I was recently directed to what is probably the most damning opinion on foreign aid I’ve come across in a while (hat tip Jodi and Tracy.)
Here’s the bottom line:
Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population -- over 350 million people -- live on less than a dollar a day, a figure that has nearly doubled in two decades.
The point the author makes is that Africa (and I would add other developing nations) needs investment and not aid. When you accept investment, be it equity or debt, there is significant responsibility attached to provide a return. In other words, you need to make the money work so you can pay back your investors.
Hopefully the money you make with the investment is more than what you need to pay back. If so, you have economic growth and that is good.
It’s not a perfect system, but it seems to work in places like India, SE Asia and more recently in Latin America (the Economist gushed on Brazil in its cover story a few weeks back.)
I’ve touched on this point before, but my view is that the world is awash with capital trying to find its way into places like Africa. Yes, I know there is a credit crunch going on but I think the view still holds.
African countries could start by issuing bonds to raise cash. To be sure, the traditional capital markets of the U.S. and Europe remain challenging. However, African countries could explore opportunities to raise capital in more non-traditional markets such as the Middle East and China (whose foreign exchange reserves are more than $4 trillion). Moreover, the current market malaise provides an opening for African countries to focus on acquiring credit ratings (a prerequisite to accessing the bond markets), and preparing themselves for the time when the capital markets return to some semblance of normalcy.
I would also add multilateral institutions and development banks as potential partners. Yes they have been part of the problem in the past, endlessly financing non-returning projects. But there are factions within these organizations that are now demanding a return and reform for their development financing dollars, and that is a good thing.
Corporations are eager to invest in developing country as well. The problem is there aren’t any good projects to invest in. There is a lot of money sitting on the sidelines waiting for the right time to enter Africa (I’m talking about investment in things other than resource extraction).
So what is everyone waiting for? Institutional reform for one (or even institutional creation in some instances)
Governments need to attract more foreign direct investment by creating attractive tax structures and reducing the red tape and complex regulations for businesses. African nations should also focus on increasing trade; China is one promising partner. And Western countries can help by cutting off the cycle of giving something for nothing. It's time for a change.
I would disagree with the point on China. Yes, China is pouring money into Africa but it is doing so to buy up resources and it is hard to see China making the demands for reform an outside investor has to make on Africa. Recent news from Dubai may make the Middle East a less active investor as well.
Why Foreign Aid Is Hurting Africa - WSJ.com
Showing posts with label development. Show all posts
Showing posts with label development. Show all posts
Saturday, November 28, 2009
Monday, November 23, 2009
BRIC? BIIC?
Nouriel Roubini questions whether Russia is solid enough to be a BRIC. I have to admit, I've had the same reservation (not that anyone noticed/cared.)
He makes an case for a number of other countries that should be included in the most famous acronym in the emerging markets; Turkey, Mexico and so on. All good choices, Turkey especially.
He also makes this point:
Indonesia, moreover, has shown resilience not only economically, but also as a nation. In spite of its diverse ethnic makeup and far-flung island territory, the country has made a quick transition from military dictatorship and has recovered from myriad challenges and setbacks, including the 1997 Asian financial crisis, the tsunami in 2004, the emergence of radical Islam, and domestic unrest. While Indonesia’s per capita GDP remains low, it is a country’s potential that matters in economic affairs, and here Indonesia shines.
I couldn't agree more.
He makes an case for a number of other countries that should be included in the most famous acronym in the emerging markets; Turkey, Mexico and so on. All good choices, Turkey especially.
He also makes this point:
Indonesia, moreover, has shown resilience not only economically, but also as a nation. In spite of its diverse ethnic makeup and far-flung island territory, the country has made a quick transition from military dictatorship and has recovered from myriad challenges and setbacks, including the 1997 Asian financial crisis, the tsunami in 2004, the emergence of radical Islam, and domestic unrest. While Indonesia’s per capita GDP remains low, it is a country’s potential that matters in economic affairs, and here Indonesia shines.
I couldn't agree more.
Wednesday, November 18, 2009
Climbing out of the Aid Trap
Although I would probably disagree with Glenn Hubbard about a lot of things, I am very eager to read his new book questioning the efficacy of past international aid initiatives.
The simple truth is that billions have been spent on aid, and billions are still left in poverty. Something clearly isn’t working. I understand that Hubbard looks at the post WWII Marshall Plan for inspiration on what could be done in the 21st century to address global poverty. Interesting idea.
