Wole Soyinka: A Literary Thorn in the Side of Power

 As religious fanaticism increases, “the scroll of faith becomes indistinguishable from the roll call of death.” Nigerian poet and playwright Wole Soyinka (80) spoke out firmly against faith-inspired violence in a video address delivered at the World Humanist Congress – a triennial event organised by the International Humanist and Ethical Union.

Mr Soyinka warned that even moderate religious leaders may be “vicariously liable” for sectarian violence in case they fail to unequivocally condemn it. “The conflict between humanists and religionists has always been one between the torch of enlightenment and the chains of enslavement,” said Mr Soyinka. “Those chains are not merely visible, but cruelly palpable. All too often they lead directly to the gallows, beheadings, to death under a hail of stones.”

Mr Soyinka has dedicated his life to hold usurpers to account. He still uses the might of his pen to fight those who claim to know, or have access to, the indisputable truth. All too often, Mr Soyinka’s literary antidotes to the absolutism of the powerful brought severe discomfort to both the playwright and his subjects. In 1967 he was arrested and thrown into prison by Nigeria’s military rulers for meeting with the leader of the breakaway Biafra Province in an attempt to avert civil war. Mr Soyinka remained behind bars for 22 months and during this time produced a number of plays and poems.

“He still uses the might of his pen to fight those who claim to know, or have access to, the indisputable truth.”

In 1986, Mr Soyinka became the first African to be awarded the Nobel Prize for Literature. However, the worldwide recognition that followed did not shield him from further persecution in his homeland. Toward the end of 1994, Mr Soyinka had to flee Nigeria on a motorcycle via the porous border with Benin when General Sani Abacha, the dictator of the moment, took note of his critical writings.

The Nigerian junta eventually levelled charges of treason against Mr Soyinka and had him condemned to death in absentia. However, by now the playwright had settled safely in the United States where he was welcomed at Cornell University.
The power-hungry Nigerian generals were not the only ones to fall foul of Mr Soyinka’s unfailingly sharp pen. The Mugabe regime in Zimbabwe was also made to feel the full weight of Mr Soyinka’s reproach as did South Africa’s apartheid rulers. The playwright once famously remarked that “the colour of the foot wearing the oppressive boot is irrelevant.”

After civilian rule was restored in 1999, Mr Soyinka returned to Nigeria where he was appointed professor emeritus Obafemi Awolowo University in Ife. He also holds a number of professorships at US and British universities. With a sizeable body of work now spanning over six decades – from plays to essays via novels, memoirs, poetry collections, and short stories – Wole Soyinka has carefully documented in prose the contemporary history of an entire continent as it struggles to reconnect with a lost identity and regain the composure shaken by traumatic experience.


World Bank Commits over $1 Billion to Bangladesh

[caption id="attachment_8537" align="alignright" width="184"] Bangladesh[/caption]

WASHINGTON - The World Bank today approved approximately $1.1 billion for three projects in Bangladesh that would benefit almost 36 million people by improving the quality of primary education, building coastal communities’ resilience to natural disaster, and increasing the nutrition and cognitive development of children from the poorest households.

The projects approved by the Bank’s Board of Executive Directors are $400 million in additional financing for the Third Primary Education Development Program; $375 million for the Multipurpose Disaster Shelter Project; and $300 million for the Income Support Program for the Poorest Project.

“These three projects weave a strong story of complementarity in the World Bank’s efforts to create opportunities for the poor—by using cash transfers for mothers to promote better nutrition at home, helping children take advantage of pre-primary education under the primary education program and providing school infrastructure in vulnerable coastal zones,”said Johannes Zutt, World Bank Country Director for Bangladesh. “Directly and indirectly, these operations help ensure that even the poorest children in Bangladesh can achieve their full potential.”

The additional financing for the ongoing US$300 Third Primary Education Development Program (PEDP3) would continue to improve the primary education sector by increasing net enrollment to 98 percent and the primary completion rate to 80 percent. The project would also continue efforts to ensure merit-based teacher recruitment and fill in vacant school positions. The project will ensure textbook delivery to 90 percent of the schools within the first month of the school year.

"Despite Bangladesh’s remarkable record in reducing poverty over the last three decades, the presence of high numbers of extremely poor people poses a daunting development challenge."

“The additional financing for the Government-led program will contribute to bring 19 million Bangladeshi primary school age children to school, provide them quality learning, and ensure they complete the primary school cycle,” said Ayesha Vawda, World Bank Task team Leader for PEDP3. In addition to bringing in more children into the primary cycle, the program would continue the introduction of pre-primary education, especially in disadvantaged areas and enhance quality of the school facilities and infrastructure.

The Multipurpose Disaster Shelter Project (MDSP) aims to make the coastal population less vulnerable to natural disasters. The project will construct 552 new multipurpose disaster shelters, improve 450 existing shelters, and build connecting roads and communication networks for easy accessibility in 9 coastal districts.

“The project will benefit 14 million people among the coastal population living in the front line of climate change,” said Anna C. O'Donnell, World Bank Task Team Leader for MDSP. “The project will introduce steel shelter designs for the first time in Bangladesh for improved construction quality and durability.”

Despite Bangladesh’s remarkable record in reducing poverty over the last three decades, the presence of high numbers of extremely poor people poses a daunting development challenge. The Income Support Program for the Poorest (ISPP) project will benefit 10 percent of the extremely poor population, or 2.7 million people in 42 of the poorest Upazilas in the country. The project will provide income support to about 600,000 poorest mothers in exchange for participating in activities aimed to improve their children's nutrition and cognitive development.

Monthly cash transfers will be electronically disbursed into these mothers’ post office accounts using smart cash cards. “Ensuring adequate nutrition prenatally and in the first 2 years of life helps to maximize a child’s brain development and health. Helping a child’s growth and cognitive development in the initial 5 years is critical to boost the earnings capacity in the later years of life and to prevent the transmission of poverty across generations”, said Iffath Sharif, World Bank Task Team Leader, ISPP. The project will also focus on strengthening local governments’ delivery of safety net programs.

The credits are from the International Development Association (IDA), the World Bank’s concessional lending arm, have 38 years to maturity with a 6 year grace period and carry a service charge of 0.75 percent. Source


World Bank: Framing the Future of Accountancy

The main objective of Accountancy Development for Results (ADR) is to raise awareness among leaders of the accountancy profession of their significant role in advancing the World Bank’s twin goals of eradicating extreme poverty and promoting shared prosperity.

Accountants and auditors play a central role in building an environment of transparency and trust that allows businesses to flourish, and supports a public sector that is efficient and accountable to its citizens.

The Governance Global Practice is committed to move forward with the ideas brought forward at the ADR conference aimed at supporting capacity development, and continuing to share and transfer knowledge globally.

[caption id="attachment_8545" align="alignright" width="172"] Guillaume Brialon[/caption]

On November 10, more than 160 leaders of accountancy profession from over 60 countries gathered in Rome on the occasion of the World Congress of Accountants. The goal of the event was to provide a forum for a forward-looking, solutions-focused discussion among participants, with a view to shaping the World Bank’s engagement with professional accountancy organizations in the years to come.

The second Accountancy Development for Results (ADR) conference—Accountancy: Framing the Future—was held in cooperation with the International Federation of Accountants (IFAC). This event represented an important element of the World Bank’s engagement with the global accountancy profession in support of partner countries.

“Acting at the global level is at the heart of the vision of the World Bank today,” said Samia Msadek, director in the World Bank Governance Global Practice Group.

Over the course of the day, participants focused on four themes of global relevance.

Public oversight plays an important role in fostering public trust in the accounting profession. However, implementing an effective public oversight system is challenging and requires resources and expertise. The experiences of other countries can offer valuable guidance, help avoid pitfalls, and provide solutions for capacity enhancement. The conference discussed several examples of strategic partnerships that are being successfully developed, such as in Dubai.

"Acting at the global level is at the heart of the vision of the World Bank today."

- Samia Msadek, Director in the World Bank Governance Global Practice Group

There is sometimes a mismatch between the skills businesses and the public sector require, and those that accounting professionals are able to offer. Several suggestions were discussed for addressing the skills gap, including the development of qualification frameworks, strengthening regional organizations, and the professionalization of accounting technicians, an approach being taken in New Zealand and South Africa.

The range of information technology options for accountants is vast and rich. However, the array of options can be confusing, expensive and even threatening. Professional Accounting Organizations (PAOs) have been instrumental in assisting members in navigating IT options for adapting their practices, increasing the value of their services, and gaining efficiency. One area in which PAOs have added significant value is in using their bargaining power to work with IT companies to develop and adapt software to the needs of their members, particularly small accounting firms. Some smaller PAOs have partnered to achieve even greater economies of scale, such as in Latvia and Estonia. Taking full advantage of the opportunities IT offers for education and training will be vital going forward. In this regard, the World Bank has pioneered the development of educational software; for example software is being developed to teach International Standards on Auditing (ISA) through simulated audits, and will be piloted in Poland beginning in 2015.

