So Long Saigon? Vietnam and the TPP

Growing out of the 2004 meetings of the Asia-Pacific Economic Cooperation forum, the development of the Trans-Pacific Partnership (TPP) went largely unnoticed by most policymakers until the entry of the United States in 2008. With the recent announcement of Japan’s entry into the agreement, the members involved in the negotiation of the TPP would be responsible for roughly a third of global trade and control over 39 percent of the world’s total GDP. With the stakes so high, disagreements among members should come as no surprise, and indeed the latest round of negotiations have reignited simmering trade disputes. Recently, the American negotiators have been haranguing their Japanese counterparts over autoworker unions and Canadian representatives have been defending their nation’s beleaguered dairy industry from all sides. What is, however, surprising has been the unusual amount of derision and vitriol piled on an otherwise relatively junior party to the negotiations: Vietnam.

Witnesses before Subcommittee on Terrorism, Nonproliferation, and Trade

At a recent hearing of the House’s Subcommittee on Terrorism, Nonproliferation, and Trade to discuss the impact of the TPP on the United States, members of both parties took time to criticize Vietnam, with Congressman Sherman (D-CA) decrying its “state-controlled economy” and Congressman Poe (R-TX) their inability to “treat their own people right”. While Vietnam endured less frequent criticism than Japan,  what it did suffer was arguably more damning, which leads to a simple question: Why is Vietnam, whose contribution to total TPP GDP is less than half of one percent, receiving so much attention? Although a number of explanations abound, they seem to fall into one of two categories; legitimate Vietnam-specific concerns and proximate issues to which Vietnam is only tangentially related.

Hope Springs Eternal

The issue of social mobility has proved itself a continual challenge for those working in international development.  New research has given policy makers and the poor an unlikely resource in their fight against poverty. Indeed, a recent article in The Economist shows that hope, or lack thereof, plays a major role in the poverty trap.

Esther Duflo, professor of economics at MIT

Development economists have long included the poverty trap in their understanding of the poor.  A poverty trap is, simply put, a “self-reinforcing mechanism” which limits the ability of poor individuals to escape poverty, according to a World Bank publication.  The publication goes on to identify insufficient capital and technological under-development as two mechanisms working to ensnare the poor in a perpetual cycle of poverty.  The work of researchers Eldar Shafir, Esther Duflo, and others, however, is expanding the definition of a poverty trap beyond economic mechanisms to include psychological mechanisms as well.

The link between depression and poverty is well documented.  A STAR-D study identifies low income as one of many factors related to higher risk of chronic depression.  A Journal of Health and Social Behavior article complements these findings, suggesting that depression can lead to or “transmit” poverty, contributing to the inescapable cycle.

After the Storm: Working with an Authoritarian Regime

In June 2011, the United Nations Development Program in Myanmar released their second Household Living Conditions Survey results. This survey aims to provide data on the living conditions within the country in order to strengthen development programs. The results show that overall poverty has been reduced. However, the report  notes that Myanmar is still facing significant humanitarian and developmental challenges. The most recent Human Development Index, which measures literacy, life expectancy and standard of living, ranks Myanmar 149 out of 187. About 25% of its population lives below the national poverty line.

Despite the harsh sanctions placed upon the country by the West, many international NGOs have implemented quite successful development programs in Myanmar. A 2011 Study by the Hauser Center for Non Profit Organizations at Harvard University, found that there are currently 65 international NGOs operating in the country.

The Macro Side of Microfinance

“Microcredit has given rise to its own breed of loan sharks,” groused Muhammed Yunus, Nobel Prize winner and the father of microfinance. These comments came in January, 2011 after the revelation that about 20 farmers in the Indian state of Andhra Pradesh had committed suicide due to over indebtedness and ruthless loan collection methods. An investigation by Associated Press (AP), identified Swayam Krishi Sangam (SKS) Microfinance, once the biggest microfinance company in India, as one of the main causes of these suicides, including sordid details of how their loan collection officers had allegedly driven their clients to death. SKS has refuted these allegations, having been exonerated from 14 out of 15 alleged suicide cases.

The Philanthropic Fork in the Road

Apparently philanthropy can no longer be the epitome of altruism. Instead, it needs to yield a smart business decision, too. Philanthropy, and its many facets, was discussed recently in the Wall Street Journal’s “The Journal Report.”

In the philanthropy world, there are usually two decisions to make: which organizations (of thousands) should I donate to, and how much should I give? Well, a third question has been added to that decision-making process, one that might not be easy to ignore. The new, big question: do I invest in an organization that runs its operations like a business and expects returns on investments, or do I invest in one that is addressing a cause I find important and worthwhile? If you’re lucky, the organization fits both criteria. However, the recent financial crises have put a kink in that idea, promoting the need for safer investment and more calculated giving strategies.

