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Begin New Search Topic Development Content Type Working Paper Publication Year within 5 Years

101. How Huawei’s Localization in North Africa Delivered Mixed Returns

Author:
Tin Hinane El Kadi
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Trade between China and North Africa has increased significantly since the early 2000s, but it has largely reproduced patterns of unequal exchange. Since they were unveiled, the Belt and Road Initiative (BRI) and the Chinese government’s 2016 Arab Policy Paper have signaled the promise of a qualitative shift in China’s engagement with the region. China has committed to increase investments in high-value-added sectors and to boost cooperation in science and technology with countries across North Africa. The digital space is a notable aspect of recent China–North African partnerships. Chinese tech firms are becoming ever more important actors in North Africa through the Digital Silk Road, the digital component of the BRI. North African governments see the Digital Silk Road as an opportunity to help bridge the digital divide and bolster their own national efforts to build digital economies and create high-quality jobs for the millions of unemployed university graduates across the region. In recent years, the region has become home to notable Digital Silk Road projects such as smart cities, satellite navigation centers, data centers, and network infrastructure. Huawei’s localization strategies in Algeria and Egypt show that, far from imposing a one-size-fits-all blueprint on other countries, as Beijing is often depicted as doing in U.S. and European media and policy discussions, Chinese tech players adapt their engagement depending on local development agendas. Flexibility, customization, and services tailored to local demand have been cornerstones of Huawei’s localization strategies in North Africa. Accommodating local development priorities is central to Huawei’s success in globalizing its business ventures. The Chinese firm has responded favorably to Algeria’s and Egypt’s attempts to leverage foreign companies for conducting more value-added activities within their respective economies. Among other things, Huawei opened its first African factory in Algeria, employing Algerians to assemble products for and beyond the Algerian market. It also launched an OpenLab for conducting research and development (R&D) activities in Egypt and established partnerships with several universities in the region to train local students. However, closer scrutiny of Huawei’s localization in both Algeria and Egypt indicates that the company improved its brand image without engaging in meaningful capacity building. For all its success at winning the hearts of government officials across the region, Huawei has engaged in training, manufacturing, and R&D in a way designed to maintain the firm’s technological edge. The Chinese tech giant has managed to localize seemingly developmental activities in North Africa without contributing much to technological upgrading. North African governments should take lessons from China’s playbook of how it became a technological superpower. This means adopting policies that could maximize the benefits of Chinese and non-Chinese investments by ensuring positives spillovers and protecting potential local tech champions. Increasing economic integration across North African countries and moving beyond fragmented bilateral commercial negotiations with China are two steps that may help level the playing field with the Asian giant.
Topic:
Development, Science and Technology, Telecommunications, Huawei, and Digital Space
Political Geography:
China, Asia, Algeria, North Africa, and Egypt

102. The World Bank, the IMF, and the GATT/WTO: Which institution most supported trade reform in developing economies?

Author:
Douglas A. Irwin
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The 1980s and 1990s saw a policy revolution in developing countries in which many highly protected (if not closed) economies were opened to world trade. These reforms were largely undertaken unilaterally, but international economic institutions such as the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade/World Trade Organization supported these efforts. This paper examines the ways in which these institutions promoted, or failed to promote, trade policy reform during this pivotal period.
Topic:
Development, World Bank, Reform, Trade, IMF, and WTO
Political Geography:
Global Focus

103. A feminist approach to Australian Overseas Development Assistance?

Author:
Annabel Dulhunty
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
International Women's Development Agency (IWDA)
Abstract:
Over the past nine years, the Australian aid program has suffered extensive budget cuts, lost significant development expertise within the Department of Foreign Affairs and Trade (DFAT) after the integration of AusAID, and seen significant reprioritisation of its objectives due to the emergence of COVID-19. Despite these setbacks, however, gender equality and women’s empowerment seemingly remain important to the aid program. Why then is a feminist foreign policy needed for Australia and its aid program?
Topic:
Foreign Policy, Development, Feminism, and Development Assistance
Political Geography:
Australia

