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Development Channel

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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Energy and Environment
The Potential of Clean Cookstoves
For decades, global health experts have recognized that smoke from indoor cooking is a major contributor to premature death.  Yet, in poor countries around the world, some 3 billion people still rely on wood, coal, or animal dung to cook their food over indoor fires. The impact of the resulting indoor air pollution is devastating, particularly for the women and girls who are largely responsible for cooking and bear the brunt of the smoke. A new study calculates that the toll from indoor air pollution is even larger than previously thought: the World Health Organization (WHO) estimates that exposure to smoke from traditional cooking was linked to 4.3 million deaths in 2012 – more than was attributable to HIV, malaria, and tuberculosis combined, and double the number estimated just five years ago. In 2010, a public-private partnership, the Global Alliance for Clean Cookstoves, set out the ambitious goal of getting 100 million homes to adopt clean cooking methods by 2020. Last week, I hosted a Council on Foreign Relations meeting that brought together three experts who are working on different aspects of the challenge: Radha Muthiah, the executive director of the Global Alliance; Gary Hattem, president of the Deutsche Bank Americas Foundation, which is helping to finance development of clean cooking solutions; and Jonathan Cedar, CEO of BioLite, an innovative producer of clean cookstoves based in Brooklyn. You can access the audio of this fascinating discussion here. Since its inception, the Global Alliance has played a critical role in not only drawing attention to the need for clean cooking solutions but also getting a broad set of partners – including governments, donors, financiers, scientists, manufacturers, distributors, users, and advocacy groups - to work in a somewhat coordinated fashion.  One significant milestone occurred earlier this year when the Global Alliance was able to corral stakeholders into establishing a set of international standards - making it possible to rate cookstoves across markets on four important dimensions: fuel use, total emissions, indoor emissions, and safety. As Hattem explained, such standard setting enables investors to evaluate promising technologies and unlocks capital for development. Deutsche Bank recently partnered with the Alliance to create a $4 million Working Capital Fund to invest in the sector. One of the fund’s first investments is in the producer BioLite, which has developed a low-cost biomass cookstove that reduces smoke emissions by up to 95 percent. BioLite’s approach (one of just many different approaches in the marketplace today) is not to try to get people to switch to a different fuel source, but to produce a product that uses existing fuel (typically biomass) in a vastly more efficient and cleaner way.  Cedar notes that if given the choice, most people using traditional cooking methods today would be delighted to switch to the cleaner liquefied petroleum gas (LPG), but that is not a realistic solution given the price (which varies but averages around $400 per year for cooking). So BioLite set out to replicate the benefits of LPG as much as possible with existing fuel sources.  BioLite’s added benefit is that its cooker can also charge an electrical device such as a cell phone. Cedar noted that this can be a selling point for men in the household who are often not so interested in clean cooking solutions but do get excited about a power source – and they tend to play an important decision-making role in household purchases. As is the case with distributing many useful products to those at the bottom of the pyramid, the last mile is always the biggest challenge. The benefits of clean cookstoves are so large one could argue that they should just be given away. But not only is this approach financially unsustainable, it never allows a viable market – with lucrative sales and crucial after-service – to develop. As Cedar notes, more than half of the cost of the BioLite stove is in distribution, which will create jobs and help develop rural economies.  (Cedar joins a growing community of social entrepreneurs committed to market-based solutions – such as Martin Fisher, co-founder and CEO of KickStart, a non-profit organization specializing in irrigation technology targeted to improve the crops of sub-Saharan Africa’s impoverished smallholder farmers.) Clean cookstoves will bring not only dramatic health improvements, but also a valuable new market to poor economies. They also save time for women and girls usually charged with collecting fuel and offer substantial environmental benefits. The recent WHO report estimates that Asia contributed more than 75 percent of air pollution-related deaths in 2012, with a total of 3.3 million deaths linked to indoor air pollution. It makes sense, then, that the Global Alliance estimates 20 percent of its 100 million goal will be realized in China alone. Given that the Biolite stove is manufactured in China, it won’t have to travel far to have an impact.
