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The Development Channel highlights big debates, promising approaches, and new research and thinkers addressing opportunity and exclusion in the global economy.

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Mossack Fonseca law firm sign is pictured in Panama City, April 4, 2016.
Mossack Fonseca law firm sign is pictured in Panama City, April 4, 2016. Carlos Jasso/Reuters

Corruption Brief Series: How Anonymous Shell Companies Finance Insurgents, Criminals, and Dictators

The latest paper in the Corruption Brief series from the Civil Society, Markets, and Democracy program at the Council on Foreign Relations was published this month. In the brief, Dr. Jodi Vittori, senior policy advisor at Global Witness, addresses the myriad problems posed by anonymous shell companies – corporate entities with few or no employees and no substantive business, which offer a convenient way to privately move money through the international financial system.

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Iraq
Underground Railroad to Save Yazidi Women from the Islamic State Could Offer Critical Intel
It has been nearly a year since the self-proclaimed Islamic State kidnapped an estimated three thousand Yazidi women and children during an attack on their villages in northern Iraq. The Islamic State views these attacks, kidnappings, and killings as justifiable because they consider the Yazidi people—a religious minority group—infidels and devil-worshipers. An English-language magazine article published by the Islamic State noted, “Before [the Devil] reveals his doubts to the weak-minded and weak hearted, one would remember that enslaving the families of the [infidels] and taking their women as concubines is a firmly established aspect of Shariah.” Another document, published by the Islamic State’s “Religious Edicts Council,” reaffirmed that kidnapped and enslaved women were allowed to be bought, sold, and given as gifts by Islamic State members. The Islamic State subjects the Yazidi women to organized rape, sexual assault, forced marriages, forced conversions, sexual slavery, and other abuses during their captivity. Recent testimony from Yazidi women and girls who have escaped confirm this grim reality. In fact, some women reported being bought and sold for $2,000. Most who escape from the Islamic State do so with assistance from Yazidi activists who have created an underground network of safe houses and guides to help women escape. However, these efforts would not be possible without the critical support of former captives, who are knowledgeable about the Islamic State’s territory and are able to provide information about where enslaved women are being held, among other crucial intelligence. Though the Yazidi activists’ work offers a story of heroism in the face of great brutality, this effort alone is not enough to assist an estimated 3,500 Yazidis still held captive. Currently, there are no major initiatives or concentrated efforts to enter Islamic State’s territory to rescue the rest of the women still in the Islamic State’s captivity. However, the Kurdistan Regional Government (KRG) has provided some assistance to activists running the underground network. While the UN has requested $498 million to provide food, water, shelter, and basic education and health care to those fleeing the Islamic State, it has thus far received only 30 percent of the total. Therefore, there is limited support for women and children who escape from the Islamic State’s grip. Some of the women are pregnant and bearing the children of their captors. Abortion is not legal in Iraq, and it is not yet clear how much support the women will receive from their communities to raise these children. Many of the escaped women and children now live in the Kurdistan Region of Iraq, where most of the Yazidis fled in August 2014. The KRG provides health services for escaped Yazidi women, but access to psychological care is limited. In September 2014, a prominent Yazidi religious leader, Baba Sheikh, issued a statement, asking the community to welcome women who escaped from the Islamic State back into the community. This statement reportedly has helped prevent Yazidi women from being negatively stigmatized and allowed them to more easily reintegrate back into daily life. According to a recent Human Rights Watch report, 513 Yazidi women and 304 Yazidi children have escaped from the Islamic State as of March 15, 2015. Thousands more remain enslaved by the Islamic State. From a humanitarian perspective, further efforts to rescue and help these women reintegrate into their communities is urgent. Their experiences also have the potential to offer critical insight into the inner workings of the Islamic State. Those who have escaped could offer a blueprint for how to rescue others as well as critical intelligence that can help combat the Islamic State.