104. Does aid fragmentation affect tax revenue dynamics in developing countries? Observations with new tax data

Author:
Ali Compaoré and Abrams M. E. Tagem
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
There exists a burgeoning empirical literature on the impact of aid fragmentation on development outcomes in aid-receiving countries, with it being widely recognized that aid fragmentation is deleterious. This paper adds to the existing literature by estimating the impact of aid fragmentation on tax revenue mobilization in developing countries. Drawing on the popular system generalized method of moments technique to counter endogeneity issues, this study focuses on a sample of 90 developing countries covering the period from 2000 to 2020. We show that aid fragmentation, measured by the Herfindahl index, has a significant negative impact on recipient countries’ tax revenue ratios, an impact that is not mitigated by the level of institutional quality. The paper also explores the impact of aid fragmentation on tax structure and finds convincing evidence that direct taxes, particularly corporate income taxes, are the most affected. Value-added tax is the only indirect tax affected by aid fragmentation.
Topic:
Development, Tax Systems, Institutions, and Revenue
Political Geography:
Global Focus

105. Employer power and employment in developing countries

Author:
Nancy H. Chau, Ravi Kanbur, and Vidhya Soundararajan
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The issue of employer power is underemphasized in the development literature. The default model is usually one of competitive labour markets. This assumption matters for analysis and policy prescription. There is growing evidence that the competitive labour markets assumption is not valid for employment in developing countries. Our objective in this paper is to review this evidence, to present theoretical and policy perspectives that follow from it, and to highlight areas for further research.
Topic:
Development, Employment, and Labor Market
Political Geography:
Global Focus

106. The Business Case for the Sustainable Development Goals: An Empirical Analysis of 21 Danish Companies' Engagement with the SDGs

Author:
Michael W. Hansen, Henrik Gundelach, and Erik Johnson
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
This paper explores why business engage with the SDG agenda, with a view to understanding the business case for the SDGs. Building on and extending the responsibility literature’s discussion of the business case for responsibility, the paper develops a conceptual framework for analyzing why business engage with the SDGs. This framework is employed to analyze why a sample of 21 Danish companies decided to engage with the SDG agenda. The analysis finds that most companies view the SDGs as a platform for achieving rather conventional business goals such as mitigating risk, saving costs, and differentiating products and services. However, in a few cases, companies use the SDGs as a lever for carving out uncontested positions in future markets. The paper concludes that companies overwhelmingly view the SDGs as a business opportunity rather than as a business responsibility, something that fundamentally may distinguish the SDG agenda from previous responsibility agendas. The paper fills a gap in the extant literature on business responsibility by developing and validating a classification of the business case for the SDGs based on economic value drivers, and by deepening the empirical understanding of, what precisely this business case may be.
Topic:
Development, Economics, Sustainable Development Goals, Business, and Social Responsibility
Political Geography:
Europe and Denmark

107. Space Technologies Key to the EU's Fight Against Climate Change

Author:
Aleksandra Kozioł
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
Launched in March 2022, the Destination Earth initiative to create a digital model of the Earth confirms the importance of space technologies in the EU’s green and digital transformations. The consequences of climate change, such as droughts, fires, and floods, reduce the security of citizens and cause economic losses. The dissemination of applications using satellite data will increase the effectiveness of climate action and sustainable development in the EU.
Topic:
Climate Change, Development, Science and Technology, and European Union
Political Geography:
Europe

