Exploring New Approaches For Poverty Reduction

As the Global Forum on Development (GFD) 2013 draws closer, Cameroonian blogger Julia Owono of Global Voices has written about recent online exchanges on poverty reduction, including a TEDx talk in Mongolia and the ongoing online discussion in preparation for the GFD.

The quest is on for solutions to poverty reduction with the approach of the 2015 deadline for the UN Millenium Development Goals (MDG). Many organizations are exploring new avenues for answers, hoping it can lead to fresh ideas. Among the goals agreed to by the international community more than a decade ago was to halve the number of people suffering from hunger, and for the world's poorest citizens to gain productive employment. Most of the targets are far from being met in most countries, but progress has been made, for instance in Sub Saharan Africa where the proportion of people living on less than USD 1.25 a day declined from 58% to 51% between 1990 and 2005.

Ideas exchange on the internet

The Organisation for Economic Co-operation and Development (OECD) will hold their annual Global Forum on Development in Paris on April 4-5, 2013. This year, the OECD is exploring more inclusive approaches to tackle the poverty issue by inviting to anopen pre-forum discussion online with OECD scholars. All the main conversation topics on the agenda are laid out for everyone to see and contribute.

Another interesting approach to online ideas exchange is hosted by Concerned African Scholars, an organization of scholars and students of Africa. Among the many issues explored is the impact of the hundreds of billions of dollars flowing illicitly out of Africa on the slow progress of poverty reduction. The author, Janvier D. Nkurunziza, suggests one key to bringing down poverty would be "the repatriation of the resources which are currently held abroad and not benefiting the continent."

Had Africa had not lost so much resources in the form of illicit financial transfers, it is likely that poverty would have been less acute. The logic is that keeping these resources in Africa would have produced higher rates of investment, allowing African countries to invest in productivity enhancing sectors such as infrastructure, creating jobs, and raising incomes, resulting in lower levels of poverty.

In a TEDx talk in UlaanBataar, Mongolia on "Social Media and Poverty Reduction" in September 2012, Robert Reid, the Resident Country Director of the Millennium Challenge Corporation in Mongolia, highlighted the necessity of a broad public participation in poverty reduction projects, stressing the importance of private sector involvement for sustainable development. "It's important that the involvment of the private sector be considered at the beginning of discussions on how to reduce poverty," he says.

This multistakeholder approach is also a key tenet of the open data movement, which is progressively penetrating the development sphere. The Uganda Open Development Partnership Platform, a civil society organization-led public initiative, is an example of what open data could bring to the debate on poverty reduction:

Open development is where organisations are using information technologies, among other information sharing channels, to provide and share information. Open development enhances transparency and accountability about resources that are available to be invested in development, how those resources are invested and what results they achieve. In the end, all the stakeholders involved in this information sharing chain; the data owners and users benefit from this mutually reinforcing ecosystem‌

By Julie Owono

This blog first appeared on the OECD Global Forum on Development 2013 site, here.

Discussion questions

The past two decades has seen decreases in both the number of people living in absolute poverty and the rate of poverty in the developing world. This has resulted in part from rapid economic growth, but also from the adoption of active poverty reduction policies, in particular in the framework of the MDGs.

Even though the objective of reducing poverty remains a priority, other social goals need to be tackled today. In this respect, by focusing on three complementary dimensions – social inclusion, social capital and social mobility – social cohesion represents an important challenge for policy makers. While the adoption and rapid propagation of institutional innovations – such as conditional cash transfers, employment guarantee schemes and social savings accounts – have helped to alleviate poverty in many developing countries, they have also contributed to creating fragmented social systems, which can deepen divisions in society.

Questions

1.  What should be the priorities of a renewed social cohesion agenda?
2. What policy mix best addresses the multi-dimensional nature of social cohesion?
3. What institutional innovations have enhanced the social inclusion and mobility of vulnerable and discriminated populations?
4. Is the implementation of universal social programmes achievable in developing countries?

The OECD Global Forum would like to hear your opinions the above. Click here to discuss

In Global Downturn, Sustainable Development Begins at Home

In preparation for the Global Forum on Development 2013, Lova Rakotomalala of Global Voices discusses how to better link remittances and sustainable development.

As Western economies struggle with rising debt and unemployment, their approach to development and cooperation with low-income countries and emerging markets has taken a twist. It is becoming more clear that sustainable development should not be based on external wealth or redistribution, but must instead be generated at home.

Foreign investment and remittances have long been identified as a crucial source of revenue for poor populations in countries like Mali or Cape Verde. Entire villages have been built out of remittances in Mali, for instance, mainly from immigrants to France. However, this does not mean that these countries are being helped to develop sustainably.

