Trade, Not Aid


The first week of August marked the inaugural U.S.-Africa Leaders Summit, a meeting of nearly 50 African leaders and American businessmen in Washington, D.C. Though taking place nearly six years after President Obama’s first inauguration, the Summit manifested the President’s longstanding interest in stronger U.S.-Africa ties. During his time in the Oval Office, however, President Obama has often been criticized for his lack of serious involvement in Africa.

Until now.

At the tail end of the Obama Administration, the Leadership Summit briefly silenced critics who claimed the President Obama has ignored Africa. The Summit, the first meeting of its kind, was an opportunity for African leaders, most of whom are heads of state, to convene in one place with a sitting American president. After 3 days, the Summit unveiled its greatest initiative: a $33 billion investment plan to catalyze economic activity on the continent.

Unlike previous financial flows to Africa, the Summit’s investment plan is a departure from traditional Official Development Assistance (ODA), usually in the form of bilateral loans. Instead, the investment plan is set to take three forms: $7 billion to encourage trade and investment in Africa, $14 billion from American multi-national corporations (MNC), and the remaining $12 billion for infrastructure development through the USAID Power Africa initiative. The investment package is designed not only to reduce poverty across the continent but also to encourage investment beyond Africa’s primary resources. As such, the investment package may signal a swing of the economic development pendulum from aid to trade.

This marked shift, though a step in the right direction, is only a step. In comparison to the United States’ previous financial flows to Africa, $33 billion is small. In 2013 alone, the U.S. imported $39.3 billion from Africa and exported $24 billion to the continent. Outside of trade, ODA claimed nearly $7 billion to the continent in the same time period. Despite comparatively meager figures, the forthcoming investments could embody a new trend in development assistance for Africa. By shirking traditional bilateral loans, the new investments emphasize the importance of private sector activity rather than corrupt governments.

Only a few countries will benefit from the package’s key investments. The Power Africa Initiative’s newest investment will only benefit six countries, meaning that each country will receive $2.4 billion over the course of five years. While not a small number, the Power Africa investment will close a small section of the continent’s infrastructure gap, worth an estimated $38 billion annually for the next decade. Some critics are further puzzled by the initiative’s strategy of distributing the money for various projects such as mini-grid and off-grid expansion throughout six counties (Ethiopia, Ghana, Kenya, Nigeria, Tanzania, and Liberia) when it could make a greater impact by devoting the money to one project. The Grand Inga Dam, the Trans-African Highway, and the Lesotho Highlands Water Project are all far-reaching projects aimed at improving infrastructure beyond a limited geographic area. Instead of distributing funds to six countries, Power Africa could focus its invest in one of the aforementioned projects, and perhaps even further reduce the Infrastructure Gap.


Additionally, MNC investment is unlikely to go to the continent’s poorest countries. One of the investment package’s most notable companies Coca-Cola already has offices is Kenya, Nigeria, and South Africa, making it more likely that these countries will receive greater investments. Targeted investment, however, might not be such a bad thing. Countries likely to receive the majority of the investments are those with more stable governments and more trade-friendly economic policies. If anything, investments toward these countries could incentivize countries to improve their own investment climates.

 Perhaps the most prominent of the criticisms of the investment package is that these efforts are too small and too late for lasting impact. Such criticism is well-taken, but the U.S.-Africa Leaders Summit’s investment plan could signal a transition for further U.S.-Africa investments. Unlike traditional ODA, the Summit’s forthcoming investment recognizes the African continent as a legitimate investment location, corresponding to the continent’s impressive GDP growth rate. The Obama Administration cites Africa’s 5.4% growth rate as a promising sign of Africa’s investment potential. With the upcoming investments, the African continent can sustain an upward growth trend. Though the dust has settled on the U.S.-Africa Leaders Summit, the investment’s real work, still lies ahead.