Here’s a great quote talking about why microfinance isn’t enough. I’ll pre-empt the quote to say that I agree. Microfinance is great in certain instances, the rural poor for example, to help people on the path to economic development. But microfinance doesn’t really help SMBs and there is a real gap in the market there. Often SMBs are too big for microfinance, but too small for a regular bank loan, so they’re stuck. Happily, this gap seems to be filling in in many countries
Microfinance can be a catalyst for entrepreneurship up to a certain stage of business development, but the businesses launched through microfinance need to develop into full-fledged small businesses if they are to promote greater economic growth. Small and medium-sized businesses are the source of growth in all countries. Eighty percent of China’s employment, for example, is in small business — not in microfinance.
The barriers to growing past micro-entrepreneurship are formidable. Starting a formally-recognized business can require months of waiting, and paying enormous fees — including bribes — as the Doing Business rankings show. An example we use in the book is Mozambique, where starting a business requires forms 12 government agencies; you also have to pay bribes to each of the 12 government employees who stamp your documents. When you have 12 stamps, you can — at last — run your business without fear of being shut down. Similar hurdles in other countries mean that micro-entrepreneurs have a very difficult time becoming a political or economic force strong enough to challenge the status quo.
The bright spot is that micro-lenders are increasingly expanding their loan programs to serve not only individuals, but also established small and medium-sized businesses. Our proposal includes provisions for supporting existing small and medium-sized businesses through microfinance institutions.
Climbing out of the Aid Trap
The simple truth is that billions have been spent on aid, and billions are still left in poverty. Something clearly isn’t working. I understand that Hubbard looks at the post WWII Marshall Plan for inspiration on what could be done in the 21st century to address global poverty. Interesting idea.
Here’s a great quote talking about why microfinance isn’t enough. I’ll pre-empt the quote to say that I agree. Microfinance is great in certain instances, the rural poor for example, to help people on the path to economic development. But microfinance doesn’t really help SMBs and there is a real gap in the market there. Often SMBs are too big for microfinance, but too small for a regular bank loan, so they’re stuck. Happily, this gap seems to be filling in in many countries
Microfinance can be a catalyst for entrepreneurship up to a certain stage of business development, but the businesses launched through microfinance need to develop into full-fledged small businesses if they are to promote greater economic growth. Small and medium-sized businesses are the source of growth in all countries. Eighty percent of China’s employment, for example, is in small business — not in microfinance.
The barriers to growing past micro-entrepreneurship are formidable. Starting a formally-recognized business can require months of waiting, and paying enormous fees — including bribes — as the Doing Business rankings show. An example we use in the book is Mozambique, where starting a business requires forms 12 government agencies; you also have to pay bribes to each of the 12 government employees who stamp your documents. When you have 12 stamps, you can — at last — run your business without fear of being shut down. Similar hurdles in other countries mean that micro-entrepreneurs have a very difficult time becoming a political or economic force strong enough to challenge the status quo.
The bright spot is that micro-lenders are increasingly expanding their loan programs to serve not only individuals, but also established small and medium-sized businesses. Our proposal includes provisions for supporting existing small and medium-sized businesses through microfinance institutions.
Climbing out of the Aid Trap
Tuesday, August 25, 2009
Global warming money for Africa... great idea.. in concept....
So here's the jist of the deal:
Experts say Africa contributes little to the pollution blamed for warming, but is likely to be hit hardest by the droughts, floods, heatwaves and rising sea levels forecast if climate change is not checked.
The draft resolution, which must still be approved by the 10 leaders, called for rich countries to pay $67 billion annually to counter the impact of global warming in Africa.
Kinda makes sense, doesn't it? Africa contributed least to global warming yet they might get hit hardest, so they want something for their troubles.
Sure, who could argue that it isn’t only fair? In concept anyway….
Trying to figure out how this would be deployed in practice makes my head hurt (or maybe my head hurts from the other work I should be doing, instead of goofing off and reading the news off the Internet). As I've said here a few times, the world is not short of cash for emerging countries. Between development banks, organizations and thoughtful individuals, there is actually a lot of cash floating around.
The problem is, how do you reasonably deploy and track that cash? Therein lies the rub. As someone who spends time on issues such as this, I can say there is far more cash than deployment models out there.
I hope this global warming reimbursement idea comes with some deployment and monitoring ideas. If so, it will have a higher probability of success.
Africa wants $67 bln a year in global warming funds | U.S. | Reuters
Experts say Africa contributes little to the pollution blamed for warming, but is likely to be hit hardest by the droughts, floods, heatwaves and rising sea levels forecast if climate change is not checked.
The draft resolution, which must still be approved by the 10 leaders, called for rich countries to pay $67 billion annually to counter the impact of global warming in Africa.
Kinda makes sense, doesn't it? Africa contributed least to global warming yet they might get hit hardest, so they want something for their troubles.
