Emerging Markets

This post features a conversation with Georgia Levenson Keohane, executive director of the Pershing Square Foundation, adjunct professor of social enterprise at Columbia Business School, and author of Capital and the Common Good: How Innovative Finance is Tackling the World’s Most Urgent Problems. She talks about what innovative finance means and how it works, addressing its successes and limitations in putting private and public capital to work for the common good.   1) Can you explain what innovative finance is (and what it is not) and how you came to work on it? Innovative finance is about creative ways to finance and pay for unmet needs and public goods—about integrating government, financial, and philanthropic resources to invest in solutions to global challenges and promote inclusive, shared prosperity. It is not the same as “financial innovation”—feats of engingeering designed to improve market efficiency, but not always a valuable end in themselves (as we saw in the 2008 financal crisis). Instead innovative finance, by design, is intended to solve problems, overcome market and political failures, and meet the needs of the poor and underserved. The innovation often comes in a new application, pressing time-tested tools like lending, insurance, and credit enhancements into the service of global health, financial inclusion, disaster relief, and battling climate change. Which is to say, virtual currencies, speed trading, subprime mortgages, or even payday lending might be considered financial innovation. Micro agriculture insurance for poor farmers, low income loans or equity for higher education, pay-as-you-go financing for solar electricity in Kenya, or discounted Metro Cards in New York City are innovative finance. In the fall of 2012, I had just finished a book on social entrepreneurship and public-private partnerships, when Hurricane Sandy hit—and I started to consider innovation in a different light. Sandy’s surging waves caused more than $5 billion in damage to New York City’s mass transit systems and the Metropolitan Transit Authority (MTA) emerged from the wreckage uninsurable. This was a huge challenge: no insurance, no subway, and the city shuts down. In a municipal finance first, the MTA went to the catastrophe (cat) bond market for coverage against future Sandys. (With cat bonds, insurers transfer risk to capital market investors who bet against catastrophe: that a hurricane will not hit in a particular place, time, or intensity.  If that proves true, investors are repaid principal plus a high rate of interest). I thought this was an entrepreneurial use of finance, and went on to explore others: vaccine bonds, green bonds, social impact bonds, new kinds of financing facilities and emerging insurance entities large and small. The work took on greater urgency last year when the United Nations adopted the global Sustainable Development Goals—and with them a multi-trillion funding gap to meet the goals. Many see innovative finance as a way to harness more and particularly private capital to fill this gap. But, in fact, innovative finance is also about smarter capital: finance as an instrument that encourages behavior change, motivating governments to respond faster to disasters like drought or pandemic, or to invest in cost-effective preventions like vaccines or maternal health. 2) What are some successful examples of innovative finance? Many involve technology. For example, Kenya’s M-Pesa, a mobile payments platform that allows people to send and receive money from their phones, has been an extraordinary success. Ten years ago, for all practical purposes, mobile phones did not exist in Kenya, and most of the country was unbanked. Today 80 percent of Kenyans own a mobile phone, and 70 percent have mobile money accounts. By some estimates nearly 40 percent of Kenya’s GDP flows through the M-Pesa platform. Yet as interesting as what people pay for (just about everything—remittances, taxes, school fees, etc.) is how they pay for it. The mobile money platform has created new kinds of consumer finance, as it allows people to save, insure, and to pay for things over time. Consider the case of solar. Eighty perecent of the country may now use mobile money, but they still live far from the electric grid, reliant for light on things like kerosene—an expensive and noxious source of energy that poisons, burns, and contributes to global warming. For Kenyan families who pay over $200 a year for kerosene, a one-time investment in a $199 solar panel would make sense, but they lack the upfront cash to make this purchase. That is where companies such as M-Kopa or Angaza come in; they use the M-Pesa platform to allow households to pay for solar panels in small installments. By some estimates, pay-as-you-go finance has accelerated the rate of solar adoption fourfold. A company called Alice Financial is using the same approach to public transportation in New York City, where a one-way subway or bus ride costs $2.75. This is no small expense for a daily commuter, who makes 500 of those trips a year. For many New Yorkers, the substantial discount of a thirty-day metrocard is out of reach, since it costs $116 upfront each month. (New Yorkers overpay $500,000 a day because they can’t afford the discount). Alice offers instead a pay-as-you go weekly installment plan, made possible via its socially-motivated, innovative finance arbitrage. 