Developing Countries

Has the World Bank lost its way?

Has the World Bank lost its way?

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The World Bank’s chief economist Paul Romer has just quit, amid intense controversy about how the Bank pursues its development mission.

According to reports, Mr Romer left following a disagreement about with the way in the Bank calculated its annual Ease of Doing Business Index, which ranks countries according to how easy it is to start a new business. Although the rankings are highly influential in political circles, serous questions have been raised about their accuracy in predicting a country’s real-world economic success.

As Bloomberg reports:

“In 2016, economics student and blogger Evan Soltas measured whether large increases in a country’s position in the rankings were followed by growth. He found no measurable effect, even in the long term, and that taking the World Bank’s advice on structural issues seems to do very little if anything for economic growth.”

In other words, the World Bank has been relying more on guesswork than hard evidence about what actually drives economic growth. And the row the Ease of Doing Business Index is only the latest controversy to hit the Bank.

Its biggest shareholder, the US, has become increasingly vexed that the World Bank continues to lend money to China – a country so rich it has its own development bank – while continuing to deny finance to poorer countries that want to use fossil fuels to develop.

This has led some to argue that the World Bank is in fact become an anti-development bank, more interested in pushing environmental ideology than in helping to address the root causes of poverty. Experts have even suggested that the Bank should wind down its current lending mission and become a development think tank instead.

If the World Bank wants to regain its credibility it should listen to developing countries and lift its restrictions on one thing that we know for sure delivers economic growth: affordable, reliable baseload electricity.

Marshall Plan for Africa to stop migration

Marshall Plan for Africa to stop migration

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Greece and Italy have demanded the creation of an EU-wide “Marshall Plan for Africa” to tackle the underlying causes of the migrant crisis, evoking the US aid programme that rebuilt Western Europe after the Second World War.

Speaking at the World Economic Forum in Davos, Greek Prime Minister Alexis Tsipras said:

“the problem is not the flows [of migrants], it is not the people who are trying to find a new life in Europe, but the problem is why the people cannot live in their countries.”

This call will be welcomed by Angela Merkel’s government, which has also stressed the need for an African answer to the Marshall Plan.

“We need a paradigm shift,’ says German international development minister Gerd Muller. “We have to realise that Africa is not the continent of cheap commodities but that the people of Africa need infrastructure and a future.”

So what would a Marshall Plan for Africa look like? Like its European predecessor, infrastructure would likely be the focus. Power infrastructure is the number one priority for sub-Saharan Africa, where two thirds of the population lack electricity and businesses struggle with constant blackouts.

The US has also taken an interest in tackling the scourge of energy poverty, proposing a “Clean Coal Alliance” that would see the transfer of carbon capture technology to developing nations dependent on coal.

This matters because reliable power can be transformational. 1000MW of electricity – equivalent to a medium-sized power station – can sustain the equivalent of 800,000 jobs according to the UK government, creating much-needed opportunity in a region where young people are risking everything to get to Europe.

As African Development Bank President Akinwumi Adesina has said

“The future of Africa’s youth does not lie in migration to Europe; it should not be at the bottom of the Mediterranean; it lies in a prosperous Africa. We must create greater economic opportunities for our youth right at home in Africa.”

A prosperous Africa needs reliable, affordable power. Now Europe and the US have to get on and deliver.

Urbanising Africa needs the grid

Urbanising Africa needs the grid

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“I came to [Rwandan capital] Kigali about five years ago,” says 35-year-old Hassan Mudenge, a construction site assistant, “to look for a job and other opportunities. I can say I am now financially stable. I pay my rent regularly and send some money home to help my parents.

Across sub-Saharan Africa millions of young people are pursuing the same path, migrating from rural areas to the fast-growing urban centres in search of a better life. This is process is closely associated with job creation and poverty reduction, according to the World Bank.

It’s also why grid electricity matters. Western environmental groups often argue that since the majority of people without electricity live in rural areas, it’s usually cheaper and quicker to provide them with off-grid solar panels rather than connect them to the grid.

Yet this ignores the fact that so many Africans are now moving to the cities, where grid power is much easier to roll out thanks to population density. The World Bank projects that the continent’s urban population will rise from 36 percent to 50 percent by 2030. All of these people, schools, businesses and hospitals, need reliable, 24/7 power, which with current technology can only be provided by the grid.

And for the factories and companies that Africa needs to eradicate poverty, the alternative to the grid isn’t solar, but costly, inefficient and heavily polluting diesel generators.

But get this right and the prize is huge. Rwanda is banking on reaching high-income country status by 2050, with its urban economy powering that rise.

In other words, poverty could be over within a generation.

US Environment Protection Agency: stewardship of natural resources can "feed and fuel the world"

US Environment Protection Agency: stewardship of natural resources can “feed and fuel the world”

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Developing countries must be able to use their natural resources for development, says the head of the US Environmental Protection Agency (EPA).

The EPA is the US federal department charged with protecting the environment and public health.