According to Warren Allen, IFAC President, “public sector financial management reform is the ultimate public interest issue for the accountancy profession.” Citing examples of recent global civil unrest he said “the public, and particularly the younger generation, have had enough of the inappropriate way in which many public sector entities are run.” Modernizing public financial management (PFM) is essential to achieving the World Bank’s twin goals of eradicating extreme poverty and promoting shared prosperity, and accountants play a vital role in this process.

Overall, Accountancy: Framing the Future, was an opportunity for the World Bank to receive valuable feedback from the profession in our partner countries. World Bank is committed to move forward with the ideas discussed in Rome aimed at supporting capacity development, and continuing to share and transfer knowledge globally, particularly with regard to:

Facilitating engagement among partner countries, including through technical assistance and peer exchange, in order to build and enhance sustainable systems of quality assurance for the audit profession.

Strengthening the professional skills of accounting practitioners at all levels.

Driving reform: while regulation has had a significant role in the profession’s evolution, advances in technology should be explored and disseminated.

Developing practical tools to support PAOs: the ongoing development and broad availability of relevant software is essential, and can serve as an equalizer among firms and countries.

Promoting information that is clear and simple in government financial reports: while transparency is essential, citizens must also be able to understand and derive meaningful information from these reports.


UN-Backed Project to Help Colombian Farmers Move Away from Illicit Crops Towards Fair Trade Chocolate

[caption id="attachment_8572" align="alignright" width="200"] Agricultural advisor in Colombia splits open a fruit to expose cacao seeds, used to make chocolate. Photo: Scott Wallace / World Bank.[/caption]

A sweet new partnership between the United Nations, the Colombian and Austrian Governments and a renowned chocolate manufacturer is slated to bring free-trade practices and a critical source of income to Colombian farmers who have long relied on revenues from illicit drug crops, the Organization’s Office on Drugs and Crime (UNODC) has announced.

Launched today, the initiative – coordinated in tandem with, Zotter, an Austrian fair trade chocolatier – will see the introduction of a new premium chocolate bar made with cacao produced by small-scale farmers from Colombia’s Chocó region.

The Zotter partnership will allow 1,250 farmer families to move away from the cultivation of illicit crops, such as coca leaves, and into commercially viable livelihoods, generating “markedly higher incomes than those made illegally,” according to a UNODC press release.

The project is part of a wider UN-backed Colombian Government programme – known as “Montebravo” – which reaches over 120,000 farmer families and was set up to help reduce the economic dependence of farmers on coca leaf production.

“The viability of alternative sources of income ultimately depends on products that actually sell in national and export markets.”

- Aldo Lale-Demoz, UNODC Deputy Executive Director

Founded in 2007, Montebravo unites 10 farmers associations which manage some 1,200 hectares of cacao and also provides for other income-generating activities tied to forestry and agroforestry production, such as sustainable forest management and forest timber harvesting.

“The viability of alternative sources of income ultimately depends on products that actually sell in national and export markets,” said UNODC Deputy Executive Director, Aldo Lale-Demoz at an unveiling event, which took place at the Zotter factory in Graz, Austria. “Thanks to Zotter and all the partners in this initiative, this is what is happening.”


China’s High-Speed Rail: the Rapid Growth of a New Travel Option

[caption id="attachment_8585" align="alignright" width="256"] Beijing[/caption]

BEIJING - China has the world’s largest and still expanding high-speed rail (HSR) network, but whether ridership would materialize has been the subject of much debate. A new World Bank paper finds initial traffic volumes are promising, with traffic growing from 128 million trips in 2008 to 672 million trips in 2013 and over 2.9 billion passengers having taken a high speed train trip between April 2007 and October 1st 2014.

The paper underlines that the circumstances in China in terms of long distances, high population density, well interspaced large cities, and its economic rebalancing strategies are propitious for the long-term success of HSR. By focusing on understanding and addressing passenger needs, as well as efficient and effective operation, traffic can be expected to continue rapid growth over the coming two decades.

The paper titled High-Speed Railways in China: A Look at Traffic looks at China’ s HSR traffic in a global perspective and presents case studies of one of the country’s busiest routes and a relatively lightly used intercity route to illustrate how passengers have responded to new HSR services.

China has over 12,000 kilometers of passenger-dedicated high-speed rail in operation.  In the summer 2014, China Railways was running over 1,330 pairs of high-speed trains a day on both this dedicated network and on upgraded conventional lines.  More lines are being built and upgraded to connect all cities of more than 500,000 people through rapid rail by 2015.

“Understanding and addressing passenger needs are critical to achieving the full impact of the high-speed rail network. While initial results are encouraging, high-speed rail remains a major investment that requires high traffic density to be justified economically and financially.”

- Gerald Ollivier, World Bank Senior Transport Specialist

In 2013, China’s high-speed rail lines carried more passenger-kilometers (214 billion) than the rest of the world combined, about 2.5 times the volume in Japan and four times the volume in France. Traffic densities of 22.5 million [1] in 2013 compare favorably to levels reached by Japan and France at the same stage of development.

The paper examines who is using HSR, whether the service has benefitted ordinary citizens, and how it has affected personal mobility by using survey data collected from passengers along the Changchun-Jilin and Tianjin-Jinan corridors. The survey was carried out by the World Bank, China Railway Corporation and the Third Railway Survey and Design Institute.

Survey findings indicate that a large proportion of high-speed train passengers are between the ages of 25 and 55, with many using the HSR for business travel. A broad range of travelers of different income levels choose HSR for its comfort, convenience, safety and punctuality over existing alternatives. The survey found that the average income of high-speed train passengers was 35-50 percent higher than that of conventional train passengers. The majority of surveyed passengers (50 to 70 percent of users in the two case studies) reported income of less than RMB5,000 per month. Users perceive HSR as facilitating reunions with family and friends, tourism, and access to job opportunities. High-speed rail also has had a marked impact on local businesses and personal mobility of their employees.

“Understanding and addressing passenger needs are critical to achieving the full impact of the high-speed rail network. While initial results are encouraging, high-speed rail remains a major investment that requires high traffic density to be justified economically and financially,” said Gerald Ollivier, a World Bank Senior Transport Specialist and co-author of the paper.

“This can be achieved by working closely with cities to develop areas around stations in a way that leverages the gain in accessibility that high speed rail provides. It also important to optimize train frequencies and city pairing, introduce flexible ticket prices reflecting peak and off-peak periods, and introduce convenient e-ticketing services.  By focusing on these aspects, and on the efficient and effective operation of the network, high-speed rail in China can continue to experience substantial growth for many years to come,” he added.

This paper is part of the China Transport Note Series produced by the World Bank in Beijing to share experience about the transformation of the Chinese transport sector. The World Bank has supported six railway projects with design speeds ranging from 200 km/h to 350 km/h in China. Source

[1] Passenger-kilometers per kilometer of line.


World Bank: Transforming the Economy to Achieve Zero Net Emissions

To stabilize warming at less than 2 degrees Celsius, as the international community agreed in 2009, the world will have to cut greenhouse gas emissions to net zero before 2100.

Economic policy will be the key to mobilizing that global response, World Bank President Jim Yong Kim said in an agenda-setting speech that outlined the path ahead.

A year from now, climate negotiators representing countries worldwide will be in Paris finalizing an international agreement to reduce greenhouse gas emissions and begin slowing the impacts of climate change. Their success will depend heavily on how leaders over the next year shape their economic policies to respond to the risks.

To stabilize warming at under 2 degrees Celsius, as the international community agreed in 2009, the world will have to cut greenhouse gas emissions to net zero before 2100. Economic policy will be the key to mobilizing that global response, World Bank President Jim Yong Kim said in a speech today to the Council on Foreign Relations in Washington, D.C., that outlined steps ahead.

“Paris must be where we make the rallying cry for effective management of local, national and global economies,” Kim said. “Unlike treaties of the past, the Paris agreement needs to speak as loudly of economic transformation as it does of carbon emissions targets.”

Transforming the Economy

Over the next year, countries will be developing their national commitments and contributions for the Paris agreement for lowering emissions and building resilience to climate change. To decarbonize economies on a trajectory necessary to reach net zero emissions before 2100, their commitments for mitigation and adaptation efforts will have to be ambitious.

“We understand that many of our clients still face huge development challenges and many countries will reach their own peak emissions at different moments,” Kim said.

"Unlike treaties of the past, the Paris agreement needs to speak as loudly of economic transformation as it does of carbon emissions targets."