108. Characterisation of Danish agricultural investments in Tanzania and Uganda

Author:
Rikke Broegaard, Helle Monk Ravnborg, Evelyne Lazaro, Teddy Nakanwagi, and David Tumusiime
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Danish Institute for International Studies (DIIS)
Abstract:
This DIIS Working Paper presents key characteristics of each of the six cases including main crop focus, size and business model, as well as types of investors, their investment approach and the factors that motivate them. It also presents the different objectives that the investors have expressed wanting to achieve. As most of the investments involve private funds, it is reasonable to expect that one important goal is to ensure a viable economy in the investment. However, in addition to an economically sound investment, all of the investors behind these six cases have ambitions regarding ways in which they see themselves - through the investment - as contributors towards a positive societal development in the area of the investment. Thus, the paper presents the different ways the investors see their investments contributing to development in the area. The paper is based on interviews with the investors and field work in the areas of investments.
Topic:
Agriculture, Development, Environment, Poverty, Natural Resources, Food, Inequality, Investment, and Land Rights
Political Geography:
Europe, Denmark, Tanzania, and Africa

109. Private Insurance, Public Welfare, and Financial Markets: Alpine and Maritime Countries in Comparative-Historical Perspective

Author:
A. van der Heide and S. Kohl
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Contemporary capitalist societies use different institutions to manage economic risks. While different public welfare state and financial institutions (banks, capital markets) have been studied across coordinated and liberal market economies, this paper adds the private insurance sector to the study of countries’ security arrangements, following up on Michel Albert’s classical distinction between Alpine and Maritime insurance cultures. Building on extensive new insurance data collections (1880–2017) and institutional analysis, this paper corroborates the long-run historical existence of two worlds of private insurance. Maritime countries (USA, GBR, CAN) developed much bigger life and non-life insurance earlier, with no state-associated insurance enterprises and riskier investments steered towards financial markets. Alpine insurance (AUT, DEU, CHE), by contrast, was initially smaller, with strong state involvement, a significant reinsurance tradition and relatively heavy investments in mortgages and property, due to economic and financial backwardness. We argue that the larger and more “Maritime” the insurance sector, the more it made welfare states liberal and securities markets large. Insurance is thus a hidden factor for countries’ varieties of capitalism and world of welfare. The recent convergence on the Maritime model, however, implies that the riskier and risk-individualizing type of private insurance has added to privatization and securitization trends everywhere.
Topic:
Development, Capitalism, Finance, and Welfare
Political Geography:
Global Focus

110. China’s Infrastructure Projects in the Middle East: Lessons from China’s Engagement Elsewhere

Author:
Dominika Urhová
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Moshe Dayan Center for Middle Eastern and African Studies
Abstract:
In our latest issue of Iqtisadi, Ms. Dominika Urhova discusses the economic strategy and role of China in the Middle East, and analyzes the implications of China's growing influence in the region.
Topic:
Foreign Policy, Development, Economics, Belt and Road Initiative (BRI), and Strategic Engagement
Political Geography:
China, Middle East, and Asia

111. Country, Culture or Competition - What Drives Attitudes Towards Immigrants in Sub-Saharan Africa?

Author:
Malte Becker, Ralf Krüger, and Tobias Heidland
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Sub-Saharan Africa is becoming an increasingly important destination for international migration. The region hosts immigrants from other African countries and from other parts of the world, such as China. Given high poverty levels and weak social security systems in Sub-Saharan Africa, host populations might fear increasing competition for resources and labor, potentially resulting in negative attitudes towards immigrants. We provide the first systematic study of attitudes towards immigrants in Sub-Saharan African countries that uses a causal framework. Using a survey experiment in Uganda and Senegal, we study both attitudes towards immigrants in general and towards specific immigrant groups. In particular, we focus on Chinese immigrants, whose increasing presence in Africa is seen by many as the most important contemporary geopolitical shift involving the continent. We find that attitudes towards immigrants are mainly driven by sociotropic cultural and sociotropic economic concerns. Furthermore, immigrants from China are perceived less positively and economically more threatening than immigrants in general.
Topic:
Development, Migration, Immigration, Sustainability, and Attitudes
Political Geography:
Africa and China

