also recognised by the report, that the reduction in income inequality is not the result of structural change leading to a more equal primary distribution of income –i.e. before taxes and transfers. Instead it is the outcome of favourable international conditions (the Chinese demand for commodities) and especially of government redistributive transfers. This is particularly the case in the high performers; the Benefício de Prestação Continuada and Bolsa Família programs in Brazil and the Oportunidades social assistance program in Mexico account for between 18 and 20 per cent of the decline in income inequality in those countries.

The ability of the governments to maintain that level of support depends on whether the economies will continue to perform well. This in turn is highly dependent on the international economic context remaining favourable, an uncertain prospect at best. The gains are therefore fragile, and do not relieve the governments from the need to engage in serious structural reforms as the only solid basis for a reduction in inequality.


1 Francisco H. G. Ferreira, Julian Messina, Jamele Rigolini, Luis-Felipe López-Calva, Maria Ana Lugo, and Renos Vakis, Economic Mobility and the Rise of the Latin American Middle Class, Washington D.C., The World Bank, 2013. At http://siteresources.worldbank.org/LACEXT/Resources/English_Report_midclass.pdf (Pdf)
2 Based on data in the Socio-Economic Database for Latin America and the Caribbean (SEDLAC). At 
http://sedlahttp://sedlac.econo.unlp.edu.ar/eng/statistics-detalle.php?idE=35

Thursday, 22 November 2012

Managing policy rents for the green transformation

By Hubert Schmitz

Last week I attended a conference at the German Development Institute (DIE) concerned with green industrial policy. It concentrated on rent management for the green transformation. This is an issue on which we at IDS are working with our DIE colleagues. Our common starting position is that first, enormous investment is needed to bring about the green transformation. Second, the bulk of this investment has to come from the private sector. Third, due to market failures government needs to intervene and help mobilise this private investment. These three things are not controversial; they are widely shared. Controversial however is how much government should intervene, how it should go about it and which green sectors it should target. It is a highly politicised debate – see for example the fierce discussion in the UK over government support for wind power.

Such political contestation is inevitable. After all managing policy rents means providing (and withdrawing) opportunities for above average profits on investment. This is always a difficult task but particularly challenging when it comes to accelerating the green transformation. The reasons? We are in a hurry; this is the first transformation in history to be achieved against a deadline; carbon emissions need to come down by dates which are frighteningly near. Second, the uncertainties are enormous; the viability and costs of the new technologies are impossible to predict. Third, these investments have time horizons of three or more decades. What a nightmarish scenario for policy making – even without the politics!

In our own work we (Tilman Altenburg, Oliver Johnson and I) have asked what guidance we can derive from the international experience with industrial and energy policy. What are the critical success factors for rent management? Let me share with you our initial thoughts. Management of green policy rents runs four risks:
  1. Abuse of the incentives
  2. Selecting the wrong instruments
  3. Targeting the wrong technologies or sectors, and
  4. Doing too little.
Critical success factors are those which help policy makers deal with these four risks. Let us take them one by one.

The first risk is the abuse of government incentives by rent seekers. This is the most talked about risk but it can be contained in a number of ways. These include monitoring by independent research organisations, by consumer protection agencies and by the press. Yes, the private sector can try to capture the whole process but this is hardly what has occurred in the British or German renewables industry.

The second risk is choosing the wrong instruments. Consultants tend to sell best practice rather than best fit. This is best dealt with by testing instruments in selected parts of the country. China and Vietnam have become so successful partly because they have a long tradition of experimenting and testing before rolling out policies country wide.

The third risk is targeting the wrong technologies or sectors. This is the old debate over whether governments can and should pick winners. History tells us that the most successful economies have prioritised sectors. Yes, they made mistakes in the process but making mistakes is unavoidable. It is hard to see how the green transformation can be achieved without making informed choices of priority sectors and technologies.

The fourth risk is doing too little. In my view this is the most fundamental risk. The creation and allocation of rents remains insufficient and as a result the required scaling up of investment is not achieved. It is true that investments in renewable energy have been substantial in recent years but the totals are counted in billions of £, € or $. In contrast, investments in the fossil fuels industry are counted in trillions. These investors seek to protect their assets and undermine the case for renewables with any means at their disposal.

Achieving a substantially greener investment and energy mix is not a project which can be achieved from within government alone. It requires government working with business and with civil society (NGOs and research communities): a government-business-civic alliance. Members of the alliance do not have to be driven by concerns for the climate. Support can be gained from government and business people whose priorities lie elsewhere, notably securing energy, building new competitive industries and creating green jobs. The chance of exerting influence increases dramatically if players with different motivations (climate change, energy security, competitiveness, jobs) are brought together. In short, ‘building transformative alliances’ needs to be included in our list of critical success factors for green rent management.

Monday, 5 November 2012

Staying in the high value chain after the developed countries have gone: The case of Brazil

By Luciana Vieira (guest blogger, Visiting Fellow in the Globalisation Team, IDS)

Traditionally, developed countries have been the buyers of products manufactured in developing countries, although this has been changing lately. How can these countries ensure that they are still able participate in high value supply chains if their main buyers are gone?

Global Value Chain Approach in Brazil
One approach is to consider the Global Value Chains (GVC) analysis which tries to understand inter-firm relationships in the context of buyer and supplier. An important contribution to GVC is to understand how the workforce can get organised to have some bargaining power. In this sense, Benjamin Selwyn describes the rise of the Sao Francisco valley*, in the Northeast of Brazil, that became a successful exporter of high value fruit with public-private collaboration. He analyses the role of important stakeholders, such as unions, associations, local agencies, among others, also involved in the training and organisation that allow this region to produce more value added products (upgrading) in the global value chain.  Ben´s work certainly shows that small producers can get gains participating in global supply chains.

However, even in this unique case study, the production standards are being set by a transnational retailer who keeps much of the value added of the product. The transnational retailer’s willingness to pay a “premium price” was the driver for the workforce to organise and to upgrade. If there was no buyer paying that premium price and requiring such strict compliance with specific standards, would these workers naturally organise themselves and upgrade?

And if we look to other case studies from a GVC perspective, where there are no asset specificities such as perishability, favourable natural resources and location (lack of other available labour), would the empowerment of workforce be replicated under different conditions? Probably buyers would just source elsewhere where the standards could be met at the required price. We have seen this happen a number of times with other manufacturing products, such as the footwear industry moving from Brazil to China.

Getting trapped in the sophisticated European market
A further threat to export supply chains from developing countries (to ‘developed’ countries) is that they can get trapped or locked into more sophisticated European markets than those existing in the countries where the products originate from. Small producers may become involved in developing such high quality products that they can hardly find an alternative in their domestic market. And while these producers can upgrade technically:
  • Are they able to find other buyers for their products abroad, in order to overcome the trap of being dependent on a single buyer or market?  
  • Have they developed marketing skills and business development skills needed to this? 
My years of experience working with a number of Brazilian export supply chains tell me that, in contrast to many Asian companies, they know very little about markets, brands and pricing.

The Fair Trade example
One example is Fair Trade products. These have no appeal in Brazil where most consumers are constrained by their incomes and wouldn’t pay a premium price for this specific certification. If you consider other developing countries, for example in Africa, there is no alternative consumer market at all.