Development
Formalizing Economies to Fight Poverty
Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Karen Tramontano, founder and president of the Global Fairness Initiative, and is part of an ongoing Development Channel series on global justice and development. Sixty percent of the labor force in most developing countries works in the informal economy. Even though the informal economy is vibrant and provides essential services and goods to many communities, most governments disregard it. If governments instead sought to bring informal economies into the fold, they could enjoy substantial economic benefits.  Even more important, granting economic and legal rights to these overlooked workers and producers could lift thousands out of poverty—simply because social security is one of the most effective poverty-fighting tools that a government can utilize. The Global Fairness Initiative (GFI), a non-profit organization I founded, works to expand livelihood opportunities for the poor through market-based interventions. In 2008, we launched a project in Guatemala to prove that formalizing workers and enterprises is feasible and can directly reduce poverty.  Because the Guatemalan government had almost no data on the informal sector prior to the project, GFI first surveyed informal workers and small enterprises to understand the dimensions and economic value of the sector. The results shed light on both the strengths and challenges of the informal economy. Community discussions, interviews, and surveys that GFI conducted revealed that workers were eager to escape the shadows of the informal economy, voice their opinions, and be taken into account by the government and its leaders. We found that many workers and producers were completely excluded from their country’s economic and legal framework: they lacked access to legal protections, fair wages, safe working conditions, and social safety nets and services. As a result, these men and women often worked harder and longer hours than their formalized counterparts and were among the most exploited and the least protected from harsh labor conditions. GFI presented the government with statistics on the financial benefits of incorporating the informal economy, as well as information on how a more transparent labor force could attract more foreign direct investment. GFI also worked to secure the support of Guatemala’s civil society -- generally opposed to integrating the informal sector because of the tax burden-- as well as private sector actors nervous about the impact new formalized enterprises would have on their market share. In the end, the Roadmap to Formalization in Guatemala was endorsed by all stakeholders. The Guatemalan government now understands the benefits of having a larger economy, and the private sector recognizes the benefits of competition and new consumers. The agreement committed the government to formalizing workers and enterprises and granting them social security and human rights. Since the roadmap was adopted in October 2010, Guatemala has used one of its central tenets--access to social security--as an incentive to formalize thousands of small enterprises through a “one-stop shop” system that streamlines enrollment in a wide set of government services, such as business registration, health care, and social security. This approach is not without challenges.  First and foremost, the government must hold up its side of the bargain.  If informal workers and farmers meet their requirements to join the formal economy—namely by paying taxes—then governments are obliged to provide the promised benefits of formalization. Another daunting task is outreach to informal workers and farmers.  The government must engage the informal labor force.  Private sector and civil society step in to help the poor navigate and evaluate their new options. With transparent and meaningful engagement, the informal workers will begin to trust the process and see the benefits of the formal system. Formalization can reduce poverty, strengthen economies, and afford rights to those who need them the most.
Development
Will Justice Be Part of the Post-2015 Development Agenda?
This piece is part of an ongoing Development Channel series on global justice and development. Whether or not justice will be part of the world’s post-2015 global development agenda remains an open question. Many states have expressed support for including a strong commitment to justice in any new development goals. The Open Working Group of the United Nations, which is charged with putting together a framework proposal for those new goals, recently released a statement that endorsed the inclusion of rule of law and justice as important for peace, security, and capable institutions. However, some states have raised concerns regarding infringements on national sovereignty, and others argue that the focus on domestic justice reform neglects governance and rule of law failures at the international level. In response to this high-level dithering, civil society groups around the world have issued a “Justice 2015” appeal: an open letter to the UN General Assembly that urges the inclusion of justice in the post-2015 development goals. A recent blog post from Nicholas Menzies of the World Bank proposes a menu approach of justice targets and indicators that could be used in the post-2015 development framework. My previous posts on this same topic explored the main trade-offs and issues that need to be considered in measuring justice and rule of law. High diplomacy usually leaves little opportunity for outside input, but this case seems to be an exception. On April 24-25, the President of the General Assembly will host a Thematic Debate on "Ensuring Stable and Peaceful Societies.” And on June 9-10 there will be a High Level Event on Human Rights and the Rule of Law in the Post-2015 Development Agenda. In both cases, leaders will be looking to civil society for guidance. What do you think?
  • Development
    Balancing Security and Accountability
    Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Nema Milaninia, a legal officer in the Office of the Prosecutor at the International Criminal Tribunal for the Former Yugoslavia (ICTY). The views expressed are those of the author alone and do not necessarily reflect the views of the United Nations or the ICTY. This piece is part of an ongoing Development Channel series on global justice and development. In 1994, the international community reacted to brutal crimes committed in Rwanda and the former Yugoslavia by establishing tribunals mandated to bring those most responsible to justice. The thinking was that justice would help restore and maintain peace in those regions struggling to recover from divisive tragedies. But today, the relationship between justice, peace, and political stability faces serious scrutiny. How governments and international organizations choose to view that relationship has huge implications for how individuals responsible for mass atrocities will be held accountable. The recent prosecution of Kenyan leaders in the International Criminal Court (ICC) sheds light on the tenuous balance between stability and justice. In October 2013, leaders of the African Union (AU) passed a resolution requesting that the ICC defer its trials against Kenyan President Uhuru Kenyatta and his deputy William Ruto – both charged with organizing post-electoral violence in Kenya that resulted in the deaths of over 1,000 civilians and the displacement of another 250,000 or more people. The resolution argued that the ICC cases could “undermine [Kenya’s] sovereignty, stability, and peace.”  