Economics

Emerging Markets

  • Europe
    The Meaning of Ukraine’s IMF Deal
    While today’s headlines focus on the truce agreement between Ukraine and Russia, a significant economic milestone was achieved yesterday with the IMF’s announcement that its staff has reached agreement with the government on a new four-year program. The Fund’s Board will likely consider the program next month. Whether or not the truce holds, the program is the core of western financial support for Ukraine. Is it enough? The program is for $17.5 billion, representing about $6 billion in new IMF financial commitments. This is somewhat misleading, because this amount is spread over four years, as compared to the two years remaining in the existing program it replaces. It appears that the amounts the IMF will disburse this year are broadly comparable to what they were before. Similarly, the statement that total support for Ukraine will total $40 billion would seem to represent mostly a repackaging of previously announced commitments (including $2 billion in U.S. loan guarantees and a roughly similar amount from the EU). If you believe that the program will need to be revised several times even in the best of scenarios, and could need a major rewrite later this year if events on the ground continue on their current path, then the truly additional resources, or “real water” of the announcement, is minimal. Most of the additional financing for the program comes from restructuring of private debt, which will take time to arrange but will be a condition for future drawings in the program (a similar approach was used in Uruguay in 2003). Pushing back maturities at roughly current interest rates (a “reprofiling” in Fund-speak) would provide substantial relief and keep creditors engaged in Ukraine until a time when sustainability is clearer, and seems to be what the markets are anticipating. Further, given the extraordinary uncertainty associated with the conflict, and the difficulty the IMF has in taking such factors into account in their debt sustainability assessments, it is folly to think we know now what the needed relief will be. But a deeper restructuring now that also includes some reduction of principal amount can’t be ruled out. After all, debt is much higher than previously admitted and in almost any reasonable scenario it is highly likely that the official sector will decide that a deep restructuring is needed eventually, so why not do it now?  On balance, and with the focus on assuring adequate financing through a quick deal with broad participation, reprofiling looks to be the sensible choice. But either way, the decision on private sector involvement (PSI) in this deal may well be precedential for the larger, ongoing debate over the architecture of international debt policy. The financing program would seem to assume that the $3 billion Russian bond that comes due in December would be restructured or otherwise pushed back, but presumably the documents will need to be silent on this issue, as Russian consent cannot be assumed at this point. With reserves down to $5.4 billion (from $16.3 billion in May), and external financing needs of $45-50 billion over the next three years, there is little scope for debt payment in the near term. Is the program “enough?” It is hard to see this program as creating the conditions for Ukraine to grow absent an end to the hostilities. Much higher levels of official bilateral aid will likely be required in the future if the West is truly committed to rebuilding Ukraine. Still, there are important positives from the agreement, both in terms of the government’s commitment to continue its reform effort and the West’s commitment to stick with Ukraine in the face of continued Russian aggression. The upfront measures in the program—including further sizable energy tariff increases, bank restructuring, governance reforms of state-owned enterprises, and legal changes to implement the anti-corruption and judicial reform agenda—are all desperately needed over the longer run even as the pace of reform needs to be slowed reflecting the current crisis. The degree of fiscal consolidation also seems realistic. One big question relates to the hole in the banking system, which appears much larger than originally estimated; the recent sharp decline in the exchange rate no doubt made that hole even larger. Overall, while I remain highly critical of the West’s stinginess in providing bilateral economic assistance as part of its overall strategy of support for Ukraine, the Fund has done what it could do, and it is an important bit of breathing space for the Ukrainian government.
    by Robert Kahn February 12, 2015 Macro and Markets
  • International Organizations
    On the Line in Brisbane: Global Growth and G20 Credibility
    Coauthored with Daniel Chardell, research associate in the International Institutions and Global Governance program. This weekend, leaders of the Group of Twenty (G20) states gather in Brisbane, Australia, for their annual summit. To maintain the G20’s credibility, President Obama and his counterparts need to demonstrate that it is capable of taking concrete steps to restore global economic growth. Designated the world’s “premier forum” for international economic cooperation in the wake of the 2008 financial crisis, the G20 is widely credited with staving off a global depression. No mean feat, by any estimation. Its more recent performance has been disappointing. Many commentators, noting the still-tepid global recovery, the G20’s failure to implement past commitments, and its members’ diverging interests, question its credibility and capacity to effect real change. The forum’s best days, they suggest, are behind it. That judgment is premature. The G20 remains a mainstay of global economic coordination, for reasons both symbolic and practical. The world is experiencing an unprecedented shift in global economic power. At such a fluid (and potentially volatile) moment, the world urgently needs a high-level steering group that convenes leaders of the most important advanced and emerging countries. Unlike the more exclusive and homogeneous Group of Seven (G7), the G20’s large and diverse composition gives its decisions more heft and greater legitimacy. It provides a potentially flexible framework in which to hammer out consensus on chronic challenges—as well as respond to urgent crises. Aware that many are treating the Brisbane summit as a test of the G20’s relevance, the Australian government—which holds the G20’s rotating chair—has crafted a narrow agenda focused on restoring global economic growth. Earlier this year, G20 finance ministers and central bank governors agreed to develop policies to lift global GDP 2 percent above the business-as-usual scenario over the next five years. This weekend, G20 leaders will present their national strategies to realize this target, as part of what is being called the Brisbane Action Plan. Reaching this new growth target will require new member state commitments in several policy areas–all of which are on the Brisbane agenda. These include redoubling investment in global infrastructure, combating corporate tax evasion, strengthening financial regulation, and implementing long-deferred governance reforms in international financial institutions. Investing in infrastructure: In September, G20 finance ministers and central bank governors agreed to launch the Global Infrastructure Initiative (GII) as a knowledge-sharing platform that seeks to match potential investors with projects. The GII will complement the Global Infrastructure Facility, established in October by the World Bank Group to facilitate public-private partnerships to finance infrastructure in the developing world. In Brisbane, G20 leaders should announce demonstration projects to illustrate the concrete benefits of these matchmaking initiatives. Curtailing tax evasion: Effective, transparent, and fair tax systems are vital to inclusive economic growth. In Brisbane, leaders will announce new steps to combat base erosion and profit-shifting (BEPS), which occurs when multinational corporations funnel profits to low- or no-tax jurisdictions to avoid taxation where business activity actually occurs. Last year in St. Petersburg, Russia, G20 leaders endorsed the OECD’s Action Plan on BEPS, intended to lead to a single set of international rules on tax evasion by the end of 2015. The battle against tax evasion was given a boost last week by the leak of documents showing that more than three hundred major multinationals channeled their profits to Luxembourg, allegedly saving them billions in taxes. President Obama can leverage the international outrage at these revelations to press for prompt adoption of the OECD Action Plan by G20 members. Ending the era of “too big to fail”: This week, the Financial Stability Board (FSB) released new rules that aim to end taxpayer bailouts of banks deemed “too big to fail.” The FSB will present the rules at Brisbane this weekend. President Obama and other G20 