3) What are the limits of innovative finance? Unfortunately, technological innovation alone is not going to solve all of our financial inclusion needs and aspirations. Technology might make more financial services and products available or affordable, but that does not necessarily mean people use them. Just as innovative financial service organizations across the globe have recognized that they need to offer more than just credit to move people out of poverty, so too do they realize that simply having a broader set of product offerings—savings, pensions, insurance—may not be enough. Adoption often requires an important relationship, a human interaction. For example, IFMR Trust in India now employs local wealth managers who are trusted members of the community to work with poor, rural families by collecting their basic financial information on a tablet, and then walking them through the product or service recommendations generated by the company’s algorithms. The combination of technology and a trusted agent translates into greater use of beneficial financial service products.  Neighborhood Trust Financial Partners (NTFP) in Upper Manhattan illustrates the same principle. In recent years, NTFP has developed a range of new products for their their low-income customers: a socially-responsible credit card to pay down debt, an app to encourage savings, and payroll innovations for lending or retirement needs. Yet their success depends on the work of local financial advisors who educate, translate, and earn the trust of their clients. 4) What are some areas that market-based solutions cannot, or perhaps should not, address? Innovative finance is not a panacea. It is particularly well suited to challenges that can be measured, and benefits or savings that can be achieved—and monetized—in a relatively short time frame. Cap and trade, for example, allows us to put a price on carbon, which is not as simple for problems such as government corruption or racial injustice. In many cases, there will never be a viable market solution. Serving the very poorest, working in particularly challenging geographies or conditions—or areas where a constellation of problems is particularly complex (and solutions hard to isolate)—might never be profitable, and will always require substantial philanthropic or government support or subsidy. However, even on issues that don’t lend themselves to these kinds of tools or instruments, the innovative finance lens helps us think differently about the costs of delay and inaction, and the benefits of prevention. Vaccines are cheaper than treating full-blown disease (and cheaper still than pandemic); early childhood education and job training costs a whole lot less than mass incarceration. Innovative finance reminds us that an ounce of prevention is worth a pound of cure. 5) How can government policy help innovative finance succeed? There are a number of ways policy can encourage greater use of innovative finance. For example, last fall the U.S. Department of Labor repealed restrictive rules that had previously prevented U.S. pension funds from considering social, environmental, and good governance factors when making in investment decisions. This “ERISA” (Employee Retirement Income Security Act) reform has the potential to catalyze greater investment in innovative financial products by pension funds that must follow the guidelines. While there is more work to do on norms and guidance related to fiduciary responsibility, this is an important first step. Under the Obama administration, the Treasury Department, USAID, the White House Office of Social Innovation, and even Congress promoted various forms of innovative finance activity. The hope is that the next U.S. administration has the same openness to this approach. Perhaps more important, many of the most successful innovative finance examples are those that involve cost-effective investments in prevention, made possible through new kinds of public-private partnerships. The International Finance Facility for Immunization (IFFIm), for example, has raised over $5 billion since 2006 in “vaccine bonds” to fund large-scale immunizations. Bondholders are repaid out of future government aid pledges, front loading that future aid for investment in vaccines today. Closer to home, social impact bonds (SIBs) are a new breed of pay-for-success contracts between local governments, social service providers, and private investors that finance preventive social services like early childhood education, maternal health support to families to keep children out of foster care, or programs to keep former prisoners from re-offending. Investors, who loan working capital to service providers, are only repaid by the government if interventions work—with payments coming out of the social savings. Today there are more than sixty SIBs in action across the globe, and much of the innovation occurs at the local level. This willingness to partner across sectors is critical for innovative finance in the years ahead.    