112. Tracking Chinese Aid through China Customs: Darlings and Orphans after the COVID-19 Outbreak

Author:
Andreas Fuchs, Lennart Kaplan, Krisztina Kis-Katos, Sebastian Schmidt, Felix Turbanisch, and Feicheng Wang
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Since the outbreak of the COVID-19 pandemic, China's mask and vaccine diplomacy have been widely discussed, but the debate relies on a few stylized data points. This article introduces a systematic way to measure China's foreign aid in almost real-time through official customs records of exported aid goods. Our results show significant shifts in China's aid after the outbreak of the COVID-19 pandemic. First, medical aid skyrocketed after the outbreak. It was initially dominated by face masks and other protective equipment and later by vaccines. This came at the expense of non-medical aid, which was 16.3 percent below its pre-pandemic level. Second, China's aid became global, clearly extending beyond the Global South. Third, in the aftermath of the initial outbreak in March 2020, China's aid became less responsive to both recipient need and political friendship, which can be mainly attributed to the rise of aid through non-government sources. However, in the vaccine diplomacy period of 2021, economic needs and political factors have regained their original importance.
Topic:
Development, Diplomacy, Public Health, Vaccine, and COVID-19
Political Geography:
China and Asia

113. A Survey of Importers: Results of a Survey Conducted in Collaboration with the Ethiopian Economics Association

Author:
Ricardo Hausmann, Tim O'Brien, Tim Cheston, Nikita Taniparti, and Ibrahim Worku Hassen
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Ethiopia suffers from a chronic shortage of foreign exchange (forex).[1] The resulting lack of access to imports prevents firms from accessing imported inputs required for production. This creates a vicious cycle as exporters are constrained by this same problem, which further reduces overall supply of foreign exchange in the Ethiopian economy. The inability to reliably access foreign exchange for imports affects firm decisions on sourcing, capacity, and output. While the cost of this constraint is known to be high on the Ethiopian economy and firms are known to use a range of measures to attempt to bypass this constraint, quantitative assessments of the problem and response actions by firms are limited. It is in this context that an importer survey was conducted with the goal of informing policy decisions. A total of 202 firms with an active importing license were interviewed in March-April 2022. These firms were randomly sampled from firms registered with an importer license. All firms interviewed reported that they were operating below capacity, often well below capacity. Foreign exchange shortages were the main reason respondent firms cited for not operating at full capacity (63% of firms reporting this as their biggest constraint). Forex shortages far surpass the second and third reasons cited for not operating at full capacity — constraints due to the conflict (13%) and COVID-19 restrictions (11%). Firms operating below capacity cited forex shortages as the main constraint, regardless of whether they imported or not in the previous year. This was the most pressing constraint reported by firms of all sizes and sectors surveyed. It was the most pressing constraint faced by exporters and by foreign-owned firms as well as non-exporters and domestic firms. Amongst the total sample of firms with a renewed importer license, more than one-third of respondent firms (37%) had not imported in FY2020-21. Overall, 74% of firms reported experiencing challenges in accessing forex. Access to forex was reported as most challenging for manufacturing firms and smaller firms but impacted all sectors and firm sizes. The losses attributed to forex scarcity at the firm level were largest for agricultural firms, for micro-firms, and for firms that did not import at all in the previous year. In general, the larger the firm sales, the higher the likelihood that they were able import. The survey found different types of imports for different sectors. Manufacturing firms imported a large share semi-finished goods as imports as compared to agricultural firms that primarily imported finished goods. The survey results find that foreign exchange shortages and an inability to import are most severe for the manufacturing and agriculture sectors, small and micro-sized firms, and all non-exporters. However, the constraint is also the top problem facing all firm types in the survey, including exporters and foreign-owned firms. The primary means of accessing foreign exchange where it did occur was through specialized forex accounts or ‘diaspora’ accounts. The second most common means of accessing foreign exchange was through retention accounts available to exporters. The black market featured in many responses, but questions across the survey suggest that self-reported use of the black market by survey participants is underreported versus actual usage. The ability to source foreign exchange differed significantly by firm size. Exporting firms primarily used retention account earnings, as compared to non-exporters, which relied more on forex accounts. For faster access to forex, most firms reported that they approach banks, followed by turning to the black market. Friends and family abroad also served as a source of forex for one-quarter of firm respondents, and that foreign exchange was often used immediately. Foreign exchange access from banks is nevertheless a major pain point for firms. Most firms (55%) requested forex from a bank in the past year. On average, fulfilled forex requests took three months to be processed when they were fulfilled, but many firms reported that they have an unfulfilled request that has been in the system for more than a year. These firms are especially likely to report foreign exchange access as their top challenge. The survey finds that individual firms do not tend to use both official and black-market foreign exchange sources but rather tend to access all their forex at the (lower) official rate or all at the (higher) black-market. Large firms import most of their products at the official rate. By contrast, most small and micro firms import through other means. Manufacturing firms are also more likely to import all their production through other means and outside of the banking system. Non-exporting firms tended to import through other means than the official rate and outside of the banking system at a higher prevalence than exporting firms. The survey gleaned new insights on the implicit exchange rate that firms face as they navigate official and black-market channels of foreign exchange access. The survey does not allow for a precise estimate of the transaction-weighted exchange rate facing the economy but finds firm-level estimates align with previous macro-level estimates. The implicit exchange rate was higher for non-exporting firms, which show a greater willingness to pay a higher exchange rate to access imports. This signals the importance of the retention account for exporters to guarantee an import price closer to the official exchange rate. When asked about the maximum rate firms would pay to guarantee access to forex, some groups of firms were willing to pay higher amounts, including all non-exporters, firms that imported in the past year, and those that declared forex access a challenge. When compared to the implied rate they paid in the past year, many firms are willing to pay more than the implied rate to guarantee access to forex. Firm perspectives on policy changes to the exchange rate underscored challenges faced by policymakers. Current policy has been one of a crawling peg, with changes within the last several years to increase the rate of devaluation. The survey asked respondents about their support for faster devaluation, for a one-off movement to unify the official rate with the black-market rate, or about alternative exchange rate systems such as a floating exchange rate. Most respondents (71%) opposed maintaining the current regime, yet no option received majority support. Most firms appear to want both a stronger exchange rate and easier access to foreign exchange despite a tradeoff between these two priorities. The largest share of support for policy change was to adjust the exchange rate such that the official rate matches the black-market rate.
Topic:
Development, Economics, Imports, and Collaboration
Political Geography:
Africa and Ethiopia

