Business and New Markets – BORGEN http://www.borgenmagazine.com Humanity, Politics & You Sun, 20 May 2018 08:30:53 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.5 Reinvesting in Locals: The Benefits of Pro-Poor Tourism http://www.borgenmagazine.com/reinvesting-in-locals-the-benefits-of-pro-poor-tourism/ Wed, 16 May 2018 08:30:09 +0000 http://www.borgenmagazine.com/?p=126814 SEATTLE — Tourism accounts for one of every 12 jobs worldwide, and is broadly seen as a viable path to sustainable growth in least developed countries (LDCs). In many LDCs, tourism spending is both the primary driver of economic growth and a source for foreign exchange. But much of the tourism investments fail to reach, [...]

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SEATTLE — Tourism accounts for one of every 12 jobs worldwide, and is broadly seen as a viable path to sustainable growth in least developed countries (LDCs). In many LDCs, tourism spending is both the primary driver of economic growth and a source for foreign exchange. But much of the tourism investments fail to reach, let alone benefit, the poor local communities where the money is spent. However, some novel approaches to tourism, which engage and provide earnings for poor local residents, are succeeding in Africa and Southeast Asia.

These poverty reduction efforts, known as “pro-poor tourism,” are effectively channeling tourism funds towards the poor—and with $2 trillion a year in tourism earnings worldwide, there are ample opportunities for reinvesting these earnings in local communities. A variety of LDCs and developing countries, such as Laos, Uganda and Kenya, are realizing the formerly unknown benefits of pro-poor tourism.

Ecotourism in Laos

Home to tigers, clouded leopards, gibbons and more than 800 species of birds, Laos is arguably the most ecologically dense and diverse country on the Indochina Peninsula. Unsurprisingly, pro-poor tourism programs in Laos tend to focus on sustainable ecotourism.

Ecotourism Laos, under the auspices of the Asian Development Bank, is creating opportunities for local villagers to directly contribute to, and benefit from, fee-generating tourism activities. In Laos, an interactive hiking experience with locally trained guides is one promising example of reinvestment in the local economy and populace.

Utilizing local guides’ extensive knowledge of the plants, wildlife and culture of the region, Ecotourism Laos provides one to three-day treks for tourists interested in, among other things, hidden waterfalls and caves, bird watching and visiting ancient ruins. A sizable portion of the fees goes directly to guides and villagers living in the area. These windfalls are reinvested into ongoing guide training and trail and facility maintenance.

Uganda’s Byoona Amagara Project

Sharing a border with Kenya, Uganda is a popular destination for travelers due to the numerous game reserves and beautiful national parks and lakes. In 2016, travel and tourism generated more than 6 percent of all economic activity in Uganda, while also creating more than 500,000 jobs. Linking this tourism spending to investment in vital services for locals is the aim of the Byoona Amagara Project.

Byoona Amagara is a nonprofit organization that puts 100 percent of its proceeds towards various pro-poor programs. Some of the project’s core initiatives include healthcare treatment, rural education and literacy, organic agriculture and indigenous forestry.

There are other noteworthy initiatives the Byoona Amagara Project promotes that are too numerous to mention here. One common element shared by all is the focus on sustainable community development. Whether it is building a new library and multimedia center on nearby Itambira Island or supporting cross-cultural exchange, the program is providing an active role for the poor local community in the profitable tourism industry in Uganda.

Kenya’s Sustainable Safaris

The benefits of pro-poor tourism are not the sole domain of LDCs. Take Uganda’s more developed eastern neighbor, for example. Kenya, having recently graduated from LDC status, serves as an example for other developing countries in Africa to follow.

The African Pro-Poor Tourism Development Centre (APTDC) is focusing on sustainable safaris to address some of the shortcomings of traditional tourism. Reinvesting the profits from tourism back into the regional economy is the overall goal of the APTDC.

Safaris create an opportunity to enjoy Kenya’s natural beauty and wildlife, while at the same time contributing to improving the locals’ standard of living. A simple 10 percent markup on safaris is put aside as donations to support economic development projects in the local community. More specifically, the slight price hike helps pay for access to fundamental resources, such as water and education, for nearby residents.

Engaging travelers with the livelihood of locals is creating a more interactive and rewarding form of travel for both the tourist and the rural Kenyan community. Although simple, this approach to sustainable safaris in Kenya is a great example of the benefits of pro-poor tourism.

The Benefits of Pro-Poor Tourism for Tomorrow

Like many poverty reduction efforts, there is no single blueprint for pro-poor tourism. However, the examples above of pro-poor tourism initiatives, from Africa to Southeast Asia, show a recurring theme in allowing room for local involvement in the tourism industry.

Providing interaction between tourists and local communities paves the way for a more sustainable development of the tourism industry in that country. Being knowledgeable about the benefits of pro-poor tourism on local villagers should spur greater growth of this unique method of poverty reduction. Countries hoping to graduate from LDC status might find that reinvesting tourism dollars at home today could go a long way towards helping achieve their development goals in the future.