Scott Pruitt, the administrator of the EPA, argues that poor countries should be free to use their natural resources in order to drive economic growth. He criticised the previous government’s ideological approach to international development, which often imposed restrictions on using extracting minerals and fuels essential to electrification.

For Pruitt, the US must advocate a responsible use of these natural resources, acting as stewards of the environment, whilst also ensuring that these natural resources can “feed the world and fuel the world.”

He compares this to the current puritanical prohibition mindset of NGOs and development organisations, that look to restrict extraction of these resources, which consequently starve countries of the opportunity to develop. In his mind, these people who are comfortable “putting up a fence and saying ‘do not use’,” are only exacerbating the problem.

Pruitt’s remarks follow US Energy Secretary Rick Perry’s calls for a “Clean Coal Alliance” to help promote High Efficient Low Emission (HELE) technology during a recent energy conference in South Africa.

Economist: Africans consuming less electricity now than in the 80s

Economist: Africans consuming less electricity now than in the 80s

By | Developing Countries, Ethiopia, Ghana, Kenya, Nigeria, South Africa | No Comments

According to the World Bank, the proportion of Africans with access to electricity increased from 19% in 1991 to 37% in 2014. But as a recent article in the Economist points out, this is nowhere near as impressive as it seems.

More people than ever may be connected to the grid, but they are not consuming more electricity. In 2014 each African consumed, on average, just 483 kilowatt hours (kWh). That is less than in the 1980s.

By contrast, Americans use 13,000 kWh each on average. Indeed, in the West, a typical family fridge consumes several times more power than a whole family of Nigerians.

As the Economist says:

“Some greens may hail such frugality. They should not: the alternative to electricity is often filthy, dangerous charcoal stoves and kerosene lamps. Besides, if utilities are unable to sell enough electricity to cover their costs then they cannot invest in maintaining or modernising their grids.”

Worldwide, power consumption is strongly correlated to GDP. The more electricity you use, the richer your country is likely to be. Yet this is not the case in Africa, where many countries use less power than their national incomes would suggest.

According to the Economist, this is because Africa has so little of the world’s manufacturing and heavy industries, who are the biggest consumers of electricity. In turn that keeps demand for power low in the rest of the economy. Without industrialisation and the good jobs it brings, ordinary Africans just can’t afford more electricity.

It’s why an approach to energy access which stresses small-scale solar powered solutions – while the ignoring the needs of industrial consumers – is unlikely to do much to alleviate poverty. To power Africa, all forms of energy will have to be used.

Boris Johnson: aid should be spent more “sensibly” to boost British interests

Boris Johnson: aid should be spent more “sensibly” to boost British interests

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British aid spending will be more “sensibly distributed”, with a view to supporting British foreign policy goals. That’s the message from Foreign Secretary Boris Johnson, who has kicked off 2018 promising a radical shake-up of the £13bn aid budget.

Ministers have previously voiced concern at waste and inefficiency in the UK’s aid programme, much of which is distributed on Britain’s behalf by multilateral bodies such as the UN and the World Bank. “Britain must show further leadership to reform the global humanitarian system,” International Development Secretary Penny Mordaunt vowed recently, with senior government sources vowing to crack down on “pointless projects and sky-high salaries.”

If the goal is to shore up core British interests such as tackling extremism and addressing the “push” factors driving uncontrolled migration, then more spending on energy access makes enormous sense. Experts agree that a decent power infrastructure is a prerequisite for poverty reduction, with some of the world’s least stable regions crying out for affordable, reliable energy.

A new value-for-money driven approach would ideally mean a greater emphasis on funding for large-scale baseload power projects such as hydro, gas and clean coal, which can support many hundreds of thousands of jobs in developing countries and ultimately reduce reliance on aid spending.

And as we know, too often in the past the Department for International Development has tried to meet energy access targets with small-scale solar projects that can power a lightbulb for a few hours a day but can’t run the factories, businesses and hospitals that a country needs to develop.

It remains to be seen whether 2018 is the year when Johnson and Mordaunt will deliver.

US: we will use all forms of energy, including fossil fuels, to tackle global poverty

US: we will use all forms of energy, including fossil fuels, to tackle global poverty

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The United States has announced it will help developing countries use fossil fuels to lift their people out of poverty.

In its new National Security Strategy, the White House stated its goal of securing US “energy dominance” i.e. America’s position as the world’s “leading energy producer, consumer and innovator”. As part of this it plans to share US energy technology, including fossil fuel technologies, with developing countries.

“Given future global energy demand, much of the developing world will require fossil fuels, as well as other forms of energy, to power their economies and lift their people out of poverty,” the strategy states.

America’s explicit recognition of the need for fossil fuels to power developing economies will be welcome news to leaders in Africa and developing Asia, who have long argued for a pragmatic balance between poverty reduction and environmental protection.

It also represents a distinct change of tone from the Obama era, which prioritised renewables while failing to make a dent in global energy poverty.

The National Security Strategy states that the US aims to achieve universal energy access with an all of the above approach, “including highly efficient fossil fuels, nuclear, and renewables.”