114. Development in a Complex World: The Case of Ethiopia: A Compendium of Project Research on Advancing Economic Diversification in Ethiopia

Author:
Ricardo Hausmann, Tim O'Brien, Tim Cheston, Ibrahim Worku Hassen, and Can Soylu
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
This research compendium provides an explanation of Ethiopia’s fundamental economic challenge of slowing economic growth after an exceptional growth acceleration — a challenge that has been compounded by COVID-19, conflict, and climate change impacts. Ethiopia has experienced exceptional growth since the early 2000s but began to see a slowdown in the capacity of the economy to grow, export, and produce jobs since roughly 2015. This intensified a set of macroeconomic challenges, including high, volatile, and escalating inflation. This compendium identifies a path forward for more sustainable and inclusive growth that builds on the government’s Homegrown Economic Reform strategy. It includes growth diagnostics and economic complexity research as well as applications to unpack interacting macroeconomic distortions and inform diversification strategies. Drawing on lessons from past success in Ethiopia and new constraints, this compendium offers insights into what the Government of Ethiopia and the international community must do to unlock resilient, post-conflict economic recovery across Ethiopia. The research across the chapters of this compendium was developed during the Growth Lab’s research project in Ethiopia from 2019 to 2022, supported through a grant by the United States Agency of International Development (USAID). This research effort, which was at times conducted in close collaboration with government and non-government researchers in Ethiopia, pushed the boundaries of Growth Lab research. The project team worked to understand to intensive shocks faced by the country and enable local capability building in the context of limited government resources in a very low-income country. Given the value of this learning, this compendium not only discusses challenges and opportunities in Ethiopia in significant detail but also describes how various tools of diagnostic work and economic strategy-building were used in practice. As such, it aims to serve as a teaching resource for how economic tools can be applied to unique development contexts. The compendium reveals lessons for Ethiopian policymakers regarding the country’s development path as well as numerous lessons that the development community and development practitioners can learn from Ethiopia.
Topic:
Development, Economic Growth, Diversification, and Structural Transformation
Political Geography:
Africa and Ethiopia

