Hawala: An International Development Tool?

By Catarina Santos

Introduction

Roughly 38 percent of the two billion people in the world’s lowest economic percentile do not have bank accounts and therefore lack access to the global financial market.  Hawala, or “transfer” in Arabic, is a remittance system that runs parallel to formal financial system transactions. Although it is often associated with financing terrorist activities, narcotics trafficking and tax evasion, and is therefore illegal in most countries, hawala can be an important tool to facilitate the sending of remittances. This is especially the case for poorer populations in developing countries and for transactions by undocumented people. In fact, remittances received through hawala account for a third of Somalia’s gross domestic product (GDP).

Despite its ubiquity in many parts of the world, hawala remains under the radar. This article provides a background on how hawala functions, discusses why it can be an attractive alternative remittance system, and considers whether hawala should be regulated as a security threat or promoted as a development tool.

Background on hawala and how it works

Hawala started in South Asia around the 18th century, before Western banking practices reached the region. It evolved over the years and today is used mostly by migrant workers overseas for financial transactions domestically and internationally. This system distinguishes itself from the traditional remittance systems because it is largely based on trust and uses family connections and affiliations within communities to circulate money between “hawaladars,” or hawala dealers.

Why would migrants prefer to use this system over an official banking system? The main reasons are cost effectiveness, efficiency, reliability, lack of bureaucracy, and tax evasion. This system does not require identification documents or formal bank accounts, and does not leave a paper trail.  Users of this method are therefore often associated with undocumented people and people committing illegal activities.

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Creating Public-Private-Military Partnerships to Fill Administrative and Financial Gaps in U.S. Infrastructure Reconstruction Projects in Afghanistan

By Jackson Celestin 

On March 11, 2016, the Special Inspector General for Afghanistan Reconstruction (SIGAR) John F. Sopko released a report reviewing 45 Department of Defense (DOD) reconstruction projects in Afghanistan. Of the 45 projects, 28 did not meet structural contract requirements or technical specifications, 16 were structurally deficient to the point that they were considered unsafe for use, and 7 of the 15 completed projects had never been used. According to Sopko, the projects suffered from inadequate contractors, project management and oversight; and faulty building materials. To limit deficient projects, Sopko suggested the DOD improve its project planning and design procedures, hire contractors who are qualified and capable of complying with construction requirements, and conduct adequate oversight to guarantee that projects are built to protocol and contractors are held accountable

 Though Sopko’s recommendations are reasonable solutions, they ignore larger trends visible in the U.S.’ reconstruction budget in Afghanistan. Of the $114.92 billion the U.S. has spent since 2002 through the Afghanistan Reconstruction Fund, the DOD has dedicated $10.68 billion (9 percent) to Operations and Oversight and only $990 million (less than 1 percent) to the main infrastructure fund, the Afghanistan Infrastructure Fund (AIF).

Between Sopko’s report and the allocation of U.S. reconstruction funds in Afghanistan, there appears to be an expertise, administration, and funding gap that is preventing the United States from establishing sustainable infrastructure projects in Afghanistan. In the field of international development, this is a common challenge, and more agencies are turning to public-private partnerships (PPPs) to address it. Inspired by PPPs in international development, this blog presents a new model that partners the public and private sectors with the military. This article will refer to this model as Public-Private-Military Partnerships (PPMPs). Though they may face challenges in attracting private investors, working with low starting budgets, and addressing anti-Western and anti-military perceptions, PPMPs can combine the groups’ comparative advantages to fill the knowledge and funding gap in the United States’ Afghanistan reconstruction projects. They can also further connect the military to global development for better military assistance in conflict areas and help conflict and post-conflict areas to pursue global development and sustainability goals.

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This graph is an original creation of the author, Jackson Celestin, based on data from the July 30, 2016 SIGAR Quarterly Report to Congress.

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Youth at Risk: How can the Private Sector help Nigeria Fight Boko Haram?

By Catarina Santos

Introduction

Since 2007, Nigeria has attracted the most foreign direct investment in Sub-Sahara Africa due to its well-developed legal and banking systems. However, Boko Haram’s spread of violence to regions where oil and gas are extracted is now intimidating investors. Economically empowering youth is a key piece in this puzzle: the private sector needs a workforce, and youth need employment opportunities as an alternative to joining insurgent groups. Although radicalized Nigerians have not yet reached European or American cities, the potential for global economic impact from terrorism in Nigeria deserves attention. This article discusses the importance of the private sector’s involvement in fighting Boko Haram in Nigeria and recommends that the private sector focus on engaging in the northeast region of the country. The private sector should provide capacity building in various skills, especially sustainable agriculture practices; support youth education; and provide financial grants in areas that government programs have not reached.

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A youth rally in Lagos, Nigeria in September 2012. Youth compose a significant portion of Nigerian society and lack economic opportunities, making them vulnerable to recruitment by Boko Haram. Photo courtesy of Flickr user Temi Kogbe, under a Creative Commons Attribution 2.0 Generic License.

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Buy Social: A New Way for International Organizations to Create Social Impact

By Waka Itagaki

Introduction

International organizations such as the United Nations (UN) and the World Bank have significant purchasing power. In 2014, the UN purchased $17.2 billion in their procurement process. Despite this purchasing power, international organizations have arguably not made the most of it to generate social impact across the world. “Buy Social,” a procurement process that seeks not only economic value but also social and/or environmental impact, has the potential to be transformative. This article highlights the benefits and challenges of Buy Social compared to “Socially Responsible Procurement,” and recommends that international organizations implement Buy Social.

Background

There is no widely agreed term to describe this kind of socially conscious procurement. This article uses “Buy Social” but other names include “Social Procurement,” “Socially Impactful Procurement,” “Social Impact Purchasing,” “Social Purchasing,” and “Socially Impactful Purchasing.” It is important to note that Buy Social is different from Socially Responsible Procurement, which is already implemented by international organizations.

Socially Responsible Procurement applies negative or positive screens to bidders by using a “do no harm” approach. For example, the UN buys from companies that meet labor standards of the International Labour Organization (ILO). Socially responsible procurement typically only considers if a bidder is a business with social consideration, and does not measure the outcomes.

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Hosting the Olympics: The Developing World’s Burden?

By Jackson Celestin 

The Olympic Games are supposed to be a celebration – a demonstration of global unity and national pride wrapped in ancient ceremony.  For the host city, the Olympics is more than just an opportunity to show off to the world.  It affords a collapsed timeframe for cities to take on huge projects that jolt their economy and catalyze long-term growth.  Though some cities have benefitted from the Olympics, for others, the hosting experience has been less than golden.  The expensive infrastructure and operating costs of Olympic projects have left cities with crippling debt that stagnates development rather than kick-starts it.

As Rio de Janeiro, Brazil prepares for the 2016 Olympic Games, the outlook is not positive.  The glamor of hosting this event has been overshadowed by economic, social, and political turmoil.  Compared to past hosts, Rio is expecting to take a major economic loss from hosting the Olympics and to feel the impact for years to come.  To understand Rio’s Olympics struggles, it is important to compare Rio to previous hosts while keeping Rio’s unique circumstances in mind. This article provides this analysis and concludes with a prediction of Rio’s post-Olympic status and questions for further debate.

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Protestors marching on the National Congress building in Brasilia on March 13, 2016 (just under five months before the 2016 Olympic Games in Rio).  Photo courtesy of Flickr user Agência Brasil Fotografias, under a Creative Commons Attribution 2.0 Generic License.

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