My main concern regarding such specialised export supply chains is that the economic crisis in Europe and/or the ‘buying local food’ initiatives will affect their markets in a very near future. So, from the perspective of developing country producers, there is an urgent need to transfer technical learning achieved and search/create alternative markets for their high quality products. Otherwise, there is a high risk that they will be forced to “downgrade” with all the implications that this has to the workforce and regional development.

* Listen to Ben Selwyn's seminar given at the Institute of Development Studies on 30 October 2012

For more information on this subject, visit:
www.apexbrasil.com.br
strpetrolina.com.br

Thursday, 25 October 2012

Can big business sell nutritious food to poor people? The case of Grameen Danone Foods in Bangladesh

By Ewan Robinson

Groupe Danone, the largest global producer of fresh dairy products, has done something unusual for a massive, global food business: it has experimented with selling nutritious foods to very poor people. This move is part of a growing interest in nutrition by big businesses.

If you live in North America or Europe, you’ve probably come across Danone’s products, most likely its yogurts. And the company is increasingly present in developing countries. In 2011, 51 per cent of Danone’s sales came from emerging countries.

In 2007, Danone and Grameen Bank invested a total of $1 million to create a small social enterprise venture in Bangladesh, known as Grameen Danone Foods. Grameen Danone produces a yogurt known as Shokti (Bengali for strength), which is fortified to meet 30 per cent of children’s daily requirements of vitamin A, iron, zinc and iodine. The goal is to increase consumption of these yogurts by children in poor, rural areas of Bangladesh.

Grameen Danone’s business model: It is innovative, but is it successful?
Grameen Danone was designed as a social business: it needed to be profitable, but all profits would be invested back into the business, rather than paying dividends to shareholders. The venture operates a single small factory in the city of Bogra, which was designed to use simple production techniques and minimise costs.

Grameen Danone’s distribution model was unique; it worked through saleswomen known as ‘Grameen Ladies’ to sell yogurts in remote areas where there were few shops or refrigerators to store yogurt. The saleswomen received training on how to promote the nutritional benefits of Shokti yogurt, and earned a commission fee for each yogurt they sold.

Yet despite its innovative features, Grameen Danone struggled both to earn a profit and to deliver nutrition to those who needed it. On the one hand, the venture was unable to secure a reliable supply of cheap milk. When fresh milk prices doubled in Bangladesh in 2008, Grameen Danone was forced to raise the price of Shokti, and sales plummeted. At the same time, sales by Grameen Ladies were low, and the venture operated at a loss.

Grameen Danone responded to low sales by beginning to sell yogurts to wealthier urban consumers, alongside those in rural areas. It used conventional marketing techniques, including TV commercials, to promote the yogurt’s health benefits and the fact that it was a social business.

Urban sales grew quickly, and by April 2010, they made up 80 per cent of Grameen Danone sales. While re-orienting sales had kept the company afloat, it had diverted it from its original purpose of providing nutrition to the rural poor.

Can social enterprise be big enough for nutrition?
Grameen Danone is trying to revitalise rural sales and promote new products for rural consumers. It hopes to double sales to urban shops and triple the number of Grameen Ladies, while using promotional events in villages to increase awareness and demand among the rural poor. The company has introduced a new product, a yogurt-cereal blend with a low price and a 30-day shelf life, to cope with the lack of refrigeration in rural areas.

Ultimately, Danone hopes to attract investment in the social business model to replicate it across Bangladesh.

However, it’s unclear whether the rural portion of the business can be made profitable and large scale. Grameen Danone may contribute to Danone’s efforts to expand its brand presence in South Asia, but how much will it contribute to reducing undernutrition for the poorest people?

The challenge is getting the people who really need nutritious foods to pay for them
The case of Grameen Danone also shows the challenge of convincing people to pay for nutritious foods. It has been pointed out that the rural poor in Bangladesh don’t normally buy yogurt products. Still, yogurt is already a well-established product across Bangladesh, produced by several national firms. If it is difficult to grow sales of a familiar product, introducing entirely new foods may prove even trickier.

Wednesday, 17 October 2012

Infrastructure and development finance institutions: How to maximise the development impact of private investment

By Stephen Spratt

Infrastructure remains seriously underprovided throughout the developing world. The OECD estimates:
  • More than 1 billion people lack access to roads
  • 1.2 billion do not have safe drinking water
  • 2.3 billion have no reliable sources of energy
  • 2.4 billion lack sanitation facilities
  • 4 billion are without communication services. 
  • And yet the World Bank finds that investment in Africa alone falls short of the level required by $48 billion a year.
However, it is not just the quantity of investment that matters, it is also the quality. New facilities that provide low quality services, or which poorer sections of society cannot access or afford, may tick boxes with respect to quantity, but do badly in terms of quality. Bilateral and multilateral Development Finance Institutions (DFIs) seek to use their resources to improve outcomes in both areas: they aim to attract private investment (quantity), but also try to enhance the development impact that this finance can achieve (quality).

It is in this context that I recently undertook a systematic review of the evidence for the Private Infrastructure Development Group (PIDG) to see how DFIs are performing in both areas (PDF). The results were encouraging in many ways, but less so in others.

On the positive side, we found that:
  1. DFIs have been successful in attracting additional private finance into infrastructure. They are particularly important in leveraging the long-term finance which infrastructure projects require.  
  2. DFIs are able to influence project selection and design to boost growth. For example, they tend to select infrastructure projects that relieve bottlenecks and then try and influence their design – and the policy framework in which they operate – to further boost growth effects. 
Less positively, we also found that:
  1. DFIs do little to influence projects to increase direct poverty impacts. We found surprisingly few examples of DFIs seeking to influence projects positively in vital areas such as access or affordability for the poor. Interestingly, projects where this was the case all had some form of concessional finance. This suggests that purely commercial finance may be incompatible with maximising development impacts in some areas – a very important finding. 
  2. DFIs could do more to amplify the economic impact of projects.  The supply of good jobs for local people, and linkages with small local firms, for example, are crucial for enhancing the long-term impact of infrastructure projects. While there were some positive examples, where DFIs sought to influence projects in these areas, there is considerable scope for more. Again, this was quite surprising.
  3. Demonstration effects have hard limits. A priority for DFIs is to demonstrate the commercial viability of infrastructure projects, so that private investors will then invest without needing DFI support. While there is scope for this in some areas, there are limits. Often, DFIs are able to do what they do because they are DFIs. Political backing allows them to borrow on favourable terms and to lend with greater confidence. It is simply not possible for private investors to replicate this in many cases, as they do not enjoy the same advantages.  
We were also asked to make suggestions for how DFIs could increase their impact:
  1. Project appraisal and selection is key. Only projects with the largest possible development impact should be selected, but this requires a much more thorough assessment than currently takes place. Projects should be selected solely on their potential development returns, irrespective of potential financial returns, and results should be rigorously assessed and fed back into the appraisal process.
  2. Project finance should be structured to fulfil development potential. Some projects, such as in the telecom sector, produce high financial and high development returns. Others have quite low financial returns but very high development impacts, water and sanitation is a good example. Being clear about these distinctions and structuring finance accordingly is crucial to realising these impacts. In some cases it may be necessary to combine commercial investments with concessional finance such as grants, to ensure that water projects supply rural areas at prices the poor can afford, for example. While some progress has been made here much more could and should be done. 
  3. DFIs should cooperate much more with each other. In areas such as project appraisal, design, financing, delivery and impact assessment, there is huge potential for DFIs to coordinate. While there are many positive examples of this, they are quite ad hoc. Competition is just as likely as cooperation. 
So, while DFIs are having a positive effect, they could do more, sometimes much more. It is particularly important that they are not pulled towards the most commercially viable projects at the expense of those that may not be so lucrative but have large development potential. To do this, DFIs need to maintain a complete focus on development results, and use private finance to further these goals. This requires:
  • Much stronger appraisal and selection procedures than currently exist, linked to effective impact assessment mechanisms
  • Finance to be structured to realise development results rather than suit private investors
  • Well-crafted incentives, where staff are rewarded for the development results they achieve, not the amount of deals they bring in 
  • Reform of some DFI mandates, which do not allow concessional finance to be used, and insist that DFIs are self-financing, creating an inevitable pull towards the most commercially viable types of project. 
  • More transparency: one of the problems that comes with private investment is their habitual insistence on ‘commercial confidentiality’. Evaluations of publicly funded projects are made available as a matter of course; the same should be true of projects with a private investment component. If not, it is not possible to assess their impact, or to compare with the impact of other forms of financing. 
Given the urgent need for infrastructure in low income countries, the increasing focus on private investment is understandable. However, the goals of private investors do not always align fully with development goals. As donor-funded agencies, it is the DFIs job to ensure that maximising development outcomes is the goal of all their projects, and that these are carefully structured and designed to achieve this. Leveraging private finance is a vital part of this process, but it needs to be always remembered that private investment is a means to a (development) end, not an end in itself.

