PSD Blog - The World Bank Group

Agricultural FDI: Global land grab or good business?

Editor's Note: Kusi Hornberger is an Investment Policy & Promotion Specialist with the Investment Climate Advisory Services of the World Bank Group.

Despite the recent downturn in global FDI flows and predictions of gloomier times to come for cross border investment flows, there has been a recent increase in FDI by wealthy investors from resource poor countries. These investors have been snapping up large plots of land in developing countries for the development of agriculture exports. For the most part the deals have come from wealthy investors or state development funds in resource-poor countries into poor resource-rich countries, such as the lease of 30,000 hectares by the Abu Dhabi Fund for Development in Sudan.

Access to credit and employment protection legislation

Might access to credit have anything to do with support for employment protection legislation (EPL)? Felipe Balmaceda and Ronald Fischer propose a connection. Workers in firms with easy access to credit EPL. Workers in firms with shaky access to credit oppose EPL.

Their theoretical model deserves a more detailed treatment than I can offer here, but I’ll do my best to summarize briefly. Their paper is titled “Economic Performance, Creditor Protection and Labor Inflexibility” (ungated copy available here).

Consider the following two scenarios:

A little reality check on business and the internet in developing countries

Internet usage has been increasing at a rapid rate over the last decade or so. For example, according to World Development Indicators (WDI, World Bank), internet subscribers equaled 13% of the total population in low and middle income countries in 2007. This is up from a mere 1.5% in 2000, implying on average an increase of over 109% per annum in the proportion of internet subscribers.

There is a small but growing body of work that shows that the spread of internet can have a fairly strong positive effect on economic efficiency, functioning of markets and economic development in general (see, for example, Freund and Weinhold 2002, 2004).

A good number of these studies use a general purpose measure of internet penetration such as the number of internet subscribers, portals, websites, hosts, etc. For these measures to make sense, it is important they correlate well with internet usage for business or commercial purposes. Simply exchanging, for example, personal emails with friends is unlikely to have any significant impact on economic growth.

A Grameen group for education (and the end of knowledge management for development)?

Yesterday Dave Snowden published on his blog what is currently just an intriguing snippet - the idea of a Grameen group for learning (look forward to him expanding on the concept):

The basic idea is that you get your bursary as a progressive series of payments only if you form a learning group with other people in your community and you all take responsibility for each other group members completion of whatever education programme you take.

Today, Dave followed up with an insight into what "horizontal knowledge transfer" and innovation might mean in a development context:

Presidential medals and credit bureaus

Microfinance received a nice fillip recently when Muhammad Yunus was awarded the Presidential Medal of Freedom by U.S. President Barack Obama. While Yunus's rockstar status has helped put the access to finance agenda center stage, I wonder if it might obscure some of the hard work that goes on behind the scenes. Perhaps the phrase "credit bureaus" may not cause your heart to race, but in some countries this is really where the action is at.

The problem of the "development expert"

Last year Bill Easterly came out with some harsh criticism of the development community after the release of the Growth Commission report. The crux of Easterly's complaint: "this report represents the final collapse of the “development expert” paradigm that has governed the west’s approach to poor countries since the second world war." But the problem of the expert is not one that is limited to development institutions—it is a problem faced by all large organizations.

I'm continuing to make my way through Clay Shirky's brilliant Here Comes Everybody, and here is another great passage:

Business environment and the crisis

Could a good business environment help countries cope with the crisis? Razia Khan, Regional Head of Research for Africa at Standard Chartered Bank, seems to think so:

The crisis has already hit formal sector employment in Africa, especially in resource economies. Mine closures (some temporary, others not) have become more common. Increasingly, many in the labour force are opening their own businesses just to get by. There is still pronounced growth in the SME sector which is known for its resilience. In many cases, SMEs are doing better than their larger local corporate counterparts, who had greater access to formal financing, and have been more heavily impacted by the withdrawal of foreign bank lending. The picture is not entirely negative – whereas in the past companies may have preferred to do business with larger suppliers, new opportunities have been opened up for SMEs...

Through an Internet glass, darkly

Who hasn't tried Googling himself at least once? (Even former Presidents can't help themselves, apparently.) But the folks at MIT Media Lab thought that wasn't enough, so they have created a whole new way to present your online self through a website called Personas. Give it a try, you know you want to!

(Now, we just have to work a little harder to figure out more useful ways to mine all the data available via the web, like how to predict financial vulnerability indicators.)

(Hat tip: Giulio Quaggiotto)  

Non-habit forming development aid

Does too much aid lead countries to become aid dependent? Clearly this is a possibility, and one that some aid critics believe is an inevitability. But I wouldn't say that aid is necessarily habit forming. The key issue is whether the aid is sustainable—in other words, whether the recipient country is taking the necessary steps to wean itself off aid over the longer term. And that means private sector development, without which governments will never have a tax base to replace development aid.

The greatest unexploited resource

When I was growing up I heard a lot of stories about my grandfather. He died when I was a child so my recollection of him is a little hazy, but one thing sticks out very clearly in my mind: he believed in educating his daughters.

Not a stunning revelation perhaps, but it certainly made him unique for his place and time. He was a Pakistani Muslim born early last century, with two wives, 10 children, and very little money. And he believed it was more important for his six daughters to gain an education than his four sons. His sons, he felt, would eventually find their way in the world, but his girls might need a little extra help to level the playing field.