 Preparing a new thatched roof in Mali. Photo by Jean-Marc Desfilhes on flickr (CC BY-NC-SA 2.0)

For most African countries, the positive ability to attract capital is often negated by lenient fiscal policies towards foreign investors that strip countries of public revenues to build up their economies. This trend seems was still on the rise worldwide in 2007 according to an OECD report "Tax Effects on Foreign Direct Investments".

A report by Matthew Martin and Nils Bhinda from Development Finance International shows that in Tanzania, for instance, the influx of private capital from global mining companies increased the volume of gold and diamonds sales. However, this failed to produce the expected social benefits, such as increased government revenues or public investment in social infrastructure. In fact, various tax exemptions and fiscal incentives ended up costing Tanzania $140 million USD from 2005-2008.

Remittances: Money at what cost?

A growing number of poor households worldwide are subsisting on remittances, according to the World Bank. Still the question remains: can these seemingly successful flows of migrants and money secure sustainable development and reduce poverty in the most affected countries?

Remittances from abroad to Mali amounted %3.7 of the countries GDP for the year 2005-2006, and according to some estimates remittances significantly decreased the number of poor in Mali and also reduced inequality. Cape Verde is another nation that has seemingly benefited from emigration as the country with the highest per capita remittances of any African country. With remittances amounting to 8% of the country's GDP, it has even overcome the challenge of establishing banking institutions for the poor on its many islands thanks to financial capital from migrants in Portugal, Brazil and the USA.

Because of such statistics, many international development institutions have attempted to design development policies based on remittance flows, by trying to convert this “subsistence” money into capital for infrastructure. There are some caveats to consider though.

Despite the growth of remittance flows, one should keep in mind that the very concept of remittances originates from a major outcome of global poverty: economic migration. Those who choose to leave their country are often exposed to risks and dangers during the transition (illegal border transfer, human traffickers, social and cultural isolation).

Moreover, remittances from migrants are highly dependent on the economic growth of the host countries. When unemployment in host countries rises, it frequently affects the type of labor available to most immigrants, putting both them and families back home at further risk of precariousness. Finally, the peer-to-peer nature of remittances is both a blessing and a curse. As Hein de Haas writes in an article for Third World Quarterlyin 2005:

The much-celebrated micro-level at which remittances are transferred is not only their strength, but also their main weakness, since this also implies that individual migrants are generally not able to remove general development constraints.

Because of the lack of incentives for locally-produced added value, it appears that remittances based on value created abroad can never be the sole base of a sustainable development strategy for low income countries.

Good measures for sustainable development

There are some measures that can be implemented to support foreign direct investment and remittances towards a more sustainable world.

First, transparency and accountability. With respect to foreign investments, governments should offer proper projections of the benefits for public finance, or projects should not be allowed to take place. Financial policies should encourage a permanent check and balance system for both private and public flows with an obligation of transparency for the source of the revenues and their further use. Transparency, in the form of regular and mandatory publications to civil society should be mandatory.

Low income countries often resort to the setting up Industrial Free Zones (IZF) to spur industrialization and create jobs in strategic locations with mineral resources. The creation of these zones have often led to economic and social instability through a constant race to lower costs, geographical mobility and low-quality production. Therefore if a government chooses to implement an IZF, it should also plan for a rapid conversion of labor and production capacity to evolve with markets.

This concept is all the more important because so far there has been no concerted effort to integrate local products of low income countries and services in global trade. Inter-regional trade should remain the main goal because it provides geographical proximity and reduces vulnerability to the whims of highly mobile multinational companies.

With respect to migration and remittances, a drawback of global inequality is the tendency of qualified students from low income countries to remain in richer countries to pursue careers, a phenomenon also known as the "brain drain". As the recession takes its toll on employment in Western countries, a “reverse brain drain” effect has emerged for Nigeria, Ghana, Morocco and other countries where there are competitive salaries and working conditions.

It would make sense for policymakers worldwide to start to embrace a simple idiom to ensure sustainable development: the creation of wealth through added value and redistribution must start at home. Policies based on short term incentives, social inequities or external wealth injection might spur growth temporarily, but it is doubtful that they will sustain poverty reduction in the long run.

Lova Rakotomalala of Global Voices

This blog first appeared on the OECD Global Forum on Development 2013 site, here.

The OECD Global Forum would like to hear your opinions on the major themes.

• Post 2015: Effective partnerships for development in a changing world. Click here to discuss
• Beyond Poverty reduction: The challenge of social cohesion in developing countries. Click here to discuss
• Measuring poverty, well-being and progress: Innovative approaches and their implications for statistical capacity development. Click here to discuss
• The global-national nexus and country-level policy action. Click here to discuss