- Jim Yong Kim, World Bank Group President

“Managing their economies to ensure that they can, for example, decarbonize their energy sectors over time, while having the energy they need for development constitutes a challenge no developed country had to face in its history. Nevertheless, every country no matter its stage of development can strive to effectively manage their economies, to decarbonize while ending poverty and boosting shared prosperity.”

Policies

All countries should commit to put a price on carbon, the president said. Carbon pricing, whether through emissions caps and market trading mechanisms like those being developed in China, carbon taxes like British Columbia uses, or through regulations, provides the economic signal to businesses to help drive innovation and investments in clean energy technology.

Other instruments are also needed to redirect investments toward clean technology: energy efficiency and renewable energy targets; performance standards for buildings, vehicles and appliances; and a price on carbon can all provide investors and businesses with the policy certainty to invest in clean development.

Phasing out harmful fossil fuel subsidies, which are typically captured far more by the wealthy than the poor, is also overdue, the president said. That spending can be redirected to provide targeted support for the poor.

Effective management of the economy also means finding ways to invest in resilience. With science showing that about 1.5 degrees Celsius of warming is already locked, adaptation and mainstreaming disaster risk management become essential. The World Bank Group will use its track record for financial innovation to raise a one-time injection of funds, strengthen insurance coverage for those most at risk and build resilience immediately, Kim said.

Agreement

Several components are essential for a successful Paris agreement, each requiring ambitious commitment to building cleaner economies for the future. Kim highlighted four in his address:

Binding language that should reinforce our collective ambition and provide a clear pathway to zero net emissions before 2100.

Individual country contributions and policy packages that should comprehensively address how to use all available fiscal and macroeconomic policy levers to get prices right, increase efficiency and incentivize decarbonization as well as address resilience.

A financial package that recognizes that public development funds and climate finance should be used to catalyze innovative financing for adaptation and mitigation. Finance flows cannot reach the levels we need in the timeframe we need without some form of networked carbon market based on the market mechanisms, taxes and enabling environments.

Working coalitions, not just of governments working with governments, but of private enterprises and countries and cities and CSOs moving forward together where their interests are aligned. Coalitions have been forming in support of carbon pricing and around reducing deforestation, building low-carbon cities, and establishing climate-smart agriculture practices and will be critical to reaching net zero emissions.

“If each of these components reflects an ambition equal to the challenge before us, Paris could send a powerful signal to economic actors around the globe,” Kim said.

Finance

The binding part of a Paris agreement would not come into force until 2020, however, and action is necessary now, both on building resilience and the mitigation efforts and economic policy changes that can sustainably reduce emissions.

“For these efforts to coalesce and bring us to zero net emissions, we will have to find sufficient financing. It is the critical component of a Paris agreement,” Kim said.

Right now, climate finance flows into clean energy, other mitigation efforts and adaptation are far short of the $700 billion to over $1 trillion a year estimated to be needed. It is clear that public finance alone will never be enough. Public finance is helping catalyze private funding and can do more.

The Climate Investment Funds, for example, are leveraging about $7 for every $1 of their $8.3 billion in pledges, and they will continue supporting projects as the Green Climate Fund is scaled up and put into operation.

Other innovative finance is growing, such as green bonds, which went from $11 billion in issuances last year to about $35 billion so far this year and broadened the investor base for clean development.

World Bank Group

For the World Bank Group, getting to net zero emissions before 2100 will require a continuing shift in the direction of our energy portfolio to support energy access for all and increase investment in renewable energy and energy efficiency, Kim said.

It will require continued support for clean transportation and building low-carbon, livable cities, particularly in the fast-growing cities of the developing world where development today will lock in growth patterns for decades to come, Kim said. It will also require shifting toward climate-smart agriculture and increasing the World Bank Group’s financial innovation.

“We know that if we don't confront climate change, there will be no hope of ending poverty or boosting shared prosperity,” Kim said. “Furthermore, the longer we delay in tackling climate change, the higher the cost will be to do the right thing for our planet and our children.”

“I will drive our institution and all its capabilities – financial, technical and human – to support this development transition that we must support together, toward the goal of preserving our planet for all future generations,” the president said. Source


World Bank Supports Greater Resilience to Climate Related Hazards in Mozambique

The World Bank Board of Executive Directors approved today an International Development Association (IDA)* financing in the amount of US$50 million to support climate change related reforms agreed upon between the Government of Mozambique (GoM) and the World Bank under the Climate Change Development Policy Operation (DPO). This operation will improve the country’s resilience to effects of climate change through the implementation of reforms across several sectors of the economy.

Extreme climate related events such as cyclones and floods have devastating effects on agriculture, electricity generation, mining, and transport and communications almost every year in Mozambique. The country ranks third in Africa in terms of exposure to climate-related hazards and is the only country in Africa considered to be at high risk from each of the major climate hazards – droughts, floods and coastal cyclones. Economic losses average 1.1 percent of Gross Domestic Product (GDP) annually, having cost US$1.75 billion between 1980 and 2003. The country’s GDP fell following the 2000 floods from a forecast of 7 percent to 1.5 percent and the 2013 floods in the Limpopo Valley alone inflicted damages to affected settlements and infrastructure in the order of US$135 million and losses in crops estimated at US$112 million. The 2013 floods also resulted in at least 44 reported direct fatalities, 170,000 people evacuated in Gaza province alone, and a high prevalence of water-borne diseases and malaria amongst affected populations, most of whom were extremely poor. The floods severely damaged transport, irrigation, water supply, urban drainage, sanitation, and private assets, further disrupting private sector activities.

"This is the second in a series of three operations, and is based on the Bank’s engagement with the GoM in substantive policy dialogue on climate change."

“Without changes in policies, climate change is expected to cause economic damages between US$2.3 to US$7.4 billion during the period 2003–2050,” said Mark Lundell, Country Director for Mozambique, Madagascar, Mauritius, Seychelles, and Comoros.“The policy actions supported under this operation aim to reduce the country’s vulnerability to climate risks and are in support of the implementation of the Government’s National Climate Change Adaptation and Mitigation Strategy.”

This DPO supports efforts to mainstream climate change at the national, district, and sectorial levels through the implementation of national policies for climate action, and by factoring in climate resilience in economic sectors. These include greater integration of climate resilient planning in agriculture, hydro-meteorological services, disaster risk management, human development (health and social protection), and infrastructure development such as energy, roads, and hydro-meteorology capabilities.

“Mozambique’s economic gains are significantly undermined as a result of recurrent weather related hazards,” said Ross Hughes, the Bank’s co-task team leader for the project. “For example, analysis shows that droughts and floods lead to substantial income and asset losses for farmers as well as food supply shortages and price spikes and a generalized decline in agricultural productivity. These climatic risk factors are often accompanied by disease outbreaks, mostly affecting the poor. Better policies can help address these risks – for example, by improving weather forecasting and early warning systems or by helping smallholder farmers to introduce climate resilient agricultural techniques. ”

This operation addresses the challenges to inclusive growth and poverty reduction and is in direct support of the GoM’s priorities set forth in its poverty reduction strategy (PARP) as well as its National Climate Change Adaptation and Mitigation Strategy. This is the second in a series of three operations, and is based on the Bank’s engagement with the GoM in substantive policy dialogue on climate change. It is complemented by other Bank-funded operations, including the Climate Change Technical Assistance Project co-financed by the UK Department for International Development, and by a number of investment pilots supported by the Pilot Program of Climate Resilience (PPCR) currently under implementation with support from a partnership comprising the World Bank, International Finance Corporation (IFC) and the African Development Bank.

*The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 77 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change for 2.8 billion people living on less than $2 a day. Since 1960, IDA has supported development work in 112 countries. Annual commitments have averaged about $18 billion over the last three years, with about 50 percent going to Africa. Source


Lebanon: Developing an Internet Ecosystem to Keep Young Talent at Home

High youth unemployment has led to high economic migration from Lebanon

Creating an internet workspace could help would-be entrepreneurs

Lebanon is well-positioned to develop apps for international markets

With youth unemployment close to 34 percent—and little domestic demand for educated but inexperienced labor—it often takes university graduates in Lebanon a year to find a job. Political instability and economic uncertainty have limited the range of opportunities for job seekers, resulting in the talent migration (or brain drain) of about 40 percent of male and 30 percent of  female graduates.

There are initiatives to harness their potential and drive job creation so that fewer young people migrate. These include grassroots entrepreneurship, start-ups, and partnerships between the private sector and academia. Lebanon still lags behind, though, in terms of generating enthusiasm for work among youth, and for including them in regional and global innovation and technology. A number of simple things could help motivate young people better, such as more mentorship, coordination, funding, and information.

Mobile internet services provide access to global markets for start-ups as well as the opportunity to develop entrepreneurship beyond local constraints. They also reduce transaction costs for new products and services and reduce the risk of losses incurred when turning an idea into a business. The mobile internet provides a vehicle for university students, entrepreneurs, and businesses in Lebanon to develop their skills.