Sure, who could argue that it isn’t only fair? In concept anyway….
Trying to figure out how this would be deployed in practice makes my head hurt (or maybe my head hurts from the other work I should be doing, instead of goofing off and reading the news off the Internet). As I've said here a few times, the world is not short of cash for emerging countries. Between development banks, organizations and thoughtful individuals, there is actually a lot of cash floating around.
The problem is, how do you reasonably deploy and track that cash? Therein lies the rub. As someone who spends time on issues such as this, I can say there is far more cash than deployment models out there.
I hope this global warming reimbursement idea comes with some deployment and monitoring ideas. If so, it will have a higher probability of success.
Africa wants $67 bln a year in global warming funds | U.S. | Reuters
Friday, June 26, 2009
Microloans need macro-mentoring
Very similar to the point I was making with C-BAM
Indeed, the nonprofit research group Innovations for Poverty Action in New Haven, Conn., published a paper in May that found that Peruvian villagers who had received microloans and had been randomly selected to receive business training performed significantly better than peers who had received loans and no financial education.
Canada and Peru are obviously two very different economies, but the point is that capital, be it microloans or big-buck Silicon Valley VC money, isn’t effective in building great businesses and fueling economic growth if there isn’t some sort of mentoring or business education to back it up.
Capital and mentoring are ying and yang, they need to work in harmony to produce a single successful business. The challenge is that while capital is relatively easy and quick to deploy in emerging markets, finding sustained, experienced, and committed mentoring on-the-ground in poor areas is very hard. People with the right knowledge and experience don’t tend to live in poverty-stricken areas. They’ve used their talents to move elsewhere in search of a better life.
In Canada, the need for mentoring is important, but less acute than in emerging markets, and C-BAM provides one easy fix. Canada is obviously a developed capitalist economy and the start-ups we’re dealing with are already staffed with highly educated and sophisticated people, so we’re starting at a huge advantage. Plus there is the benefit of being in a similar timezone as enthusiastic mentors and having ready access to technologies such as TP.
In poor rural areas, the need for mentoring is there in a big way but there is no sustainable, scalable way to provide it. I know for a fact experienced people want to help micro-enterprises and while parachuting experts in from time-to-time may be better then nothing, it isn’t a true fix.
Having spent some time bouncing around emerging markets, I can see what kind of important tool business mentoring is for development. I don’t have an answer here, maybe as internet video technology spreads farther and wider it will be easier to do C-BAM type events.
Small Business - Teaching Business Basics in the Developing World - NYTimes.com
Indeed, the nonprofit research group Innovations for Poverty Action in New Haven, Conn., published a paper in May that found that Peruvian villagers who had received microloans and had been randomly selected to receive business training performed significantly better than peers who had received loans and no financial education.
Canada and Peru are obviously two very different economies, but the point is that capital, be it microloans or big-buck Silicon Valley VC money, isn’t effective in building great businesses and fueling economic growth if there isn’t some sort of mentoring or business education to back it up.
Capital and mentoring are ying and yang, they need to work in harmony to produce a single successful business. The challenge is that while capital is relatively easy and quick to deploy in emerging markets, finding sustained, experienced, and committed mentoring on-the-ground in poor areas is very hard. People with the right knowledge and experience don’t tend to live in poverty-stricken areas. They’ve used their talents to move elsewhere in search of a better life.
In Canada, the need for mentoring is important, but less acute than in emerging markets, and C-BAM provides one easy fix. Canada is obviously a developed capitalist economy and the start-ups we’re dealing with are already staffed with highly educated and sophisticated people, so we’re starting at a huge advantage. Plus there is the benefit of being in a similar timezone as enthusiastic mentors and having ready access to technologies such as TP.
In poor rural areas, the need for mentoring is there in a big way but there is no sustainable, scalable way to provide it. I know for a fact experienced people want to help micro-enterprises and while parachuting experts in from time-to-time may be better then nothing, it isn’t a true fix.
Having spent some time bouncing around emerging markets, I can see what kind of important tool business mentoring is for development. I don’t have an answer here, maybe as internet video technology spreads farther and wider it will be easier to do C-BAM type events.
Small Business - Teaching Business Basics in the Developing World - NYTimes.com
C-BAM: Mentoring Canadian start-ups, Silicon Valley-style
I’ve written here and elsewhere that a main problem with the start-up communities in different parts of the world (both developed and emerging) isn’t the lack of capital, it is the lack of mentoring. While it may seem counter-intuitive in this age of “credit crisis”, the world is actually flush with capital opportunities if you have the right business plan.