This post is co-authored by Becky Allen, a research associate in the Women and Foreign Policy program at the Council on Foreign Relations. Nigeria has been identified as one of eleven emerging economies with high growth potential for the coming decades. And yet, Nigeria is far from achieving the World Bank’s goal of universal financial access by 2020, with women comprising the majority of Nigeria’s “unbanked.” Only one-third of Nigerian women own a bank account, compared with more than half of Nigerian men, a stubborn gender gap that has grown, not shrunk, in recent years, from 7 percent in 2011 to 21 percent in 2014. Factors preventing women from opening bank accounts in emerging economies – such as Nigeria – include the inability to travel to bank branches, limited financial literacy, and inadequate proof of identification. Ironically, however, evidence suggests that women default less frequently on loans and invest more in their families compared to their male counterparts. In an effort to reverse the growing gender gap among Nigeria’s unbanked, the private and public sectors have begun to harness digital technology to overcome the barriers preventing Nigerian women from opening bank accounts. One such innovative financing tool is the digital BETA savings account. Launched by Diamond Bank in partnership with Women’s World Banking in 2013, BETA savings accounts relieve customers of needing to go to a physical bank branch to open and operate an account. Rather, “BETA Friends” – female bank agents – attend open-air markets with mobile devices, enabling women to setup accounts and make deposits and withdrawals without having to leave their stalls. Significantly, women can open BETA savings accounts without documentation or minimum balance requirements thanks to Nigeria’s tiered Know Your Customer Requirements (KYC), which enables Diamond Bank to open low-value accounts with basic personal information. Since its launch, BETA has reached more than 275, 000 clients. Following the success of BETA, Diamond Bank launched BETA Target Savers Accounts – another innovative digital product designed to increase women’s financial inclusion. These accounts enable women to save for specific goals, such as financing child birth or a child’s education, likewise employing BETA Friends to facilitate the process for women. Diamond Bank also permits women to take out loans without having to provide collateral through the BETA Kwik Loan, a service that operates via BETA technology. Earlier this year, yet another mobile money platform launched to enable women in rural Nigeria to transfer money to one another. This product, the result of a partnership between the nonprofit financial platform Stellar and the fintech service provider Oradian, aims to replace less secure cash transfers (often conducted by a third party individual traveling from one area to another) with mobile money transfers. Most recently, UN Women partnered with the Zamani Foundation, MasterCard, and the National Identity Management Commission to launch the “One Woman, One ID Card” initiative in Nigeria. The project seeks to reduce the number of women without a form of personal identification and to provide women with finance and business training. Within the project’s pilot phase in Kaduna State, five thousand women are expected to benefit, and in total, the initiative is expected to impact 500,000 Nigerian women. According to UN Women representative Adjaratou Ndiaye, 70 percent of Nigerians living below the poverty line – the majority of whom are women – could benefit from increased financial inclusion in the country. Perhaps with the onset of these new technologies targeted at women, Nigeria can narrow, or even close, its banking gap and achieve the 2020 goal of universal financial access.

Emerging Voices highlights new research, thinking, and approaches to development challenges from contributing scholars and practitioners. This post is from Niklas Kossow, communications officer for the European Union FP7 ANTICORRP project and the European Research Centre for Anti-Corruption and State-Building.  In this post, he considers the challenge of designing evidence-based reforms and measuring success in global development, and describes a new approach to objective measurement in the field of anticorruption and good governance: the Index of Public Integrity. In September 2015, the United Nations General Assembly passed the sustainable development goals (SDGs) that will define the direction of global development for years to come. Among the seventeen goals that aim to end poverty, reduce inequality, and ensure quality education and healthcare, is Goal 16—a commitment to encouraging good governance. To achieve this, Goal 16 sets twelve specific targets, including promoting the rule of law, ensuring inclusive decision-making, and fighting corruption and bribery. Good governance as a UN goal would have been a surprise just a few years ago, but its addition to the development agenda reflects the increasing recognition that it affects economic growth, a functioning civil service, and development outcomes, such as better healthcare. In a corrupt system, development aid rarely ends up with those who need it the most. But measuring good governance—and especially corruption—is difficult, for the SDGs and more broadly. Existing indices, such as Transparency International’s Corruption Perception Index (CPI) and the World Bank’s Control of Corruption indicator (CoC), are perceptions-based surveys that ask experts and citizens to estimate how much corruption exists in a specific country. Though they have successfully raised awareness of corruption as a global problem and informed the policy debate, they are deeply flawed as corruption measures. As indices that aggregate expert opinions into a single country score, the individual factors experts use to make their judgements about corruption