– Nathan Ghelli

Photo: Flickr

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Recent Economic Growth in El Salvador http://www.borgenmagazine.com/economic-growth-in-el-salvador/ Fri, 16 Mar 2018 08:30:07 +0000 http://www.borgenmagazine.com/?p=125765 SEATTLE — Over the past few years, El Salvador has had the slowest growing economy in Central America. However, recent pro-business reforms and strong showings from the agricultural and industrial sectors indicate the potential strengthening of the economy. Doing Business ranked El Salvador as one of the world’s most improved economies of 2016-2017. Though the [...]

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SEATTLE — Over the past few years, El Salvador has had the slowest growing economy in Central America. However, recent pro-business reforms and strong showings from the agricultural and industrial sectors indicate the potential strengthening of the economy. Doing Business ranked El Salvador as one of the world’s most improved economies of 2016-2017. Though the country still faces numerous social and fiscal obstacles, economic conditions appear to be improving.

El Salvador’s Economy

Economic growth in El Salvador averaged only 1.9 percent between 2010 and 2016. Cumbersome commercial regulations, inadequate levels of international trade, little foreign direct investment and social instability driven by violent crime have kept growth low.

Sluggish economic growth in El Salvador has contributed to high domestic poverty levels. Approximately 41 percent of El Salvadoran households lived below the poverty line in 2015. Of these, 10 percent lived in extreme poverty.

However, in recent years El Salvador has experienced a small economic upturn. In 2016, economic growth reached 2.4 percent, though much of this was due to external factors, specifically decreased oil imports and increased remittances.

So far this year, El Salvador’s agricultural and industrial sectors have performed well. Exports have increased relative to last year.

Additionally, 2018 will see higher levels of government spending and fixed investment. On January 5, the Legislative Assembly approved the 2018 fiscal budget with an increase in government expenditures. However, one-fifth of expenditures will be used on debt repayment and not investments in economic growth.

Doing Business Evaluates El Salvador’s Business Regulations

The World Bank’s annual Doing Business report analyzes qualitative indicators of the ease of doing business in 190 different countries. Doing Business monitors 11 different indicators: starting a business, dealing with construction permits, accessing electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation.

Doing Business ranked El Salvador as one of the most improved economies of 2016-2017.

Recent reforms in El Salvador have improved business conditions in four of the 11 categories monitored by Doing Business: trading across borders, accessing electricity, paying taxes and dealing with construction permits.

Trade across borders was made easier with an increase in customs officials at the Anguiatú land border. The reliability of electricity was improved with new software allowing for better outage and maintenance management. Ease of filing taxes increased with an online filing platform. Additionally, the risk-based audit selection system will focus more on large companies. Finally, a new online platform can process preliminary construction fees and experience requirements were introduced for construction inspectors.

These positive reforms follow anti-business regulations enforced in prior years. The Doing Business 2016 report noted that an extra border inspection at the Anguiatú land border made trade across borders more difficult. The year before, access to credit became more difficult because the coverage of the credit bureau was reduced.

USAID Programs Target Economic Growth in El Salvador

Continued focus on positive business reforms could spur additional economic growth in El Salvador. Organizations like the United States Agency for International Development (USAID) help promote good business conditions in El Salvador.

USAID fiscal policy programs target some of the economic indicators measured by Doing Business. For instance, USAID has helped the El Salvadoran government streamline tax collection in order to increase the country’s revenues from taxes.

USAID also advocates for free trade and encourages increased sustainable production of key exports like cacao. El Salvador’s economy relies on exports of coffee, sugar, textiles, gold, ethanol, chemicals and electricity. The combined value of imports and exports into the country is 64 percent of its GDP.

Targeted initiatives that encourage economic growth in El Salvador, like those introduced by USAID, could help maintain the promising performance from the past few years.

– Katherine Parks

Photo: Flickr

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Credit Access in Syria a Problem on the Periphery http://www.borgenmagazine.com/credit-access-in-syria/ Wed, 07 Mar 2018 15:30:22 +0000 http://www.borgenmagazine.com/?p=125482 SEATTLE — The early portion of 2011 marked the beginning of a time period commonly referred to as the “Arab Spring” by Western societies. In a general sense, this time can be characterized as the beginning of a significant decline in the political and social stability of several Middle Eastern countries, and its consequences have arguably [...]

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SEATTLE — The early portion of 2011 marked the beginning of a time period commonly referred to as the “Arab Spring” by Western societies. In a general sense, this time can be characterized as the beginning of a significant decline in the political and social stability of several Middle Eastern countries, and its consequences have arguably extended far beyond what anyone could have predicted at the time.

The Arab Spring is a reference to anti-government, pro-democratic protests that took place throughout the Middle East, from Tunisia to Saudi Arabia. Nowhere, however, has seen worse long-lasting effects from this than Syria, a country that has been engulfed in a bloody civil war since then. While this conflict has produced a plethora of travesties, one problem significantly exacerbated by it is the increasingly severe lack of credit access in Syria.