Aye, there’s the rub, coming up with a business plan that investors will feel comfortable with. A lot of the times you come across great ideas, interesting technologies but weak companies and inexperienced (although usually very enthusiastic) management teams.
This is where mentoring comes in. An experienced mentor can help a start-up get its business plan in order and can provide an inexperienced/enthusiastic management team with the sage advice and coaching that will calm a rattled investors’ nerves.
Enter C-BAM!
C-BAM stands for Canada-Bay Area Mentoring (goofy name I know, it was the best I could come up with at the time) and the goal is to provide some Silicon Valley style advice to promising start-ups up in Canada.
The program is exciting to me because it uses technology to bring business mentoring to a whole new level. Although this is not a Cisco event, we used Cisco’s Telepresense (TP) to link up mentors in the Bay Area and start-ups in Canada (in our first instance, in Ottawa.) The start-ups pitched their companies via TP and got real-time feedback from a super group of experienced Canadian Bay Area-based executives and VCs.
(If you think there aren’t a lot of fantastically talented Canadian executives and VCs in the Bay Area, I challenge you to come down here, pick up a rock, throw it and try not to hit one. It can’t be done, I’ve tried.)
We had the first C-BAM last week and I think (hope) we were able to provide some real value to the participating start-ups. We looked at start-ups in the mobile, video conferencing and semiconductor optimization spaces. I have to say the companies were far more sophisticated than I had anticipated, so the discussions happened at a really advanced level.
We still have a few kinks to work out in the overall format but we’re continuing to plan future events, so I’m sure C-BAM will get better in each iteration.
Aye, there’s the rub, coming up with a business plan that investors will feel comfortable with. A lot of the times you come across great ideas, interesting technologies but weak companies and inexperienced (although usually very enthusiastic) management teams.
This is where mentoring comes in. An experienced mentor can help a start-up get its business plan in order and can provide an inexperienced/enthusiastic management team with the sage advice and coaching that will calm a rattled investors’ nerves.
Enter C-BAM!
C-BAM stands for Canada-Bay Area Mentoring (goofy name I know, it was the best I could come up with at the time) and the goal is to provide some Silicon Valley style advice to promising start-ups up in Canada.
The program is exciting to me because it uses technology to bring business mentoring to a whole new level. Although this is not a Cisco event, we used Cisco’s Telepresense (TP) to link up mentors in the Bay Area and start-ups in Canada (in our first instance, in Ottawa.) The start-ups pitched their companies via TP and got real-time feedback from a super group of experienced Canadian Bay Area-based executives and VCs.
(If you think there aren’t a lot of fantastically talented Canadian executives and VCs in the Bay Area, I challenge you to come down here, pick up a rock, throw it and try not to hit one. It can’t be done, I’ve tried.)
We had the first C-BAM last week and I think (hope) we were able to provide some real value to the participating start-ups. We looked at start-ups in the mobile, video conferencing and semiconductor optimization spaces. I have to say the companies were far more sophisticated than I had anticipated, so the discussions happened at a really advanced level.
We still have a few kinks to work out in the overall format but we’re continuing to plan future events, so I’m sure C-BAM will get better in each iteration.
Tuesday, June 16, 2009
Reaching out to emerging markets
Fantastic piece inthe Globe on Canada’s need to expand its economic and commercial horizons beyond the US. This has been a refrain for some time now but the writer nicely summarizes the key points. As I deal in emerging markets investments for a large US firm this topic is of particular interest to me. At conferences and in conversations, Canada is noticeable absent from the emerging markets dialog.
Canada does not have a holistic strategy on how to engage emerging markets. I use the word “holistic” because it needs to include Canada’s foreign policy and international trade interests. It seems to me that there is a separation of church and state in Canada around foreign policy and trade. In our economically interconnected world, this separation is not a sophisticated strategy. With a relatively strong banking sector, Canada has the unique opportunity to use its national balance sheet to create economic and policy linkages in the emerging markets.
Don’t forget, the emerging markets are going through a recession because the West, a main customer, is going through a recession. But there isn’t a fundamental crisis of finance in the emerging markets as there is in the West (an ironic twist of fate, one could say.) So the emerging markets remain open to do business with whoever still has capital.
Despite current challenges, Canada still has capital, but it is not seizing the opportunity to use it and expand its economic and political influence.
Some thoughts on what the writer said:
By 2050, China and India are set to be the No. 1 and No. 3 economies in the world by GDP, and together will be larger than the G7 combined.
Yes, but the US is still #2, so let’s not get too ahead of ourselves. And if we look at GDP per capita, the US will remain number 1 for a very long time.