"Many Lebanese are bilingual or trilingual, making it easier for them to develop of applications for international markets. Their economy also operates in multiple currencies."

The World Bank is introducing a new investment lending approach to capture this. Pending the approval of Lebanon’s Council of Ministers and its ratification by the Lebanese parliament, the Mobile Internet Ecosystem Project (MIEP) aims to develop a local ‘internet ecosystem’ to help Lebanese talent to remain in the country, bring local skills up to international standards, and boost the global competitiveness of Lebanon’s traditional industries through ICT.

Lebanon offers a unique regional testing ground for crowdsourcing and other open source innovation. It hosts a number of top universities in the Middle East and has a highly educated population, providing the critical base for putting ideas into practice.  Many Lebanese are bilingual or trilingual, making it easier for them to develop of applications for international markets. The economy operates in multiple currencies.

Lebanon has already developed many key elements of a technology ecosystem, including an incubator, venture capital firms, forums and clusters, and a number of successful mobile internet start-ups. It has a strong foundation for internet talent made up of creative and banking industries, which could help the mobile internet develop across the economy.

As part of the MIEP project, staff from universities and from Lebanon’s technology eco-system worked this November to co-create the Mobile Innovation Hub (MiHub), a collaborative space for addressing Lebanon’s critical economic challenges and the pressure caused by its brain drain. Together, they emphasized the need for Lebanon to develop its competitive edge by using the mobile internet to produce successful innovators and problem solvers.

Representatives from France, the Netherlands, Korea, and Finland—countries with mobile internet systems that could serve as models for Lebanon’s—participated. The hope is that MiHub is likely to help create problem solvers and entrepreneurs, giving Lebanon’s young talent the space to produce, test and refine and market business ideas. Source


World Bank to Promote High-Quality Innovations in Kazakhstan

The World Bank Group’s Board of Executive Directors today approved a US$88 million loan to help Kazakhstan foster innovation by promoting high-quality nationally relevant research and commercialization of technologies.

The Fostering Productive Innovation Project will contribute to improving critical areas, such as capacity for innovation, quality of scientific research institutes, company spending on research and development, and university-industry collaboration in research and development. The project will introduce the bottom-up competitive selection procedures open to all sectors of the Kazakhstan economy that intend to nurture a dynamic productive sector in the country, particularly a segment of private start-ups.

“Innovation is key to boosting economic development and unleashing the potential of the private sector as Kazakhstan is striving to build a more diversified and competitive economy,” said Ludmilla Butenko, World Bank Country Manager for Kazakhstan.“Building on achievements of the ongoing Technology Commercialization Project and similar World Bank projects implemented worldwide, the new project will help make innovations a more active element of the country’s economy.”

The loan will finance competitive grants to scientist groups developing commercially viable high-quality research and ideas; and to Kazakh research institutes, design bureaus, and engineering laboratories upgrading their test sites as members of productive technology consortia in agriculture, extractive industries, manufacturing, as well as inclusive innovation consortia in social sector. Grants will also support the Kazakhstan-related research projects by postdoctoral fellows working or studying abroad, including establishment of educational consortia.

Early stage financing will be available for innovative small- and medium-enterprises to complement existing financial instruments and solutions suitable to different stages of start-up development.

In addition, the project is expected to significantly strengthen the capacity of key institutions of the National Innovation System by introducing market-oriented approaches in the selection and support of innovation projects and technology start-ups.

The implementation of the five-year project (2015-2020) will start after the country approval process is completed.

The Fostering Productive Innovation Project will be financed through a variable-margin US$88 million IBRD loan, with a 15-year maturity period and a 5-year grace period, with US$22 million in co-financing from the Government of Kazakhstan. Source


World Bank Approves Financing for Nepal Grid Solar and Energy Efficiency Project

[caption id="attachment_8606" align="alignright" width="196"] Janaki Mandir, Nepal[/caption]

The World Bank today approved a US$130 million credit for the Nepal Grid Solar and Energy Efficiency Project to help address Nepal’s energy shortages that are a major constraint to economic growth and overcoming poverty.

The project intends to increase electricity supply to the national grid through grid-connected solar farms and reduce distribution losses in pilot distribution centers.

The project has two components. The first component includes the design, supply, construction, commissioning, operation and maintenance of grid connected solar farms, in a total capacity of 25 MWp, to supply electricity directly to the Nepal Electricity Authority’s (NEA) distribution network. The second component includes the preparation of a Distribution Loss Reduction Master Plan and implementation of pilot loss reduction projects in selected distribution centers of NEA.

“Reliable electricity is crucial for Nepal to achieve its full growth potential.”

- Takuya Kamata, World Bank’s Country Manager for Nepal

Nepal suffers up to 18 hours of electricity blackouts a day, especially in the winter months. Solar power is one of the ideal power generation sources to complement the hydropower electricity generation in Nepal as solar radiation is strongest in winters when the electricity demand is at the highest and hydropower generation at the lowest levels.

“Reliable electricity is crucial for Nepal to achieve its full growth potential,” said Takuya Kamata, the World Bank’s Country Manager for Nepal. “This project will not only address short-term measures of introducing solar power generation into the system but will also contribute to reduction of distribution losses” he said.

The credit carries a 6 year grace period and a maturity of 38 years. Source


Fishing for a Sustainable and Equitable Future in the Pacific

World Bank approves US$32.97 million for regional fisheries program.

The World Bank’s Board of Executive Directors today approved US$32.97 million in International Development Association (IDA) grants and credits to support the Pacific Islands Regional Oceanscape Program (PROP) – a regional program of operations to strengthen the management of select Pacific Island fisheries.

PROP will initially provide funding to the Federated States of Micronesia, the Republic of the Marshall Islands, the Solomon Islands, Tuvalu and the Pacific Islands Forum Fisheries Agency to improve the sustainable use of oceanic fisheries, coastal fisheries, and the critical habitats on which they depend.

“The social and economic benefits gained from ensuring the strength and sustainability of what is a major source of national revenue and livelihoods in many countries will be significant,” said Franz Drees-Gross, Country Director for the World Bank in Timor-Leste, Papua New Guinea, and the Pacific Islands. “Improved management of this vital resource offers significant revenue potential for Pacific Island Countries – revenue which will ultimately help reduce poverty and boost shared prosperity.”

Specifically, PROP will target the sustainable management of oceanic fisheries by strengthening the capacity of regional and national institutions to manage fisheries and ensure the benefits they produce are equitably shared within Pacific Island countries. The project will support the sustainability of coastal fisheries by helping to empower stakeholders to better manage fisheries, and by linking sustainable coastal fish products to regional markets.

“The social and economic benefits gained from ensuring the strength and sustainability of what is a major source of national revenue and livelihoods in many countries will be significant.”

- Franz Drees-Gross, Country Director for the World Bank in Timor-Leste, Papua New Guinea, and the Pacific Islands

PROP will also protect critical fishery habitats by creating financing mechanisms to fund the conservation of the growing number of protected marine areas in the region, and providing funds to ensure a coordinated regional approach to the implementation, monitoring and evaluation of the program.

“Oceanic and coastal fisheries in the Pacific are reaching their long-term sustainable limits due to environmental changes and overfishing by vessels from outside the region,” said James Movick, Director General of the Pacific Islands Forum Fisheries Agency.“Collaboration among Pacific nations to secure the health of fisheries is essential to regional economic integration and growth. PROP will support this by building on existing fisheries management policies and frameworks already adopted by governments and administrations in the region.”

The program will promote the local implementation of shared regional objectives, together with coordination from the Pacific Islands Forum Fisheries Agency. PROP will eventually expand the number of countries involved over its six to 10 year duration, with the potential to involve all 11 eligible Pacific Island Countries.

“Pacific Island countries’ economies are in many cases driven by a strong reliance on healthy coastal ecosystems for food, livelihoods, weather protection, and resilience to shocks,” said John Virdin, Senior Natural Resources Management Specialist for the World Bank and task team leader for the project. “As the threat from climate change grows throughout the region – including sea-level rises and the potential for more intense and frequent storm events – maintaining or restoring healthy ocean environments and resources will be fundamental to building resilience to climatic shocks.”

PROP will be funded through a US$32.97 million in grants and credits from the IDA, the World Bank’s fund for the poorest countries. An additional US$6.3 million will be provided by the Global Environment Facility (GEF) Trust Fund to the Solomon Islands, Tuvalu and the Pacific Islands Forum Fisheries Agency. Source


Upcoming Greek Vote a Buying Opportunity?

[caption id="attachment_8622" align="alignright" width="274"] Athens[/caption]

Mark Zandy is worried that Greece may yet prove the undoing of the euro as the country prepares for elections. Mr Zandy is chief economist at Moody’s Analytics. He fears the Greek opening Pandora’s Box on January 25 could well release demons of nationalism eager to stir up trouble elsewhere in Europe. “The thing I worry most about isn’t so much Greece but whether what’s happening there affects the politics in the rest of Europe. If what’s happening in Greece is a catalyst for broader political change around Europe, I think that’s the real issue.”