In 2009, the AU passed a similar resolution concerning ICC proceedings against Sudanese President Omar Hassan Ahmad al Bashir, out of fear that his genocide case could “undermine the ongoing efforts aimed at facilitating the early resolution of the conflict in Darfur.” Both of these cases currently face serious obstacles: in Kenya, witnesses have withdrawn, likely due to bribery, pressure, and a climate of hostility. And al Bashir continues to evade extradition to The Hague. Resistance to the ICC is not unique to Africa. Just last year, the Russian government stated that referring the ongoing conflict in Syria to the ICC would be “ill-timed and counterproductive” to peace efforts. Some argue that in conflict or post-conflict situations, the emphasis should be on ensuring security, encouraging economic development, rebuilding key institutions, and disarming belligerent groups. In this view, justice is placed in juxtaposition with peace, and other factors usually weigh against holding leaders accountable. For example, the perpetrators of an atrocity, or their chosen successors, often retain or come into power after a conflict ends. In other cases, both sides of the conflict commit abuses and there is a fear that the quest for justice might undermine reconciliation. Increasingly, however, studies show that the justice or peace dichotomy is false. Instead of being at odds, there is an important and fundamental link between justice, stability, and economic development. In 2010, the International Institute on Higher Criminal Studies (IIHCS) published a survey of world conflicts that took place from 1945 to 2008. The study found that of the over 300 conflicts that took place during that period, nearly all were of a non-international or internal character and were largely concentrated in developing countries in Asia and Africa. The conflicts themselves were usually caused by poverty, exploitation, corruption, and other factors relating to economic, social, and political grievances. Furthermore, the survey found that those who promoted conflict in poor countries were often motivated by personal greed and were willing to surrender their states to the interests of foreign governments (such as in the Cold War) or foreign corporations. In the vast majority of cases, perpetrators of crimes escaped accountability. More often than not, justice was sacrificed for short-term political expediency. However, as the IIHCS study revealed, stability, security, and democracy are actually strengthened by a post-conflict commitment to accountability. Openly facing past violence is essential to prevent future violence. It is for these reasons that Kenya’s key aid donors and senior Washington officials support the ICC process, viewing impunity for state corruption and political violence as a threat to Kenya’s long-term stability.  There is also indication that international prosecutions helped prevent another outbreak of election-related violence when Kenyans voted for a new president in 2013. Of course, balancing political and economic development with accountability will always be a case-by-case determination. Just as conflicts arise from distinct issues and involve different types of violence, post-conflict resolutions must also be context-specific. There is no one-size-fits-all approach to ensuring justice and stability following major conflicts. But there is at least strong indication and growing international consensus that justice and stability are collaborative and not mutually exclusive concepts. Despite this finding, international justice institutions like the ICC continue to suffer from budgetary restraints and limited state cooperation, particularly from the most powerful countries in the world. Without more resources and support, the prospect of realizing both justice and peace risks being reduced to an aspiration instead of a reality.
  • Health
    The Global Politics of Universal Health Care
    This guest post is from Yanzhong Huang, senior fellow for Global Health at the Council on Foreign Relations, and CFR Research Associate Jay T. Chittooran. Global momentum is building for universal health care (UHC). In January 2012, health ministers from around the world gathered in Bangkok and committed themselves to raising “universal health coverage on the national, regional and global agendas.” Within a year, the United Nations General Assembly adopted a resolution on UHC, encouraging national governments worldwide to “plan or pursue the transition towards universal access to affordable and quality health-care services.” Since then, the World Health Organization and the World Bank have worked together to encourage global action on instituting UHC. Over seventy countries have enacted UHC or similar programs within their borders. But even with growing political commitment, difficult decisions remain regarding what health services will be covered by UHC, given that resources for health are finite and demand is seemingly limitless. This is especially true in low- and middle-income countries (LMICs), which typically face tough budget constraints. In setting priorities about what to cover, policymakers have to address some thorny questions, such as: how can evidence and social values be systematically incorporated into the design of health plans?  How do you ensure a proper balance between promotive and preventive care on the one hand, and curative and rehabilitative care on the other? Which types of patients receive what interventions, when, and at what cost? Very often, the selection of services and technologies to be covered is based on cost effectiveness with respect to health outcomes. But any UHC plan should also take equity, financial protection, and social values into account. Unfortunately, health care coverage in many LMICs is associated with general inefficiency, wasted money, and needless illness and death. For example, in India, even though only 44 percent of children under two years old are fully vaccinated, open-heart surgery is subsidized in national public hospitals. Similarly, in Colombia, only 58 percent of children are fully vaccinated, but public monies are used to subsidize a breast cancer treatment considered ineffective and unsafe in the United States. In both cases, expensive and potentially wasteful services are prioritized over cost effective and equity-enhancing health interventions. In order to correct this problem, countries should ensure that they have an adequate amount of certain affordable drugs that satisfy the health care needs of their population, consult health insurance priority lists, and incorporate technology-related policy-making in health care to encourage the use of cost-effective health care tools. This requires building capacities to produce quality data and developing evidence-based decision-making. Fortunately, in many LMICs, data, methods, and evidence on the costs, effectiveness, and equity of health interventions are increasingly available. But health care resources and interventions remain skewed in favor of the privileged and politically-connected. As UHC generates more demand for better health care, in turn putting financial pressure on governments, public spending will respond even more to interest groups and wealthy populations. This makes it imperative that countries invest in independent institutions to overcome the inherent biases of participatory politics, which tends to favor the loudest, best connected, and most articulate, but not always those most in need of care.