Moreover, the emerging patterns of global trade, travel and investment are increasingly multidirectional - from China to Africa, Brazil to India and no longer guaranteed to flow through the once dominant hubs of Europe and the United States.
Great point. All Western countries, not just Canada, need to better understand this trend.
Our competitors are cued up with active strategies and we risk losing out if we do not act quickly and with focus.
The US and Europe have diverse strategies that engage the emerging markets with a combination of aid, expertise, commercial contacts, loans, equity investments, technology sharing, JVs, the list goes on and on. It involves national governments and companies together creating linkages in the emerging markets and using a portfolio of investments, loans and grants to win influence and business. Canada doesn’t seem to get this.
The structural advantage is we have a good story for the times. Canada's relative financial stability amidst crisis, our advanced resource markets, quiet excellence in many of the emerging 21st-century technology areas, from clean tech to agriculture, in addition to the advantage that comes from our diversity, make for a compelling story that, if marketed well, will find ready global audiences.
Agreed
Being a destination and source of trade with India is essential - but better still, we need to be part of India's strategy for Brazil. Innovative trade and corporate strategies should be focused on building these trade triangles.
Genius.. This man for PM.
An effective diversification strategy requires focusing even greater corporate and public diplomatic resources on three key markets: Latin America, China and India.
What can I add?
To send the right signal to corporate India, Canadian business needs to take the lead and support the call for a "comprehensive economic partnership agreement" - a pathway to free trade. We should start simply by focusing on free trade in services and leave the other more contentious issue like agriculture off the table.
I agree in theory, but wonder if this will work in practice. Can Canadian businesses take the lead in building these sorts of economic partnerships? Perhaps, unfortunately, business waits too long and government must lead. That seems like a more Canadian way.
We are late to the party in these emerging markets. To jump ahead in the queue, Canada needs to get ahead of its peers with a co-ordinated public diplomacy strategy enabling us to tell a compelling 21st-century Canadian story, streamlining the cacophony of messages from our various levels of governments.
…and business communities.
Canada does not have a holistic strategy on how to engage emerging markets. I use the word “holistic” because it needs to include Canada’s foreign policy and international trade interests. It seems to me that there is a separation of church and state in Canada around foreign policy and trade. In our economically interconnected world, this separation is not a sophisticated strategy. With a relatively strong banking sector, Canada has the unique opportunity to use its national balance sheet to create economic and policy linkages in the emerging markets.
Don’t forget, the emerging markets are going through a recession because the West, a main customer, is going through a recession. But there isn’t a fundamental crisis of finance in the emerging markets as there is in the West (an ironic twist of fate, one could say.) So the emerging markets remain open to do business with whoever still has capital.
Despite current challenges, Canada still has capital, but it is not seizing the opportunity to use it and expand its economic and political influence.
Some thoughts on what the writer said:
By 2050, China and India are set to be the No. 1 and No. 3 economies in the world by GDP, and together will be larger than the G7 combined.
Yes, but the US is still #2, so let’s not get too ahead of ourselves. And if we look at GDP per capita, the US will remain number 1 for a very long time.
Moreover, the emerging patterns of global trade, travel and investment are increasingly multidirectional - from China to Africa, Brazil to India and no longer guaranteed to flow through the once dominant hubs of Europe and the United States.
Great point. All Western countries, not just Canada, need to better understand this trend.
Our competitors are cued up with active strategies and we risk losing out if we do not act quickly and with focus.
The US and Europe have diverse strategies that engage the emerging markets with a combination of aid, expertise, commercial contacts, loans, equity investments, technology sharing, JVs, the list goes on and on. It involves national governments and companies together creating linkages in the emerging markets and using a portfolio of investments, loans and grants to win influence and business. Canada doesn’t seem to get this.
The structural advantage is we have a good story for the times. Canada's relative financial stability amidst crisis, our advanced resource markets, quiet excellence in many of the emerging 21st-century technology areas, from clean tech to agriculture, in addition to the advantage that comes from our diversity, make for a compelling story that, if marketed well, will find ready global audiences.
Agreed
Being a destination and source of trade with India is essential - but better still, we need to be part of India's strategy for Brazil. Innovative trade and corporate strategies should be focused on building these trade triangles.
Genius.. This man for PM.
An effective diversification strategy requires focusing even greater corporate and public diplomatic resources on three key markets: Latin America, China and India.
What can I add?
To send the right signal to corporate India, Canadian business needs to take the lead and support the call for a "comprehensive economic partnership agreement" - a pathway to free trade. We should start simply by focusing on free trade in services and leave the other more contentious issue like agriculture off the table.