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Spratt, S. and Ryan-Collins, L. (2012) Development Finance Institutions and Infrastructure: A Systematic Review of Evidence for Development Additionality,  Surrey: Private Infrastructure Development Group (PDF)
See also: Spratt, S. and Ryan-Collins, L. (2012) Executive Summary – Development Finance Institutions and Infrastructure: A Systematic Review of Evidence for Development Additionality,  Surrey: Private Infrastructure Development Group (PDF)

Friday, 12 October 2012

The European welfare state: Will it survive?

By Carlos Fortin

In my recent trip to Oslo to give a lecture at the Norwegian Peacebuilding Resource Centre I had a chance to discuss with colleagues there the present difficulties and the future prospects of the European welfare state. The issue is topical in Latin America, where progressive leaders and parties have for some time now argued that the welfare state model offers an ideal combination of market efficiency and societal concern with equity and justice.

The crisis in the Eurozone has given defenders of the neoliberal Anglo-Saxon model of capitalism –who were badly shaken by the subprime crisis in the US and its aftermath- the opportunity to go on the offensive and denounce the shortcomings of the European model as well as predicting its demise.  Typical of this position is the statement in a 2011 paper from the Heritage Foundation, the right-wing U.S. think-tank, which proclaims:
“Europe’s socialist (or “social democratic”) welfare state is collapsing under the load of unsustainable debt. There is no chance European politicians will ever make good on the many costly and unfunded entitlements they have promised their citizens.”1 
The thesis sounds plausible, and it has been eagerly seized by Latin American neoliberals to try and fend off efforts at altering the status quo. The problem is that it is empirically false and conceptually simplistic.

It is not the case that the welfare state be the main cause of the eurozone crisis. As Nobel Prize Economics laureate Paul Krugman wrote last November:
“The nations now in crisis don’t have bigger welfare states than the nations doing well — if anything, the correlation runs the other way. Sweden, with its famously high benefits, is a star performer, one of the few countries whose G.D.P. is now higher than it was before the crisis. Meanwhile, before the crisis, “social expenditure” — spending on welfare-state programs — was lower, as a percentage of national income, in all of the nations now in trouble than in Germany, let alone Sweden.”2 
It is true that excessive social spending may have been an aggravating factor in some cases, such as Greece (although even there there are other equally important factors like the high military spending in the period 1997-2003); but empirical data show that the European debt crisis is primarily a function of problems of monetary management and the difficulties of the euro,3 and not of the existence of the welfare state.

But there is a deeper error in the vision of the Heritage Foundation. It is grossly simplistic. The modern European welfare state is not only a set of economic and social policies. It is the expression of a social compact through which, in the aftermath of Second World War, the main economic, social and political actors - business, workers, political parties and movements, various occupational groups, civic organisations - asserted their willingness to share the benefits and the costs of the economic and social reconstruction and of democratic coexistence. It is a covenant for the legitimisation of the institutions and structures of society. A radical departure from this covenant is only conceivable if society can reach a new legitimising consensus. In continental Europe the individualistic and atomistic ideology of neoliberalism does not seem to be able to provide that consensus. And for the time being no other rationale has emerged which can serve as basis for a new European social covenant.

What lies ahead is therefore a long, complex and difficult process of adjusting the welfare state to the new realities of demographics and globalisation. The process can have significant social and economic costs, as can be presently seen in countries such as Greece, Spain or Italy.  But the ultimate goal is not the demise of the welfare state, but its reinvention as a model that combines modernity and efficiency with the basic consensus that is the essential foundation of democracy.4

To paraphrase Mark Twain, it would seem that reports of the death of the European welfare state are greatly exaggerated.

----

1 Roberts, J. and Foster, J. D. (2011) Flashing Red: European Debt Crisis Signals Collapse of Social Welfare State, The Heritage Foundation, 16 August 2011 
2 Krugman, P. (2011) 'Legends of the Fail', International Herald Tribune, 10  November 
3 Nelson, R. M.; Belkin, P.; Mix, D. E. and Weiss, M. A. (2012) 'The Eurozone Crisis: Overview and Issues for Congress', Washington D.C. Congressional Research Service, 29 August 2012 (PDF)  
4 For a recent effort at giving substance to this proposition, see Diamond, P. (2012) Governing as Social
Democrats. Key policy priorities for the left in Europe, Policy Network Paper

Friday, 5 October 2012

The business of measuring impact

By Vivienne Benson

Measuring impact should not be a post mortem, according to Vinay Nair, Business Development Manager at the Acumen Fund.

Vinay was responding to the conundrum we have posed in the latest Business and Development Seminar Series: how do you assess the impact of business on development?

Is considering impact just a case of measuring outputs?
Within his presentation, Vinay explained the Acumen Fund approach in measuring outputs to ascertain the company’s impact. Husk Power Systems (HPS), a company hailed by Vinay as a successful Acumen Fund investment, founded in 2007 to reach the 20,000 villages considered out of reach by the Indian government. The company takes agricultural waste, rice husks otherwise left to rot, and converts it into gas that powers an off-the-shelf turbine to generate electricity.