The World Bank defines credit access as the provision of a loan from financial institutions (private and public) to entities such as businesses, local governments or private citizens. For inhabitants of developed countries, the notion of lacking adequate access to credit can be difficult to grasp, but if it became reality, it would render most individuals in those countries unable to use the basic functions of credit cards, acquiring a loan to purchase a vehicle or taking out a mortgage to purchase a home.

Causes of Poor Credit Acces in Syria

The overarching problem of credit access in Syria is multifaceted and would require a diligently planned, likely internationally sanctioned and comprehensive approach to solve, but can be summarized as the decimation of several key components of any well-functioning economy.

As of 2017, Syria had an estimated 50 percent unemployment rate, a 25.5 percent inflation rate, public debt accounting for 58.4 percent of the GDP, a budget deficit of 8.7 percent of the GDP and in 2014, approximately 82.5 percent of the population were estimated to be living below the poverty line. All of these factors have tremendous impacts on credit access and availability.

Another factor inhibiting efficient credit access in Syria is its disproportionately low stock of domestic credit. According to the CIA World Factbook, a country’s stock of domestic credit comes from a percentage of its GDP and can be understood as the total amount of credit that available to them in the form of that country’s currency. In essence, it is the total amount of credit that is available to banks to make loans with.

As of December 2017, Syria’s stock of domestic credit was estimated to be $6.816 billion, making it among the lowest in the world. In comparison, China’s stock of domestic credit was estimated to be $23.02 trillion in 2016, while the U.S. had a stock of $20.24 trillion.

The most likely reason for this is because, similar to many other developing countries, Syria lacks an effective taxation system, with only 4.2 percent of government revenue coming from taxes. As of 2017, Syria was ranked 218 out of 220 countries in taxation as a portion of GDP, above only Nigeria and Somalia. According to a report by The Guardian, the percentage of the GDP that is derived from taxes in most developing countries falls between 10 to 15 percent, while in developed countries this rises to an average of 35 percent.

Lending Rates Inhibit Credit Access in Syria

Aside from the ongoing civil war, one other major obstacle facing the development of quality credit access in Syria is the fact that it has the fifth highest commercial bank prime lending rate in the world, at 33.3 percent. The only countries ranking above them are the Democratic Republic of the Congo, Malawi, Brazil and Madagascar.

The commercial bank prime lending rate is defined as the average annual interest rates charged by commercial banks within the country, yet it is important to note that this rate is applicable only to those who are deemed the most worthy of receiving credit and have the financial assets to prove that. As one can imagine, there are very few people in the country currently capable of handling such a high interest rate. Comparatively, the commercial bank prime lending rates in the U.S. and Canada are 4.3 percent and 2.9 percent respectively.

Signs of Progress

Though looking at why certain factors have led to credit access in Syria being ranked in the 18th percentile of countries across the world can seem like a grim task, there does appear to be some gradual improvement that lends reason for optimism. For example, from December 2016 to December 2017, Syria’s stock of narrow money increased by $1.3 billion and its stock of broad money by $1.17 billion. During this time. the inflation rate also fell from 43.9 percent to 25.5 percent and the central bank discount rate fell from 5 percent to .75 percent.

Though it may not often be taken into consideration by someone it does not directly affect, if the inability to access credit became reality in developed countries, it is likely that the continued functioning of society as it is currently would cease to exist. Though such a claim could be perceived as overreaching or exaggerated, it is important to remember that as of 2017, the total amount debt that was offered in the form of credit for just mortgages on property in the U.S. reached $9.9 trillion, reflecting the degree of reliance developed countries have on credit accessibility.

Having considered that, without the ability to lend and borrow money, the ways in which individuals in developed nations live their lives would be fundamentally altered. Not only would it affect individuals and businesses, it would also affect the economy as a whole in a way far more damaging: inhibiting or destroying the possibility of private sector growth, and Syria serves as one of the most demonstrative case studies for this idea.

– Hunter McFerrin

Photo: Flickr

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Regional Trade in Afghanistan Could Alleviate Poverty http://www.borgenmagazine.com/trade-in-afghanistan-poverty-alleviation/ Tue, 21 Nov 2017 09:30:03 +0000 http://www.borgenmagazine.com/?p=120483 SEATTLE — As a country that has been plagued by war since the 1970s, trade in Afghanistan has been impacted by the socio, political and economic instability in the country. With the GDP showing a great decline in the past 20 years, tapping into the country’s trade potential can go a long way in sustainably [...]

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SEATTLE — As a country that has been plagued by war since the 1970s, trade in Afghanistan has been impacted by the socio, political and economic instability in the country. With the GDP showing a great decline in the past 20 years, tapping into the country’s trade potential can go a long way in sustainably alleviating poverty in the future and attracting foreign direct investment to the country.