Quantity vs. Quality: Rethinking ODA

The UK has met its .7% Official Development Assistance (ODA) target for 2013, but from the limited coverage of this issue you would never know. Britain barely advertised this huge accomplishment, only sending out a single tweet of acknowledgement. The UK is just one of 7 countries currently meeting the ODA requirement set by Development Assistance Committee (DAC) countries in 1969 and it is the first of the world’s largest economies to do so. The other countries include Norway, Sweden Luxembourg, the Netherlands, and Denmark. By comparison, the US only uses about .2% of its GNI on foreign assistance programs. The timing of the UK achievement is interesting considering the recent criticism of the country’s Department for International Development (DfID).

imgresDfID is the primary channel through which UK ODA flows. It is responsible for almost 88% of UK ODA.  But just last week the Independent Commission for Aid Impact, a watchdog agency evaluating DfID learning strategies, gave the UK agency an “amber-red” rating for its ability to research and apply its findings to foreign assistance programs. The report criticized DfID for poor returns on investment and emphasized the organization’s inability to translate research into effective action. This creates the notion that the UK could achieve the same development goals at a much lower cost if it were to employ more effective investment strategies.

The UK’s interesting situation is a stark reminder that quantity does not ensure quality in development assistance, and begs the question of which is most important for development: the quantity of foreign assistance or its quality? A higher quality means greater returns on investment, but a higher quantity means a larger investment overall. It seems, however, that by increasing the funding for an ineffective organization, the UK is wasting an opportunity to more effectively use its high ODA level but the achievement of reaching the .7% of GNI achievement masks the underlying organizational problems.

It is difficult to deny the benefits of ODA quotas. ODA quotas hold countries accountable for their continued foreign assistance. Bilateral development assistance relies on ODA, and because of the OECD agreement from 1969, developed nations have a mutual obligation to maintain a substantial foreign assistance program. By setting the quota as a percentage of GNI, each country has a high, yet attainable goal to achieve. Even if countries do not reach that goal, just by attempting to do so they contribute a large amount to development programs. The quota also serves the purpose of being an easily measurable target that ideally allows for comparisons across countries. The percentage encourages countries to contribute the same relative amount, creating a sense of equality.

The UK has drastically increased its ODA recently
The UK has drastically increased its ODA recently

The greatest negative aspect, however, of ODA as a percentage of GNI is the measure’s strict simplicity. As demonstrated, the benchmark only demonstrates how much money is spent on foreign assistance. It says nothing about the types of programs and, more importantly, the quality of these programs. Is this foreign assistance money used in the most effective way or in the areas in most dire need of assistance? It allows countries to abuse the ODA system. Countries are already under fire for suspicious ODA practices. A recent post on this blog highlighted how countries use ODA as a way to turn a profit often at the expense of a developing nation. Simply setting a high ODA target for developed nations without addressing organization issues could further contribute to this problem.

Has the age of ODA quotas come to an end? It might be time to move away from a system of ODA targets as a percentage of GNI. Development work is all about the quantifiable measures. Perhaps it is time the development community creates a quantifiable measure for ODA quality instead of merely the quantity. It is not enough for developed nations to merely donate a portion of their GNI, especially when that money is not funneled to effective development programs.

Niger Delta Blues

The nickname “black gold” has always been apt when dealing with oil. But dreams of riches and development have been masked by the murky nature of money flows connected to it. Nigeria in particular has been blessed and cursed with its abundant oil supplies. With the second largest GDP in Africa, Nigeria still has 46% of its population below the poverty line. This is despite the oil and gas sector representing 35% of the Nigerian economy, according to OPEC. The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture has even asserted that the oil and gas sector has been distorting the Nigerian economy. Recent revelations have shown that corruption in the oil sector is still rampant. The question becomes what pressure can be brought on the industry.

Lamido Sanusi, former Nigerian central banker and whistle-blower

Recently, Lamido Sanusi, the Nigerian central bank president, was suspended and removed from his position by President Goodluck Jonathan. Sanusi’s suspension was prompted by the revelation that $20 billion in oil revenue was not accounted for by the Nigerian National Petroleum Corporation. The revelation created enough of an uproar that a forensic audit has been called for to try and account for the missing money. This is on top of the fact that a month earlier, the NNPC was selling kerosene to marketers at one-third of the international price, allowing them to mark up kerosene to Nigerian citizens 300-500%. The mark-up is the difference between 140-160 naira per liter ($.85-$.97) and 40 naira per liter ($.24).