leaders are expected to endorse the proposal, a critical step to bolster public confidence in the G20. Trickier for President Obama will be pressing for full implementation of the governance reforms of the International Monetary Fund (IMF). In 2010, the United States engineered a historic agreement  to double the IMF’s quota—essentially, its lending capacity—and shift voting weight and representation (largely from Europe) to emerging economies. Unfortunately, the U.S. Congress has failed to approve these reforms, even though they will neither increase U.S. financial commitments nor endanger Washington’s veto over major IMF decisions. Congressional Republicans, the source of the opposition, are unlikely to budge, especially given their triumph in last week’s midterms. To circumvent the gridlock in Washington, the BRICS countries (Brazil, Russia, India, China, and South Africa) are expected to propose “alternative solutions” in Brisbane, such as breaking up the 2010 reform package into smaller parts. Despite this potential work-around, Congress’s failure to ratify IMF reform carries tangible financial and reputational costs for the United States. Since World War II, the Fund has been the principal multilateral forum to promote global financial stability, just as the World Bank has served as the world’s main development agency. Frustrated with U.S. intransigence, the BRICS are starting to set up alternative institutions to rival the IMF and World Bank: the Contingency Reserve Arrangement and the New Development Bank, respectively. Though not yet operational, these new institutions could presage a fragmented global economic order. For all the talk on Capitol Hill about President Obama’s indecisive leadership, Congress’s own inaction on IMF reform should be considered a national embarrassment. Notably absent from the Brisbane summit agenda, finally, is climate change. Despite pressure from the United States and Europe, Australia resisted including it as an item for discussion, and the final summit communique is expected to devote a mere paragraph to the issue. To be sure, climate change is politically sensitive for Australian Prime Minister Tony Abbott, who in July repealed the country’s carbon tax, earning the dubious distinction of the “first developed nation” to do so. Many experts, moreover, argue that climate change has no place on the agenda, since it would dilute the G20’s purely economic mandate. Alas, the world is not so neatly compartmentalized. As recent reports from the Intergovernmental Panel on Climate change (IPCC) and a coalition of prominent business executives underline, the fate of the global economy and the global climate are inextricably linked. Extreme weather, rising sea levels, the health consequences of air pollution, and other consequences of climate change pose astronomical risks to the economy. In the long-run, the cost of mitigating climate change is negligible compared to the cost of inaction. In short, a G20 “growth agenda” that ignores climate change is nothing of the sort. And if climate change demands immediate and concerted action among developed and developing countries alike (as this week’s ambitious U.S.-China climate change pact shows it does), there is no more fitting venue than the G20, which already includes all seventeen members of the Major Economies Forum (MEF) of major emitting countries. Merging the MEF into the G20 would simply elevate the former to the leaders’ level. The scope of the G20’s mandate has been the topic of a running debate since it was elevated to a leaders’ level forum six years ago. The dilemma is that the G20 may not survive the addition of new issue areas—but can it afford to ignore the most urgent global challenges? One way to square the circle, as this blog has noted, is to create a parallel foreign ministers track, alongside that headed by finance ministers and central bank governors, to address a broader suite of global issues not adequately addressed in the narrow G7, the two-tiered UN Security Council, and the unwieldy UN General Assembly. Last month, IMF Managing Director Christine Lagarde called for a “new multilateralism” based on “a renewed commitment to the global public good.” She may be overly sanguine about the willingness of independent nations to subordinate their interests to cosmopolitan purposes. But the world does need a new multilateralism, where sovereign states can bargain and horse-trade to realize broadly shared common ends. The G20 must be at the heart of this effort—in Brisbane and beyond.
    by Stewart M. Patrick November 12, 2014 The Internationalist
  • International Organizations
    Could the BRICS Bank Make China More Responsible?
    Below is a guest post by Isabella Bennett, assistant director of the International Institutions and Global Governance program. Last weekend’s World Bank and International Monetary Fund (IMF) meetings took place under a flurry of questions about their new “competition:” the BRICS development bank and contingency fund. In July, the BRICS bloc (Brazil, Russia, India, China, and South Africa) established these new institutions as parallels to the World Bank and IMF. While neither of the BRICS institutions is likely to be fully functional soon, the BRICS bank is more likely to launch in the near term, which is prompting concern that the “New Development Bank” (the BRICS bank’s official name) will undermine the World Bank’s longstanding efforts to foster good governance alongside economic development. Despite the inevitable challenges and moral conundrums of judging which countries and programs deserve financing, at least the World Bank attempts to protect human rights and the environment. With the BRICS bank, all bets are off. Or so the theory goes. There are plenty of reasons to be cautious about the new BRICS bank. China is clearly the group’s economic powerhouse and will almost certainly wield disproportionate power over the institution’s decisions. Indeed, for precisely this reason, there was significant resistance within the other four BRICS countries to basing the bank in China. But China ultimately won the argument. The BRICS bank will be based in Shanghai. The episode suggests that, among the bank’s governors, China will be the first among equals. And China’s investment record is far from spotless. As Chinese activity in developing countries spanning the globe—from Myanmar to Sudan to Peru—has surged, so has criticism of Chinese investement practices. Though some of this condemnation is misleading or exaggerated, other charges are valid. Chinese companies operating outside of China have been reported to hire primarily Chinese laborers, whom they abuse and pay next to nothing—forcing locals to work for a pittance or forego opportunities with Chinese firms—undercutting Beijing’s argument that the investment is “win-win.” For example, in their book, China’s Silent Conquest, Juan Pablo Cardenal and Heriberto Araujo document the callous response from the Chinese embassy in Gabon to two workers who had fled conditions akin to slavery at a Chinese company operating in the Central African nation. When the two laborers sought assistance, they were turned away and instructed not to talk to the media. A lawsuit in China failed to punish the company or the boss who had abused the workers. Moreover, Chinese businesspeople, accustomed to operating in a national economy where corruption is pervasive, often have little compunction about behaving similarly abroad. Chinese companies are notoriously opaque, conduct business with some the world’s most brutal regimes (most famously with Omar al-Bashir of Sudan), and have been known to bribe authorities from oppressive governments. Indeed, officials from China National Petroleum Corporation (CNPC) told Cardenal and Araujo that they regard corruption as a price of doing business in places like Turkmenistan, one of the world’s most repressive countries. CNPC even includes these bribes on its balance sheets. Beyond feeding cycles of corruption, such practices can endanger human lives, both in China and abroad. In Sichuan province, cheap construction of schools contributed to the deaths of more than one thousand children. In Angola, a Chinese-built hospital that relied on shoddy materials and workmanship closed only months after it opened. Even in Brazil, one of Beijing’s partners in the BRICS development bank, Chinese companies have engaged in questionable practices. Last year, while I was investigating Chinese investment in Brazil, several sources confirmed that a Brazilian subsidiary of Chongqing Grains, a Chinese state-owned company, had illegally bought two farms. It did so despite a Brazilian prohibition on foreign purchases of large farms, legislation passed specifically to prevent Chinese companies from doing so (according to lawmakers I interviewed). As I describe in Carta Internacional(in English), the China Development Bank likely funded the project, while then-President Hu Jintao and Dilma Rousseff personally signed the deal—but with the