Afghanistan is one of the MENAP countries (Middle East, North Africa, Afghanistan and Pakistan) being impacted by the low global oil prices, with the growth in oil exports only averaging about 1.7 percent.

Moreover, it is essential to crack down on the drug trade in Afghanistan so that funding for terrorist groups in the country is cut. Unfortunately, opium is a very commonly distributed drug in the country.

Underlying weaknesses in infrastructure and immobilities in labor and lack of capital and other resources in the country are adversely affecting the state of trade in Afghanistan. Afghanistan was only the 104th largest export economy in the world in the year 2015. The primary exports of the country include fruits, precious stones, vegetables and resins.

The aggregate revenue currently generated by Afghan trade with other countries amounts to $5 billion. This has impacted the terms of trade of the country as they majorly rely on other trade partners for vital raw materials and other essential resources.

The country majorly relies on the export of primary products like natural resources and agricultural goods, making it difficult for them to get a fair share of the value of their export goods. Beneficiation is vital to galvanize trade in Afghanistan so that export goods and services become more competitive with more value added.

Yet, despite the deficits and economic uncertainty, Afghanistan is strategically at the epicenter of a large trading hub and fast-growth economies as it is bordered by countries like Iran and India. The United States, the United Arab Emirates, Turkey and Pakistan are also very valuable trade allies for Afghanistan.

Globally, countries like India are expanding and opening up more outlets for trade in the region. India recently introduced a new trade route with Iran and sent its first wheat shipment to Afghanistan via the Chabahar port. As part of the shipment, India is supplying more than 1.1 million tons in the form of grants.

India has already committed more than $500 million toward edifying infrastructure and communication links by developing road and rail connections in the region. Not only is India a primary export destination for Afghanistan, but it is also ameliorating the state of infrastructure in the country. Afghanistan, in turn, exported nearly 40 tons of dried and fresh fruits to India this year alone.

Improving diplomatic and trade relations with other countries is beneficial in order to attract investment. Consequently, investment between Russia and Afghanistan is currently valued at $200 million.

It is vital to bolster trade in Afghanistan to boost employment and specialization. Economic, social and structural reforms aiming to improve education and training is therefore very important to prepare the nation for further developments.

To conclude, galvanizing regional trade in Afghanistan will help it develop better and normalized trade relations with other neighboring countries which could benefit trade, commerce and connectivity for the country in the long run.

– Shivani Ekkanath

Photo: Flickr

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How the Sustainable Development Goals Benefit Business http://www.borgenmagazine.com/sustainable-development-goals-benefit-business/ Sun, 12 Nov 2017 09:30:26 +0000 http://www.borgenmagazine.com/?p=119332 NEW YORK CITY — The 17 Sustainable Development Goals (SDGs) call upon governments and businesses to promote measures that deliver universal peace and prosperity. Private sector involvement in achieving the SDGs is imperative, as businesses can offer both financing and flexibility in enacting the goals. More than 9,000 companies globally have already signed the U.N. [...]

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NEW YORK CITY — The 17 Sustainable Development Goals (SDGs) call upon governments and businesses to promote measures that deliver universal peace and prosperity. Private sector involvement in achieving the SDGs is imperative, as businesses can offer both financing and flexibility in enacting the goals. More than 9,000 companies globally have already signed the U.N. Global Compact — a list of 10 principles that encourage sustainable business behaviour.

The SDGs are good for business

The Sustainable Development Goals benefit business — adherence to the goals increases corporate security and resilience. Companies that align with the national interest are more likely to receive license to operate.

Businesses whose operations are at odds with state priorities will face a competitive disadvantage in the marketplace. Furthermore, companies that already align with the SDGs are more likely to have business plans that fit with new government regulations. As national policy changes to meet the Global Goals, businesses will be forced to adapt operations — the ones who already work toward the SDGs will be better positioned for this change.

Realization of the SDGs will require an estimated $2.4 trillion a year in additional investment, particularly in infrastructure. Fortunately, private sector participation is encouraged by customers — a PwC study found that 78 percent of consumers are more likely to buy from businesses that have signed up to the SDGs. Thus, when adopted, the Sustainable Development Goals benefit business by increasing the desirability of a company’s products to socially-conscious consumers.

The SDGs are a $12 trillion opportunity

According to a Better Business, Better World report, the SDGs have the potential to create $12 trillion in profits for the private sector by 2030. Growth opportunities are concentrated into four categories — food and agriculture, energy and materials, cities and health and well-being.

Opportunities for innovative growth in the agricultural sector have an estimated value of $2.3 trillion. One growth area — reducing food waste — could add $155-405 billion to the global economy by 2030. Between 20 and 30 percent of food produced today is wasted. Investment in simple technologies like metal silos for storage could mitigate this problem.

Energy costs are expected to rise in the future due to increased regulation to reduce the environmental impact of energy harvesting, as well as increased demand as more people join the higher energy-consuming income brackets. Thus, some of the greatest potential profits for private businesses lies within circular model production.