115. Two Birds, One Budget: Using ODA for Influence and Development in the Indo-Pacific?

Author:
Rachael Calleja, Sam Hughes, and Beata Cichocka
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper explores the UK’s proposed “Indo-Pacific tilt” from a development perspective. In light of recent cuts to the UK’s official development assistance (ODA), we ask how the UK can use scarce development resources in the Indo-Pacific more effectively to capitalise on opportunities to support strategic objectives while ensuring that ODA remains squarely focused on development priorities. Our analysis seeks to understand both how the UK is positioned within the Indo-Pacific, which is an already-crowded development landscape, as well as where the UK’s strategic and developmental priorities in the region might meaningfully overlap. We find that while there are some opportunities for the UK to support both development objectives and strategic interests concurrently in the Indo-Pacific—such as in the provision of regional and global public goods—the countries with the greatest strategic value to the UK are not those where additional ODA could contribute most clearly to poverty reduction. We conclude the paper with six policy recommendations. Among others, we propose that the UK should consider partnering with other like-minded providers to maximise its presence in the region.
Topic:
Development, International Cooperation, Infrastructure, and Influence
Political Geography:
United Kingdom, Europe, and Indo-Pacific

116. Addressing the “Root Causes” of Irregular Migration from Central America: An Evidence Agenda for USAID

Author:
Sarah Rose, Reva Resstack, Helen Dempster, Elisa Cascardi, and Jeremy Weinstein
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In recent decades, the number of people migrating irregularly from the three Northern Triangle countries of Central America—El Salvador, Guatemala, and Honduras—has been increasing, putting pressure on the Biden-Harris administration to address the root causes of irregular migration and deliver “results.” Evidence suggests that these countries are undergoing a demographic and economic transition, hence emigration pressure will likely remain for the coming decades. Yet there is much an entity like USAID, the United States’ largest development agency, can do to moderate the short-run drivers of irregular migration such as violence, climate shocks, lack of economic opportunity, and inaccessibility of legal migration pathways. In this policy paper, we outline the available evidence within these areas that is directly pertinent to irregular migration and identify key evidence gaps to be filled by future research and evaluation. We conclude by outlining five recommendations for how USAID can ensure its work is evidence-based and contributes to new learning, supporting policymakers in this field for decades to come.
Topic:
Development, Immigrants, USAID, Influence, and Migrants
Political Geography:
Central America, North America, Honduras, Guatemala, El Salvador, and United States of America

117. Mapping China’s Multilateralism: A Data Survey of China’s Participation in Multilateral Development Institutions and Funds

Author:
Scott Morris, Rowan Rockafellow, and Sarah Rose
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
A considerable body of recent research attempts to shed light on China’s bilateral aid and finance flows, but there have been fewer efforts focused on China’s participation in multilateral development channels. As a result, China’s role across the landscape of multilateral institutions and funds is poorly understood, even as China has emerged as a leading donor within many of these entities. Part of China’s increased multilateral engagement reflects its economic growth, with shareholding and assessed contributions based largely on economic size. But the government of China’s policy choices are also revealed, in part, through its patterns of voluntary funding, cooperation agreements, and influence through personnel instated in leadership positions. By collating data on China’s financial and non-financial engagement with multilateral development banks and other financial institutions, sector-based vertical funds, and the development entities of the United Nations, among others, this paper seeks to provide a clear picture of China’s role in the multilateral development system and the evolution of that role over the past decade. This assessment brings to light the weight of China’s voting power across the multilateral development banks, the extent to which Chinese firms benefit from procurement opportunities in multilateral institutions, and the degree to which China has achieved a singular position of being a large-scale donor and recipient in the multilateral system.
Topic:
Development, International Cooperation, Hegemony, and Multilateralism
Political Geography:
China and Asia

