Where China’s investing

Statistics shmutistics... while the research apparently says China doesn’t invest disproportionately in resource-rich African countries, a top four of DR Congo (minerals), South Africa (coal and iron ore), Nigeria (oil) and Niger (uranium, and a fresh coup) makes me dubious.

Note also that Australia is number one overall (e.g. here, here, here).

By the way, critical mass has inspired me to add a new label for China in Africa.

Update: OK, on second thought... how is "aid" defined here? If narrowly, then perhaps I buy that Chinese aid specifically is not targeted toward resource-rich Africa countries... but who's to say where building a road, a railroad, a port, an airport becomes investment rather than aid? Building infrastructure frankly has more economic impact than most other foreign aid anyway, in all likelihood.

Update 2: Speaking of Niger, cannot help but pass on this outstanding haiku:

Another colonel
Thinks it’s his turn to spring clean
The big boss – hi coup!

Haiti and agriculture

Michael Roberts points out that one, U.S. import quotas support a domestic price well above the world price (see below), and two, the Dominican Republic's U.S. sugar import quota is twenty times that of Haiti.

I remember first reading about the stark gap (economic, political, and environmental) between the Dominican Republic and Haiti in Jared Diamond's Collapse; there are obviously a host of causes that go far beyond U.S. policy. Here is a satellite photo of the Haiti-DR border; note the severe deforestation on the Haitian (left) side.

Tyler Cowen suggests that the Haitian quota be repealed in the light of Haiti's recent tragedy. I agree with Michael that the impact now is likely small - what would have really mattered would have been lifting the quota fifty years ago.

In other Haiti news, Roger Thurow laments that the agricultural component of Haiti's recovery aid is being largely ignored

The UN’s Food and Agriculture Organization says its part of the appeal - $23 million to help revive Haiti’s food production – is being largely ignored. Only 8% has been funded.

Hopefully the recent return to prominence of agriculture on the broader aid scene will facilitate this being remedied by the time the Haitian growing season starts in March,

China and African resources

Apparently lots of folks (me included) are guilty of parroting the conventional wisdom on China's actions in Africa... which turns out not to stand up to scrutiny.

A few examples of China myths and partial truths:

1) China targets aid to African states with abundant natural resources and bad governments

Actually, China gives money to almost every single country in Sub-Saharan Africa, excluding only those that don’t acknowledge the One China policy. There is little evidence that China gives more aid to countries with more natural resources or specifically targets countries with worse governance. [emphasis mine] China is not alone in its interest in natural resources in Africa, and natural resources are not the primary motivating factor for Chinese aid: like all donors, US definitely included, China is motivated to give aid by a mix of political, commercial, and social/ideological factors.

Via Aid Watch.

Update: Or not?

Does aid cause Dutch disease?

Owen Barder considers whether foreign aid recipients are hurt by Dutch disease, and concludes that the effect is existent, but negligible.

Owen also suggests a list of readings on foreign aid; with all due respect, I think Rachel Strohm’s is better.

Aid vs. remittances

From Roving Bandit, who also gave us migration vs. microfinance, comes this equally striking chart:


That's right - private remittances outweigh the total of international development aid for a given year.

Is this related to resources? Well, it might be in the sense that the income-generating activities for migrants in developed countries might be less resource-intensive and environmentally unfriendly than in developing countries (I am thinking slash-and-burn agriculture, etc.). I’m not sure, though, and would be interested in any existing analysis of this.

Scaling up foreign aid

Speaking of making large-scale foreign aid successful, Bill Easterly has five simple principles for scaling up aid:

(1) Scale up success not failure
The only reason for mentioning this is that the aid business has a strange habit of trying to scale up again things that have already failed. PROGRESA is the great success story of scaling up something after you had determined it was successful.

(2) Don’t scale up what you think is most important, scale up what you do best
There are lots of important issues, so why not choose the one that you do best? And let the people who are good at the other issues work on the other issues? Yet both official agencies and NGOs are often pulled away from what they do best by well-meaning politicians and funders who are focused only on final goals.

(3) You can scale up only what requires cheap, abundant inputs; you cannot scale up something that depends on expensive, scarce inputs
This is one of my problems with the Millennium Villages – they at least partly depend on world-class experts flying in to solve idiosyncratic problems of each village. World-class experts are a scarce resource that you can’t scale up.

