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Foreign direct investment, financial flows, private-sector development, humanitarian assistance, Africa
Vijaya Ramachandran is a non-resident fellow at the Center for Global Development. She works on the impact of the business environment on the productivity of firms in developing countries, and is the coauthor of an essay titled "Development as Diffusion: Manufacturing Productivity and Africa's Missing Middle,” published in the Oxford Handbook on Economics and Africa. Ramachandran is also studying the unintended consequences of rich countries’ anti-money laundering policies on financial inclusion in poor countries. She has published her research in journals such as World Development, Development Policy Review, Governance, Prism, and AIDS and is the author of a CGD book, Africa’s Private Sector: What’s Wrong with the Business Environment and What to Do About It. Prior to joining CGD, Ramachandran worked at the World Bank and in the Executive Office of the Secretary-General of the United Nations. She also served on the faculties of Georgetown University and Duke University. Her work has appeared in several media outlets including the Economist, Financial Times, Guardian, Washington Post, New York Times, National Public Radio, and Vox.
In a letter to the Washington Post, Donald Trump makes the case for blocking remittances to force the Mexican government to pay for a wall between the two countries. According to the Post, “the core of Trump’s approach is a focus on the remittances of illegal immigrants, which he argues are crucial to Mexican economic stability and are a way of pressuring the country to disburse billions of dollars to the United States to fund construction of his wall.”
None of that would be good for migrants, their families back home, or for the United States.
Lifting the trade and investment embargo on Cuba is a laudable policy objective that would allow Cubans better access to American goods and services. It might also give American businesses a boost, including from places that could do with one, like rural Louisiana. Changing the law will be an uphill struggle unless November’s elections transform Congress. But even if Congress can agree, changes to the law might not be sufficient to convince investors to go to Cuba.
Last Thursday, Under Secretary of the US Treasury Nathan Sheets spoke at CGD about anti–money laundering policies and the problem of de-risking, in connection with the launch of a new CGD working group report on the unintended consequences of anti–money laundering policies for poor countries. Sheets’s comments were consistent with the report’s key recommendations including the need for better data and for clearer guidance from financial regulators and standards setters.
The aid community is well-accustomed to pushing for transparency in foreign aid transactions. But are we missing another key flow of money?
A recent article by Geoffrey York, African bureau chief for the Globe and Mail, described a contract signed a few years ago by the Government of Rwanda with Racepoint Group, which was tasked with doing an image make-over for the Rwandan government for a monthly fee of over $50,000. The rationale was that public perceptions of Rwanda were dominated by the horrific genocide that occured in the 1990s, along with accounts of human rights abuses and media censorship. The contract with Racepoint reportedly aimed to increase the number of stories of Rwanda’s successes and block criticism of the government and its alleged human rights abuses. The effort landed more than 100 positive articles per month in newspapers from the New York Times to BBC, increased discussions of travel to Rwanda by 183%, and decreased discussion of the genocide by 11%, according to Racepoint.
De-banking is an ugly word, but it’s the focus of a new working group launched by CGD in Europe. Banks in rich countries, under pressure from anti–money laundering and counterterrorism enforcement efforts, are increasingly “de-banking” money transfer organizations that operate in poor countries. In other words, to prevent criminals transferring their ill-gotten gains around the world electronically, they are denying banking services to legitimate companies that are a vital route for millions of people and businesses. And we are talking huge sums of money.
The U.S. military has become substantially engaged in economic development
and stabilization and will likely continue to be for some time to
come. This brief takes U.S. military involvement in development
as a given and concentrates on five recommendations for it to
operate more efficiently and effectively.
The informal sector is a major source of economic activity and job opportunities in poor countries as well as emerging economies. In sub-Saharan Africa, the size of the informal sector is estimated to employ over 70 percent of the population. Why do businesses remain informal? What gains in productivity or profitability do they forego by as a result of that choice?