After the Hellenic parliament on December 29 failed to elect a president in a third round of voting, triggering a constitutionally mandated snap election, yield of the benchmark 10-year bond jumped to over 9.7% (from its summer low of 3.5%) while shares on the Athens Stock Exchange plunged on average 11%.

As investors scurry for safety, anti-bailout party Syriza (Coalition of the Radical Left) seems to be running out of steam: its lead over the ruling liberal-conservatives of Prime-Minister Antonis Samaras shrank to barely three percent. Two opinion polls released on New Year’s Eve concur that about a third of respondents still prefer a coalition government erected around Mr Samaras’ liberal-conservatives to one formed by engineer-turned-rabble-rouser Alexis Tsipras of Syriza who is the preferred prime-minister of just 24% of Greek voters.

Mr Tsipras’ electoral victory is far from a foregone conclusion. Talk of a Grexit seems premature and may even amount to scaremongering. Pragmatism is set to save the day, albeit at the eleventh hour. Mr Tsipras last week surprised friend and foe by abandoning his earlier pledge to “tear up” the bailout agreement and promised to keep Greece “firmly” in the Eurozone. The more moderate stance the leftist opposition leader now embraces could help explain his party’s faltering popularity. It also signals Syriza’s readiness to pursue acceptance as a mainstream party and become a viable alternative to politics-as-usual.

Austerity Out

Some analysts brave enough to take the long view on Greece argue that a Syriza victory on January 25 may actually turn out to be a most profitable prospect. “Why not see Greece as part of the solution instead?” Krishna Memani, chief investment officer at Oppenheimer Funds, thinks a Syriza electoral triumph may well call into question the austerity dogma that has haunted Europe for “far too long” and done much harm to its economic and social fabric.

“Austerity in Europe is counterproductive. Getting out of the deflationary spiral requires flexibility on the fiscal side. Portugal is not raising the issue, Spain is not raising it, nor is Italy. Greeks finally are so desperate, they are bringing it to the forefront, and maybe it will rally more energy this time around,” said Mr Memani in the Financial Times. A few pundits are recommending Greece as a buying opportunity, arguing that a Syriza-led government is more likely to nurture the country’s timid economic recovery than to derail it.

In the third quarter of 2014, Greece managed to register a 1.6% year-on-year expansion of its GDP and emerge from a six-year recession. Deflation remains persistent at 1.2% and a brake on growth. Unemployment levels still hover northwards of 25% and are not expected to come down any time soon.

For recovery to take hold, much now depends on European attitudes to Greece. Inflammatory remarks by EU commissioners, central bankers, and politicians will only serve to stiffen Greek resistance to austerity. Last month, European Commission President Jean-Claude Juncker caused a mild uproar after warning Greek voters against electing “extreme forces” and adding that he would much rather deal with “known faces.”

Infamous Call

The Greek have yet to forget the infamous phone call placed by German Chancellor Angela Merkel on May 18 to President Karolos Papoulias in which she is said to have “relayed thoughts” rather than dictate instructions regarding the course of action deemed most appropriate for the government in Athens to follow. Any cajoling of Greek voters is bound to be counterproductive.

Mr Juncker’s faux pas notwithstanding, the Greek have been remarkably sensible in their political choices, largely eschewing radical solutions to the mounting challenges and discarding easy copouts such as a return to the drachma. For all the hardship it brought, support for the euro remains surprisingly strong with close to 60% of those asked wishing to keep the common currency.

The concern over Greek contagion expressed by Moody’s Analytics’ Chief Economist Mark Zandy would seem unwarranted. While on the rise across Europe, nationalist parties appear bound to an electoral ceiling of around 28% of voters. This holds true for France’s Front National, Belgium’s New Flemish Alliance, and The Netherlands’ Party for Freedom. As in Greece, in each of these countries an overwhelming majority of voters opts for more reasoned approaches to the enduring crisis.

However, what may well be coming to an end are the German-imposed and inspired politics of austerity that have failed to deliver a return to sustained economic growth. Rather than worry about which way the wind blows in Greece, investors could do worse than gear-up for fiscally less-constrained times and possibly even the return of a few happy days.


Mamta Murthi: World Bank to Help Poland Resolve the "Robin Hood" Tax Issue

[caption id="attachment_8616" align="alignright" width="230"] Warsaw, Poland[/caption]

The World Bank is helping Poland design a new system called the “Robin Hood” tax system. In the first quarter of 2015 a working group composed of representatives of the Ministry of Finance, the World Bank, subnational governments and academia will be launched to share international experience in Poland.

“Reforming the Robin Hood tax is a serious challenge, because Poland has a very complex system of financing subnational governments and calculating horizontal transfers between local government units. Two issues stand out, specifically. The first issue stems from the fact that Robin Hood tax is a forced system – Robin Hood took from the rich to give to the poor. This reduces the incentives of the donor governments to collect revenues, because they lose such a large share,” Mamta Murthi, World Bank Country Director for Central Europe and the Baltic Countries, told PAP.

In her opinion, the other issue related to the Polish Robin Hood tax system is the basis for transfer calculation. “In Poland this is based on revenue from two years before. That means that when the economy turns down you could have a local government making a transfer even though its own revenues are contracting. Such a system is not sustainable,” Murthi said.

As she went on to explain, the World Bank wants to assist Polish authorities in developing a new model of Robin Hood tax by providing expertise and sharing international examples.

To that purpose, a working group will be established in the first quarter of next year. “The Working group will be composed of representatives of the Ministry of Finance, subnational governments, and academics with support from World Bank experts. The details are still being discussed. “We want to make sure that the solutions developed by the group are then consulted by a broad range of stakeholders,” Ewa Korczyc from the World Bank told PAP.

“Reforming the Robin Hood tax is a serious challenge, because Poland has a very complex system of financing subnational governments and calculating horizontal transfers between local government units."

- Mamta Murthi, World Bank Country Director for Central Europe and the Baltic Countries

The group will continue the work initiated during the international workshop on “Equalization transfers in subnational governments,” organized at the beginning of December by the Ministry of Finance and the World Bank. During the workshop, the systems of horizontal transfers across local government units from various countries were presented.

”Polish Minister of Finance Mateusz Szczurek requested assistance in reforming the Robin Hood tax whilst in the Washington office of the World Bank during the annual meeting held in autumn. We agreed that the first step should be to identify how this problem has been addressed in other countries. Ministry of Finance representatives seemed to be most interested in those countries which equalize not only revenues, but also take expenditures and needs into account,” Ewa Korczyc explained.

Murthi emphasized that this is the initial stage of the work and at this point World Bank representatives are not going to give any recommendations. “Our aim now is to demonstrate some interesting examples. The solutions applied in Scandinavian countries seem to be of particular interest, but there is no single model or silver bullet,” Murthi commented.

”Even if Poland looks at Scandinavia, it will have to look very carefully and adapt that to the local context. One must consider not only technical, but also political aspects. The reason for that is that it is about money that is collected and distributed across local government units so there has to be some consensus to arrive at a sustainable solution for Poland,” she added.

According to World Bank representatives, Poland could start by looking at the Danish, Swiss, German and Canadian models, inter alia.

“In each of those models there are some elements that can be a source of inspiration in reforming the Robin Hood tax. (...) For instance, in the Danish system they take into account revenues as well as expenditure needs. It should be remembered that not every local government with low revenue is automatically a poor local government,” Ewa Korczyc underlined. One should also take into account special needs of big cities, demographics, etc. “When embarking on such reforms, one must first of all prepare a thorough and accurate diagnosis. Right now we are analyzing the Polish system, looking at the interests of all the stakeholders,” she said.

As World Bank representatives point out, “Polish standards are high, and – given a multi-tier system of local authorities – their financing system is also complex and multi-faceted.”

According to the World Bank, this is a two-way communication: Polish experiences can often be put into good use as a source of advice or inspiration for other countries. For example, the Polish experience might help to inform the reforms in Serbia. Source

Mamta Murthi, Country Director for Central Europe and the Baltic Countries

Published by Polish Press Agency (PAP) on December 23, 2014.


Otaviano Canuto, World Bank Group: Navigating Brazil’s Path to Growth

[caption id="attachment_8630" align="alignright" width="250"] Brazil: Rio de Janeiro[/caption]

Brazil’s macroeconomic management faces four major immediate challenges. The response to them will be strengthened if economic agents could have some indication of how the Brazilian economy will be steered back to a growth route.