levels are hard to identify. And because these factors are unclear, policymakers are given little guidance as to how to better control corruption and ultimately, improve governance. Additionally, these types of assessments are highly subjective and influenced by recent events. Countries can end up with worse CPI scores after a major corruption scandal is uncovered, or the government begins fighting graft, even though these likely signal a country is getting better at controlling corruption, not worse. With these shortcomings in mind, the European Research Centre for Anti-Corruption and State-Building (ERCAS) developed a new way to measure corruption: the Index of Public Integrity (IPI). Developed as part of a five-year anticorruption research project funded by the European Commission, and focused on building objective and actionable data, the IPI uses the following six indicators that have proven crucial in fighting corruption: Administrative burden: measures the time and number of procedures it takes to start a business and the time and effort it takes to pay taxes; Trade openness: measures the number of documents and the time required to complete import and export procedures; Budget transparency: assesses the transparency of an executive’s budget proposal and how easily available it is to citizens; e-citizenship: looks at the number of internet users, broadband subscriptions, and Facebook users in each country; Freedom of the press: measures press freedom based on country scores in Freedom House’s annual Freedom of the Press report. Empirical research, led by Prof. Alina Mungiu-Pippidi of the Hertie School of Governance, has shown that these six institutional features can either enable or constrain corruption. High administrative burdens, trade barriers, and a lack of budget transparency reflect the “supply side,” giving public officials the opportunity to tap state budgets and extort money from citizens. Judicial independence, freedom of the press, and e-citizenship can affect the “demand side”—constraining corruption by empowering oversight of independent institutions and citizens, and bringing corrupt officials to account. This new set of indicators also helps policymakers identify areas where countries are performing badly, and where specific reform efforts are needed. For example, the IPI shows that Chile is doing fairly well overall—ranked 26 out of 105 countries globally, and second among its Latin America and Caribbean neighbors. Yet it lags on budget transparency, coming in at 83 out of 105. And Slovakia, ranked 33 out of 105, falls down on judicial independence—coming in at 92 out of 105. The IPI’s nuance gives governments willing to tackle corruption a roadmap to do so. It can more accurately show what progress countries have made, and whether certain policies helped or failed. For development professionals, these more actionable, objective metrics can help the international community design better policies to meet the SDGs’ targets and goals.

France’s Anticorruption Reforms After years of criticism for failing to prosecute foreign bribery, France adopted a new anticorruption law that will force companies doing business on its soil to take more aggressive preventative measures, and also gives the government stronger tools to fight corruption. The Sapin II law—named for French Finance Minister Michel Sapin—makes compliance programs mandatory for companies with over 500 employees and €100 million in revenue, and creates a new anticorruption agency that can impose fines up to €200,000 for individuals and €1 million for companies that fail to comply. Sapin II also expands whistleblower protections (though some say they do not go far enough), and introduces deferred prosecution agreements similar to those used by the U.S. Department of Justice—allowing prosecutors to fine companies for wrongdoing without a criminal conviction. These changes should help France make good on its OECD Anti-Bribery Convention commitments. Until now, only U.S. courts—not France’s—have sanctioned French multinationals for bribery abroad. Panama Papers Fallout Continues in Pakistan and UK Seven months after the Panama Papers revealed a vast network of often-stolen wealth hidden in shell companies, government-led investigations continue. In Pakistan—where the leaks revealed that Prime Minister Nawaz Sharif’s family (long dogged by corruption scandals) used offshore companies to buy real estate near London’s upscale Hyde Park—the Supreme Court is setting up a commission to look into opposition claims that the money came from graft. And this week the United Kingdom announced it is investigating over thirty people and companies for potential tax fraud and financial crimes based on the papers’ revelations. The government also placed dozens of wealthy individuals under “special review” and is looking into the activities of twenty-six no longer anonymous offshore companies. The UK’s message: it wants to shed its reputation as an offshore tax haven and hub for illicit finance. India Strikes “Black Money” Research shows that removing large denomination bills from circulation can help cut back on corruption, tax evasion, and terrorist financing. Cash makes illicit payments hard to trace, and high-value notes especially allow people to discreetly move large sums of money around the world—a million dollars weighs fifty pounds in twenty dollar bills, but just 2.2 pounds in 500 euro notes. This week India put this theory into practice, abolishing its highest currency notes—500 and 1,000 rupee bills (worth about $8 and $15, respectively). The immediate aftermath was chaotic, as ATMs were overrun with citizens looking to deposit or exchange their bills. But Prime Minister Narendra Modi hopes the move will cut back on crime and replenish government coffers. Its moves follow those of the European Union, which discontinued €500 notes earlier this year.    