Girls Rule, Boys Drool: Gender-based Development

The Girl Effect.

The role of gender in development is not a new topic, and it is not one that should be taken lightly. Several studies have found that the inclusion of women in education, employment, and financial decisions can positively impact the economic growth of a country. Zap It to Me, a case study published by the Center for Global Development, shows that mobile cash transfers give women more control over the money in a household, and therefore give women more authority with decision-making. In addition, women are statistically more likely to use money for the family than men. An article by Business Week shows that there is an overwhelming 90 percent chance that women will use their salary to invest in their family – for men, the possibility is just 30-40 percent.

In 2008, the Nike foundation, along with the NoVo Foundation, United Nations Foundation, and the Coalition for Adolescent Girls, launched an ambitious new program called ‘The Girl Effect.’ The program aims to tap into the economic potential of women in order to break the cycle of poverty and abuse in developing countries. The Girl Effect promotes the argument that giving girls access to employment would add $3 billion to a developing country’s economy. By giving a young girl access to education, she is given access to better employment, better wages, better knowledge of HIV/AIDS prevention, and has a future investment in the education of her own children. In addition, by marrying at a later age, girls are less likely to suffer domestic violence from their husbands.

Trillion Dollar Baby: the Untapped Markets of the Global Poor

It has been labeled “the biggest potential market opportunity in the history of commerce.” But the corporate sector has just begun to catch on.

No, this is not the iPad 3.

To reach this market, think cheaper. Much, much cheaper. Serving the four billion people at the bottom of the world’s economic pyramid requires drastic changes in standard corporate practices, yet with over a trillion dollars between them, the global poor are a market that businesses cannot afford to overlook.

Source: Prahalad and Hart (2002)

Mr. Yunus, Telephone Ladies, and the Development Jigsaw

Photo credit to Grameen Bank

The Picture:

It came out on March 2^nd that Professor Muhammad Yunus, the Managing Director of Grameen Bank in Bangladesh and “pioneer [of] tiny loans for village entrepreneurs as a way to fight poverty,” was forced out of the bank.   The government of Prime Minister Sheikh Hasina, through a notification by the government finance ministry, issued a statement that Mr. Yunus was to be removed.  The New York Times reported that the Bangladesh Bank, the country’s central bank, had terminated Mr. Yunus on the grounds of a “technical violation,” citing that his appointment as Managing Director had never been approved by the central bank.  The High Court of Bangladesh upheld Mr. Yunus’s removal.

This most recent episode marks an ongoing row between Mr. Yunis and the Bangladeshi government; a conflict previously commented on by one of CGP’s earlier posts entitled: “Microfinance: Shunning Down??” The consequences of Bangladeshi government action, and more accurately, the government’s opportunistic advance to exert influence over Grameen Bank, are quite contentious and beg questions about what will happen to microfinance should Mr. Yunus be forced out.  What role could the removal of the godfather of microfinance have on donor confidence in the bank and microfinance system in Bangladesh?  To that point, if Mr. Yunus is in fact replaced and money were to flow out, what impact would it have on Grameen Bank’s Village Phones initiative?

The Pieces:

The Village Phones initiative is just one extension of Grameen bank’s microfinance mission.  But its impact on development and poverty alleviation has the potential to be quite large.  As part of the Village Phone effort, Grameen Bank has extended loans to 398,974 borrowers to purchase or lease a mobile phone.  The phone loans are primarily made to Bangladeshi village women, thus the term “Telephone Lady.”  In its original manifestation, the “Telephone Lady” would take out a loan from Grameen Bank “to purchase a phone… and provide [payphone] services to the people in her village.”  The bank program began operations in 1997.  By the end of 1999 there were 950 village phones in service; by the middle of 2002 there were 14,443 village phones (Monthly Reports here).

Microfinance: Shunning Down??

Courtesy: The New York Times

The world is not perfect! Likewise, no development strategy is totally perfect either.  A phenomenon that took the development world by storm was microcredit. Coined in 1983 by Noble Peace Prize winner, Dr. Muhammad Yunus, microcredit was aimed at the poor and disadvantaged in society (then specifically in Bangladesh). Today, almost 3 decades later, it seems like the very success of microcredit has attracted bad apples!

Microfinance’s Macro Implications

Microfinance, the provision of financial services to low-income clients, is hailed by many as the savior of the poor. The banking model, which grants  some of the world’s poorest access to financial services while simultaneously freeing them from money-lender loan rates has recently been under attack in India and now faces imminent collapse.