The first challenge will be the upward realignment of domestic regulated prices in a context of inflationary pressures that are still high. Since the second half of 2012, inflation has remained near or above 6.5% – the upper limit of the target. In recent years, the main inflationary factors – services and non-tradable goods – appear to be slowing down. However, the ongoing correction of regulated prices, until recently repressed, has still some way to go (Chart 1).

Difficulties to decelerate inflation will be compounded by another potential challenge: the pressure towards local currency depreciation that will likely accompany the process of normalisation of US monetary policy. Some increase of interest rates is expected for 2015. At the very least there will be higher volatility of interest and exchange rates. This tends to lower the attractiveness of Brazilian securities.

“Since the second half of 2012, inflation has remained near or above 6.5% – the upper limit of the target.”

In fact, one can assume that the Brazilian real would have already lost significant value were it not for the foreign currency hedge transactions massively offered by the central bank since the “taper tantrum” of last year (the notional value of which has now reached $100bn).

[caption id="attachment_8638" align="aligncenter" width="591"] Chart 1: Inflation. Source: IBGE[/caption]

Flows of foreign direct investment have remained stable since 2011, but have no longer been sufficient to cover the current account deficit of the balance of payments since last year, when the latter surpassed 3.5% of GDP. (Chart 2)

To the extent that some retrenchment in portfolio capital inflows takes place, the pressure to devalue the real will increase. The challenge then will become an opportunity for the partial recovery of industrial competitiveness which was eroded in recent years. This occurs only as long as the effects of a devaluation is not negated by a subsequent inflation spurt.

Inflationary Pressures

The third challenge will be to respond to such inflationary pressures without resorting to massive doses of monetary tightening, in addition to the restrictive policy already in effect, while those adjustments in relative prices (exchange rate and regulated prices) take place. The Brazilian economy is now in its fourth year of low growth with industrial production remaining stagnant at levels close to those of 2010 (Chart 3). Bank credit has not decreased more only because of the expansion of public banks’ portfolios. Today, these exceed in volume the total lending by private banks (Chart 4).

[caption id="attachment_8639" align="aligncenter" width="526"] Chart 2: Foreign Direct Investment and Current-Account Deficits. Source: Central Bank of Brazil[/caption]

Fiscal policy will be the key to addressing this challenge, insofar as it can reduce the burden of responsibility placed on monetary authorities. The primary public sector surplus has shrunk since 2012 and is unlikely to reach this year’s goal (Chart 5). A reversal of fiscal and para-fiscal expansionism – through the injection of funds by the treasury into public banks – would ease the requirement in terms of higher interest rates that, in turn, help keep inflation in check.

Such review of the fiscal stance would meet the fourth great challenge, which is to reverse the perception of fiscal deterioration of recent years thus mitigating the risk of losing the “investment grade” ratings of Brazil’s public debt. Given the limits to ambitious change in fiscal targets, mostly due to inflexibility in the current structure of public expenditures, establishing multiannual targets for primary balances and/or caps on public spending-to-GDP ratios would enhance the credibility of any fiscal adjustment effort.

[caption id="attachment_8640" align="aligncenter" width="523"] Chart 3: GDP by Sectors (Quarterly GDP, Q1 2008 = 100). Source: IBGE[/caption]

Strictly speaking, if the answers to these four major immediate challenges are taken as credible, improvements in confidence and expectations of private agents will facilitate the crossing of turbulences. This will be the case particularly if private investments – in decline since the middle of last year – start to reflect a higher optimism about future macroeconomic performance.

Plan Upfront

Therefore, a plan to return to growth must be presented upfront. There is now a widespread understanding that a systematic increase in Brazil’s “total factor productivity” (TFP) will be needed from now on if the growth-with-social-inclusion that prevailed in the 2000s is to make a comeback. For this to happen, workers need to benefit from more and better education. However, there are other areas where Brazil can find sources of increased TFP while the country is working on improving its education system.

The first of these other areas is infrastructure. In addition to its role as gross fixed capital formation, sustainable investments in infrastructure would alleviate transportation bottlenecks that have become increasingly tight in the recent past. The reduction of wasted resources, as a consequence of such investments, would not only cause productivity gains, but also more robust private investment in other sectors. Here, it will be necessary to fine-tune the division of responsibilities between the public and private sectors.

[caption id="attachment_8641" align="aligncenter" width="527"] Chart 4: Bank Credit Outstanding (percent of GDP).
Source: IIF, Central Bank of Brazil[/caption]

Additionally, horizontal productivity gains could be achieved through reforms in various operating parameters of the private sector. For example, the annual Doing Business Report, published by the World Bank for 189 countries, indicates that a Brazilian company today spends 2,600 man-hours per year just to pay taxes.

The average in Latin America and the Caribbean, and the OECD are 367 and 176 respectively. Building permits take 460 days to be issued in Brazil, against 225 days elsewhere on the continent and 143 days in the OECD. These numbers indicate that human and material resources are wasted on activities that do not generate value. This is harmful to both the competitiveness of businesses and, at macro level, Brazil’s TFP.

Simplifying the tax system should be, in our judgment, an immediate priority. The bang for the buck, in terms of a reduction in the waste of resources, would be significant and be felt across the board. Improving the legal and tax frameworks in which the labour market operates should also be high on the agenda. Brazil is a country where – compared to its peers in levels of per capita income – private companies invest the least in the training of personnel. Disincentives embedded in current tax and labour laws are among the reasons for this poor performance.

Unfriendly

The foreign trade chapter of the Brazilian business environment is also noted as unfriendly to investments and technological innovation. Transaction costs and difficulties to access technologies, equipment, and supplies from outside have limited the local scope for innovation, productivity increases, and competitiveness. Physical investments in logistics infrastructure will bring a positive contribution in this case. However, a re-evaluation of the costs of the complex structure of tariff and non-tariff barriers by which the country protects its market, is also highly due.

[caption id="attachment_8642" align="aligncenter" width="571"] Chart 5: Primary Fiscal Balances and Public Debt. Source: Brazilian National Treasury[/caption]

The third area that holds the potential of contributing significantly to TFP and economic growth is a review of public spending. International experience has shown how transparency, result evaluation, accountability, and competition in public procurement reduce corruption and improve the quality of public spending. There is also evidence that the quality of public services (education, health, etc.) responds positively to the presence of incentives that reward good performance. Improvements in the quality of public spending would provide gains not only as a significant part of GDP, but also as part of the production inputs used by the private sector.

Potential gains in TFP to be accrued with the review of public spending go beyond the search for more efficiency and effectiveness. To the extent that one may locate benefits and public subsidies that do not find justification in terms of poverty reduction or needs of the productive system, their elimination would make room for tax reductions or a redirection of the freed-up resources.

Brazil therefore has four major short-term macroeconomic challenges and three broad areas of medium-term reform where it is possible to increase its potential for economic growth. Fixing the short term while launching long-term growth foundations will be essential in retaking the course of sustainable development and social inclusion. After all, it is easier to navigate angry seas when one keeps sights of the true north.

About the Author

Otaviano Canuto is Senior Advisor on BRICS Economies in the Development Economics Department, World Bank, a new position established by President Kim to bring a fresh research focus to this increasingly critical area. He previously served as the Bank’s Vice President and Head of the Poverty Reduction Network (PREM), a division of more than 700 economists and other professionals working on economic policy, poverty reduction, gender equality and analytic work for client countries. He also served as an Executive Director of the Board of the World Bank from 2004-2007. Outside of the Bank he has held leadership positions at the Inter-American Development Bank where he was Vice President for Countries, and for the Government of Brazil where he was Secretary for International Affairs at the Ministry of Finance. He also has an extensive academic background, serving as Professor of Economics at the University of São Paulo and University of Campinas (UNICAMP) in Brazil.

The opinions expressed here are the author’s and should not be attributed to the World Bank.

Follow Otaviano Canuto on Twitter:
www.twitter.com/ocanuto


Evangelos Marinakis: A Councilman of Note

 Though the past made him a rich man, Evangelos Marinakis now wants to break with it. Elected councilman in Piraeus, Mr Marinakis aims to introduce new models for the management and development of the port city: “This is something people with experience in private business can and must provide.”

That sort of experience is not lacking in Greece’s perhaps most powerful councilman. Mr Marinakis is a shipping magnate with an estimated personal net worth of $750m and CEO of Capital Product Partners, a tanker company listed on the NASDAQ stock exchange with a fleet of thirty vessels traversing the world’s oceans. Since 2010, he also owns the Olympiacos Football Club of Piraeus boasting the best team in the country with no less than 41 Greek League titles to its name.

In the May elections that landed Mr Marinakis a seat on the city council, Olympiacos Vice-President Yannis Moralis won the mayoral race in Piraeus. Though the city is now firmly in the hands of Mr Marinakis and his close associates, this is not necessarily a disaster in the making as some would have the nation believe.