explicit provision that Chongqing Grains would rent the land, not buy it. Western companies are not immune to corruption, of course. But thanks to civil society movements, as well as legislation like the Foreign Corrupt Business Practices Act, U.S. companies risk punishment for abuse abroad or under-the-table deals, both at the hands of consumers and the U.S. government. The same is generally true for corporations headquartered in members of the Organization for Economic Cooperation and Development (OECD), which has a Common Standard for Transparency. The World Bank, meanwhile, adheres to strict procurement and consultant guidelines, and maintains a detailed list of firms that have been known to violate laws. Thanks to such activism and oversight, U.S. and other Western corporations face potentially significant economic and legal sanctions for corrupt practices. And the effects, in terms of reduced abuses, have been real. In China, in contrast, publicly criticizing a major Chinese foreign investment can be downright dangerous. Thus, it is reasonable that many are concerned about a development bank that China will lead in practice (if not in name). Ironically, however, the New Development Bank may actually help improve China’s engagement with developing countries. To begin with, Chinese authorities have begun to improve their investment practices. Their motives may be pure, or they may simply recognize that their country has a serious global image problem. Thanks to perceptions of corruption, China has become a convenient target around the world for protectionism and nationalist rhetoric. This threatens China’s “going-out strategy,” which aims to expand overseas investment to secure natural resources, promote Chinese exports, and help China’s multinational companies grow. On his tour of Africa last year, Xi Jinping’s speeches sought to confront the widespread perception that China is in Africa merely to rob resources by emphasizing partnership and cooperation with African partners. Perhaps more importantly, setting up the BRICS bank will force China to debate development challenges with its cofounders. To be sure, Russia is unlikely to be in the vanguard of anti-corruption efforts, but it is also unlikely to regard the development practices as important enough to bother fighting them. But India, Brazil, and South Africa (to a lesser extent) are all inclusive democracies where citizens openly—and loudly—criticize the government, demand better governance, and press for sound development policies. China’s experience in Brazil, in particular, shows that there is hope for improvement in Beijing’s development policies. Over the past five years, Brazil successfully reformed China’s investment approach. Local and federal authorities carefully negotiated with Chinese investors to ensure that projects hired local laborers under fair conditions—as well as strategically pushed China to focus more on investing in sectors outside natural resources. Lastly, Chinese investors have gradually grown accustomed to negotiating legitimate deals under local rules. In the BRICS bank, Brazil is likely to continue pushing China to improve its investment practices. Finally, the New Development Bank will force the BRICS to address complaints from other developing countries. As the IMF and World Bank failed to pass reforms to integrate rising powers, it was easy for the BRICS to join the chorus of criticism against the West. But as leaders of a development bank themselves, the BRICS will increasingly become a target of criticism from borrowers, and feel pressure to improve development practices. Investment in developing countries from the BRICS—and especially from China—will continue growing at a fast clip. Perhaps a development bank that forces them to debate investment practices among one another—and opens them up to more criticism—is actually an opportunity.
    by Guest Blogger for the Internationalist October 15, 2014 The Internationalist
  • Emerging Markets
    Food Security and the Need for Responsible Investment Guidelines
    Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is by Gregory Myers, director of private sector engagement at Cloudburst Group and former division chief for the Land Tenure and Property Rights Division at the U.S. Agency for International Development. Over eight hundred million people in the world do not have enough to eat. In fact, hunger kills more people every year than malaria, AIDS, and tuberculosis combined. But feeding the world’s growing population cannot be achieved through government action and public resources alone. Instead, governments and international organizations should encourage responsible investment in agriculture from a wide range of private sector actors, particularly those with large land-based investments. Coca-Cola and PepsiCo, both based in the United States, have already begun reviewing their supply chain processes and are doing more to foster responsible investment. In Europe, Unilever, Nestlé, and Rabobank are also working to address challenges related to “land grabbing.” Yet governments and the private sector need to do more. Achieving genuine progress on this front will require coordination by a variety of actors. It is encouraging that many groups—NGOs, companies, international donors, and governments—are now focused on this issue. In August, the UN Committee of World Food Security (CFS) negotiated a long sought-after set of global principles to guide responsible investment in agriculture (RAI), mainly for application in emerging economies. Although the ten RAI principles are not without controversy, the document marks an important step toward reducing food insecurity for women, men, and children while promoting sustainable economic growth. Paired with another set of principles, the Voluntary Guidelines for the Responsible Governance of Tenure of Land, Fisheries, and Forests, the RAI can facilitate clear, transparent, and predictable rules, laws, and policies that secure property rights and promote investment in ways that both benefit local populations and contribute to global economic growth. Together, these principles could dramatically improve the nature and outcomes of global development efforts by changing both how investment in agriculture in emerging economies takes place and, most importantly, who benefits from these investments. These principles complement other investment guidelines, such as the UN’s Guiding Principles on Business and Human Rights. Protecting land and resource rights is essential to responsible investment, the fight against hunger, and economic growth. With secure property and resource rights, local people and communities are granted new economic opportunities: they can rent out land to prospective investors or enter into joint ventures with them. In addition, when people believe their land and resource rights are secure, they are more likely to invest in their property, which can increase crop yields and thereby improve household incomes and reduce hunger and food insecurity. Respecting and protecting these rights can also benefit investors by reducing the financial and reputational risks of investing in economies with weak property rights systems. Implementing these principles and turning good ideas into real change requires more than setting guidelines. Therefore, world leaders, international donor organizations, civil society, and the private sector should create an independent, multi-stakeholder platform to develop practical tools to make the promise of the RAI and the guidelines for responsible governance a reality. An example of such a platform is the Kimberley Process, which prevents trafficking in conflict diamonds. A multi-stakeholder platform could develop a gold standard industry certification, which would set clear expectations for how investors should conduct business with respect to land in emerging economies. These standards would also empower civil society to monitor investments in a more systematic way and allow consumers to reward companies that behave responsibly and pressure those that do not. Next, policymakers should experiment with models at the local level to create more profitable investment relationships between commercial and smallholder farms that result in better food security, nutrition, and economic outcomes for all. These could be piloted through country-level, multi-stakeholder partnerships similar to those launched under the Group of Eight (G8) last year. Finally, this multi-stakeholder platform should improve information sharing and learning by establishing common data standards and procedures that allow information to be compared and shared more easily. The time is ripe to capitalize on the growing investor interest in agriculture and the movement to develop more responsible investment models, and thus achieve powerful results for local people and communities. Through concentrated efforts, responsible agricultural investments can drive local economic growth and propel millions out of extreme poverty.