Essentially, the HPS output is 75 operational plants in Bihar which serves 150 villages, or more than 150,000 people, and yet ultimately the impact is vast:
  • Extends villagers’ activities beyond daylight hours
  • Promoting economic development and microenterprise
  • Reduces indoor air pollution
  • Improving health
  • Increases the time children can study 
  • Improving education
  • Reduces the amount of time women spend collecting firewood
  • Increasing gender equality
  • Reduces emissions
  • Protecting global and local environments.
So when assessing impact, the question that Vinay posed to the seminar participants, is how do you measure the value of education from a good reading light? It is a challenge, so beginning at the level of output seems a good place to start.

The Acumen Fund
The Acumen Fund is a non-profit organisation which invests in social enterprises, emerging leaders, and breakthrough ideas. According to Vinay’s presentation, the Fund targets business ventures based on several criteria:
  • Potential for large-scale social impact (10x growth or 1M+ customers)
  • World-class team committed to solving problems for the poor
  • Enterprises that have the potential to be financially self-sustaining
  • Potential “game changers” – new global approaches for fighting poverty
Nair’s seminar followed Stephen Kenzie’s presentation, Manager of the UK Secretariat of the United Nations Global Compact. He argued that anecdotal evidence suggests that the Global Compact has led businesses to change their behaviour and has had a positive impact on development. However, this kind of evidence is not necessarily quantifiable.

With 6,953 business participants in 135 countries the Global Compact is the world’s largest corporate citizenship initiative, where all the business have agreed to commit to ten core principles within the areas of human rights, labour, anti-corruption and environment.

Reaching the standard: The Business of measuring and assessing impact
Kenzie introduced the first of this series of IDS Business and Development seminars, Reaching the standard: The business of measuring and assessing impact. There are a multitude of Global Initiatives designed to encourage businesses to behave ethically and sustainably, including the Global Compact, as well as others such as the Ethical Trade Initiative.

In our seminar series, leading thinkers and practitioners in businesses, government and research are outlining their vision of the impact of business in development schemes. Presenters are responding to key questions:
  • Do business and development schemes succeed in making private sector organisations have a more positive impact on development?
  • And also importantly, how can we measure this impact?
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Business and Development Seminar Series
Check out the upcoming Business and Development seminars, with speakers including Helen Wilson, Head of Corporate Social Responsibility at Old Mutual Plc (23 October 2012), and experts on Fairtrade and labour standards.

The Business and Development Seminars take place at the Institute of Development Studies, Brighton, UK and are open to everyone to attend. You can listen to interviews with previous speakers in the seminar series on the IDS website. Please contact Vivienne Benson for further information.

Image credit: Acumen Fund / Flickr

Friday, 28 September 2012

What's a BRICS bank supposed to do?

By Noshua Watson

It’s about time. A BRICS development bank is likely to be launched next year. The annual BRICS nation summit will be in Durban, South Africa in March 2013, where they will present the results of a feasibility study for a BRICS led development finance institution.

It would be the main stage debut for South-South cooperation, which represents about 10% of Official Development Assistance and has grown 52% in the last five years. In addition to representing approximately 2.9 billion people, it is hoped that the BRICS bank will begin to level the playing field with respect to setting development cooperation norms and changing aid instruments and policies, especially conditionality.

At the UN Development Cooperation Forum (DCF) in July, there was a lot of discussion about whether South-South cooperation is complementary to North-South cooperation or if it is unique. Having a BRICS bank would definitely give Southern countries more power in international institutions. But would South-South cooperation through a formal development finance institution really be different?

At the moment, BRICS donors say they define aid differently and they use different aid instruments. Also, they have been engaged as donors for a long time, although they may not have formal aid agencies. The emphasis is on countries being both donors and recipients in ‘development partnerships’. China and India are known to use loan and credit instruments and conditions that the IMF, World Bank, Development Assistance Committee donors restrict or are hesitant to use. With respect to issues like human rights or labour standards, the point of view is that it should be discussed at the multilateral level and not shoved into development finance contracts.

At the DCF, BRICS donors repeatedly said that South-South cooperation should be voluntary and commitments should be adapted to countries’ capabilities. But they will need to make some hard and firm commitments in order to support a new development finance institution. The difficulty will be in balancing the commitment to the BRICS bank with domestic politics around poverty. For example, India has more poor people than all the Least Developed Countries combined.

The BRICS bank will need to help refine the concepts, methodologies, best practices and data around South-South cooperation. The policies it will likely have to take on will include:
  • Infrastructure development
  • Increasing domestic resources, developing local financial markets and SMEs
  • Focusing financing on underfunded sectors and developing country enterprises rather than multinationals
  • Investigating policies for financial stability, including a financial transaction tax
  • Managing trade barriers, including product standards that come from private sector regulatory schemes
  • Evaluating energy, water and agriculture subsidies
  • Researching best practices for negotiating with extractive industries
  • Evaluating the effect of development policies on women and youth.
As you can see, a BRICS bank would face a number of challenges. Fair or not, they will have to show that they can do development better.

Wednesday, 26 September 2012

Norway’s development assistance policy

By Carlos Fortin

Some three weeks ago I was in Oslo presenting a paper at a seminar at the Norwegian Peacebuilding Resource Centre (NOREF), a research and policy institute sponsored by the Ministry of Foreign Affairs. Until recently the Centre had focused essentially on issues of conflict and war-torn societies in developing countries; it has now launched a major line of work on the links between those issues and the broader question of development. The seminar was the first public activity in this vein, and my paper, co-authored with Chilean sociologist Augusto Varas, was on ‘International cooperation to reduce inequality’.

In the discussion, reference was made to a recent Report on Policy Coherence for Development (pdf), produced by the Foreign Ministry and the Norwegian Agency for Development Cooperation (NORAD) for the Storting, the Norwegian Parliament.

It makes interesting reading. It opens with a candid acknowledgment of the potential conflict, faced by all donors, between development assistance policy, which should be geared to responding to the development needs of the recipient countries, and policy in other areas whose aim is to further the donor’s own national interests and whose  international implications might or might not be favourable to development. The opening paragraphs of the Report put the dilemma starkly:
This is the Norwegian Government’s first report to the Storting on the potential positive and negative impacts in developing countries of policies designed primarily to serve domestic Norwegian interests... The primary objective of Norwegian development policy is to assist developing countries to pursue policies that will promote their economic and social development. Norway’s policies in other areas are chiefly aimed at promoting interests of importance for our own development. In the interface between these two objectives, conflicts of interests will arise: initiatives that serve Norwegian interests may have adverse effects on developing countries and vice versa.
The purpose of the Report is to promote coherence between the two sets of policies:
Making Norwegian policy more coherent for development means, first of all, acknowledging the problems involved and increasing awareness of conflicts of interest. Secondly, it means striving to ensure that Norwegian and international policies promote development in poor countries, also outside the framework of development cooperation, as long as this does not clash unduly with the interests that Norway’s policies are primarily intended to safeguard.
For these purposes the Report describes in some detail the effect of Norwegian policies on six key issues of an international or global nature with a particular bearing on the development potential of developing countries: access to knowledge and technology, economic growth and social development, climate change and sustainable development, peace and security, global health, and human rights and gender equality.