In Greece, big business has traditionally steered well clear of politics – at least on the surface. Governments of all ideological stripes have usually preferred to let big business do its thing without too much interference. Greek corporate moguls returned the favour by not publically expressing any opinions on national affairs. However, and in light of the crisis that hit the country, Mr Marinakis now considers this arrangement quite unsuitable for facing the challenges ahead.

“By not remaining on the side lines while the country tries to climb out of the economic abyss, Mr Marinakis may have exposed himself to fierce criticism from those who question his motives; he also showed his true colours as a patriot more than businessman.”

Through his extensive international business activity, and the close ties he keeps with many foreign government officials for example in Japan and elsewhere where he does business, Mr Marinakis is trying to attract foreign investment in the country and notably in Piraeus.

Mr Marinakis has repeatedly stated his believe that the traditional political labels of left and right have little meaning: “Support for my candidacy comes from across the political spectrum. I believe that we can be something quite different and new; something not tainted by party politics.”

As one of the richest men in Greece, Mr Marinakis has done his part in ameliorating the social ills that were caused by the sharp economic downturn that followed the debt crisis. He supports an impressive number of charity and humanitarian projects throughout the country and recently mobilised the Olympiacos squad to help UNICEF raise money for the vaccination of children.

Mr Marinakis has also been buying up Greek debt on the secondary market for pennies on the dollar in order to help ease the country’s financial burden. The bonds acquired are handed to Greek Debt Free, a private organisation that aims to rally Greek tycoons to prop up government finances by taking bonds out of the market where they may now be had at steep discounts.

By not remaining on the side lines while the country tries to climb out of the economic abyss, Mr Marinakis may have exposed himself to fierce criticism from those who question his motives; he also showed his true colours as a patriot more than businessman. Mr Marinakis’ hometown Piraeus has been particularly hard hit. Cargo volumes and shipping traffic were down while unemployment shot up to 26% until, in 2010, the Chinese state-owned shipping conglomerate Cosco leased half of the port for $650m from the Greek government. Since then, the Chinese side of the port has seen its cargo volume triple while the Greek side languishes with little, if any, uptake in traffic.

It is precisely this lopsided development that Mr Marinakis aims to tackle as a politician. A lone councilman may perhaps not be able to accomplish all that much, but one of Mr Marinakis’ standing may yet cause a few surprises.


Change the Economy – Save the World

By Christoph Greil, PhD student of public international law at the University of Vienna.

A call for a more social and ecologically sustainable economic system: Capitalism does not offer a way to achieve the Sustainable Development Goals (SDGs). Therefore, a fundamental change needs to be made to the values and rules of our economic system. Most of all, corporate practices and objectives need to be brought into line with the SDGs and effective mechanisms must be devised to ensure that companies conduct their business in such a way that social and environmental goals are met.

The Economy for the Common Good is a new alternative concept of free market economy which ensures that those companies which behave in a socially and environmentally responsible way, gain an advantage. This takes much more than traditional measures of corporate social responsibility.

Currently, the world’s biggest problems are growing poverty levels and the systematic destruction of nature. The latest scientific wake-up call concerning the social drawbacks of our global economic system is Thomas Piketty’s Capital in the Twenty-First Century. In this hefty tome, the French economist shows with shocking empirical clarity that wealth in the hands of a small minority is growing exponentially while an increasing number of people no longer derive a decent standard of living from income generated by their labour. Also, a sizeable group of people is becoming marginalised and completely isolated from economic benefits.

"The Economy for the Common Good is a new alternative concept of free market economy which ensures that those companies which behave in a socially and environmentally responsible way, gain an advantage."

Mr Piketty’s book is rather heavy stuff for devotees of capitalism, economic deregulation, and free trade in its current raptorial neoliberal appearance. In order to shrink the growing wealth gap within states and between states, Mr Piketty suggests measures of redistribution such as a global wealth tax, progressive income taxation, a comprehensive welfare state, as well as stronger regulations of the financial sector.

While these measures would increase distributive justice, and therefore reduce poverty, the Piketty-recipe does not alter the structural tendency – inherent to capitalism – towards unequal distribution, nor does it address global environmental challenges. A valid economic system does not only need to ensure a fair distribution of wealth, but must also respect the environmental boundaries of our planet.

Overshoot Day

On August 19, Earth Overshoot Day was reached – the day mankind has exhausted this year’s ecological budget. We need to reduce our ecological footprint and global resource consumption by half in order to be sustainable. As a matter of principle, ecological boundaries are of an absolute nature and not compatible with the capitalist paradigm of infinite economic growth.

Most economic transactions involve the consumption of resources. Indeed, we need to significantly decrease the size of resource-intensive economic branches in most of the world’s industrialised regions in order to stay within the planetary boundaries. Although a switch to green energy is inevitable, we should not rely too much on technological progress for the required reduction of our ecological footprint.

This challenge is at least as much about reducing our usage of resources and energy. Earlier this year, I met with a member of the Austrian parliament who had participated in a high-level meeting organised by the Inter-Parliamentary Union a few years ago. The main task of the discussion group was to find out which political measures are needed in order to achieve the UN Millennium Development Goals or the subsequent Sustainable Development Goals.

Remarkably, most participants concluded that it is practically impossible to achieve either of those goals within the capitalist economic system. I agree. The values and rules of capitalism are not compatible with the social and environmental goals we so urgently need to achieve.

The paradigms of capitalism – infinite economic growth, profit-maximisation, and fierce competition – result in a strong incentive for companies to reduce costs (…no matter the cost…) in order to survive. Distributive justice and ecological sustainability will always be of secondary or lesser importance. We can see the results: A growing gap between rich and poor, on both a national and a global scale, and the collapse of nature.

Defenders of global free trade argue that poverty is being eliminated as the number of people having less than a dollar a day to spend shrinks. However, such claims distort reality and say little about global poverty overall. The broader picture shows a growing divergence between rich and poor in absolute numbers.

It is quite ironical that business-as-usual will destroy the vital planetary eco-systems life depends on, while politicians of all ideological stripes clamour for more economic growth as the end-all-be-all of poverty reduction. Some believe that all problems produced by the current economic system may be solved by regulation.

Half the Battle

However, regulation can only restrict the economic playground. This is only half the battle. It is equally important to change the rules of the game. As long as profit-maximisation remains the singly-most important corporate motivator, companies cannot be expected to strive for environmentally sustainable production or to care excessively for the well-being of their personnel.

If the SDGs are to be attained, we must fundamentally change the values and rules of doing business and must effectively ensure compliance of all economic actors with social and environmental goals. An answer may perhaps be found in a new and aspiring economic concept called Economy for the Common Good.

This approach aims to change the goals of doing business: Cooperation instead of competition; maximisation of the common good, instead of mere profit-maximisation; and the assumption of an optimal company size, instead of the limitless growth. Moreover, Economy for the Common Good provides a clever mechanism which ensures corporate compliance: It changes the framework of incentives.

On the basis of an annual compulsory assessment, companies receive points for socially and ecologically responsible behaviour such as, for example, horizontal and vertical cooperation with other business; ensuring proper payment and working conditions for all stakeholders; maintaining sustainable production and resource usage processes; renouncing excessive production levels; avoiding immoral marketing practices; and refusing the manufacturing and sale of unnecessary or unhealthy products.

This is eco-social behaviour that goes far beyond the traditional concept of corporate social responsibility. Transparency of the criteria employed is ensured by the establishment of a democratically legitimate Matrix for the Common Good which defines the socially and ecologically acceptable corporate behaviour that begets points. Companies that act in socially and ecologically responsible ways obtain more points than those that fall short and will therefore receive fiscal and legal benefits that allow for a competitive edge vis-à-vis businesses stuck in classical capitalist ways. Appropriate eco-social behaviour – the common good – becomes the goal of doing business. It pays for companies to act responsibly.

Aligning corporate objectives with eco-social goals is the only effective way to achieve the Sustainable Development Goals, especially those concerning distributive justice and environmental sustainability. Beside this, regulation, taxes, the reallocation of existing wealth from rich to poor and to the state, limits on income and inheritance, and other measures ensuring the required reduction of pollutant emissions and resource usage may be necessary. It may be necessary to set up an international authority to oversee the distribution of pollution and resource usage permits per region and economic sector.

Financial Reform

Furthermore, the current financial, banking, and monetary systems stand in need of reform. The financial system – which has developed into a cancer-like structure over the last decades – needs to be shrunk and brought back to serve its original purpose of providing money for the real economy through the granting loans to responsible projects or by liaising with investors.

All forms of gambling are to be done away with. Purely speculative investments like complex financial products and high-frequency trading should be abolished. A mere financial transaction tax is not enough to accomplish this. The minimum holding period for shares in a company should be synchronised with the production cycles of the real economy. Stocks should be traded on a purged type of stock exchange. Each company should undergo a compulsory eco-social check before being listed.