    by Guest Blogger for Women Around the World September 15, 2014 Development Channel
  • Development
    Unlocking the Potential of Women Entrepreneurs
    This post is from Isobel Coleman, Council on Foreign Relations (CFR) senior fellow and director of the Civil Society, Markets, and Democracy initiative, and Dina Habib Powell, global head of corporate engagement at Goldman Sachs and president of the Goldman Sachs Foundation.  A staggering six hundred million new jobs are needed globally over the next fifteen years to keep employment rates at their current level. This is especially daunting given slowing global growth rates. One bright spot in this enormous challenge is a powerful, and often overlooked, source of job creation: women entrepreneurs. In the United States, women-owned businesses account for approximately 16 percent of all jobs in the economy, and with women graduating from university at higher rates than men, that percentage is expected to grow in coming years. Governments around the world are beginning to wake up to the economic benefits of women’s empowerment. Kathy Matsui of Goldman Sachs first wrote about "womenomics" in 1999 when she advocated that Japan could increase GDP by as much as 15 percent by tapping the potential of women. Fifteen years later, Prime Minister Shinzo Abe has made greater female workforce participation the cornerstone of his strategy to accelerate the Japanese economy and has proposed new policies that will address childcare, tax distortions, and female representation in government. In most economies, significant barriers inhibiting women from reaching their full potential remain. A recent International Monetary Fund paper shows a GDP per capita loss as high as 27 percent in some regions as a result of not fully engaging women in the labor force. In certain countries, the loss is even bigger. The IMF paper estimates that in Egypt, for example, raising women’s workforce participation rate to that of men would lift the country’s GDP by more than a third. Globally, gains in women’s participation in the labor force have stalled; women continue to work in lower paying and less productive sectors than men; and there are still laws in many countries that restrict women’s movements and choices. A World Bank study shows that almost 90 percent of the 143 economies researched still have at least one legal restriction on women’s economic opportunities, including seventy-nine economies that restrict the types of jobs women can perform. There is also a lack of role models to inspire more women to join the workforce and change societal attitudes.  In addition, women are less likely than men to know other entrepreneurs and more likely to have weaker professional networks. Finally, access to capital remains a significant constraint to engaging women productively in the world economy. The International Finance Corporation (IFC) estimates that 70 percent of women-owned SMEs in the formal sector in developing countries lack access to capital, resulting in a global financing gap of $285 billion. In 2008, Goldman Sachs launched the 10,000 Women initiative to address the constraints facing women entrepreneurs in emerging markets by providing them with business training, mentoring, and networking opportunities. A new evaluation of the program conducted by Babson College, and released at the Council on Foreign Relations today, demonstrates that targeted interventions can indeed help women grow their businesses and create jobs. The study found that nearly 60 percent of graduates created new jobs, on average more than doubling the size of their workforce. Eighteen months after graduation, nearly 70 percent of the women had increased revenues, and the average growth across all participants was 480 percent. The potential to replicate these results on a broader scale by providing more women with greater access to business training, mentoring, networking, and capital is enormous. Goldman Sachs 10,000 Women is expanding its efforts and has recently launched a new partnership with IFC, a member of the World Bank Group, to create the first ever global finance facility dedicated to women entrepreneurs. The facility will enable approximately one hundred thousand women entrepreneurs around the world to access capital and grow their businesses. With 126 million women starting or running businesses in sixty-seven economies around the world, improving their growth prospects will reverberate throughout the global economy and ultimately lead to healthier, safer, and more prosperous communities—for everyone.
    by Isobel Coleman September 10, 2014 Development Channel
  • Economics
    China Chooses Growth Over Reform
    The Wall Street Journal piece on rapid credit growth in China yesterday describes the sharp tradeoff for the Chinese government: achieving growth targets in the near term comes at the expense of reform delays and further rapid debt accumulation. With growth likely to decelerate in 2015 without additional stimulus, the prospects for meaningful economic reform are receding. I’ve explored this tradeoff in my July Global Economics Monthly (here). Imposing hard budget constraints, tightening credit, recognizing losses, and addressing massive excess capacity in real estate, raw materials and other sectors is disruptive in the short term, and as long as growth is falling short of government targets the hard decisions are likely to be deferred. If it takes a crisis to force change, I argue in the GEM that the smooth rebalancing scenarios that China optimists predict will be at risk.