Development
Innovation in Development
Amidst final negotiations over the Sustainable Development Goals, both private and public sector development funders are turning their attention to the gap between this ambitious agenda and available resources. Last week, government, business, and NGO representatives gathered in Addis Ababa, Ethiopia for the Third Financing for Development Conference to devise ways to support this new development agenda. One proposal is to support innovation to fuel cost-effective approaches to development. On the eve of the Addis conference, I hosted a roundtable at the Council on Foreign Relations with a pioneer of development innovation: Ann Mei Chang, executive director of the Global Development Lab at the U.S. Agency for International Development (USAID). Launched in April 2014, the Global Development Lab is USAID’s newest entity, designed to fund breakthrough innovations to “accelerate development impact faster, cheaper, and more sustainably.” Such a broad mandate requires both flexibility and a willingness to fail—two characteristics not traditionally associated with government agencies. The Global Development Lab takes a venture capital-style approach to funding development. It crowdsources solutions from around the globe, including from individuals and organizations that have never before worked with USAID. The Lab makes high-risk, low-cost investments in projects, with the potential to increase funding for those that show promise. By experimenting and “failing small,” the Lab can take on more risk than the average government aid funder. Some have expressed skepticism about the power of innovation to accelerate development gains. Bill Gates, for example, has criticized models that emphasize tech innovations too heavily as potentially distracting from perpetual development challenges, such as a lack of sanitation infrastructure or access to basic health services. In fact, while the Global Development Lab does support projects that are technically advanced, some of the most successful initiatives simply improve upon common solutions and existing knowledge by permitting the flexibility to innovate. For example, in one Lab-funded project, the NGO Evidence Action explored how to enhance the uptake of chlorine to disinfect drinking water and prevent diarrhea, which is the cause of death for an estimated 760,000 children under five each year. Despite widespread acknowledgment of chlorine’s efficacy, uptake stands at less than ten percent around the world. In an attempt to improve this number, innovators from Evidence Action came up with an idea called the chlorine dispenser, a low cost machine installed in areas with community water services. With the push of a button, the dispenser distributes an appropriate amount of chlorine into a bucket or jerrican. This simple innovation has already had an outsized impact: in areas where it is operational, including Kenya, Malawi, and Uganda, it has increased the use of chlorine to nearly 50 percent. Other projects funded by the Lab stem from unlikely sources and test unexpected methods. One intervention dreamed up by a car mechanic in Argentina—called the Odón Device—became a potentially life-saving tool to assist with obstructed labor. The device, which is now in development at Becton, Dickinson and Company, features a plastic bag which inflates around the baby’s head in the womb and is pulled until it emerges. The innovator, Jorge Odón, first thought of the idea after watching a YouTube video that showed how to extract a cork stuck inside an empty wine bottle. This device is considered safer than vacuum assist and forceps, which are even more dangerous when used by inexperienced practitioners in low-resource settings. While these out-of-the-box ideas have the potential to accelerate development gains, one of the Lab’s greatest challenges is how to measure impact—particularly in areas such as democracy, human rights, and governance. The Lab is piloting sensors and mobile surveys in an attempt to obtain timely and gender-disaggregated data, but more work is certainly needed. Though the Lab is still a work in progress, its approach to innovation in development is a model to consider incorporating into the next stage of development funding.