In the past, Nigeria tried to tackle the issue of corruption and the lack of transparency in the oil sector by establishing the Nigeria Extractive Industries Transparency Initiative (NEITI) in 2007, which is the local adaptation of the Extractive Industries Transparency Initiative (EITI). NEITI is mandated to audit the extractive industries, and provide transparency and accountability. It is comprised of representatives from the government, oil industries, and civil society. While the cooperation of national governments and NGOs is a laudable achievement, the voluntary nature of the EITI has been criticized.

Shell and the Niger Delta

International NGOs, such as Oxfam and Publish What You Pay (PWYP), feel that the standard adopted by extractive industries should also be backed by a legal enforcement framework. EITI has also been criticized for the role of civil society organizations (CSOs) in the EITI framework. EITI can be considered a top-down reform, and the governments and extractive industries still have more power than the CSOs, creating pressure for the CSOs to go along with the EITI process, according to Kees Visser at the Focus on the Global South. There is also the question of which CSOs are chosen to be represented. EITI has also not been shown to reduce the Corruption Perceptions Index. In Nigeria, the NEITI has published audits, which have had no effect on laws,  because dissemination is not simple in a country with low internet access. There have also been representatives of NGOs who were actually single person self-promoters.

With the doubt cast over the EITI, the question remains on what model civil society in Nigeria should use to ensure that all Nigerians benefit from their extractive industries. While there is a local chapter of Publish What You Pay, coalitions in Ghana and Uganda could serve as templates for counterbalances to the government and industries. The Civil Society Coalition on Oil and Gas (CSCO) in Uganda and the Ghana Civil Society Platform on Oil and Gas are both large coalitions of CSOs: 40 in CSCO and 120 in Ghana compared to 19 in PWYP. Both coalitions use the expertise from individual CSOs to issue media campaigns and community interaction to pressure governments to keep oil and gas taxes and concessions transparent. In Ghana, the Civil Society Platform on Oil and Gas issues “Readiness Report Cards” and actively contributes to the Public Interest and Accountability Committee and proposed laws through the committee. The Ghana platform is funded by various international donor agencies, such as USAID and the EU, and therefore have the backing of powerful partners. Both of these countries have only recently discovered oil, so it remains to be seen how successful these coalitions will be in exerting pressure. For the most part, there’s nowhere to go but up.

I Predict a Riot!

Predicting the future is here! Well, maybe not quite, but data scientists are currently working hard to accurately predict rebellions, ethnic violence, insurgencies, and mass atrocities around the world through the use of supercomputers and algorithms. With the current political situations and turmoil in countries like Ukraine, Venezuela, Thailand, Syria, and Egypt, making these types of accurate and reliable predictions can be very valuable information.

Protests in Tahrir Square, Egypt.

So far there have been several attempts to calculate these types of predictions.  For instance, Duke University’s Ward Lab collects and deciphers big data using several software programs that analyze news articles from around the world in order to make predictions about which countries are most at risk for rebellion, increase in insurgency, ethnic violence, domestic crisis, and international crises.  Ward Labs have seen some success in accurately making these predictions. In July they estimated that Paraguay had a 97% chance of insurgency, which later proved to be accurate when guerilla attacks increased.  Additionally, in October, Ward Labs predicted that Thailand was at a 95% risk for a domestic crisis, and in December predicted that Iraq’s probability of having an international crisis was 99%; both predictions have since proven to be true. Ward Labs has not been able to predict everything, though; the current crisis in Ukraine was not on their lists until after the protests had begun.  This is okay, however, as they maintain that their main objective is to test theories, and making accurate predictions is a difficult thing to do.


USAID is even getting in on the action, partnering with Humanity United to create the Tech Challenge for Atrocity Prevention.  This worldwide technology competition challenges participants to use current technology to create innovative ways of preventing atrocities.  One of the challenges in the competition is to create a model or algorithm to predict where future atrocities are most likely to occur.  Xiaoshi Liu won this challenge, earning himself $12,000 USD.  His algorithm creates decision trees for every five day period, using data from the most recent atrocity and social-political records.  If his model is indeed effective, it will help USAID effectively calculate what countries need help most and mitigate any damages.

