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