Report May Bring Down South Africa’s President New allegations may finally bring down teflon president Jacob Zuma. Despite his earlier legal protests, South Africa’s public protector’s office released a report suggesting that a wealthy family close to the president influenced government hires and used their ties to promote their private interests. It recommends opening a criminal investigation, a prelude to impeachment proceedings. While the African National Congress (ANC) party backed Zuma during a previous impeachment vote over the use of $16 million in state funds to renovate his private home, these new allegations are hurting him within his party. Already Zuma faces a no-confidence vote in parliament next week, and some ANC members are joining religious leaders, thousands of protestors, and forty South African CEOs in calling for his resignation. Going After Kleptocrats to Protect DRC’s Democracy As Democratic Republic of Congo (DRC) President Joseph Kabila clings to power, delaying elections even though his second and last term expires next month, the United States is pushing back. The Treasury Department already imposed financial sanctions on two top security officers who helped lead a violent crackdown against antigovernment protestors, opposition supporters, and the media. Now members of Congress want the White House to go after assets and ill-gotten gains of Kabila cronies. They hope President Obama will take actions similar to those against senior Venezuelan officials last year, imposing targeted economic sanctions on those who committed human rights abuses, undermined democracy, or were involved in public corruption. Africans Like China’s Growing Presence Africans across thirty-six nations view China’s involvement and investment—and the explosion in trade from $10 billion in 2000 to nearly $300 billion in 2015—in their countries favorably. A new Afrobarometer survey finds 63 percent rate Chinese economic and political influence as “somewhat” or “very” positive. China’s state-driven economic model now ranks second only to the United States as the preferred means for development. This suggests Africans focus more on the infrastructure, business, and cheap goods Chinese investment brings, and less on democracy and human rights concerns.

Welcome to “Women Around the World: This Week,” a series that highlights noteworthy news related to women and U.S. foreign policy. This week’s post, covering from October 21 to October 29, was compiled with support from Becky Allen, Anne Connell, and Lauren Hoffman. Women’s rights in Tunisia Tunisia’s parliament will debate a landmark gender-based violence bill this month that is poised to pass by the end of the year. The bill introduces significant new provisions to combat violence against women and girls, including criminalizing marital rape, eliminating pardons for perpetrators of violence who marry their victims, and incorporating definitions of gender-based violence into existing law. Proponents of the bill are predominantly members of the Ennahda party, a moderate Islamist party. As one female Ennahda parliamentarian asserted, “We see no contradiction between Islam and protecting women’s rights.” The new bill is the latest of a number of reforms following the overthrow of President Zine el Abidine Ben Ali in 2011: Tunisia’s new constitution was regarded by many as a breakthrough for women’s rights, with provisions establishing a woman’s right to divorce, run for political office, and marry by mutual consent; Tunisia passed a National Plan of Action to end violence against women; and one-third of the Tunisian parliament is now female. Nevertheless, in many areas, such as inheritance law, legal gender inequalities persist, and violence against women remains pervasive throughout the country, with nearly half of Tunisian women affected, according to recent estimates. Marital naming law in Japan Women in Japan have been speaking out against Japanese marital naming law, arguing that keeping a given surname is a fundamental right critical to independence, identity, and employment. Last winter, Japan’s Supreme Court upheld the nineteenth-century law requiring married couples to share a surname. While the law technically allows a husband and wife to choose whose surname to adopt, in practice, the husband’s name is used in over 96 percent of marriages. A recent case brought the Tokyo District Court reignited debate on the issue: the court rejected a request from a teacher to use her maiden name professionally, despite her argument that she had built relationships and published under her maiden name. The court, composed of three male judges, ruled that the law was neither a violation of the teacher’s rights nor Japan’s Civil Code. Critics suggest, however, that the law hampers the Japanese government’s efforts to make workplaces more equitable. Opponents have been battling against the law for over a decade, with little success to date; Japan’s justice ministry sought legal reform ten years ago, but the ruling Liberal Democratic Party rejected a proposed amendment. Female forces deploy to India-China border