Circular models reduce production because goods are refurbished and remain in use for longer. Investing in circular models in two industries — automotive and appliance — could create $475-810 billion and $305-525 billion, respectively. To capture these profits, businesses can switch from selling to leasing products.

Meeting the SDGs in city-related industries could create an additional $3.7 trillion. As city populations grow, the need for affordable housing will rise. Shrinking availability of urban space means developers will need to implement creative space utilization. Providers that overcome these building challenges could net $650-1,080 billion; affordable housing development could potentially create 70 million new jobs.

Healthcare access is limited in developing countries and many of the emerging potential profits in this industry reflect a movement to expand basic medical care to underserved populations. Remote patient monitoring offers a potential $300-440 billion in profits. The McKinsey Global Institute estimates that remote patient monitoring could stimulate a 10 to 20 percent decrease in the cost of treating chronic illnesses by 2025. An example of a new innovation in this field is the introduction of a platform that allow diabetics to monitor their glucose levels with their smartphones.

Achieving the SDGs in these four industries could stimulate creation of 380 million new jobs by 2030, with almost 90 percent of these jobs located in developing countries.

Ultimately, growth from the SDGs could surpass the estimated $12 trillion. The Sustainable Development Goals benefit business by fostering a healthy, more productive labor force and by raising the purchasing power of citizens in developing countries. These two factors hold potential profits far beyond those found in any single industry.

Business is becoming more involved

Barriers like strict regulation and inefficient public-private collaboration currently prevents businesses from engaging fully with the SDGs. However, 71 percent of businesses surveyed by PwC are developing plans to engage with the Global Goals. Though 22 percent of surveyed businesses said they had no engagement plan today, only 4 percent answered that they would still not have a plan in 5 years.

Fortunately, there are strong market incentives for the private sector to increase its engagement. The Sustainable Development Goals benefit business — the Global Goals offer a tangible opportunity to businesses to increase their profits while working toward the greater good.

Katherine Parks

Photo: Flickr

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Latest Efforts to Move Forward With CFTA for World’s Largest Free Trade Area http://www.borgenmagazine.com/free-trade-area/ Sun, 05 Nov 2017 08:30:17 +0000 http://www.borgenmagazine.com/?p=118212 SEATTLE — Since its proposal in 2012 at the 18th session of the African Union (AU) in Ethiopia, the Continental Free Trade Area (CFTA) has become an increasingly important strategy for inclusive growth and sustainable development in Africa. If continued to move forward, it would constitute the world’s largest free trade area with enormous economic [...]

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SEATTLE — Since its proposal in 2012 at the 18th session of the African Union (AU) in Ethiopia, the Continental Free Trade Area (CFTA) has become an increasingly important strategy for inclusive growth and sustainable development in Africa. If continued to move forward, it would constitute the world’s largest free trade area with enormous economic impacts on not only its 54 member states in Africa, but also the international market.

The latest meetings from August 21st to September 1st brought together officials from the AU, United Nations Economic Commission for Africa (ECA), U.N. Conference on Trade and Development (UNCTAD) and the African Development Bank (AfDB) to Durban, South Africa. The meetings focused on preparing legal provisions and considering inputs on annexes and appendices to the CFTA Agreement, before the Eighth Meeting of the CFTA Negotiating Forum this coming October.

The range of the discussion included legal and institutional affairs, non-tariff and technical barriers to trade, rules of origin, trade in services, sanitary and phytosanitary measures, customs procedures and trade remedies.

The CFTA hopes to create a single continental market for goods and services, alongside free movement of business peoples, investments, expansions within intra-African trade and better coordination throughout Africa. It will also facilitate competitiveness at industry and enterprise levels with larger demands for production, market access and reallocation of resources.

The proposal hopes to resolve challenges regularly faced from multiple, fragmented or overlapping memberships, markets and regional trade agreements. If properly launched, it will bring together 54 countries with more than one billion people and a combined gross domestic product of more than $3.4 trillion.

This free trade area would not only attract investments from international actors, but it would also provide employment opportunities for African youth and speed up all kinds of development in the continent by boosting trade. Such a large trade agreement is not new to the region — almost eight regional trade agreements already exist in Africa, including the Economic Community of West African States (ECOWAS) which established a free trade zone between 15 West African countries, as well as the Tripartite Free Trade Area (TFTA) which united 27 countries for a similar but non-all-inclusive free trade area in Africa.

Eight meetings of the CFTA Negotiating Forum (CFTA-NF) have been carried out so far, and meeting their 2017 deadline to launch the CFTA while still moving towards tangible and substantive results is extremely anticipated by the world. At the seventh meeting this past June in Niger, deliberations over committing to liberalize 90 percent of tariff lines, with remaining 10 percent of product lines designated as sensitive and open to tariff reductions and longer time frames, brought out a disagreement between CFTA members.

Hopefully disagreements can be resolved in time so that the CFTA Agreement can be adopted so Africa can generate larger economic returns for itself and its people.