118. Navigating the Straits: Pull Financing for Climate and Development Outcomes

Author:
Ranil Dissanayake
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
An increasing share of official development assistance is being used for climate-related activities. This trend is continuing despite the lack of comprehensive cost-effectiveness evidence to guide spending decisions and continuing concerns that few applications are effective or efficient mechanisms for either climate or development outcomes. This represents both a waste of scarce resources and a missed opportunity. This paper proposes that a well-designed pull financing mechanism, which identifies specific problems for which it will pay a pre-specified price for solutions that can scale up, has the potential to navigate these problems. When they work, a pull instrument can solve problems at scale at low cost by incentivizing private innovators to produce a socially beneficial product that people want to buy and use. However, the design challenges associated with them are not trivial: firstly, the identification and selection of technologies or problems for which the pull financing facility would be a sufficiently large portion of the market to shift incentives for innovators or producers (for technologies that exist but have not been taken up widely yet); and secondly, the ability to design contracts that incentivize socially beneficial innovation that are bought and used. This paper sets out the case for pull financing for climate and development activities, the challenges that need to be addressed to do it well, criteria for judging potential applications of pull financing and an initial indication of some sectors to which pull financing may be applied.
Topic:
Climate Change, Development, Environment, and Finance
Political Geography:
Global Focus

119. Translating Results-Based Financing from Theory to Operational Reality: Lessons from the Practical Application of RBF at the European Commission

Author:
Rachel Silverman
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
esults-based financing (RBF) is one of several broad approaches to finance official development assistance (ODA) “that attempt[s] to connect at least a portion of payment to the verified achievement of results.” Despite some relatively high-profile programs and pilots—and broad interest and curiosity—RBF approaches have yet to penetrate the routine operations of large institutional grant- and contract-based funders, many of which are governed by complex bureaucracies, restrictive financial regulations, and deeply entrenched, risk-averse corporate cultures. The European Commission (EC) is one large and influential donor that has shown a long-standing interest in RBF approaches but is still in initial phases of implementation. Informed by a research partnership between the Center for Global Development (CGD) and EC Commission Directorate-General for International Partnerships (INTPA), this Policy Paper reflects on the experience and lessons learned in attempting to operationalize RBF at scale within a large funder of ODA, with important implications for the broader international development community. Starting at the macro level, it considers the institutional prerequisites for adoption of RBF within a donor agency—in this case, the European Commission/INTPA. It then zooms into the project-level design and negotiation process, including the choice of implementing partner (in this case a United Nations agency) and political and technical stumbling blocks. It concludes with a discussion of remaining challenges for broader use.
Topic:
Development, International Cooperation, Regional Cooperation, and Finance
Political Geography:
Europe

120. Are Development Finance Institutions Good Value for Money?

Author:
Paddy Carter
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Finance institutions take money from foreign aid budgets to invest in private enterprises. How much should they be given? We can make some progress on that question by looking at the return on investment in the form of higher real incomes for workers and customers, and comparing that to a cash transfer benchmark. There is considerable uncertainty, but what evidence we have suggests returns on investment are in a range that compares well to that benchmark. There is also a diversification argument that because we don’t know which of the things that aid can finance will ultimately prove most important for poverty eradication, aid allocation should hedge its bets. A low single digit percentage of aid allocated to increase the quantity and quality of private investment in low- and middle-income countries seems reasonable.
Topic:
Development, Foreign Aid, Finance, Investment, and Institutions
Political Geography:
Global Focus