Month: July 2015

Zimbabwe’s Opportunity to Join the African Economic Success Story

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By Motoki Aoki

Long the pariah in Sub Saharan Africa’s economic integration, Zimbabwe has recently made an effort to re-engage with the global community. In February 2015, the EU lifted its 12-year sanction and resumed aid to Zimbabwe. In June, after a decade-long freeze, an IFC delegation visited Harare to seek ways to reinvigorate Zimbabwe’s private sector and help the country’s economy continue trending upwards after it shrank by nearly 40 percent from 2000 to 2008. After what was essentially a lost decade, leaders in Zimbabwe are now seeking long-term, inexpensive funding for the country’s economy and undercapitalized firms. They have found willing partners in multilateral institutions.

Zimbabwe GDP

The Political Landscape: The Root of Economic Underperformance

Zimbabwe has rich human capital, characterized by a high adult literacy rate of 86.5 percent. It is the political landscape, however, that Zimbabwean chief financial officers specify is the largest risk to business performance. Recognized as the world’s oldest leader, President Robert Mugabe will run for another term in 2018, when he will be 94 years old. Mugabe’s economic policies have been notoriously inconsistent and unfriendly to FDI. Continue reading →

Water Security in the Middle East: Good Practices and Sustainable Solutions

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By Miguel E. Eusse Bencardino

Water scarcity in the Middle East has long been an issue due to the area’s desert climate and lack of freshwater resources. While water access is a humanitarian issue, in this region it also carries enormous political importance. Despite efforts in previous peace negotiations to bring water security, more technical, institutional and political cooperation is needed. A new World Bank initiative aims to help spur this type of cooperation, with Israel at the helm.

Israel is internationally recognized for its ability to manage and deliver scarce water resources. Israel has built four desalination plants since 2005, and five more are expected to begin operations soon. Additionally, cooperation agreements with Jordan have improved the region’s water distribution infrastructure. Through desalinization of Mediterranean and Red Sea water (which accounts for 80% of Israel’s total water today), Israel has reached water stability.

Desal

Nitzana Desalinization Plant in Israel courtesy of Wikimedia Commons.

On June 17 Israel’s Ministry of Economy signed a $500,000 agreement with the World Bank to promote knowledge sharing on water issues through technical assistance, capacity building, and knowledge dissemination. Every World Bank Group member country aiming to improve its water resilience is eligible to participate; countries facing water stress are highly encouraged to take part.

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How Can Tunisia Stop Tax Evasion?

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By Ali Reza Sarwar

On June 22, the World Bank reported that Tunisia is losing at least US$1.2 billion due to tax evasion by enterprises belonging to well-connected elites. The report comes after the Tunisian government conducted a number of policy reviews to improve the tax collection system and stop further fraud.

The World Bank’s Development Policy Review explains that Tunisia’s tax collection system is fraught with complexity and under reports exports and imports. Furthermore, the system fails to capture revenue from the massive informal businesses sector, which has grown larger in recent years. Currently, tax revenues contribute to 20 percent of GDP and 80 percent of corporate taxation is made by only 1 percent of firms. This means that many corporations receive some form of political treatment or simply manage to operate outside of tax collection regulations.

Tunisians protest elite capture of the government during the Arab Spring. Photo courtesy of the World Bank.

Tunisians protest elite capture of the government during the Arab Spring. Photo courtesy of the World Bank.

This update on tax fraud comes at a time when Tunisia, once the region’s most thriving economy, is grappling with slow economic growth, rising unemployment, and frequent interruptions in overseas export markets. This includes Libya, Tunisia’s second economic partner after the European Union. Libya committed to supplying 25 percent of Tunisia’s fuel needs at a subsidized price, but cannot honor this agreement now. Additionally, a spate of recent terrorist attacks against tourists will serve as a blow to Tunisia’s tourism sector, which accounted for 15.2 percent of GDP in 2014.

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Preventing Violence Against Women in the DRC: A Lesson in Aid Effectiveness

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By Elizabeth Melampy

The Democratic Republic of the Congo (DRC) was coined the “rape capital of the world” by UN Special Representative of Sexual Violence in Conflict Margot Wallstrom after her 2010 visit. According to a study in the American Journal of Public Health, 48 women are raped per hour in the DRC. This statistic, as well as public outcry to news coverage of a 2012 mass rape in Minova, DRC, led to the UK’s Preventing Sexual Violence Initiative (PSVI).

As part of PSVI the UK organized a 2014 summit aimed at combatting sexual violence in conflict areas. Angelina Jolie, the special envoy for UNHRC and UK Foreign Secretary William Hague co-chaired the “Global Summit to End Sexual Violence in Conflict.” Over 120 countries, more than 100 NGOs and other international partners, and nearly 900 experts from various fields attended the summit in London.

Possible Caption: Thousands of Congolese live near Goma, DRC, where rape rates are still high. Photo courtesy of Marie Cacace/Oxfam 2012

Thousands of Congolese live near Goma, DRC, where rape rates are still high. Photo courtesy of Marie Cacace/Oxfam 2012

According to the summit report, there were four major areas of focus: strengthening accountability, providing support for victims (especially children), integrating and promoting gender equality, and improving strategic international cooperation. These topics provided the framework for recommendations, which were general in nature due to the global focus of the summit. The summit ended with a vague Statement of Action.

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Maximizing Partnerships between Indigenous Communities and the Extractive Sector

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By Daniel F. Runde

Between now and 2050, global population growth and rapid urbanization are expected result in an additional 1.6 billion people in need of electricity. Traditional energy sources based on extractive industries – coal, oil, and gas – will continue to drive the market and satisfy the energy demands of burgeoning populations in the short to medium term. The emerging markets of China and India, for example, account for approximately one-third of the world’s population and will need to exponentially increase imports of cheap energy sources in order to produce electricity for their growing middle classes. Where will these resources be extracted and imported from? Largely from the lands inhabited by indigenous peoples, who live on top of the some of the most biodiverse and resource-rich regions on earth.

Indigenous peoples have suffered marginalization, intimidation, and even displacement at the hands of their national governments and multinational companies in the past. However, this has largely changed for the better as many companies have recognized that the ultimate success of extractive investments depends on local partnerships with indigenous communities. Forward-thinking companies that implement guidelines to include the input and build the capacity of indigenous populations have the opportunity to achieve successful, profitable outcomes that simultaneously meet end-user energy demands and benefit the local populations from where that energy is sourced.

Panelists at a recent event hosted here at CSIS discussing partnerships between extractive companies and indigenous communities.

Panelists at a recent event hosted here at CSIS discussing partnerships between extractive companies and indigenous communities.

There is undoubtedly a salient financial case for uniting the extractive industry’s objectives for powering the world with corporate practices that promote cultural awareness and local capacity building among indigenous community partners. A participant at a recent CSIS meeting noted that companies that mitigate social risk by partnering with indigenous populations have a 5-6% higher return on investment. Partnerships with these indigenous populations can drive profit, and social and economic development for underserved communities.  Failing to partner with indigenous communities, on the other hand, increases the risk that local opposition will impede a project’s success and hurt the company’s bottom line. Continue reading →