Zar-Tashiya Khan

Photo: Flickr

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Improving Business Environments in Burma One Program at a Time http://www.borgenmagazine.com/improving-business-environments-in-burma/ Sat, 14 Oct 2017 08:30:15 +0000 http://www.borgenmagazine.com/?p=116923 BURMA — As one of Asia’s poorest countries, despite upturns in growth and foreign investment over the past few years, Burma (or Myanmar) has a growing need to improve large and small business opportunities in its private sector. Small and medium-sized enterprises (SMEs) account for 90 percent of all enterprises in the country, but largely [...]

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BURMA — As one of Asia’s poorest countries, despite upturns in growth and foreign investment over the past few years, Burma (or Myanmar) has a growing need to improve large and small business opportunities in its private sector. Small and medium-sized enterprises (SMEs) account for 90 percent of all enterprises in the country, but largely operate on an informal basis, receive little outside investment and are underemployed.

The majority of capital and prosperity is still focused within a handful of long-established business entities. With the introduction of a three-year program alongside The Asia Foundation, The DaNa Facility is actively addressing these problems within business environments in Burma for more inclusive economic growth and sustainable private sector development.

The DaNa Facility 

Funded by the U.K. Department for International Development (DFID), and partnered with Development Alternatives Incorporated (DAI) and KPMG International Cooperative, The DaNa Facility is a five-year program under their ‘Business for Shared Prosperity’ (BSP) program. Focused on reducing poverty and increasing incomes through strengthening business environments for SMEs and the impoverished, they work across all levels with policy makers, business leaders and single entrepreneurs.

They have discovered five key impediments to inclusive growth include infrastructure, regulatory environments, access to finance, exports and the inclusion of women and minorities. To address this, they deliver technical assistance, direct grant funding and open and competitive appeals for cofounding on projects with the potential to better conditions.

Working closely with national governments and adhering to their economic policy goals, The DaNa Facility can successfully coordinate operations at national and subnational levels. They facilitate trade and exports in predominantly non-extractive and job-creating sectors like textiles, bamboo and agribusiness.

Launched this past July, their newest initiative in Burma will improve business competitiveness, as a central part of the Myanmar Business Environment Index (Myanmar BEI) which identifies business constraints, makes recommendations and raises awareness on solutions to improving business environments in Burma. They will be building off of and looking to past projects undertaken by The Asia Foundation, in Vietnam, Indonesia, Sri Lanka, Bangladesh and on.

In the words of Myanmar’s Country Representative for The Asia Foundation, Kim Ninh, a better understanding of local governance practices that effect day-to-day business practices is important to improve business environments in Burma since, “For many Myanmar micro, small, and medium enterprises, the first engagement with government is at the township level, whether this involves business registration, tax collection, or inspection of a business.”

Vietnam’s Competitive Initiative 

Looking at Vietnam’s Competitiveness Initiative (VNCI), which was funded by the U.S Agency for International Development (USAID) and ran from 2003 to 2013, it was designed to increase competitiveness of SMEs through improved provincial economic governance, as with implementation of the Vietnam Provincial Competitiveness Index. The program additionally catalyzed work in the communications and information technology, dragon fruit, home furnishings and banking industries and promoted access to finance.

And under so-called Project 30, they were able to inventory over 5,700 administrative procedures, 9,000 legal documents, and thousands of more forms into the first National Database.

As a result, cost savings to individuals and businesses due to Project 30 are estimated at around $1.4 billion yearly after full implementation, while increasing transparency and accessibility to such materials for investment, construction and so forth. Lastly they established the Administrative Procedures Control Agency under the People’s Committee of Ho Chi Minh City, comprising 87 control units with over 500 professionals coordinating reform in 24 ministries in over 63 cities and provinces.

Hence there is great potential for such programs in Burma, as improving business competitiveness and environments opens countries up to reform and growth that benefits all its people.

Zar-Tashiya Khan

Photo: Flickr

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India’s Small Businesses and $225 Million OPIC Loan to India Bank http://www.borgenmagazine.com/opic-loan-to-india-bank/ Tue, 15 Aug 2017 08:30:14 +0000 http://www.borgenmagazine.com/?p=111197 NEW DELHI — The micro, small and medium enterprises (MSMEs) India are about to receive a significant boost in funding. This increase is due to the IndusInd Bank which will use the proceeds from a $225 million loan from the U.S.’s Overseas Private Investment Corporation (OPIC) to finance the sub-continent’s small business sector. At least 25 percent [...]

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NEW DELHI — The micro, small and medium enterprises (MSMEs) India are about to receive a significant boost in funding. This increase is due to the IndusInd Bank which will use the proceeds from a $225 million loan from the U.S.’s Overseas Private Investment Corporation (OPIC) to finance the sub-continent’s small business sector.

At least 25 percent of the OPIC loan to India will be used to fund women entrepreneurs and the “unbanked” populations. MSMEs are the backbone of the Indian economy but historically have had limited access to bank financing.