    by Robert Kahn July 18, 2014 Macro and Markets
  • India
    Bringing India Inside the Asian Trade Tent
    The new Indian government, led by the Bharatiya Janata Party, has outlined trade as a national priority. But economic ties between the United States and India have soured recently, with both sides entrenched in acrimonious market-access complaints. Coming at a time when the United States and India have differences over post-2014 Afghanistan, Pakistan, and other regional security issues, the absence of a once-strong economic ballast matters. To reestablish a constructive economic dialogue with India at just the time a new government takes charge in New Delhi, the United States should champion India's long-pending request for membership in the Asia-Pacific Economic Cooperation (APEC) forum as a step toward eventual inclusion in the Trans-Pacific Partnership (TPP). Membership alone would not eliminate bilateral frictions, but would provide a good opening to resolve concerns and revitalize ties. Growing Commercial Ties, Growing Frictions India has the world's tenth-largest economy in nominal terms and the third largest based on purchasing-power parity, a measure of gross domestic product (GDP) incorporating relative costs and inflation. Not long ago, U.S. economic ties with India—which began to open its markets following a foreign reserves crisis in 1991—were minimal. That has changed; U.S.-India trade in goods and services grew from $15 billion to nearly $100 billion over the past fifteen years, and two-way investment has increased rapidly. Growing business ties during the 2000s propelled Washington and New Delhi closer. Yet U.S.-India trade remains well below its potential—a little more than one-tenth of U.S.-China trade in goods, the scale of Taiwan or the Netherlands. Worse, in the last three years, disputes over issues such as Indian barriers to U.S. poultry and dairy imports, local content requirements (especially in solar energy), intellectual property protections, and investment limits have become major sources of friction. The United States has initiated three disputes with India in the World Trade Organization (WTO). India has its own countercomplaints about temporary worker visas and nonrefundable social security contributions. In 2013 the atmosphere deteriorated sharply when exasperated U.S. businesses, industry associations, and members of Congress began urging more aggressive action. In 2014, the U.S. International Trade Commission held hearings on India at Congress's request, and the U.S. Trade Representative's office reviewed India for Special 301 Priority Foreign Country designation, with a further out-of-cycle review in the fall. This all-sticks, no-carrots approach has achieved little with India, which sees these processes as illegitimate and outside the WTO. Getting back on track with India will require something positive to collaborate on, so a clear signal of U.S. support for India's bid would be beneficial. Finally, collaboration can be helpful in and of itself: while the U.S.-India civil nuclear initiative has yet to yield the commercial benefits many supporters expected, the deal improved the two countries' ability to work on nonproliferation, which had previously been the most intractable aspect of the bilateral relationship. The Case For APEC Membership Support for India's APEC membership request might seem intuitive. India desires entry and has been waiting for nearly twenty years since its first request. Yet India has been on the outside even prior to the forum's moratorium on new members declared in 1997, which expired in 2010. Action on new requests writ large remains stalled amid indecision among APEC members about enlargement, especially over selection of a broader multiregional slate of new members. For U.S. interests, further delay on considering India is both a strategic and tactical mistake. India is expanding its economic ties across Asia and Latin America, embarking on numerous trade agreements with Asian countries and the Association of Southeast Asian Nations (ASEAN), and joining the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) effort, in which the United States does not participate. APEC membership would embed India in the premier organization promoting free trade and economic cooperation in Asia, an organization that sets norms also shared by the United States. Indian membership would provide an incentive to continue economic liberalization. An India within APEC—responsible for upholding its commitments—would likely ameliorate some of the market-access concerns troubling U.S.-India economic ties. APEC's technical groups, which align with several of the areas of U.S.-India friction, hold expert-level consultations within the multilateral framework. With its "green goods" goal, APEC's energy working group promotes eliminating barriers in clean energy trade and services, such as the removal of local content requirements, a live issue between the United States and India. All APEC member economies craft annual action plans toward APEC's Osaka Action Agenda goals of "free and open trade and investment," covering tariffs, nontariff barriers, services, investment, standards, intellectual property rights, and other issues. Member economies peer review action plans. India would reject such a transparency exercise bilaterally, but it prizes the role of multilateral institutions and seeks to uphold the norms of those in which it is part. Its relationships with such institutions do not provoke concerns about strategic autonomy in the way that bilateral relationships sometimes do. For this reason alone, APEC would provide a substantial assist to managing bilateral frictions, complementing the adversarial approaches inherent to the WTO. Most importantly, India has demonstrated responsiveness to its multilateral commitments. India remains a tough WTO negotiator, but joining the organization substantially changed the country. It lowered tariffs and implemented intellectual property–rights protections to meet WTO requirements, including amending its patent law after adhering to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. India updated its domestic export controls to harmonize with global norms as it works to join the global nonproliferation regimes. In these cases, global organizations provided incentives to make tough political choices at home that bilateral negotiations did not. The effects have not been instant, but were realized in the WTO case within a decade, and in the nonproliferation case within five years. India seeks APEC membership fully aware of its requirements, so entry would significantly affect the way India approaches its own commitments to free and open trade. It would also build confidence for considering future Indian membership in the TPP. Indeed, the Confederation of Indian Industry has begun preparing a roadmap for what India could do to be eligible for the TPP's demanding terms. APEC would be a helpful stepping-stone. There is no financial cost to the United States for supporting India's APEC membership request. But there will be diplomatic costs: the membership moratorium closed the door after Russia, Vietnam, and Peru joined in 1998, so consideration of any new member spurs talk about the need for "balance" from all APEC regions, such as Latin America and Southeast Asia. Although there appears to be no specific objection to India—all but four APEC member economies already have, or are pursuing, trade agreements with India bilaterally or multilaterally, including China—the balance quest bogs down any conversation about India. Balance is a laudable goal, but should not delay consideration of India's case; the economies of Panama or Cambodia, for example, should not be debated as if they were comparable to India's. (For example, using World Bank 2012 GDP figures, India's GDP is $1.8 trillion; Panama's is $36 billion; and Cambodia's is $14 billion—50 and 128 times smaller than India, respectively.) U.S. leadership will be needed to nudge the twenty other members to focus on the special opportunity India presents. It is, however, doable—especially compared to the far more challenging diplomacy needed in 2008 to secure an exemption for India from the forty-two-member Nuclear Suppliers Group. If the United States decides to advocate strongly for India, it could achieve success within a year or two. Some critics worry that India may not be ready for APEC membership, or that Indian membership may hinder consensus decisions within APEC. These concerns stem from well-documented tough negotiating postures India has taken in the Doha Round and the Bali trade facilitation talks. APEC is not a binding negotiating forum, however, but an organization focused on transparency and peer consultation to meet open trade goals. The merits of APEC lie in providing a set of shared norms to help orient India toward greater openness in step with the region. Including Asia's second-fastest-growing economy, a colossus in its own right, in this consultative forum far outweighs any potential losses to efficiency once India joins the table. Without India, the forum cannot represent the Asia-Pacific economy. Getting Back on a Positive Track: Next Steps Successfully championing India's bid for APEC membership will require deft diplomacy. As the U.S. government's lead agency for APEC, the Department of State should coordinate support for India's membership bid and commit to working closely with India. To be most effective and sensitive to India's needs, Washington and New Delhi should be fully aligned on strategy, process, and talking points at all times. The secretary of state should call his counterpart with the proposal, as a sign of the importance the U.S. government places on one of India's long-standing goals. In coordination with India, the United States should execute the following steps: Convey U.S. support for India's bid for APEC membership to the host country. With China as the 2014 APEC forum host, the secretary of state should express to China the U.S. intention to back India's membership bid, in preparation for the many upcoming coordination meetings among senior officials before the November summit. Instruct U.S. ambassadors in all APEC member economies and aspirants to convey the U.S. decision to support India's bid. The East Asia, Europe, and Western Hemisphere bureaus in the State Department should mobilize support from all current APEC member economies, informing aspirants subsequently. Identifying champions of Indian membership will help advance the bid. Assistant secretaries can follow up with phone calls; undecided members should receive sub-cabinet-level calls. Arguments supporting India's APEC bid should be provided to every U.S. official at the deputy assistant secretary–level and higher for every appropriate meeting. Include specific instructions in démarche and senior officials' talking points to separate deliberation on additional members from discussion of India. Should member economies fail to reach agreement on a broader slate of new members, as has been the case for years, the United States should propose to postpone deliberation over other candidates to a later date, to prevent India's case from stalling further. Consult the business advisory group and seek input. The State Department should consult the APEC Business Advisory Council (ABAC) on India, given Indian businesses' participation in ABAC's chief executive summit. First points of contact should be the U.S. members (Caterpillar, Eli Lilly, and Qualcomm) and the ABAC secretariat. By supporting India's long-standing request as a new trade-oriented government takes charge in New Delhi, Washington can take an important step toward reorienting economic ties with India just as they become more important. The opinions and characterizations in this memo are those of the author and do not necessarily reflect the opinions of the U.S. government.