Helping data scientists make these predictions is Kalev Leetaru, creator of the Global Database of Events, Language, and Tone (GDELT).  GDELT is a database that stores information about political events from around the world.  Listing who did what to whom, when, and where, GDELT has recorded more than 200 million events going back to 1979, and plans to go even further back to the year 1800.  Every day, information is gathered by examining news reports from all the countries in the world, and through sentiment analysis – a computer automated method to determine the attitude of the writer or speaker – GDELT is able to catalogue human behavior and beliefs across the world. GDELT is available to the public, and has since provided many political scientists the information with which to test their theories and make predictions about future events.

Mapping areas of protest in Ukraine

Making accurate and reliable predictions has proven to be hard; there are always going to be variables that are impossible to envision, such as plane crashes with political leaders on board, or natural disasters that wipe out cities.  We may never be able to make perfect predictions, but with the growing popularity of the business, we are certainly getting better at it.  There is a future for predicting the future.

Local Procurement for Global Success

Large companies obsess over their supply chains. Every item or component must be sourced from a producer, transported quickly and cheaply, and delivered on time. Maximizing a supply chain’s efficiency can lead to massive savings for a company.

In past years, large nongovernmental organizations and aid agencies have been taking a line from international corporations and improving their supply chains through local and regional procurement (LRP). Instead of purchasing their suppliers and goods in developed countries and shipping them where they are needed, organizations have started to carefully source their purchases from the country in which they’re operating or from neighboring countries.

This has several advantages. First, it cuts down on costs by minimizing transportation; USAID estimates that purchasing food through LRP would cost about 30% less per metric ton than purchasing it in the United States and shipping it abroad. Second, it sharply reduces the time it takes to have a purchase delivered where it is needed. Third, the economy of a region benefits from having a large organization purchasing large quantities of goods. With that impetus, farmers and producers have an incentive to increase the quality of their goods and bring them to market.

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How Does the Shutdown Affect USAID?

This week the United States federal government was shut down after Congress failed to come up with a budget plan for the new fiscal year. Officials had spent much of the previous week arguing over funding for the President’s legislative centerpiece the Affordable Care Act. With both parties refusing concessions, the United States has found itself in a situation not seen since the mid-1990’s. Over 800,000 federal employees have been furloughed, public parks and museums have been closed, and various agency activities are put on hold. But how does this domestic issue affect U.S. foreign aid agencies like USAID? So far, not very much.

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Is the Partnership for Growth Going to Grow?

In 2010, the Obama administration emphasized the fundamental importance of the private sector in international development in the Presidential Policy Directive on Global Development. From this directive came the Partnership for Growth (PfG), an interagency initiative that selected four countries to develop deep partnerships with the U.S. government to help them “accelerate and sustain broad-based economic growth.” U.S. agencies including the U.S. Agency for International Development (USAID) and the Millennium Challenge Corporation (MCC) are now working with the governments of El Salvador, Ghana, the Philippines, and Tanzania to analyze constraints on their growth and create development plans that leverage private investment.

In PfG partner countries, the U.S. government’s development efforts aim to create an “enabling environment for economic growth” which will attract private capital. The government is engaging with private sector partners to determine what specific factors are keeping them from investing in the PfG countries, in order to focus its resources towards addressing those issues. The PfG aims to “spur new investment by lowering the risks and costs of investment with developmental impact,” increasing non-aid flows into developing countries and creating more sustainable development. By deliberately promoting economic growth through private investment and economic growth, U.S. agencies are positioning themselves as “catalytic minority shareholders in development” helping to unleash growth with more than official aid money.

On Friday, September 13, the Center for Strategic and International Studies held an event to promote Jeri Jensen’s new paper evaluating the successes and failures of PfG, “Toward a New Paradigm of Sustainable Development: Lessons from the Partnership for Growth.” Gayle Smith, Special Assistant to the President and Senior Director of the National Security Council, keynoted the event.

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