At the same time that OPIC announced its loan, Wells Fargo Bank committed to a $20 million loan to IndusInd Bank to support its MSME programs. As with the OPIC loan, 25 percent of the Wells Fargo investment will go to female entrepreneurs.

MSMEs are crucial to the economy of India and are expected to play a central role in raising the share of manufacturing in the nation’s Gross Domestic Product (GDP) from 16 percent in 2013 to an estimated 25 percent by the end of 2022. MSMEs total more than 32 million individual businesses and employ around 70 million people. They produce 6,000 different products. They account for 45 percent of India’s manufacturing output and 40 percent of exports. The OPIC loan to India should help make those numbers grow.

Gaining access to financing was identified by a 2010 Indian government task force as one of the four challenges facing MSMEs in their drive for growth. MSMEs have made progress on three of the problems it is attempting to address. These include operations, infrastructure/technology and legal taxation. However, financial issues have persisted while the organization continues to deal with these matters.

The OPIC loan to India is intended to help ameliorate financial issues. Specifically, the investment hopes to reduce MSMEs’ lack of access to credit. MSMEs often end up borrowing outside the regulated lending markets, paying much higher interest rates. That, in turn, drives up prices for their products and inhibits their ability to invest in technology, improve quality and implement modern management.

OPIC is a self-sustaining organization and a U.S. government agency. The agency was established to help U.S. businesses invest in emerging markets.

IndusInd Bank, founded in 1994 in Mumbai, provides both consumer and commercial banking services and products. This task gets accomplished through its 1,200 branches and 2,036 ATMs in 683 geographical locations. The $225 million OPIC loan to India fulfills one part of OPIC’s promise to provide $1 billion to finance MSMEs in the country.

Robert Cornet
Photo: Flickr

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Overcoming Challenges: the Modern Economic Recovery in Spain http://www.borgenmagazine.com/economic-recovery-in-spain/ Wed, 12 Jul 2017 08:30:43 +0000 http://www.borgenmagazine.com/?p=108840 MADRID — Almost a decade after the housing bubble burst in Spain in 2008, the country’s GDP continues to grow in 2017 for the third year in succession, and unemployment rates are dropping. Although economic recovery in Spain seems to be under way, various challenges remain. A Boom, then a Burst  After Spain adopted the [...]

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MADRID — Almost a decade after the housing bubble burst in Spain in 2008, the country’s GDP continues to grow in 2017 for the third year in succession, and unemployment rates are dropping. Although economic recovery in Spain seems to be under way, various challenges remain.

A Boom, then a Burst 

After Spain adopted the euro in 1999, the country’s economy experienced a boom. Cheap loans helped finance large numbers of construction projects. Housing prices rose by 44 percent between 2004 and 2008, until the bubble burst and Spain was hit hard by the recession. The economy contracted in the following years. Until 2013, unemployment levels rose and reached a level of almost 27 percent. As many borrowers struggled to pay back their loans, several banks experienced great losses.

After the election of the conservative People’s Party (PP) and Prime Minister Mariano Rajoy in 2011, a number of reforms were implemented to stabilize the economy. In 2012, financial support from the EU restructured the banking sector. The banking bailout and recapitalization package were “vital” for economic recovery in Spain, according to the Financial Times, since it allowed credit to flow to private actors again.

Spain also implemented austerity measures – cuts in spending and raising taxes – in order to reduce budget deficits. Spain also reformed the labor market in 2012, giving companies more flexibility to ease the creation of employment.

The Need for Reforms

In some ways, the reforms have come to fruition and steered economic recovery in Spain. Since 2015, the economy is growing again, with GDP growth rates of over three percent in the past two years. In 2017, further growth of at least 2.5 percent is expected. The export sector has grown and diversified, and unemployment has dropped again to 18.4 percent in December 2016.

Yet a look beyond these figures shows that it is yet too early to celebrate. The unemployment is still twice as high as the Eurozone average. Youth unemployment stays at exorbitant rates, 41 percent in February 2017. The labor reforms and the renewed flexibility for employers came at a high cost for workers. Real wages have dropped, a majority of the newly created jobs are based on short-term contracts, and conditions for dismissals eased for employers. This resulted in growing inequality and the emergence of a new class of working poor.

A report of the European Commission stated in February 2017, that the economic growth has only led to a minimal drop in poverty. The report outlines that the high levels of temporary employment have negative social and fiscal implications and affect productivity. The limitedness of social benefits and support for families compared to other EU member states were also criticized.

In 2017, Spain is still confronted with many challenges. Unemployment, as well as poverty rates, remain high. The labor market conditions result in a loss of human capital, as many of the educated youth leave the country. In the first months of the year, the inflation rate has also increased, potentially threatening further economic growth.