    Policy Innovation Memorandum by Alyssa Ayres June 25, 2014
  • Middle East and North Africa
    Segovia: A New Player in Cash Transfers
    For several years now I’ve been following the progress of an innovative new philanthropy: GiveDirectly. Its cofounders, Michael Faye and Paul Niehaus, started the organization in 2008 while doing their PhD’s in economics at Harvard. Their idea was simple. Given mounting evidence that cash transfers are among the most efficient and effective ways to address poverty (and that the poor know very well what to do with money), why not start a charity that skips the rigmarole of providing services to poor people in poor countries and just gives them cash? Satellite imagery allowed GiveDirectly to efficiently and objectively identify the poorest in their chosen test sites in rural Kenya–those living in huts with only thatched roofs. The spread of mobile payments via cell phones provided a reliable and inexpensive way to distribute money. Committed to measuring results every step of the way, GiveDirectly collaborated with Innovations for Poverty Action (IPA) to conduct a randomized control trial and have been transparent with the results. And so far, those results have been impressive: recipients increased their assets and income significantly; their food security and mental health improved; violence against women fell. GiveDirectly achieved these results with an expense ratio of roughly seven percent–far less than what most NGO’s spend. “We want cash transfers to be the benchmark against which everything else is judged,” says Niehaus. Not surprisingly, GiveDirectly has gone from success to success, winning accolades and raising millions from the likes of Google and Good Ventures. But despite these gains, and talk about scaling the organization to disperse billions, it wasn’t clear to me how they were going to evolve from reaching a few thousand recipients now to their lofty goal of reaching millions. With their announcement today of the formation of a for-profit spin-off company, I’m beginning to see the way. The new company is called Segovia after one of the largest aqueducts of the Roman Empire–an engineering feat that carried water for two thousand years. Segovia’s founders hope the name will evoke “good governance.” Essentially, the company will build out a technology platform to make cash transfers efficiently to millions of people, with its eye on governments and other institutions as clients. Undoubtedly, Segovia’s potential market is enormous. A World Economic Forum report estimates that government cash transfers to the unbanked in emerging markets are nearing $550 billion. India’s cash transfer program to workers alone is $14 billion. Already, approximately a billion people are reached by cash transfers in emerging markets, and that figure is only likely to grow as research continues to demonstrate their efficiency and effectiveness at poverty alleviation. Segovia’s goal is to partner with governments and other institutions to streamline those cash transfers–to make the process better, faster, cheaper. The same World Economic Forum report estimates that the potential savings of migrating government cash transfer payments onto a digital platform could be as high as $100 billion. This includes reducing the leakage, transaction, and administrative costs of existing programs and realizing the economic benefits of greater ease and safety for recipients. Michael Faye, who will head up Segovia as CEO, believes that the sophisticated modeling behind GiveDirectly, and the insights they’ve gained by working in the field on cash transfers, give them a distinct advantage in building out the platform and becoming the partner of choice for governments looking to more efficiently manage their cash transfer programs or to start one. Already, Segovia has put together an impressive management team. Chris Hughes, one of the cofounders of Facebook and now publisher and editor-in-chief of the New Republic, will serve as the company’s executive chairman. When we chatted recently about Segovia, Hughes stressed that he was planning to devote significant time to the new endeavor. The opportunity to push the world’s collective thinking on the potential of cash transfers, combined with the attractive market opportunity, is clearly a winning combination for Hughes. Investor Arif Naqvi, founder and CEO of the Abraaj Group, will also play an active role in Segovia–no doubt helping to open doors to governments around the world. GiveDirectly will remain a separate non-profit, albeit with close ties to for-profit Segovia. The charity will continue to be run by Paul Niehaus, who will also sit on Segovia’s board (and Faye and Hughes on GiveDirectly’s board), and it will be a minority shareholder in the new company. It will probably continue to function as an important idea lab, undertaking innovative test cases that governments would be reluctant to do without more data and proven results. Despite the cofounders’ best efforts to rationalize the decision to move into the for-profit space (namely, that a non-profit structure would hinder their work with governments and their march to scale), I’d be surprised if some controversy doesn’t accompany Segovia’s founding. There will be the inevitable brickbat of “selling out.” And with the higher financial stakes, there will certainly be deeper scrutiny of the unconditional cash transfer model which has already generated some grumbling. But I applaud the move. Other examples of non-profits spinning off into for-profits demonstrate that it can be an effective way to attract the capital and talent necessary to get to scale. Unconditional cash transfers are a big idea in poverty alleviation: if Segovia can help build the infrastructure to allow more efficient transfers, while scrupulously measuring impact and learning from those evaluations, the world will be better off for it. So what if a couple of economists get rich along the way?