I agree in theory, but wonder if this will work in practice. Can Canadian businesses take the lead in building these sorts of economic partnerships? Perhaps, unfortunately, business waits too long and government must lead. That seems like a more Canadian way.
We are late to the party in these emerging markets. To jump ahead in the queue, Canada needs to get ahead of its peers with a co-ordinated public diplomacy strategy enabling us to tell a compelling 21st-century Canadian story, streamlining the cacophony of messages from our various levels of governments.
…and business communities.
Monday, April 06, 2009
Investment in addition to aid
I’m not sure I agree with much of this WSJ article, but hidden within this anti-IDB opinion is I think a valuable point, that creating an environment to attract investment, not just aid, is key for a country’s development.
Those developing countries that are the most attractive for investment are those with a stable local market, an educated population, and those that facilitate a way to both protect and safely deploy capital.
Developing countries (especially those that don’t happen to be China or India) need to demonstrate to international investors that the government is on their side when it comes to protecting capital.
People and institutions that put money in emerging markets are not risk-takers, they are in fact very risk-averse (or at least, the smart ones are.) So if these risk-averse investors find a developing country where they see a reasonably safe way to deploy and grow their capital---allowing them to put money in and take it out, to find and invest in promising enterprises, to work with trustworthy local partners—then the country will not only benefit from the money that comes in, but also from the talent and know-how that often accompanies these types of investment.
Latin America Needs Economic Liberalization and Property Rights, Not Foreign Aid - WSJ.com
Those developing countries that are the most attractive for investment are those with a stable local market, an educated population, and those that facilitate a way to both protect and safely deploy capital.
Developing countries (especially those that don’t happen to be China or India) need to demonstrate to international investors that the government is on their side when it comes to protecting capital.
People and institutions that put money in emerging markets are not risk-takers, they are in fact very risk-averse (or at least, the smart ones are.) So if these risk-averse investors find a developing country where they see a reasonably safe way to deploy and grow their capital---allowing them to put money in and take it out, to find and invest in promising enterprises, to work with trustworthy local partners—then the country will not only benefit from the money that comes in, but also from the talent and know-how that often accompanies these types of investment.
Latin America Needs Economic Liberalization and Property Rights, Not Foreign Aid - WSJ.com
Friday, January 16, 2009
Canada's old economy vs new economy
Old Economy:
Canada's oil bust | A sticky ending for the tar sands | The Economist
New Economy:
Better Place to create electric car infrastructure in Canada
Oil, of course will come back... this price drop is temporary and as we work through this recession demand and prices will rise; and there will probably be more EV company flame-outs than huge sucesses (although Better Place looks promising).
Don't get me wrong, I have no illusions that Canada's economy will totally evolve from a resource-based one to an R&D-based one (although that would be nice.) But any investment the country makes in bits and bytes is more sustainable, more forward thinking and is more in keeping with developing a 21st century economy than any investment in rocks and trees.
Canada's oil bust | A sticky ending for the tar sands | The Economist
New Economy:
Better Place to create electric car infrastructure in Canada
Oil, of course will come back... this price drop is temporary and as we work through this recession demand and prices will rise; and there will probably be more EV company flame-outs than huge sucesses (although Better Place looks promising).
Don't get me wrong, I have no illusions that Canada's economy will totally evolve from a resource-based one to an R&D-based one (although that would be nice.) But any investment the country makes in bits and bytes is more sustainable, more forward thinking and is more in keeping with developing a 21st century economy than any investment in rocks and trees.
Monday, September 29, 2008
Dani Rodrik's weblog: How to invest in Africa, really quickly
Interesting how different ideas around development are coming to the fore. Here is another DIY microfinance through the Center of International Development at Harvard. Actually, I'm more interested in hearing about their plans for the "Empowerment Lab".
Dani Rodrik's weblog: How to invest in Africa, really quickly
Dani Rodrik's weblog: How to invest in Africa, really quickly
Sunday, September 14, 2008
Canada didn't invest, so now it must pay
Sadly, Canada didn't use the recent good times in commodities to invest in other industries and further diversify its economy. The country remained stuck in its rut of relying on exporting rocks and trees for economic growth. Well, with the global slow-down happening, I'm afraid that party is over (or at least feeling super gross with a wicked hangover).
Canada could have taken its surpluses, its stronger currency and its commodities revenues to make some strategic investments. But it passed on that opportunity and now maybe future opportunities will pass on Canada.
ViewsWire
Canada could have taken its surpluses, its stronger currency and its commodities revenues to make some strategic investments. But it passed on that opportunity and now maybe future opportunities will pass on Canada.