This builds on an earlier US announcement that it would be pushing to reverse a World Bank ban on funding for coal power. Indeed, the National Security Strategy pointedly suggests that the US will “reform” multilateral development banks by encouraging them to “invest in high-quality infrastructure projects that promote economic growth”.

These countries are determined to use whatever natural resources they have to lift their people out of poverty. Now America’s has signalled it will give them the technology to use these fuels in the cleanest and most efficient way possible. This represents a huge step forward.

Why electricity matters 101

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1.2 billion people have no access to electricity

140 years after the invention of the lightbulb, about 1.2 billion people – 17 percent of the world’s population – have no access to electricity and the higher living standards it brings.

A further 1 billion have to put up with regular blackouts because the reliability of their electricity is so poor.

2.7 billion are forced to rely on traditional biomass, such as wood, dung or charcoal, for cooking and heating.

We are not on track to deliver for the world’s poorest

The UN has set a goal of achieving universal electricity access by 2030. We are not track to reach that target. On current trends, it is due to be missed by 800 million people.

In Sub-Saharan Africa, a growing population means that the number of people without electricity is set to rise over the next 15 years – by 45 million.

If nothing changes, Africa will not have achieved universal access until 2080.

Lack of electricity is costing millions of lives

An estimated 1 billion people around the world depend on healthcare services that lack electricity.

This denies them the basic equipment needed to sterilise medical instruments, store vaccines at the right temperature, incubate newborns, or perform vital HIV/AIDS tests.

The pollution from using traditional fuels like wood or dung for heating, lighting and cooking is equivalent to smoking 400 cigarettes an hour. Breathing in this toxic smoke kills more people each year than AIDS and malaria combined.

Reliable electricity is fundamental to jobs and growth

The UK Government estimates that 1000MW of electricity – equivalent to a large power station – can support 800,000 jobs in the developing world.

Everything a country needs to develop, from factories to mobile phone masts, transport infrastructure to irrigation systems, depends on modern grid power. Yet currently the whole of Sub-Saharan Africa currently produces less electricity than Spain.

How electricity and TV are channelling social progress

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When electricity arrives in a rural area, often one of the first things a family will do is go out and buy a TV. And this can have a surprising effect on social progress.

In India, researchers have found a close link between TV ownership and female empowerment. In areas with more TVs, birth rates are lower and girls’ attendance at school is higher. This effect holds true, even when you control for income.

Fertility matters a lot, because larger families are much more likely to be living in poverty. The poorest countries on earth also have the highest birth rates. And of course, getting girls into school is one the best poverty reduction measures we know.

So what is it about TV that’s helping to drive social progress?

Some studies suggest that it allows governments to run large-scale public awareness campaigns campaigns on family planning. But there’s also evidence from India and Brazil that popular culture is helping to shift bias against women.

This is because, whether set in Mumbai or Manchester, soap operas generally feature strong female characters, who are well-educated, work outside the home and are in control of their own lives. As Dr Martin Lewis, senior lecturer in geography at Stanford University, puts it:

‘Television [in the developing world] depresses fertility because many of its offerings provide a model of middle-class families successfully grappling with the transition from tradition to modernity, helped by the fact that they have few children to support.’

But of course, none of this is possible without the reliable source of electricity that makes owning a TV worthwhile. The rural areas where attitudes towards women are hardest to shift are also those which are least likely to be connected to the grid.

Yet another reason why electricity matters.

Why the poorest African families still choose dirty kerosene lamps over solar

Why the poorest African families still choose dirty kerosene lamps over solar

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Cheap, rechargeable solar lamps are often cited by environmental NGOs as a “quick win” for the very poorest families in the rural Africa. Without electricity, these families are forced to rely on dim and dirty kerosene lamps, which cause eye irritation and respiratory illness. So according to this argument, solar is clearly the superior alternative, at least until grid electricity arrives.

Yet new research from French business school Insead has now called this into question. The researchers looked at why some of the world’s poorest rural dwellers, still preferred to use kerosene, even when cheap solar was available.

What the study found is that some consumers preferred the reliability of kerosene, which contrasted with the “inconvenience costs and high blackout costs” of solar lamps.

In other words, a low-income rural family in Africa or Asia has to weigh up the time cost of spending hours charging a solar lamp – which may not always be possible given cloud cover – versus the convenience of kerosene, which despite being dirtier and more expensive, can be used whenever needed.

This continued use of kerosene is a scandal that needs to be tackled. No-one should have to sacrifice their lungs just to light their home. Kerosene also places a huge burden on family finances, with the average person in Rwanda spending up to 15 percent of their income on the fuel, according to the World Bank. At the same time, it’s clear that many people value the reliability and convenience of lighting on demand that can’t yet be guaranteed with solar technology.

The obvious answer to this dilemma is the grid. A single 100W incandescent light bulb presents no fire risk, no fumes, it’s 145 times brighter than a kerosene lamp, able to provide 20,000 hours of light before needing to be replaced. All it requires is cheap and reliable electricity. When it comes to solving energy poverty, there are no shortcuts.