Month: November 2015

The Afghan Refugee Crisis: Multiple Origins, Few Solutions

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By Michael Jacobs

Starting in the spring of 2015, the number of refugees and migrants arriving in Europe skyrocketed, catching many observers by surprise. Most readers who are aware of this issue know that the primary country of origin for these refugees is Syria, a country in the midst of a brutal civil war. What most people wouldn’t guess, however, is the refugees’ second most popular country of origin: Afghanistan.

According to the United Nations High Commissioner for Refugees (UNHCR), Syrians make up 52 percent of all Mediterranean Sea refugee arrivals in 2015, followed by Afghans at 19 percent and Iraqis at 9 percent – less than half the number coming from more distant Afghanistan. Furthermore, this doesn’t take into account refugees arriving via the Arctic Route, where over the last 3 weeks Afghans outnumbered Syrians seeking refuge in Norway.

Migrants of unspecified ethnicity cross underneath unfinished border fence from Serbia into Hungary, August 2015.

Migrants of unspecified ethnicity cross underneath unfinished border fence from Serbia into Hungary, August 2015. 

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“The Beginning of the End” for Commodity-Reliant Countries

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By Erin Nealer

The price of commodities has seen a sharp decline over the last five years, and continued depreciation could leave developing countries vulnerable to economic and political shocks. Many developing countries rely on exporting raw materials like oil, grains, and metals, rather than focusing on service industries. This reliance on commodities, coupled with falling prices, could undermine development initiatives and set least developed countries (LDCs) back to square one.

The United Nations Conference on Trade and Development (UNCTAD) determined that commodity dependence among developing countries is increasing. In 2009-2010, there were 88 developing countries reliant on commodities, compared to 94 in 2012-2013. LDCs saw a similar increase, from 80 percent of countries dependent on commodity trade in 2009 to 85 percent in 2012.

Developing country dependence on commodities, 2012-2013. Map courtesy of UNCTAD State of Commodity Dependence 2014.

Developing country dependence on commodities, 2012-2013. Map courtesy of UNCTAD State of Commodity Dependence 2014.

Trade in commodities is attractive to LDCs for several reasons. While other industries are at the mercy of fluctuating demand, political stability, or technology, extractive industries – “hard commodities” – are consistently in high demand worldwide and can be stored for long periods of time without depreciating in value. “Soft commodities” such as grains, tobacco, and sugar, have a shorter shelf life and can fluctuate in price as weather conditions change, but are in increasingly high demand as the world’s population continues to climb. Stockpiling rubber, oil, or gold can become a commodity exporter’s insurance plan against future economic shocks that result from relying on the continued demand for raw materials.

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Does Microfinance Increase Women’s Profits and Incomes?

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By Helen Moser

The assumption of many Microfinance Institutions (MFIs) is that providing microfinance to women is not only a social imperative – it is also one that may yield higher returns to capital, as women are typically more credit-constrained than men due to their limited access to formal financial services.  Women in developing countries are 20 percent less likely than men to have access to formal credit. Additionally, women tend to be poorer than men on average and have less collateral to offer.

MFIs rose in popularity in the late 1990s and early 2000s, and many MFIs like the Grameen Bank began strategies of lending primarily to women that continue today. Over 80 percent of the poorest MFI clients worldwide (those who live on less than $1.25/day) are women.  MFIs and their supporters often claim women make better use of loaned or granted funds than men do. But in actuality, microfinance may not be an effective solution to raise women’s business profits from microenterprise, nor their incomes. Continue reading →

Developing India’s Andaman and Nicobar Islands: A Test of Governance

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By Amy Chang

This July, Indian Prime Minister Modi’s government approved the use of the Swiss Challenge Model (SCM) as part of an effort to increase private sector investment for the renovation of 400 railways across the country. SCM is a form of public procurement in which the government publicizes unsolicited bids for projects and invites third party actors to match or exceed them.  Later in October, the SCM was also adopted to develop the Andaman and Nicobar Islands—a cluster of islands due east of India in the Bay of Bengal.

The decision to adopt the SCM comes against the backdrop of a sharp plunge in private sector investment for infrastructure projects in India, and the government hopes it will help cut red tape and increase efficiency by allowing local companies and investors to craft proposals in line with their capabilities and needs. There are, however, serious concerns regarding the level of accountability that the SCM process requires, particularly when dealing with projects where public authorities have limited knowledge and experience.

The Andaman and Nicobar Islands remain largely ecologically and socially untouched by the outside world.

The Andaman and Nicobar Islands remain largely untouched by the outside world.

The World Bank estimates that India needs $1.7 trillion to fund its infrastructure gap by 2020, but current levels of funding are insufficient to cover that cost: Private investment in infrastructure fell from $23.8 billion in 2012 to $3.6 billion last year. Under the SCM, companies present an unsolicited proposal to the government, and then the project is opened to other third-party bidders. The original proposer then has the right to counter-match any final offer. The SCM invites private investors to formulate their own projects, while still encouraging competition through an open bidding process. Continue reading →

Venezuela’s Troubled Economy Needs Dollarization

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By Moises Rendon

Venezuela has the highest inflation rate in the world, with an estimated annual rate of as much as 700 percent as of this October. The Venezuelan economy is also due to shrink at the world’s highest rate this year – about 10 percent, according to the International Monetary Fund (IMF). With high inflation and a shrinking economy, Venezuela is facing one of the worst economic crises in the world, and a solution is urgently needed.

The Bolívar, Venezuela’s currency, has lost its credibility among Venezuelans, and is viewed with even less respect abroad.  An alternative is needed to reset the Venezuelan economy, improve trust, and provide a reliable store of value. Dollarizing the Venezuelan economy is a compelling possibility.

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The current Venezuelan administration is one of the worst in the world when it comes to economic and monetary management. Each year Steve Hanke, a John Hopkins Professor and Cato Institute scholar, assembles a Misery Index – an economic indicator that takes into account inflation, lending rates, unemployment rates, and year-on-year per capita gross domestic product (GDP) growth. It assumes that both a higher rate of unemployment and a worsening of inflation create economic and social costs for a country. The Misery Index is used to construct a ranking for 108 countries. For 2014, Venezuela holds the top spot in the world with an index value of 106.03, considerably higher than the next worst country on the list. Continue reading →