ViewsWire
Monday, August 04, 2008
Entrepreneurship | Spreading the gospel | Economist.com
Another example of using entrepreneurship and market forces as tools for global development.
I highlight this example and examples such as Digicel not to discredit more traditional forms of development (although those models could use a re-working), but to illustrate that developments needs a portfolio approach.
There is no one model (for-profit or non-profit) that can help raise people out of poverty. Rather it takes the efforts of many different organizations, with different goals and motivations to really raise the lot of the global poor. For too long perhaps we have focused on the non-profit model and it is now clear that some of the most exciting thinking is coming out of the for-profit world.
I highlight this example and examples such as Digicel not to discredit more traditional forms of development (although those models could use a re-working), but to illustrate that developments needs a portfolio approach.
There is no one model (for-profit or non-profit) that can help raise people out of poverty. Rather it takes the efforts of many different organizations, with different goals and motivations to really raise the lot of the global poor. For too long perhaps we have focused on the non-profit model and it is now clear that some of the most exciting thinking is coming out of the for-profit world.
Tuesday, July 29, 2008
Barefisted development
Great story on Digicel, a company that has a very barefisted approach to development and market creation. They (apparently) go into a country, develop their infrastructure and sell mobile phones to the masses, all before the government knows what is going on. The gamble is that when people get their mobiles, they are not willing to give them up without a fight.
Fun business model, but it is perhaps not for the faint at heart.
Babble Rouser - Forbes.com
Fun business model, but it is perhaps not for the faint at heart.
Babble Rouser - Forbes.com
Monday, June 02, 2008
When Shakira Calls, Even the Shy Appear - New York Times
The rise of PPP-- new private, public and pop-star partnerships in LatAm.
When Shakira Calls, Even the Shy Appear - New York Times
When Shakira Calls, Even the Shy Appear - New York Times
What Microloans Miss: Financial Page: The New Yorker
The problem is a dearth not just of lenders but also of people willing to buy an ownership stake in companies, like the angel investors and venture capitalists that American entrepreneurs often rely on.
This has been a theme in some of the recent literature on development, that a more VC approach needs to be taken to promote the founding and expanding of SMBs in emerging countries.
The relationship between lender and SMB is transactional, with the lender only interested in getting back the principle plus interest.
With interests aligned around the success of an enterprise, however, a unique symbiotic relationship forms between owner and manager (when the process works well.) This encourages sharing of resources, contacts and business ideas.
What Microloans Miss: Financial Page: The New Yorker
This has been a theme in some of the recent literature on development, that a more VC approach needs to be taken to promote the founding and expanding of SMBs in emerging countries.
The relationship between lender and SMB is transactional, with the lender only interested in getting back the principle plus interest.
With interests aligned around the success of an enterprise, however, a unique symbiotic relationship forms between owner and manager (when the process works well.) This encourages sharing of resources, contacts and business ideas.
What Microloans Miss: Financial Page: The New Yorker
Thursday, May 29, 2008
7 billion development experts worldwide
The end of the “development expert” paradigm does not mean the end of hope for development. Development is already gradually ending poverty (global poverty rates have fallen by more than half in the past three decades) – not be- cause of development experts such as those who wrote the World Bank Growth Commission report – but thanks to more freedom for more of the 6.7bn individual development experts alive today.
Couldn't agree more.
FT.com / Comment & analysis / Comment - Trust the development experts – all 7bn
Couldn't agree more.
FT.com / Comment & analysis / Comment - Trust the development experts – all 7bn
Palestinians pin biz hopes on high-tech industry - Yahoo! News
The question of the Middle East is obviously a very complex one, but I have to think that economic development that provides jobs and financial security has to be a good thing. It looks like a number of innovators in both Israel and Palestine agree and are putting money and expertise to help build an indigenous Palestinian IT industry.
Palestinian information technology is still in its infancy with just two dozen software houses, a few thousand engineers and $15 million in exports a year.
I have to admit, these numbers surprised me. I didn't think the Palestinian IT industry was even this big. It looks like a very positive development.
Palestinians pin biz hopes on high-tech industry - Yahoo! News
Palestinian information technology is still in its infancy with just two dozen software houses, a few thousand engineers and $15 million in exports a year.
I have to admit, these numbers surprised me. I didn't think the Palestinian IT industry was even this big. It looks like a very positive development.
Palestinians pin biz hopes on high-tech industry - Yahoo! News
Monday, April 14, 2008
Food inflation and biofuels
Food inflation is terrible but even more worrying are some of the steps being taken in an attempt to manage it.