(4) Things that you make routine are among the easiest to scale up
It worked for Henry Ford, McDonald’s, and WalMart, why not in aid? One of the secrets to success of the large vaccination campaigns that reduced child mortality was that relatively unskilled medical workers (in abundant supply) could give vaccinations as a routine activity. Of course, not everything can be made routine. For a more complex discussion about social service delivery in general, see the great paper by Lant Pritchett and Michael Woolcock.

(5) Evaluate whether you are still successful after scaling up
Scaling up often changes the nature of what you are doing, so evaluate whether the scaled-up version works as well as the original version.

I don't have a hard-and-fast adherence to one side or the other of the vitriolic Easterly-Sachs debate, but Easterly usually strikes me as quite commonsense and reasonable, and these principles are no exception. The White Man's Burden remains one of the best books on economic development that I've ever read, and encapsulates well his bottom-up philosophy (the polar opposite of Sachs' top-down Millenium Villages approach).

Chris Blattman on Glenn Hubbard on a Marshall Plan for Africa

Chris Blattman points out four important questions left apparently unanswered by Columbia Business School dean Glenn Hubbard's recent call for a Marshall Plan for Africa in Foreign Policy.

1. Aren’t we doing this already? And can’t we check if it’s working? The World Bank and USAID provide enormous commercial sector support–loans, incentives, tax breaks, you name it. Do these generate more growth than public sector aid? Or does Hubbard have something different in mind?

2. Is cheap credit the big constraint? B.E.T. founder Robert Johnson has made millions in cheap loans available to Liberian businesses the past year. The result I’ve heard? No one’s taking it up. I’ve heard this anecdote repeated in many countries.

3. Could context matter? World War II decimated Europe’s labor and capital, but its political and financial institutions remained strong, and its stablity assured by decisive defeat of the Axis and the presence of American troops. Injections of capital thrived in that environment–in a simple growth model, we might say that the Marshall Plan sped Europe’s return to its equilibrium growth rate. Can the same be said of Africa today?

4. Did the Marshall Plan ignite European growth? One of my favorite economic history papers of all time, by Brad Delong and Barry Eichengreen, answers “yes, but not the way you think.” Overall flows were small, as were the effects on private investment. And infrastructure was mostly rebuilt by the time funds arrived. The Plan mattered because its conditions tipped governments towards a market rather than a planned economy. Western Europe quickly pushed beyond simple recovery to unprecedented growth.

Like healthcare, economic development is a deeply tricky debate. I was once quite enamored of microfinance as a silver bullet (no so much); and in general there is this nothing-new-under-the-sun sort of cyclical quality to development fads. Like the G8's new "teach a man to fish" agricultural development policy - it sounds great, as it did when Robert McNamara tried it in the 1970s. I think that business schools and business thinkers and business in general have a huge amount to contribute, but they (at least the first two) have to avoid this hubris that economic development is a tractable problem which will yield up its secrets, if only the right management analysis techniques are applied. So like Chris, I am teased by Hubbard's proposal, but I'd like to see the nuts and bolts.

Professional services in failed states

Via FP Passport, Somalia hires PricewaterhouseCoopers to manage development funds:

The world's largest accountancy firm has been appointed to allocate international aid in Somalia in an effort to demonstrate to donors that contributions will be spent on national development. PwC will set up money tracking systems to ensure that relief assistance, including $67 million pledged by international donors in April, will be spent on security, health and education instead of being siphoned into officials' pockets.

They have a track record:

The firm has undertaken similar work in Afghanistan and Sudan, and will receive a commission of between two and four percent on all funds that reach their intended destinations.

Who knows whether it will work, but it seems unlikely to make things worse. Maybe if they do a good job, their next assignment can be closer to home.

Dead Aid

I read Dambisa Moyo's recent book the weekend before last (there may have been some skimming involved). In general I agree with the negative reviews - her premise lacks nuance and her analysis lacks rigor. Ryan Hahn at the World Bank's Private Sector Development blog argues that some decent ideas around sourcing of capital have been ignored in the general dismissal.