The Report concludes that there is no contradiction between the interests of the developing countries and the policies of the Norwegian government in the six areas. The conclusion is perhaps not surprising, but the Report presents a persuasive argument for it, including declaring support for developing countries’ demands in a number of sensitive areas such as, for instance, intellectual property rights; Norway is strongly in favour of introducing legally binding international rules on the protection of the traditional knowledge, genetic resources and cultural expressions of indigenous and local communities.

All in all a refreshing approach at a time when elsewhere the notion is still unfortunately alive that development cooperation should essentially be treated as an instrument for the pursuit of the commercial and investment interest of the donor.

Friday, 21 September 2012

Part two: Profiting from undernutrition? The challenges of distributing foods through private channels

By Ewan Robinson

In my last post, I looked at how businesses are jumping into the marketplace for therapeutic foods, products designed to treat acute malnutrition. Yet the potential market for nutritional foods that can be eaten on a day-to-day basis is much bigger: as large as $5 billion, according to Valid Nutrition, a social enterprise working to commercialise foods targeted at undernutrition.

Potential nutritional foods might include fortified biscuits, yogurts or porridge mixes. Unlike therapeutic foods, they complement a normal diet, rather than substituting for it.

Will businesses invest in nutritional food products?
The potential for business involvement in nutritional foods is not as simple as the above comparison suggests; there are major differences between the value chains that deliver therapeutic foods and those that might provide future nutritional foods.

The key difference lies in how these products are distributed. Therapeutic foods are distributed by publically-funded agencies like UNICEF, or by NGOs. These organisations provide the products free of charge to groups suffering from malnutrition, often in emergency situations.

But the major portion of the 1 billion people suffering from undernutrition are not acutely undernourished. Instead, they chronically don’t get vital nutrients in their diets. To reach these populations, nutritional foods will need a different distribution model, one that delivers to the shops and markets where the majority of poor people buy their food.

Two challenges for distributing nutritious foods through private systems
A private distribution system for nutritious foods would function through networks of wholesalers, shipping companies, supermarkets and small traders. However, achieving the desired goal of reducing undernutrition through such a system isn’t straightforward; several challenges have to be overcome.

How can we get nutritious foods to the right people?
Nutrition matters most for a very specific group of people: children under 2-years old and women who are pregnant or have young infants. When they distribute therapeutic foods, agencies like UNICEF can make sure that the products reach women and infants. At some distribution centres, recipients have to eat products before leaving, to make sure infants, not other family members, get the nutrients.

If packaged nutritional foods were sold in local shops, would poor households purchase them? Would vulnerable women and infants eat them? Assuring they reached this target group might be especially challenging in contexts where women have less control over how income is spent.

How can we be sure that foods really are nutritious?
Knowing that foods are nutritious is also a challenge in a private distribution system. Imagine two packages of fortified porridge mix sitting next to each other on a store shelf. Both claim to contain the nutrients needed for healthy child development. But how can a consumer know whether these products really do contain these nutrients?

Few developing countries mandate the kind of nutrition labelling that Western consumers are accustomed to. (The Government of Hong Kong compiled a list of countries with labelling standards (pdf) in 2005.) Many countries don’t even have laboratories to test foods. And even if those porridge packets did have nutrition labels, would consumers be able to analyse them?

For private distribution to work, we need to think about how potential consumers would become familiar with products and aware of their benefits.

Value chain regulation to make private distribution work for nutrition
Without policies to assure how nutritious foods really are, food manufacturers will have incentives to cut back on nutrition in order to reduce costs. And if consumers don’t trust that foods claiming to be healthier really do contain more nutrients, they won’t be willing to pay more for them (this challenge with reliably communicating information across value chains is referred to as the ‘credence’ problem).

So how are businesses, governments and non-profits responding to challenges like reaching vulnerable groups and ensuring credence (trust) in food value chains? Will companies deem that foods for people who don’t get enough micronutrients are a profitable investment?

Thursday, 6 September 2012

Part one: Profiting from undernutrition? Businesses and processed nutrition food products

By Ewan Robinson

When the issue of global nutrition is mentioned, the first image in many people’s minds – and beside many headlines – is that of an emaciated child clutching a foil pouch containing emergency food aid. Indeed, with the ongoing food crisis in the Sahel following last year’s famine in the Horn of Africa, these images of acute malnutrition have become too familiar. Now notice that ever-present foil pouch: it wasn’t there in images representing food crises 20 years ago.

Från 5,7 till 6 kg på en vecka
The image of the foil pouch indicates the rapid rise of a product that today might be an unofficial symbol of emergency relief: the fortified peanut butter paste called Plumpy’nut.

Plumpy’nut is the dominant example of a type of product known as ‘ready-to-use therapeutic foods’. Because these foods are sealed in sterile packaging and do not require adding water, they have allowed acutely malnourished children to be treated without being hospitalised. This increases children’s survival rate and cuts the number of personnel needed to deliver emergency relief.

Today, Plumpy’nut dominates the market for therapeutic foods, making up 90 per cent of UNICEF’s supply (UNICEF is the largest single distributor). But Plumpy’nut has also triggered a controversy: the product is patented by French company Nutriset, which prevents potentially lower cost competitors in developed countries from entering the market. NGOs including Médécins Sans Frontiers have argued that patents should not be allowed on food aid, since they increase costs and reduce the number of people who can be reached (for more details on the Plumpy’nut story, check out this New York Times article from 2010).

From emergency relief products to everyday complementary foods
Yet if the market for therapeutic foods like Plumpy’nut is big, the potential stakes are much larger for the emerging field of processed, nutrient-fortified foods. Therapeutic foods are used to treat acute malnutrition, the kind that reduces children to skin and bones. But hundreds of millions of people are also chronically undernourished. Some are just plain hungry, not getting enough calories. Others suffer from so-called "hidden hunger". They may eat enough calories, but don’t get the vitamins and minerals (micronutrients) that are essential, especially for children’s development.

Alongside therapeutic food products, a range of other processed foods, such as fortified biscuits or nutrient sprinkles, could target these widespread micronutrient deficiencies.

The market for these ‘complementary foods’ (which provide micronutrients but don’t replace people’s normal diet) is potentially huge; around 1 billion people suffer from micronutrient deficiencies. While the therapeutic food market is currently worth about 200 million USD, the complementary foods market might someday be worth 5 billion USD (check out this interview with the CEO of Valid Nutrition; scroll down to view a table estimating the size of the markets for processed nutrition foods).

5 billion is big enough that some major multinational agri-food corporations have expressed interest. The world’s largest snack producer PepsiCo is involved in trials.

Where do big agri-food businesses fit into nutritious foods?
The involvement of big businesses has critics. Companies like PepsiCo produce and market sugar- and fat-filled snack foods linked to the obesity crisis that affects 1 billion people, increasingly including people in the developing world (see this analysis of the link between under- and overnutrition). Will nutrient-rich processed foods become a gateway to unhealthy snack foods marketed by the same companies?

Of course, producing food products is only one piece of the puzzle. Much more is needed if we want to make sure people have access to nutritious foods. My next post will look at other key pieces in the puzzle.

Image credit: UNICEF Sweden / Flickr

Tuesday, 21 August 2012

Is ‘separate but equal’ really development?