China
This Week in Markets and Democracy: Financing for Development, Pope in Latin America, Arrests in Egypt and China
This is a post in a new series on the Development Channel,“This Week in Markets and Democracy.” Each week, CFR’s Civil Society, Markets, and Democracy Program will highlight noteworthy events and articles. Takeaways from Third Financing for Development Conference World economic leaders and civil society groups were in Addis Ababa this week for the Third Financing for Development Conference, discussing how to fund global development for the next 15 years. Most debated was international tax reform. Developing countries advocated two changes: replacing the existing OECD tax-regulating body with a UN agency (to give them more of a say), and cracking down on corporate tax evasion. Unsurprisingly, rich countries blocked the UN proposal. One issue that participants were able to agree on–the need for more accurate, real-time development data. As a first step, the U.S., U.K. and the Hewlett Foundation jointly pledged $5 million to the Global Partnership for Sustainable Development Data, launched in Addis on Wednesday. Pope Francis Takes on Capitalism, Corruption in Latin America Pope Francis sealed his status as champion of the marginalized during an eight-day tour through Bolivia, Ecuador and Paraguay. In public speeches and meetings with civil society, he decried the “globalization of exploitation and indifference,” and the ills of free market capitalism–poverty, injustice and environmental degradation. The Pope openly criticized political leaders for their role in deepening inequality, even as many tried to use his visit to boost their credibility. In Ecuador, the Pope urged President Rafael Correa to forego the short-term economic benefits of resource exploitation, responding to indigenous groups’ concerns over expanded oil exploration. In Paraguay, he called on government officials to banish corruption, the “gangrene of the people,” and to improve rule of law with “rapid, clear trials,” a nod to the country’s flawed judicial system. Though the Pope’s message was well-received in a region facing severe poverty and graft, some question bringing this anti-capitalist rhetoric to U.S. Congress and UN General Assembly speeches this fall. Egypt and China Justify Recent Arrests In the name of countering Islamic State terrorism, Egyptian President Abdel Fattah al-Sisi’s government is systematically silencing dissent. Last week’s arrests of four journalists add to the eighteen already imprisoned for allegedly “sympathizing” with the banned Muslim Brotherhood. And a new counterterrorism law that would impose draconian jail sentences on journalists who contradict government information was only amended after significant domestic and international pushback. Egypt’s “anti-terror” crackdowns echo China, where this week security services detained more than 50 human rights lawyers and activists, accused of creating “social chaos” as part of a criminal syndicate.  
  • Development
    The UN’s Third Financing for Development Conference: After Growth & Aid, What Comes Next?
    Governments, civil society groups, and business leaders are gathered this week in Addis Ababa, Ethiopia for the UN’s Third Financing for Development Conference (FFD3). Up for debate is how to fund the Sustainable Development Goals, or SDGs, a new set of global development indicators that the UN will adopt in September. The Addis agenda reflects two major changes since the First Financing for Development conference held in Monterrey, Mexico in 2002. First, the good news–there has been a dramatic reduction in global poverty. Between 2002 and 2015, 28 low-income countries–as classified by the World Bank–made the jump to middle-income status. The second, less-encouraging trend is that foreign aid commitments from developed countries have faltered. Aid spending is far from the UN target of 0.7 percent of gross national product (GNP) established in Monterrey. Instead, the OECD average is closer to 0.39 percent as of 2014, ranging from 1.1 percent in Sweden to 0.08 percent in Poland and the Slovak Republic. In the wake of these trends, the Addis talks will focus on two alternative approaches—private sector investment and domestic reforms. Foreign direct investment (FDI) in developing countries already far outstrips aid flows, totaling $480 billion in 2012, compared to $90 billion in aid spending. While investment stimulates growth and creates jobs, conference participants want to ensure that FDI contributes to inclusive growth that reaches the poorest populations. One proposal at Addis seeks to end tax evasion by multinational corporations, estimated to siphon $100 billion away from developing economies each year—money that might otherwise be used for health and education, and to modernize agriculture and infrastructure. Another avenue for post-2015 development financing is mobilizing domestic resources. Developing countries can raise revenue through higher taxes–now only 13 percent of their GDPs–and improve collection through automation. Equally important is combating corruption and illicit financial flows, which deprive developing economies of an estimated $1 trillion annually. The policy recommendations adopted at FFD3 will be non-binding. But, they could help set the tone for September, when governments and the development community commit to an ambitious post-2015 agenda that aims to eradicate poverty, end hunger, and ensure water and sanitation for all. Whether the 17 proposed SDGs will be achieved largely depends on financing.            
  • Wars and Conflict
    Can the Chibok Girls Be Held Accountable for Boko Haram’s Atrocities?