The number of women personnel deployed by the Indo-Tibetan Border Police (ITBP) swelled to a record one-hundred stationed at fifteen checkpoints this week, a significant uptick from the twelve women at five posts near the border a year ago. As part of a government initiative to make forces more inclusive, women are now deployed at forward operating posts in areas of harsh climatic conditions and extreme mountainous terrain. The majority of the newest forces have been sent to the Ladakh frontier in Jammu and Kashmir, and some have been posted at other locations in Himachal Pradesh, Uttarakhand, Sikkim, and Arunachal Pradesh. More women personnel are expected to follow: earlier this year, the ITBP commissioned five-hundred women troops for deployment at the India-China border after completion of an intensive 44-week training in battle craft and mountain survival. The ITBP’s Director General Krishna Chaudhary stated during a recent press conference that the police force now has a total of 1,661 women personnel in various ranks and will continue to deploy women mahila combatants at forward operating posts.  

This post is co-authored by Becky Allen, a research associate in the Women and Foreign Policy program at the Council on Foreign Relations. First Deputy Managing Director of the IMF David Lipton set the tone for the Annual Meetings of the International Monetary Fund (IMF) and the World Bank this month when he made the economic case for promoting policies that benefit women’s economic advancement in his opening remarks. Drawing upon widely cited research, Lipton noted that women’s economic participation not only boosts GDP, but also contributes to sustainable growth and reduced income inequality. In a subsequent panel, Elizabeth Shuler, secretary-treasurer of the AFL-CIO, addressed a less documented issue: unpaid work. According to Shuler, “If all the unpaid jobs in the care economy had been paid, this would have added 13 million jobs to the U.S. economy alone.” Globally, women do three times more of the world’s unpaid work than men. Economic policies that reduce and redistribute unpaid work could increase women’s labor force participation, promote sustained economic growth, and advance gender equality. According to the OECD, however, unpaid care work has been largely ignored by policy agendas around the world because of the difficulty in measuring the burden and benefits of unpaid care, in addition to its only recently recognized status as an issue worth studying. Fortunately, new studies are emerging to add to the data and highlight the need for new and revised policies. For example, data from the OECD suggests a negative correlation between time spent on unpaid care work and female labor force participation. 50 percent of women are employed or job hunting in countries where women devote an average of five hours to unpaid work, in contrast to 60 percent of women in countries where women perform three hours of unpaid work. In other words, when women have to spend less time on activities such as cooking, collecting firewood, and cleaning, their labor force participation increases. Seen this way, it is evident that unpaid care work is a deterrent to women’s economic advancement. A recent Action Aid study estimated that women perform an average of four years’ more worth of work than men – or an extra month’s worth of work per year – in order to balance their commitments to both paid and unpaid care work. Without government policies to address the burden of unpaid care work falling largely on women, the report argues, countries will be unable to achieve the Sustainable Development Goals (SDGs) – particularly in developing nations where the problem is most acute. Action Aid urges governments to improve formal labor opportunities for women by implementing policies that prevent gender-based violence; increasing girls’ access to education, health, and economic resources; enabling safe transportation for women; and facilitating women’s inclusion in decision-making processes. Such policies should target social benefits, including mandated paid parental leave policies – with a percentage specifically earmarked for fathers – and subsidized, quality childcare. Policies should also ensure economic reforms, such as the removal of tax burdens on secondary earners in a family, and legal reforms, such as restrictions on women’s mobility and access to credit. Cultural attitudes that assign unpaid work exclusively to women will need to change as well for the view that unpaid work is women’s work to evolve. But the first steps to cultural transformation are recognizing and counting unpaid care work, and removing the structural barriers to women’s labor force participation. On Tuesday, Gayle will host a roundtable featuring Shauna Olney, chief of the gender, equality and diversity branch (GED) of the International Labor Organization. Olney will expand upon the barriers to female labor force participation and the policies needed to facilitate women’s increased involvement in their own work force. Please check back here for audio from the event in the coming weeks.