By Noshua Watson

The Saudi Industrial Property Authority is developing an industrial city for women workers, planned to open in 2013 in Hofuf, near Al-Ahsa.

The zone will likely have light industrial and clean manufacturing  projects. The city will not be women-only, but the factories will have special sections and production halls for women and it will be located close to residential neighbourhoods. It has been reported that the intention is to increase employment and income among Saudi women, while continuing to maintain traditions of gender segregation.

In development, it seems that we accept ‘separate but equal’ policies in employment, education, health and so on, when the objective is to increase economic, political or social equality. To its credit, the Saudi government ministry has resisted firms’ demands that the women be single or not pregnant if married.

In the OECD, there is considerable gender segregation in professions, despite relatively high female labour force participation. Gender segregation, plus time away from the workforce for care-giving, leads to the persistence of the wage gap between men and women. In order to evaluate the Saudi case, we need to see what happens. Does the disparity between male and female employment and wages decrease? Is there an increase in female ownership or entrepreneurship? What effect will this have on female schooling or maternal and child health? 

The real question is, is this a stop-gap to preserve power or a genuine step towards societal wellbeing?

Thursday, 16 August 2012

Education and profits: a troubled relationship

By Carlos Fortin

As I left Chile for the UK last month, an intense public debate was taking place on the issue of profit in higher education. Mass student demonstrations were demanding the banning of universities run for profit.

The issue has a specific connotation in the Chilean context. Chilean law already forbids profit in higher education; any surpluses generated by the operation of universities must be reinvested. However, many private universities have circumvented this through creating separate companies that own the buildings and facilities and rent them to the university; profits are then transferred to the linked company through the leasing arrangements. Universities also outsource services such as computing, transport and security to firms controlled by the owners of the university. The students are demanding an end to these legal subterfuges.

But the debate is more general. It has to do with whether the profit motive is acceptable at all in the field of university education. Some defenders of the neoliberal economic model in place in Chile are arguing that, far from closing the legal loopholes, what should be done is to authorise explicitly the existence of for-profit universities. They maintain that the ban runs contrary to the principles of freedom of education and freedom of enterprise. Furthermore, they point out that it has been the possibility for universities to operate with commercial criteria, including outsourcing, which has led to a spectacular growth in their numbers; from fewer than ten in the 1970s to nearly 60 today, thus opening up higher educational opportunities for large sections of the youth previously unable to attend university.

The counter argument is that the mission of universities is educational and formative, and their goal is academic excellence as distinct from money making. If commercial interests are allowed to intervene, they are likely to end up dominating decisions with the consequent erosion of academic quality. This is particularly likely if, as is the case in Chile, some of the universities have been purchased and are run by international investment firms attracted by the country’s large academic market which has a yearly turnover of about $2 billion, realising profits that could reach 18 or 20 per cent.

There is some evidence for the proposition that universities run for profit in Chile have lower academic standards, even to the point of their graduates finding it difficult to have their qualifications recognised in the labour market. The evidence is, however, essentially anecdotal. By contrast a recent report by the Health, Education, Labor and Pensions Committee of the United States Senate provides harder proof of the shortcomings of the for-profit system in the US.

The Committee carried out an in-depth investigation of 30 for-profit colleges and found that there were significant problems in the way of substandard academic offerings, high tuition and executive compensation, low student retention rates and the issuance of credentials of questionable value; and that they are related to the for-profit status. Specifically:
  • large numbers of students at for-profits colleges fail to earn credentials - 64 per cent dropout rate in associate degree programmes - and this is linked to the small amount of money those colleges spend in teaching;
  • for-profits colleges devote substantial resources to non-education related spending, in particular marketing and dividend distribution. In 2009, the examined companies spent $4.1 billion or 22.4 per cent of all revenue on marketing, advertising, recruiting and admissions staffing. Profit distributions accounted for $3.6 billion or 19.4 per cent of revenue. In contrast, the companies spent $3.2 billion or 17.7 per cent on teaching;
  • particularly bad is the performance of publicly traded chains and colleges owned by private equity companies, which accounted for 76 per cent of the sector’s enrolment in 2009, because investors in those colleges often seek quick returns. Tuition increases are often implemented to satisfy company profit goals, and internal discussions among for-profit executives regarding tuition often revolve around how best to justify tuition increases.
The report concludes that, unless there are significant reforms, the sector will continue to turn out hundreds of students with debt but with no degree or a nearly worthless degree. It gives strong ammunition to those of us who feel that when it comes to profits and higher education – with apologies to Kipling - never the twain shall meet.

Tuesday, 14 August 2012

After the hunger summit: Where does the private sector fit into the new agenda on undernutrition?

By Ewan Robinson

David Cameron’s plan to use the hunger summit at the close of the Olympics to direct attention to global child undernutrition seems to have worked. Mainstream media coverage featured snapshots of Cameron standing besides sport legends Mo Farah and Pele.

Campaign groups and analysts have begun to debate whether the summit amounts to a step towards the UK leading an international push on nutrition or simply ‘mouthwashing’ (Duncan Green’s re-coining of ‘greenwashing’).

So what came out of the hunger summit? According to DFID (also see Lawrence Haddad’s analysis), the UK has pledged support in three areas:

  • Agriculture, including creating and distributing biofortified crops enriched with micronutrients;
  • Working with the private sector (including corporations Unilever, Syngenta and GSK) to make nutritious food available and affordable to poor people;
  • Tracking undernutrition, and governments’ commitment to tackling it.

How do agriculture, private sector development and nutrition link up?
Many of the critiques of the hunger summit have focused on the involvement of the private sector, with particular anger about multinationals’ role in wildly fluctuating food prices and land grabs in Africa. These issues warrant serious attention. At the same time, these are not the only causes at the root of global undernutrition. Micronutrient deficiencies have been around much longer than food price speculation. And although we should be concerned about issues affecting farmers’ incomes, income alone isn’t enough.1 Even in places where households’ incomes have risen, this hasn’t necessarily led to better nutrition. Clearly there's much more we need to consider in order to assess the role of businesses in (under)nutrition.

Tackling undernutrition will require action on multiple fronts. We need direct interventions to help the neediest people, but also market-based approaches to make sure nutritious foods are produced, and all people have access to them. Aid or government action alone will not be enough.

Can value chains deliver nutritious food to people that need it?
Agencies and NGOs have been enthusiastically discussing how to make agriculture promote better nutrition 2. Much of this discussion has focused on encouraging small farmers to produce food for their own consumption. For many small farmers, being better able to grow more nutritious foods for household consumption would be a major benefit. But if we want to promote nutrition for the majority of the world’s poor, we need to consider that, from urban slum dwellers to dryland farmers, a majority of poor people do not grow all the food they eat - they buy it.

To understand how people get access to nutritious food (or don’t), we need to look at how food gets to consumers.

This is where a value chain approach is helpful. Looking at value chains draws our attention to the stages that connect crops on farms to the food that people eat, including how food is transported, processed, distributed and marketed to consumers.