    It has been nearly fifteen months since Boko Haram abducted nearly three hundred girls from a secondary school in Chibok, Nigeria, sparking the #BringBackOurGirls campaign on Twitter. Since then, reports have surfaced that the girls have been sold, forcibly converted to Islam, and married to terrorist group members. Dozens of the girls managed to escape, but despite efforts to secure the release of the remaining 219 captives, no agreement has come through. Recent reports from other former captives of Boko Haram indicate that the fate of the Chibok girls has taken an even darker turn. Many are allegedly carrying out atrocities on behalf of Boko Haram, including flogging prisoners who are unable to recite the Quran or killing Christian captives. This is not the first instance of Boko Haram employing women in their attacks. According to the Aljazeera Center for Studies, women were responsible for fifteen of Boko Haram’s successful suicide bombings as of January. An April Amnesty International report includes the story of a girl forced to learn how to shoot, use bombs, and attack villages on pain of death: “Some refused to learn how to kill others. They were buried in a mass grave in the bush. They’ll just pack the dead bodies and dump them in a big hole, but not deep enough.” This is the first report of the Chibok girls participating in atrocities outside of the context of suicide attacks. The 219 girls were last seen in video in May 2014, reciting the Quran and looking terrified. This horrifying revelation raises the question of the girls’ culpability or complicity in Boko Haram’s attacks. It is clear from testimony of eyewitnesses that they have undergone trauma. As one former captive said, “Anyone who sees the Chibok girls has to feel sorry for them,” and experts who have examined other freed captives of Boko Haram called for “intensive psychological treatment.” Given their presumed state of duress, can these girls be held responsible for their actions? One useful framework to answer this question is that of child soldiers under the law. According to the 2007 Paris Principles and Guidelines on Children Associated with Armed Forces and Armed Groups, “children who are accused of crimes under international law allegedly committed while they were associated with armed forced or armed groups should be considered primarily as victims and not as perpetrators.” While this is not an exact legal proscription in the case of the Chibok girls—who were between the ages of sixteen and eighteen, and therefore not considered child soldiers under either the International Criminal Court Statute (ICC) nor the Additional Protocol II of the Geneva Conventions—the fact that the girls likely acted under severe duress should be considered as a mitigating circumstance. Thus, the law of duress is another possible framework for analyzing the legal responsibility of the schoolgirls. The usage of the duress defense varies across international and national legal systems. For example, in most common law countries—including the United States and United Kingdom—duress is only a mitigating circumstance in sentencing, not a complete defense against criminal liability. In international law, under Article 31 of the ICC statute, a defendant can be freed from criminal responsibility for “conduct which is alleged to constitute a crime [that] has been caused by duress resulting from a threat of imminent death or of continuing or imminent serious bodily harm against that person or another person,” as long as he or she “acts necessarily and reasonably to avoid this threat” and “does not intend to cause a greater harm than the one sought to be avoided.” Since we have little information on the circumstances facing the schoolgirls—other than the few skeletal accounts offered from those who have escaped—it is not clear that the Chibok girls’ situation fits this duress defense scenario, particularly regarding the immediacy of the threat of force. A final potential framework is that of Stockholm Syndrome, when a captive becomes bonded to his or her captor or “brainwashed.” Reportedly, the Chibok girls are now acting as Quranic teachers for Boko Haram, making statements like “You women should learn from your husbands because they are giving their blood for the cause. We must also go to war for Allah”—arguably an indication that they may be suffering from one of these types of conditions. In one of the most famous cases characterized as turning on Stockholm Syndrome—that of Patty Hearst, who carried out an armed robbery on behalf of her kidnappers, the Symbionese Liberation Army—the duress defense  was not successful, since she committed the crime after the initial state of duress. In fact, though Hearst was characterized as “brainwashed” in the media, a court-appointed expert in the Hearst case noted that “brainwashing” was actually a misnomer for the coercion alleged in the case. Given the limited information available about the current state of the Chibok girls, it is difficult to know whether they could be held culpable for their actions under international or Nigerian law. But rehabilitation should be considered as a primary response, in contrast to punishment, for the ordeal they have suffered for too long.