BRICS Fund Infrastructure As commodity prices have plunged, global growth slowed, and geopolitical competition risen, the BRICS’ interests have diverged, making annual meetings of the five emerging economies more complicated. Last weekend’s get-together in Goa, India focused mostly on counterterrorism and the New Development Bank (NBD), a two-year old alternative to the World Bank and other Western-dominated institutions. Its focus is green and sustainable infrastructure, seeded with $100 billion in capital. At the BRICS Summit, leaders celebrated the NBD’s first $900 million in loans for renewable energy projects in Brazil, China, India, and South Africa, and promised to expand the bank’s portfolio tenfold by 2020. The NBD joins the new Beijing-led Asian Infrastructure Investment Bank (AIIB), which promises a similar capital base for a more traditional infrastructure-based projects. Together they could rival the World Bank’s lending power. France’s Obiang Corruption Case France is set to try Teodoro Obiang—the vice president of Equatorial Guinea and the son of its long-ruling dictator—on money laundering, corruption, and embezzlement charges. Obiang’s court date comes almost a decade after Transparency International and other civil society groups filed a criminal complaint accusing him of using stolen public funds to fund a lavish lifestyle in Paris. France’s highest court allowed the case to move forward, and the government took measures to confiscate millions in assets, including at least eleven luxury cars, a multi-million dollar wine collection, artwork by Degas and Rodin, and a $3.7 million clock. Equatorial Guinea has fought back, trying to have the case dismissed by claiming diplomatic immunity, and Obiang refuses to appear in court. If the case continues and succeeds with a criminal prosecution, it will represent a significant blow to kleptocrats. The UK May Make it Easier to Seize Suspect Assets The United Kingdom is also looking to crack down on kleptocrats, going after those who hide their money in the country, often in its real estate market—London alone has over 36,000 anonymously-owned properties. The new Criminal Finances Bill, introduced last week, creates Unexplained Wealth Orders, which would allow British authorities to freeze and seize assets worth over £100,000—including property and jewelry—bought with suspect funds. The bill puts the burden on owners to prove their properties’ legal providence, and addresses major weaknesses in UK asset recovery, including law enforcement’s preference to wait on convictions in corrupt officials’ home countries before seizing assets (this often takes decades). If passed, the bill could come into effect as soon as spring 2017, following through on the UK’s pledge to strengthen anti-money laundering laws at the Anticorruption Summit it hosted last May.  

Fighting the Worst Kleptocracies Worse than kleptocracies are violent kleptocracies, as defined in a new report by advocacy group The Enough Project. In these, leaders run the state as a predatory criminal enterprise, looting the treasury and using virtually all means of government power—the judicial system, military, and security forces—to intimidate, jail, and eliminate any opposition. With near unquestioned power, this all happens with impunity. South Sudan is a classic example—its leaders making millions off of a brutal civil war they fueled. Existing anticorruption tools and agreements—the OECD Anti-Bribery Convention and the UN Convention Against Corruption among them—do little to change this deadly status quo, according the report. Instead, it says the United States should crack down on these corrupt leaders—taking away their visas, imposing sanctions, seizing ill-gotten assets that come through the U.S. banking system, and using evidence from Foreign Corrupt Practices Act investigations to help go after not only the companies that pay bribes, but the officials who take them. Ethiopia Opens Economically, Closes Politically Ethiopia has pushed its way into global supply chains. Touting its low wages and improved infrastructure, it attracted global apparel brands like H&M, Primark, and Tesco, as well as foreign-owned flower farms and a Heineken brewery. European Union countries eager to spur development and stem migrant flows are supporting these efforts, with German Chancellor Angela Merkel visiting this week to promote private investment opportunities. But the government’s darker side—discriminating against the country’s long-marginalized Oromo ethnic group and stealing their farmland—threatens to upend its economic plans. Months of protests that killed up to 500 people led to declaring a state of emergency with internet blockages and curfews, and many persecuted see foreign-owned businesses not as bringing economic development, but instead propping up an authoritarian regime.  