As a starting point, here are four big questions we should ask about whether value chains are delivering nutritious food to the people that need it:
  • Is food available? Can it be purchased in places and markets that those who need it can access?
  • Is food affordable? Can poor and at-risk households afford nutritious food, if it is available?
  • How nutritious is food? When looking at nutrition, it’s not just the quantity and price of food that matters, but the nutrients that it contains. Are nutrients maintained or enhanced as food moves through value chains? Can consumers tell whether food is nutritious or not?
  • Is food acceptable? Is food available in forms that people find attractive or acceptable to buy, cook and eat? Do they understand its benefits and are they willing to pay for them? 
  • (These questions are adapted from a paper by Corinna Hawkes and Marie Ruel 3).

The challenges and opportunities of value chains for nutrition 
These are big challenges for businesses of all types, from the multinationals highlighted in the hunger summit to food processors and local shops in developing countries. So, what incentives and challenges do businesses face in building (and profiting from) value chains for nutrition?

Notes
1 See for example, evidence from a nationally representative survey in India.

2 For a synthesis of recent guidelines on linking agriculture and nutrition, see Herforth, A. (2012) Guiding Principles for Linking Agriculture and Nutrition: Synthesis from 10 development institutions, Rome: FAO

3 Hawkes, C. and Ruel, M. T. (2011) ‘Value Chains for Nutrition’, paper prepared the IFPRI 2020 international conference Leveraging Agriculture for Improving Nutrition and Health, 10-12 February

Friday, 10 August 2012

Going for gold: Looking beyond the farm to solve malnutrition

By Ewan Robinson

Here in the UK, the Olympics are filling the airwaves, hallways and pubs alike. And the UK Government and development community are hoping to use Olympic fever to spotlight the global problems of hunger and malnutrition, by hosting a ‘hunger summit’ on the last day of the Games.

Connecting the Olympics and malnutrition seems slightly incongruous. But Prime Minister David Cameron may hope to use both as examples of UK leadership on the international scene.

Although the details are scant, it’s said the summit will be attended by heads of state, international NGOs and business leaders. Cameron will host the summit alongside Brazilian Vice President, Michel Temer. In addition to hosting the next Summer Olympics, Brazil is also seen as a nutrition champion, making substantial inroads using an integrated approach. If this is anything to go by, it appears that the Summit may represent part of a big push on nutrition by UK policymakers in the next year.

Lawrence Haddad recently asked how we can sustain all this attention on malnutrition in the long run. In this post and upcoming ones, I’ll look into one angle on tackling long-run undernutrition: the role of agriculture.

How can agriculture address the challenges of undernutrition?
Agriculture is a big issue on the nutrition agenda. A number of large agencies, donors and International NGOs have recently gotten excited about agriculture’s potential for improving nutrition. It sounds obvious: people need to eat nutritious food, and we need agriculture to grow it. But, as John Humphrey suggested in an earlier post, getting nutritious food from farm to fingers (or forks) turns out to be more complicated than you might expect.

Much of the work so far on agriculture and nutrition has focused on what happens on farms. A number of donors are looking to make their agricultural projects ‘nutrition sensitive’ in addition to increasing yields and incomes. But is this the only way agriculture connects with nutrition?

Are there ways that agriculture can bring better nutrition to the majority of people who don’t grow enough food for themselves? The key here is the value chains through which we get our food. I’ll explore this in my next post.

Thursday, 9 August 2012

Our uncertain relations with commercial interests....at the Olympics and in international development

By Spencer Henson

One of the common complaints about the 2012 London Olympics, at least if you believe the media, is the ‘stranglehold’ commercial sponsors have over what you see, what you can eat and even what you can wear whilst at the Olympic Park. The underlying discourse is that some very large and powerful businesses have monopolised the Olympic experience. Certainly if you witnessed the torch relay, one of the most conspicuous (and unfortunately most memorable) parts was the large and very loud vehicles promoting the products of sponsors....Samsung, Coca Cola, Lloyds Bank and the like. These are all brands that we see (and buy and use) on a daily basis.  But evidently we sometimes feel that commercial sponsorship goes too far.

The IOC has long-established relations with ‘big business’, including the likes of Coca Cola and McDonalds. Further, in the case of the London Olympics a decision was made locally to court commercial sponsorship, at least in part to cut the cost to the public purse. We can question whether this is a sound (or even right) thing to do. However, once commercial money was taken, what did we expect?  Businesses might be willing to hand over some of their cash in order to be charitable and to ‘look good’, but they mainly engage with the Olympics because it furthers their broader commercial interests. This means getting their brands exposed to consumers, selling more of their products, and making a profit. We might have got a bigger and better Olympics as a result (although some may question this), but at the inevitable cost of greater commercialism.

There are interesting parallels with the role of business in international development. Increasingly, donors, NGOs and the like recognise business as critical to development.  Their expertise, commercial might and resources are seen as vehicles to economic growth and lifting the masses out of poverty. For example, both CARE International and Oxfam, well-respected development NGOs, now work quite closely with business, including some major multinationals. Some question whether this is a sound (or even right) thing to do, in principle (seeing it wrong to make a profit on the ‘backs of the poor’) or reflecting a belief that commercial pressure will inevitably drive down wages, bring about unsustainable practices, etc.

Even the proponents, however, must be realistic about what to expect if we ‘get in bed’ with business. Beyond their corporate social responsibility (CSR) agendas, businesses will engage because it means they sell more, cut costs and make a profit. The hope is that we will get quicker and ‘more’ development as a result. The job for those of us in development is to make ‘doing development’ profitable.

Once you accept that it is okay to work with business in principle, there are perhaps even trickier questions over which businesses it is okay to work with. In the case of the Olympics, there are concerns that businesses that produce soft drinks and fast food are incompatible with an event that is supposed to promote sport, and by implication fitness and health. Parallel debates in international development relate to businesses engaged in arms, mining, tobacco and agribusiness. One approach to this conundrum is to deem ‘off limits’ all businesses in particular sectors; maybe soft drinks in the case of the Olympics and tobacco in the case of development? This is the way many ‘ethical’ investment funds work. However, whilst such an approach is quick and easy, presumably all businesses potentially have some positive development impacts to the extent that they buy things from local businesses, employ people, pay taxes, etc. At the same time, businesses operating in sectors that are deemed acceptable may at time do things we don’t like, such as paying low wages or polluting the environment.

An alternative approach is to look at business on a firm-by-firm basis and to assess whether it meets certain minimum standards, on respect for local laws and customs, labour practices, protection of the environment and the like, that are in line with sustainable development. But what minimum standards should be required, and who should determine whether a particular firms meets them or not? The history of global governance in this context is not great.  It is difficult to get autonomous nation states (with differing interests) to agree on what practices should and should not be allowed, and even more so to then do something about the practices deemed ‘off limits’.

Inevitably, therefore, we have become reliant on private modes of business governance whereby firms regulate themselves and/or one another.  This is where we come back to commercial interests. Private governance only works when there is a solid business case for firms to comply, by selling more, cutting costs and making a profit. Again, the job for those of us in development is to make ‘doing development’ profitable.