Run-down on the whole problem in this article: Food Inflation, Riots Spark Worries for World Leaders
Here are some money quotes:
The global effect of export barriers, however, is to drive food prices even higher than they would be otherwise. Such policies "distort global prices," said Mr. Simsek, the Turkish finance minister, in an interview.
Yep, totally agree.
During informal conversations and interviews, ministers mainly agreed that the U.S. policies on biofuels were especially harmful. U.S. ethanol is made from corn, which, ministers said, could be exported to feed the hungry, and benefited from tariffs that block Brazilian ethanol, which is produced much more efficiently from sugar cane.
Ummm... Where have I heard that before?
Run-down on the whole problem in this article: Food Inflation, Riots Spark Worries for World Leaders
Here are some money quotes:
The global effect of export barriers, however, is to drive food prices even higher than they would be otherwise. Such policies "distort global prices," said Mr. Simsek, the Turkish finance minister, in an interview.
Yep, totally agree.
During informal conversations and interviews, ministers mainly agreed that the U.S. policies on biofuels were especially harmful. U.S. ethanol is made from corn, which, ministers said, could be exported to feed the hungry, and benefited from tariffs that block Brazilian ethanol, which is produced much more efficiently from sugar cane.
Ummm... Where have I heard that before?
Friday, April 04, 2008
For good and for profit
An article in the NYT talks about the controversy surrounding Compartamos, a publicly traded for-profit microlender in Mexico. I don’t know anything about Compartamos, so I won’t defend them directly. But I will take on the criticism that they are making too much profit off the backs of their clients, who are poor micro-borrowers.
But Compartamos’s decision to go public last April became a flashpoint in what had been a genteel debate over how microfinance could tap into the financial markets’ vast resources. The initial public offering gets special mention at every microfinance conference, and has been condemned by Mr. Yunus, the Nobel laureate.
Alex Counts, president of the Washington-based Grameen Foundation said Compartamos’s poor clients “were generating the profits but they were excluded from them.”
They key point in my opinion is made here in the story:
After Compartamos became a for-profit company in 2000, costs fell as efficiencies increased, but the bank kept interest rates high. On average, customers pay an annual interest rate of almost 90 percent, which includes 15 percent in government tax. In much of the world, microfinance interest rates range from 25 to 45 percent. But in Mexico, high costs, inefficiency and limited competition keep interest rates much higher. Compartamos’s rates are only a few percentage points higher than Pro Mujer’s, for example.
Simply put, in their quest to become profitable, Compartamos has become a highly efficient lender. As other microlenders were non-profit and not as efficient, Compartamos could afford to offer essentially the same market rates as the other lenders and pocket some money for themselves and their shareholders.
If Compartamos can offer essentially the same service as other banks, then it is hard to see how they are taking advantage of their customers. Sure, rates are high (90%?!?!?!?!...geez!), but all microlenders are offering similar rates.
The answer here is not to discourage for-profit microlender, but to encourage it! Hopefully others will see Camportamos’ success and seek to replicate it. This will bring more for-profit players into the market and in their quest to compete, they will begin to offer loans at lower rates.
After Success, Problems for Microfinancing in Mexico
But Compartamos’s decision to go public last April became a flashpoint in what had been a genteel debate over how microfinance could tap into the financial markets’ vast resources. The initial public offering gets special mention at every microfinance conference, and has been condemned by Mr. Yunus, the Nobel laureate.
Alex Counts, president of the Washington-based Grameen Foundation said Compartamos’s poor clients “were generating the profits but they were excluded from them.”
They key point in my opinion is made here in the story:
After Compartamos became a for-profit company in 2000, costs fell as efficiencies increased, but the bank kept interest rates high. On average, customers pay an annual interest rate of almost 90 percent, which includes 15 percent in government tax. In much of the world, microfinance interest rates range from 25 to 45 percent. But in Mexico, high costs, inefficiency and limited competition keep interest rates much higher. Compartamos’s rates are only a few percentage points higher than Pro Mujer’s, for example.
Simply put, in their quest to become profitable, Compartamos has become a highly efficient lender. As other microlenders were non-profit and not as efficient, Compartamos could afford to offer essentially the same market rates as the other lenders and pocket some money for themselves and their shareholders.
If Compartamos can offer essentially the same service as other banks, then it is hard to see how they are taking advantage of their customers. Sure, rates are high (90%?!?!?!?!...geez!), but all microlenders are offering similar rates.
The answer here is not to discourage for-profit microlender, but to encourage it! Hopefully others will see Camportamos’ success and seek to replicate it. This will bring more for-profit players into the market and in their quest to compete, they will begin to offer loans at lower rates.
After Success, Problems for Microfinancing in Mexico
Subscribe to:
Comments (Atom)