Why Trade Deals Matter for Workers Everywhere The shift of low-skilled manufacturing jobs from industrialized to emerging economies helped lift millions out of poverty over the past few decades (even as it displaced Western workers). But a new study of Ethiopia’s growing manufacturing sector shows that while factory jobs raise wages throughout the economy, the benefits for workers are mixed. Compared to a control group of self-employed and informal sector workers, those employed in the new factories did not earn more and faced significantly higher health and safety risks—exposed to chemicals and injuries from unsafe working conditions. These findings show why trade agreements matter. By incorporating labor and environmental standards and mechanisms to enforce these rules, they can improve the livelihood of workers in all places. Thailand Opens Anticorruption Court Inaugurating a new anticorruption court on Monday, Thailand’s junta leader, Prime Minister Prayut Chan-o-cha, reaffirmed his promise to eradicate corruption over the next twenty years. Yet studies show that separate anticorruption courts are not always effective. These bodies often suffer from the same limits as regular courts, including lack of judicial independence, few qualified staff, and long backlogs. And specialized or not, prosecutors or judges are often reluctant to go after elites, leading mostly to convictions of low-level officials. More important for rooting out corruption are making government procurement more transparent, and partnering with international organizations that have the resources and clout to tackle large-scale grand corruption. Despite Corruption, Afghan Government Asks for More Aid The deep-seated corruption plaguing Afghanistan overshadows the Ashraf Ghani government’s recent appeal to the United States and other donors for fresh funds. The Special Inspector General for Afghanistan Reconstruction (SIGAR), a U.S. watchdog agency, estimates that billions of aid dollars have disappeared over the past fifteen years. The United States contributed to this graft by failing to monitor how donations were spent, funding NGOs and contractors that accepted bribes and pocketed funds. This time, the U.S. government says it will make assistance dependent on anticorruption reforms. President Ghani claims his administration has already taken steps to root out graft—Ghani himself became the first senior official to comply with a U.S.-backed effort to disclose public officials’ assets, and his administration has fired hundreds of judges and prosecutors, many on corruption charges.

The EU Investigates the Panama Papers Six months after the first Panama Papers leak, revelations about the global shell company business continue. The latest tranche of documents from the International Consortium of Investigative Journalists (ICIJ) detail over 175,000 Bahamian companies, many linked to European Union (EU) politicians. Having just opened a Panama Papers-inspired inquiry into whether the European Commission or European governments were applying their own laws on tax-avoidance and financial transparency, the new data illuminates potential test cases—including the former EU commissioner for competition policy and current UK home secretary. Reporters and the named politicians will be asked to speak at upcoming hearings that could lead to reforms. Boeing Wins, but Global Trade May Lose The United States won the latest round in a twelve-year trade dispute between the world’s two biggest aircraft manufacturers: U.S.-based Boeing and its European competitor, Airbus. Last week the World Trade Organization (WTO) found that the European Union (EU) provided up to $22 billion in illegal subsidies to Airbus, costing Boeing billions of dollars in sales. Worse, the subsidies continued even after a 2011 WTO ruling ordered them to stop. After an appeals process, the United States can impose up to $10 billion in annual retaliatory tariffs. If it does, it will increase the already rising Western protectionism that has led the WTO to cut its 2016 global trade forecast, down from 2.8 to 1.7 percent. Och-Ziff Pays for Bribery with Money, not Jail Time The largest publicly-traded U.S. hedge fund, Och-Ziff, reached a settlement with the U.S. Department of Justice (DOJ) in one of the DOJ’s biggest Foreign Corrupt Practices Act cases to date. The financial firm admitted to bribing senior government officials in the Democratic Republic of Congo (DRC)— where it bought mines on the cheap and then sold them for millions in profits—as well as in Chad, Libya, and Niger. At $412 million, the DOJ and SEC fines are some of the heftiest ever; still no one from Och-Ziff will face criminal charges. The DOJ has yet to make good on its 2015 pledge to bring individual criminal charges for corporate wrong doing. As the Och-Ziff case shows, issuing fines is often easier than holding executives accountable for corruption.