    by Isobel Coleman June 20, 2014 Development Channel
  • International Organizations
    Ukraine: Now Comes the Hard Part
      Petro Poroshenko’s convincing first-round victory in yesterday’s Ukrainian presidential elections, with 54 percent of the vote, is an important step toward political stability. But hard work lies ahead, as attention now returns to the even-more-daunting task of restoring economic stability. Remember that the political crisis of the last six months began as an economic crisis and had its origins in decades of failed economic policies. Massive fuel subsidies going disproportionately to the wealthy, widespread corruption, and distorted markets all contributed to the rot. These policies were reflected in an overvalued exchange rate, large sustained budget deficits, a rising current account deficit, and a falling foreign exchange reserves. Former President Yanukovych’s decision to accept $12 billion from Russia and repudiate the EU association agreement in late 2013 was an effort to delay the inevitable economic crisis that Ukraine now confronts. The IMF stepped in with a $17 billion reform package at the end of April designed to both provide emergency financing and begin the process of reform. Actions taken prior to IMF approval of its program included floating the exchange rate, an initial increase in energy prices, some other budget measures, and steps to address corruption. While necessary, the additional austerity implied by these measures represents a burden on an economy already in recession. So far, the government has sustained support for pro-Western policies despite the clear economic pain involved. Goodwill towards the new regime, and perhaps the unifying effect of the threat from Russia, have limited opposition to these measures outside of southeast Ukraine. But the new President will have to move quickly to address a number of economic challenges if yesterday’s political achievement is going to translate into a more enduring stability. These include: 1.  Reaching agreement with Russia on energy and debt.  Attention has focused on Russia’s threat to cut off gas deliveries on June 1, but equally important is the price that Ukraine pays. The IMF assumes agreement is reached with Russia on a price for gas in line with global prices at $385/mcm (thousand cubic meters).  It also assumes gas arrears and debt service are paid.  A slightly higher or lower price would be handled through an adjustment to IMF financing, but a significantly higher price for gas would outstrip Western financing and raise serious concerns about fiscal and debt sustainability. 2.  Accelerate the financial and trade flows from the West. The West has actually contributed little relative to headline promises so far, though Europe has accelerated trade benefits from the still-to-be–signed association agreement. The $17 billion pledged by the IMF is supposed to unlock a further $10 billion to $15 billion in funding from the World Bank, EU, and other individual countries, and accelerating those flows will be a critical task. 3.  “Sell” austerity at home. The new government will need to explain to the general public why deeper austerity is needed, and why the measures being taken are being done. The interim government, perhaps reflecting Russia’s threat, had maintained a low profile on economic as well as political grounds. That will need to change. 4.  Renegotiate the IMF program?  When the IMF team returns to Kiev at the end of June, it likely will find an economy far different from the rosy economic projections in the program. Anecdotally, the economy outside of southeast Ukraine looks to have weathered the crisis better than some feared, but there is no doubt that the recent turmoil has imposed material costs. The threat of Russian invasion may have receded, but the crisis is imposing continuing costs on economic activity and investment. Further, it is usually the case in cases like this that fiscal revenue falls, not just because of falling growth but also because of increased tax avoidance. The program is not asking for a lot of fiscal austerity—just two percent of GDP in measures (and the deficit actually widens in the short term with the decline in output). But activity is likely to be lower, and debt higher, than projected. The costs of the financial sector bailout are still not clear, and could be higher than the government is assuming. The new government will likely make the case that a more gradual fiscal adjustment, coupled with additional spending on social services, would be more sustainable. I have sympathy for that argument, though Ukraine’s past record of failed programs creates unsurprising skepticism. And who will pay, official creditors or creditors who may be asked to restructure their claims? The IMF is scheduled to disburse $1.4 billion as soon as July 25, and again at end September. Success will require strong governance, and substantial support from the West.  It will not come cheap, and it will take time.  But some early success may be essential to sustaining public support over a difficult coming period.  
    by Robert Kahn May 26, 2014 Macro and Markets
  • Middle East and North Africa
    World Bank Report on Women’s Empowerment Breaks New Ground
    Over the past several decades, the World Bank has been an important thought leader on the value of investing in women and girls. In 2001, the Bank released a seminal report, “Engendering Development – Through Gender Equality in Rights, Resources, and Voice,” which made the incontrovertible case that investing in girls’ education and other aspects of female empowerment is critical for poverty alleviation. More recently, in 2012, the Bank devoted its annual World Development Report to women and girls, highlighting that, despite gains, gender gaps persist and greater gender equality is critical to growth. Earlier this week, under the direction of Director for Gender and Development Jeni Klugman, the Bank released another major report on the importance of women and girls’ rights. In many ways, the report, “Voice and Agency: Empowering Women and Girls for Shared Prosperity,” breaks new ground and gets at the heart of the challenge for women’s empowerment: in some regions, norms and traditions actively constrain opportunities for girls and women. Until norms evolve to allow greater agency for women and girls, cycles of poverty will not be broken. Using reams of data, which is one of the Bank’s strengths, this new report quantifies in a variety of ways the cost to society of disempowering women and girls. One eye-popping statistic from the report is the cost to society of intimate partner violence, which is pervasive in many countries. The Bank estimates the toll on gross domestic product (GDP) ranges from 1.2 to 3.7 percent in some countries. This is equivalent to what these same countries are spending on education. Another staggering calculation is the cost of limiting women’s reproductive and sexual rights. The report estimates that the lifetime opportunity cost of adolescent pregnancy reaches as high as 12 percent of GDP in India and 30 percent in Uganda. This week, I had the pleasure of moderating a panel discussion among World Bank President Jim Kim, UN Women Executive Director Phumzile Mlambo-Ngcuka, and former U.S. Secretary of State Hillary Clinton to launch this report. All of the panelists acknowledged the power of social norms in limiting women’s agency. Kim emphasized that we have to be careful because “what one group says is a cultural norm is not necessarily what all the groups will say is the social norm,” and argued that often norms are used as “a way of justifying very unequal power relations.” Clinton echoed Kim’s point with several striking examples from her tenure as secretary of state, and underscored the idea that “often times these social norms cannot bear the light of day. They are carried on because they’ve always been carried on.” To watch the panel discussion in its entirety, check it out on the Bank’s website here.
    by Isobel Coleman May 16, 2014 Development Channel
  • Economics
    Russian Contagion, Geopolitical Risk, and Markets
    Yesterday, I published my Global Economics Monthly. I argue that further economic sanctions against Russia would have significant global economic effects because of the Russia’s connectedness to energy and financial markets. Why then, are markets apparently so sanguine? Is it because investors, by and large, expect de-escalation? Is it a view that Russia does not matter for the global economy? Could it be a search for yield? Or is it the inherent difficultly that markets face in pricing in hard-to-quantify, large geopolitical dislocations? Probably a little bit of all of the above. A poll of investors by Citigroup’s Matthew Dabrowski and Tina Fordham illustrates the problem even if it doesn’t answer these questions. The survey of over 1000 investors reported significant concern about political and security risks in Russia, China, and Europe this year. In addition to sanctions, these risks included a breakdown in Iran nuclear talks, victories by fringe parties in European elections, snap elections in Greece, and Sino-Japanese military tensions sanctions. Russian trade sanctions and China tensions were seen as having the most negative impact (see their chart below), but markets remain constructive at the same time, “raising the question of whether market participants have fully considered these geopolitical risks.” Source: Citigroup David Gordon at Eurasia Group also sees a disconnect between the two worlds: the political and the markets-based. He contrasts rising geopolitical concerns with the generally constructive mood among investors at the recent IMF-World Bank spring meetings as well as strong (and not-terribly volatile) markets. He is more comfortable than I am that markets  have it right: “geopolitics is not quite the nightmare some seem to think. Markets don’t always have it right, but their current perspective on the big picture remains pretty close to the mark.” He does agree, though, that on Russia in particular, markets do seem too sanguine. What does this mean for our sanctions policy towards Russia? Up till now, it does appear that vulnerability of Western companies to sanctions and possible retaliation has been a brake on the Obama administration’s willingness to move aggressively ahead with financial sector (“sectoral”) sanctions. But that may be changing. There is a growing recognition that the chill of potential sanctions has not been an effective constraint on Russia’s aggression against Ukraine, and perhaps frustration that markets have not reacted more. (Though my market friends emphasize it is hard to derisk in this environment, particularly for large emerging market portfolio investors facing shrinking liquidity.) There is a sense now in Washington, D.C. that markets have been warned and have had time to adjust. Financial sector sanctions are not a zero-one decision, as they could in principal be targeted at certain transactions and relationships to try and manage the fallout for the West. But sectoral sanctions seem to me the most likely scenario. The continuing disconnect between D.C. and New York suggests markets could correct sharply if conditions on the ground in Ukraine worsen.  