The crisis has also taken its toll on Spain’s political stability. The austerity measures and labor reforms were hugely unpopular and, combined with corruption scandals, led to an erosion of support for the PP. In 2016, the country underwent a political deadlock without a government for ten months, after two general elections remained inconclusive without a simple majority. In October, Rajoy’s party was able to return to power as a minority government.

To reach decisions, the PP is now forced to compromise in parliament. The second strongest party is the Spanish Socialist Workers’ Party (PSOE), followed by Podemos, both democratic socialist forces. This shows in the 2017 budget plan that is steering away from the previous rigidity of austerity.

The budget increases spending on social measures to reduce child poverty and support the unemployed, but also holds onto the objective to decrease public deficit spending further.

According to an OECD economic forecast published in June, economic recovery in Spain “is projected to remain robust in 2017 and 2018, although at a more moderate pace.” As conservative and left-leaning forces now have to compromise in parliament, there is hope that the economy will not only grow further, but that larger parts of the population will profit from the progress as the focus on equality increases.

Lena Riebl

Photo: Flickr

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Uber’s Investment in Egypt http://www.borgenmagazine.com/ubers-investment-in-egypt/ Tue, 20 Jun 2017 08:30:17 +0000 http://www.borgenmagazine.com/?p=107537 CAIRO — According to Emil Michael, Uber’s chief business officer, “the Egyptian market is the most important for Uber in the Middle East.” There are currently 50,000 drivers using the ride-sharing app in the country, and the company is poised to make further investments in the Egyptian market. Uber’s investment in Egypt highlights the economic [...]

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CAIRO — According to Emil Michael, Uber’s chief business officer, “the Egyptian market is the most important for Uber in the Middle East.” There are currently 50,000 drivers using the ride-sharing app in the country, and the company is poised to make further investments in the Egyptian market. Uber’s investment in Egypt highlights the economic opportunity for foreign companies in the country and the benefits of foreign investment for the local population.

In a recent interview with Daily News Egypt, Michael asserts that roughly 40 percent of the 50,000 drivers in Egypt were unemployed prior to joining the company. He predicts that the market will continue to grow, creating jobs for tens of thousands of Egyptians. Last year, Uber invested nearly $14 million in the Egyptian economy, and, according to The Economist, the company has plans to invest more than $50 million in Cairo alone in the future.

Michael is of Egyptian origin and has a personal desire to see the Egyptian market succeed through job creation for local people. According to The World Bank, one-third of young Egyptians are unemployed, up from one-fourth in 2010. Jobs with Uber, particularly for young people familiar with technology, provide a quick and flexible source of income for the country’s many unemployed.

Egypt’s economy relies on foreign aid. The country is one the top five recipients of U.S. aid, receiving roughly $1.5 billion in 2015, mostly in security-related military assistance. Any foreign direct investment from companies such as Uber is therefore critical in diversifying Egypt’s economy and reducing its reliance on foreign aid.

Uber’s launch in Egypt came after an arduous six-month licensing process, and the country still has not enacted a proper ride-sharing law. Egypt currently ranks 122 of 190 in the World Bank’s ease-of-doing-business index. Considering the potential job creation and boost to the economy companies like Uber provide, it is important for the Egyptian government to attract investment. On May 7, the Egyptian government passed an investment law that aims to encourage foreign investment in Egypt. The new law commits to reducing bureaucracy and provides tax incentives for businesses looking to invest in the country.

The Egyptian government is keen to show that Egypt is open to foreign businesses. Six months ago, as part of a $12 billion deal with the International Monetary Fund, the Egyptian pound was converted to a floating currency. Before this, the pound was artificially inflated relative to other currencies, discouraging foreign investment. Now that the currency is floating in the global market, Egypt is better prepared for increased foreign investment. According to Michael, the newly depreciated currency gives Uber’s investments more value and helps produce greater returns for the company.

Uber claims to benefit Egypt in other ways than job creation. According to Michael, Uber aids the Egyptian economy by easing traffic problems and reducing pollution in major urban centers, particularly Cairo. Cairo has levels of fine carcinogenic particles in the air seven times greater than the World Heath Organization’s guidelines deem safe. Every autumn, a “black cloud” of pollution descends on Cairo, so severe that it sometimes burns residents’ eyes and throats.

By convincing people to use their services and keep their cars parked, Uber is reducing the number of cars on the streets. An Uber driver averages 10 trips each shift, so the company’s presence could result in around 10 fewer cars on the road per driver per shift. In another measure to mitigate the effects of congestion and pollution in Cairo, Uber recently announced that it is partnering with NileTaxi, a river transport company operating on the Nile. UberBoat will be available at 10 docking stations along the Nile river and will operate daily from 8 a.m. to 10 p.m.

Uber’s expansion in Egypt has provided quick and accessible jobs in a difficult economic climate. New drivers are joining at a rate of 2,000 a week, and Uber’s success in the country shows shows signs of gaining speed. This investment in Egypt also demonstrates the potential for other innovative technology firms in the country.

Michael Farquharson

Photo: Flickr

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