The fiat money system should be abandoned as well. This allows banks to create money out of thin air when loans are requested. The granting of loans should only be undertaken by banks that have a 100% capital cover. There should be strict eco-social project assessments before any loan is granted. Interest rates should be low too – just in an amount to cover the bank’s administrative efforts.

Money should only be issued by a state-owned central bank to a degree that allows for the payment of products and services supplied to the state by private companies. New money is brought into circulation at a rate equal to the absolute growth of the national economy. If the state’s expenditure is higher than the estimated economic growth in absolute numbers, the state will have to use its own means of covering the deficit. It will do so mostly through taxes. On an international scale, compensation payments for countries with aggressive export-strategies could encourage economic balance. Finally, it is self-evident that tax havens need to be closed.

In 2015, three international conferences of the utmost importance will take place: On climate change, Sustainable Development Goals, and on the financing of development. Whatever the SDGs will look like in their final version: The success of this concept will depend not so much on the concrete number of goals formulated, but rather on the clarity and effectiveness of the policies adopted for their implementation. Any post-2015 agenda for the SDGs that does not include a fundamental change in the economic rules is destined for failure.

It is necessary to align the objectives of business with the social and environmental goals we now need to achieve and to ensure that companies act far more responsibly than they have over the past decades. The three international conferences scheduled for 2015 offer a golden opportunity to obtain a strong political commitment in terms of achieving global distributive justice and ecological sustainability.


Charlie Hebdo Attack: The Triumph of the Last Laugh

[caption id="attachment_8670" align="alignright" width="168"] Paris[/caption]

In the wake of the terrorist attack on the French satirical magazine Charlie Hebdo, which left ten staff members and two police officers dead, it is more important than ever to remember – and indeed emphasise – the difference between a faith and those who misuse faith to commit heinous acts.

No faith may be used as an excuse for throat-slitting or, indeed, assaults on the freedom of expression. Those arguing that Islam incites to violence against non-believers – and is thus a reprehensible religion – would be well advised to read the Book of Deuteronomy which mandates the killing of “friends and family” who worship a different deity (Deuteronomy 13:6-10). In fact, taken at face value – or literally – the Bible is not the most peaceful of books, advocating rape, slavery, genocide, infanticide amongst a great many other vile acts.

Charlie Hebdo’s editor Stéphane Charbonnier – a hero fallen in the line of duty – only recently remarked that he could understand why Muslims would perhaps not be all that appreciative of the cartoons published by the magazine: “However, we are a French magazine and as such conform to French Law and not to the laws of, say, Afghanistan or Saudi Arabia.”

Mr Charbonnier refused to compromise on the freedom of the press, arguing that anyone with a beef against Charlie Hebdo is free to seek legal recourse. The editor regularly refused to honour government requests to refrain from poking fun at Islam. In 2012, Laurent Fabius – then minister of foreign affairs – was forced to close embassies, cultural centres, and schools in twenty countries for fear of reprisals after Charlie Hebdo published cartoons deemed offending to Muslims.

"Mr Charbonnier refused to compromise on the freedom of the press, arguing that anyone with a beef against Charlie Hebdo is free to seek legal recourse."

“If you start by asking whether or not you have the right to draw Muhammad, then the next question is: can you put Muslims in the paper? And then, can you put human beings in the paper? In the end, you can’t put anything in, and the handful of extremists who are agitating around the world and in France will have won,” Mr Charbonnier said at the time.

In 2006, Charlie Hebdo was one of only a handful of publications that came out in support of the embattled Danish newspaper Jyllands-Posten by reprinting twelve cartoons that had caused uproar across the Middle East. The French magazine’s offices were firebombed in 2011 after it published a special issue critical of Islam.

Wednesday’s attack came as the magazine prepared to go to press with yet another issue poking fun at the symbols of Islam. The assault took place on press day when the magazine’s full staff was assembled at the downtown Paris office to finish the issue.

Editor-in-chief Gérard Briard is one of the few staff members to survive. He was away on a business trip when the attack occurred. “I am shocked that people have attacked a newspaper in France, a secular republic. I don’t understand it. I don’t understand how people can attack a newspaper with heavy weapons. A newspaper is not a weapon of war.”

Moments after the attack, President François Hollande visited the scene as did an impressive number of leaders of French Muslims organisations, unison in their unequivocal condemnation of the violence. Expressions of solidarity streamed in from all corners of the world with a number of Mideast publications lamenting the violence and reprinting on their websites some of the more controversial covers of the stricken French magazine.

President Hollande called the assault “an attack on free speech” and assured: “No one can harm the spirit of this country which this newspaper embodies.”

With a weekly circulation in excess of 45,000, Charlie Hebdo is one of France’s leading satirical magazines. It was first published in 1969 and went out of business in 1981 before being resurrected in 1992. The publication is known – if not infamous – for its irreverence and a fiercely anti-religious stance poking fun, at times savagely so, at Christians, Jews, and Muslims alike.

Charlie Hebdo is the expression of the pronounced French penchant for satire. It is the smaller of the country’s two trend-setting satirical publications. The much larger Le Canard enchaîné (The Chained Duck or The Chained Paper), founded in 1915, has a weekly print run of close to 500,000 copies. Both publications have become redoubts of journalistic luddites bravely resisting the onslaught of digital media. The two publications still refuse to have more than a token presence on the Internet.

Whereas Le Canard enchaîné is politically neutral and somewhat less irreverent (and offensive), Charlie Hebdo makes no apologies and, indeed, takes no prisoners being a holdout of leftist radicals, albeit with a well-developed, if not acerbic, sense of humour.

If the attackers will have managed to accomplish anything, it will be the survival not just of Charlie Hebdo, but of the satirical press as a whole. Humour – devoid of taboos and dogmas – is bound to triumph, for the alternative – a society without smiles or laughs – is too dreary to conceive.

“When humour goes, there goes civilisation.”

Erma Bombeck – US humourist and columnist


Catherine Samba-Panza: Determined to Bring Peace and Democracy

 She promises elections and works vigorously towards that ultimate goal, but will not stand as a candidate. President Catherine Samba-Panza of the Central African Republic is trying to rally all stakeholders behind a concerted effort to pacify the warn-torn country and rebuild its wrecked civil society. She is bravely fighting an uphill battle.

With help of a United Nations peacekeeping force, President Samba-Panza hopes to stem the political violence. However, the Anti-balaka rebel movement is gaining strength and now regularly strikes in the capital Bangui. Meanwhile, former fighters of the disbanded Séléka rebel movement run amok in the countryside.

Though initially sectarian in nature, the violence in the Central African Republic has become indiscriminate. Over the past year, the United Nations repeatedly warned that a full-blown civil war is in the making and appealed to all sides to lay down arms. However, the irregular militias lack a clear command structure and are difficult to engage with in talks.

President Samba-Panza has asked the UN and France for help in rebuilding her country’s virtually non-existent armed forces. Great care is being taken to form an army that represents all ethnicities and welcomes former rebel fighters into its ranks. At present, the Central African Armed Forces has as many decrepit tanks as words in its name – four.

“Fighting what has now become common banditry, the Samba-Panza government needs help in checking the rebels’ progress in order for a process of national reconciliation to take place.”

President Catherina Samba-Panza was appointed interim head of state on January 23, 2014 after her name was picked from a list of eight candidates by representatives of both rebel movements. The National Transitional Council, set up to function as an interim parliament, subsequently sanctioned her appointment after two rounds of voting. Mrs Samba-Panza is non-partisan, a corporate lawyer by trade, and a successful businesswoman.

She has incessantly called for both Anti-balaka and Séléka rebels to cease fighting and return to the negotiating table without fear of reprisals. President Samba-Panza has also said that the violence is not so much inspired by religious differences as it is caused by abject poverty and a failure of governance. She aims to remedy that.

Attempts to assuage the Séléka militias backfired with the appointment of a Muslim prime-minister. The rebels were, in fact, outraged as they do not consider Prime-Minister Mahamat Kamoun one of their own. As a result, the group declared war on President Samba-Panza’s government of national unity. Not to be outdone, the Anti-balaka group, drawing its support from the Christian community, also intensified fighting finding an excuse in unsubstantiated accusations against President Samba-Panza in regard to the alleged pilfering of aid money.

In between, an embattled president is trying to keep a nation together seemingly bent on self-destruction. However, what President Samba-Panza does know is that the Central African Republic, notwithstanding all its problems, remains a viable country. The state may indeed have failed miserably in the past, President Samba-Panza is determined to finish both her mandates: To end the cycle of violence and to pave the way to democratic elections in 2015.

It is this almost single-minded determination that merits international support. Fighting what has now become common banditry, the Samba-Panza government needs help in checking the rebels’ progress in order for a process of national reconciliation to take place. The price for not actively supporting the transitional government is the birth of yet another failed state and a possible future haven for extremists.