    by Robert Kahn May 8, 2014 Macro and Markets
  • Europe
    IMF/World Bank Spring Meetings: Three Questions
    The IMF/World Bank spring meetings start today, with a broad agenda and amidst significant global uncertainty.  A good discussion of the agenda is here  and of the Fund’s view is here.  Here are three questions on which I am looking for news, and perhaps even answers. Have we lost confidence in our global growth story? IMF’s global outlook is reasonably sanguine:  the IMF forecasts global growth to average 3.6 percent in 2014--up from 3 percent in 2013--and to rise to 3.9 percent in 2015, led by a solid U.S. recovery. They argue that global headwinds from the great recession are receding, allowing monetary policy—both conventional and unconventional—to normalize. Yet the hallway discussion will be on the new threats to global economy, most notably geopolitical tensions with Russia and in Asia, and what policymakers need to do to prepare.  Most significantly, an intensification of sanctions against Russia could have significant effects on trade and investment, and cause substantial deleveraging in global financial markets. With fiscal authorities for the most part having limited room to offset this shock, contingency planning likely will focus on central bank monetary policy and liquidity facilities (e.g., swap lines). Is this enough? Beyond the evident cyclical risks, a broader question is whether we are too optimistic about trend growth.  In the emerging markets in particular, optimism about growth and convergence has been tempered by weakening performance and more adverse external conditions (e.g., capital outflows, falling export demand due to lower China growth).  From this perspective, the taper tantrum of last year is a false issue (though some emerging market policymakers will still raise it for domestic political purposes); communication is good and the Fed is well aware of the implications of its policies on the world (though they are always cautious in talking about their systemic responsibilities given their legal dual mandate on price stability and employment).  The real issue is whether domestic policies are supportive of growth aspirations. And if not, is there scope, economic and political (with elections coming up in a number of countries), to change policies to restore the momentum of growth? Or is the emerging market growth model broken? How do we reform the IMF?  It appears that the main headline from these meetings will be a new effort to restart IMF reform. The disappointing refusal of the U.S. Congress to pass the IMF reform package will do long-run damage to America’s soft power and the ability to build consensus in difficult crisis resolution issues. But what is the solution? Ted Truman has an interesting idea for the Fund to end-run the U.S. Congress  but I think going around legislatures is too politically dangerous in the United States and elsewhere.  Perhaps more reasonable would be to “combine" the 14th and 15th quota review.  Translated, this means that the agreement would be set aside and a new negotiation begun.  The U.S. administration could commit to the negotiation with Congressional approval, deferring Congressional approval for a better day. Will the rising powers be satisfied with an approach that delays them having an appropriate representative voice in the organization? Is low inflation a major global risk?  A few weeks ago, the IMF had a great blog on the risks for Europe from persistently low inflation (“lowflation”).  Their argument was, at its core, that even absent deflation, low inflation  raises real interest rates and the burden of debt, inhibits adjustment, and  weakens demand. While the issue is most salient for Europe, we could ask the question more broadly. Lower China growth and the turn in the commodity cycle is a drag on export prospects of many countries, particularly commodity-exporting emerging markets. Corporate leverage in Europe and emerging markets is dangerously high. High levels of unemployment remain a critical social and economic problem.  Are disinflationary pressures dampening global growth prospects?  
    by Robert Kahn April 10, 2014 Macro and Markets
  • Europe and Eurasia
    Lew Does Not Need IMF Reform to Aid Ukraine
    The new provisional government in Ukraine is seeking $15 billion in assistance from the International Monetary Fund.  This would represent 700% of the country’s quota with the Fund, added on top of the loans it has already outstanding, amounting to 214% of its quota. The Fund allows members to borrow up to 200% of their quota annually and 600% cumulatively through stand-by and extended arrangements, so Ukraine is clearly seeking well in excess of this.  U.S. Treasury Secretary Jack Lew has called on Congress to back IMF quota reform, “which would support the IMF’s capacity to lend additional resources to Ukraine.” We wholeheartedly back the IMF reform the administration seeks, but it is neither necessary nor desirable for Lew to ratchet up this fight with Congress now. The IMF already has criteria for allowing member countries to borrow beyond the normal access limits.  And indeed, as shown in the graphic above, Greece, Portugal, and Ireland are already doing so. Lew knows this.  Since Ukraine should also meet the criteria for above-quota borrowing, it is imprudent of him openly to question the IMF’s “capacity” to aid Ukraine as a pretext for shunting Republicans into action on broader IMF reform. CFR Expert Roundup: The Case for IMF Quota Reform Congressional Research Service: IMF Reforms Macro and Markets: Make or Break for IMF Reform Geo-Graphics: A GDP-Based IMF Would Boost China’s Voice . . . and America’s   Follow Benn on Twitter: @BennSteil Follow Geo-Graphics on Twitter: @CFR_GeoGraphics Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”
    by Benn Steil and Dinah Walker March 5, 2014 Geo-Graphics
  • South Korea
    South Korea, Poland, and Turkey: Three Emerging Market Success Stories Look to Sustain Their Growth
    Play
    Emerging economies have boomed over the past decade, but many have recently seen their currencies come under pressure. With a potential currency crisis looming, CFR's Steven A. Cook, Marcus Noland of the Petersen Institute for International Economics, and Mitchell Orenstein of Northeastern University take an in-depth look at three emerging market success stories in a conversation with Foreign Affairs editor Gideon Rose.
    Event with Marcus Noland, Mitchell Orenstein, Steven A. Cook and Gideon Rose January 29, 2014 Foreign Affairs Issue Launch
  • South Korea
    South Korea, Poland, and Turkey: Three Emerging Market Success Stories Look to Sustain Their Growth
    Play
    Emerging economies have boomed over the past decade, but many have recently seen their currencies come under pressure. With a potential currency crisis looming, CFR's Steven Cook, Marcus Noland of the Petersen Institute for International Economics, and Mitchell Orenstein of Northeastern University take an in-depth look at three emerging market success stories in a conversation with Foreign Affairs editor Gideon Rose.
    Event January 29, 2014