This begs the question, how do we make ‘doing development’ profitable for business? There are various ways in which those who work in development can contribute here. Just a few are noted ‘for starters’:
  1. Help make businesses aware of their impacts on development, both positive and negative.  This requires the use of rigorous approaches to impact assessment and communication of the results in a manner that will attract the attention of business decision-makers. 
  2. Create demands for actions by businesses that are ‘good’ for development amongst consumers, investment institutions, public procurement agencies and trade unions.  Again there is a major role for development communication here.  
  3. Help businesses work in developing countries, both in general and in a manner that is ‘inclusive’ of the poor.  Those who work in development have a wealth of knowledge regarding the situation on the ground and on what works and what doesn’t.  The challenge is creating the willingness and incentives for development practitioners and researchers to share this knowledge with businesses who wish to make investments.

Wednesday, 1 August 2012

Stopping the Race to the Bottom

By Hubert Schmitz

We have just launched a research report on ‘Who drives economic reform in Vietnam’s provinces?’.  Vietnam continues to surprise the world with the speed and depth of its economic transformation. Our project finds that the decentralisation of economic power from central to provincial government has contributed to this success. It explores who drives the economic reform in the provinces, by studying the role of business, government and public-private alliances. We found that the private sector played an important role, not against government but with government.  In the provinces which made most progress in reform the private sector was very much involved. Other positive things came out of this investigation:  For example the provinces competing with each other and learning from each other has contributed a great deal to Vietnam’s progress.

The web story on the websites of IDS and our partner organisation VCCI  give you some of our other findings. However, let me report here on a negative thing we found. In order to make themselves attractive to big investors, provincial governments offer tax exemptions. The effect is well known, it undermines the financial capacity of their governments. Such races to the bottom are also known from other countries.
 
Granting tax exemptions also seems to undermine policy processes. Good policy making requires collaboration between government and business. For this to happen the private sector needs to be organised and develop business association.  This is where tax exemptions have an undermining effect.  They drive a wedge between small and large business. When tax-paying small enterprises see that large enterprises are exempt from tax it is very difficult to join forces in an organisation. This is not the only difficulty in establishing effective associations but in our interviews with small firms it came up as a stumbling block. 

In my view the most effective measure is to stop all tax exemptions. The effect on actual investment is likely to be small. Investors are attracted by business opportunities. If this business opportunity can be pursued in several provinces, the investors will of course shop around and negotiate the lowest tax rates. If no tax incentives are available they are unlikely to abandon the business opportunity. In Vietnam such a measure might even be politically feasible because the Communist Party continues to be powerful. But is abolishing tax incentives too drastic from an economic point of view? It would be great to have reactions, especially reactions from countries struggling with similar problems. 

Friday, 27 July 2012

Are governments willing to share the aid arena?

By Noshua Watson

On July 5 and 6, the United Nations ECOSOC hosted the Development Cooperation Forum. One of the most interesting sessions was a policy dialogue titled ‘How can development cooperation serve as a catalyst for other sources of development financing?’ Given the continuing entry of new actors into development finance, especially NGOs, foundations and businesses, the session was a welcome discussion.

Representatives from many sectors, government, private and social, believe that the need for development cooperation is being driven by decreasing official development assistance (ODA). At the same time, financing considerations need to include ‘aid exit’. There is a general sense that development finance consists not only of ODA, but many recipients and donors are not ready to move away from ODA.

I agreed with the general theme of the session that the key to generating other funds for development is increasing domestic resources. Representatives from government, NGOs and multilateral organisations said that ODA should be directed at developing local financial sectors, equity markets, bond markets and SMEs. At the national level, implementing policies to reduce corruption and tax avoidance and improve national budget accounting would generate additional domestic funds for development.

The main source of disagreement was over the extent to which new policies in this area are negotiated inter-governmentally rather than between the different types of actors on a bilateral basis. Many countries believe that the presence and activities of philanthropies, companies and NGOs in development finance should be entirely managed by the government.

The solutions seem to lie in the space between the public and private sectors, but these solutions are also complicated. There were a number of calls from NGOs to implement a financial transaction tax, but this was not taken up by representatives from other sectors. The observation that much of the funding from Development Finance Institutions goes to Western multinationals and private equity companies was better received along with the recommendation that development finance needs to be refocused on underfunded areas and developing country enterprises. Another keen observation was that trade barriers can also come in the form of product standards that exclude developing country producers, and are frequently set by the private sector, not governments.

It is clear that aid and trade (and FDI and microfinance) can coexist. But can they cooperate?

Wednesday, 18 July 2012

Politics and legitimacy in Latin America: Some worrying findings

By Carlos Fortin

I was recently involved in the launch in Chile of the latest study on democracy in Latin America. The report, by the United Nations Development Programme, is entitled 'The State of Citizenship' 1.
 
It focuses on the notion of social citizenship, defined in terms of effective access to the rights contained in the United Nations International Covenant on Economic, Social and Cultural Rights. These include the right of an individual to: 
  • work in just and favourable conditions and to unionise
  • social security, including social insurance, with emphasis on the family, mothers and children
  • an adequate standard of living
  • the enjoyment of the highest attainable standard of physical and mental health
  • education
  • take part in cultural life and enjoy the benefits of scientific progress and its applications.

On those bases, the study develops an Index of Social Citizenship and applies it to the countries of the region to assess progress in social citizenship in the continent.
The conclusions are, on the whole, encouraging. The figures show that there has been:
  • a broadening of the coverage of social protection policies
  • an increase in transfers targeted to poverty alleviation
  • the introduction of innovative forms of social protection for children, the aged and women as well as safety nets for important sections of the labour force
  • the establishment of public institutions and structures for a continuing dialogue with civil society.

There are, however, some worrying findings.

Two opposite trends seem to coexist in the attitudes of the citizenry vis-a-vis the political system. On the one hand, there is ‘a demand for more State’ -  for higher and better public expenditure - and for a more active presence of the public sector in the economy and society; this is coupled with a new activism on the part of civil society, NGOs and grass roots organisations, often through non-conventional forms of political participation.

On the other hand, there is a growing disenchantment with, and distrust of, traditional political institutions and structures.

Figures from a 2010 opinion poll substantiate this dichotomy. When asked whether they think the State can solve the problems of the country, 66.6 per cent of respondents answered it can solve all, most or many of the problems. Similarly, 74.3 per cent of those interviewed felt that the State has the means to solve the problems. However, the response was less positive when asked about levels of confidence in the political parties, legislature and the judiciary:
Latin America:  Do you have confidence in the following? (percentages)

Political
 parties
Congress
The judiciary
Great confidence
2.9
6.6
5.9
Some confidence
20.0
28.2
28.0
22.9
34.8
33.9
Little confidence
38.4
37.5
38.4
No confidence
38.7
27.6
27.7
77.1
65.1
66.1
Source:  Latinobarometro 2010, available at http://www.latinobarometro.org/latino/LATAnalizeQuestion.jsp


The UNDP study neatly summarises the situation saying: ‘we witness a return to the political together with an unresolved legitimacy crisis and a devaluing of politics’. Precisely, I am afraid, the kinds of conditions for the emergence of populist responses which may well endanger the gains in social citizenship.

1   Pinto, A. & Flisfisch, A. (eds)(2011) 'Transformaciones, Logros y Desafíos del Estado en América Latina en el Siglo' ( available in Spanish only), New York: United Nations Development Program