Chile has had impressive success over the past 15 years, after a major recession brought on by excessive faith in free market economics under Pinochet through insufficiently regulated banking. But there are alternative interpretations/explanations of that success. Chile did not follow many key elements of the Washington Consensus during its most successful years. It imposed capital controls. It only privatized part of its copper mines, and the privatized mines arguably did not perform better than the nationalized ones, though the profits were sent abroad, while the profits of the nationalized mines could be used in the nation’s efforts to develop. Government and foundations lay behind many of its successful development projects (such as its fisheries) - the kind of industrial policies that the Washington Consensus railed against. And unlike the Washington Consensus, Chile put considerable emphasis on social policies.

Chile did two things that were part of the Washington consensus - it liberalized trade and it limited its government deficits. The lesson is similar to that of the successful countries of East Asia: Globalization can help bring prosperity, but countries have to manage globalization on their own terms, in their own way. Chile did this. The countries that followed the Washington Consensus mantra have, by and large, not done so well.

Between the disbursement of foreign aid and eventual development outcomes, there is a long causality chain. This chain has three main links that shed light on what we do know about aid effectiveness. First is the link between country policies (macroeconomic stabilization, regulation, trade, public finance) and final outcomes. Although not perfect, a stock of knowledge exists on the development impact of such policies. Economic research and evaluation can generate this knowledge through ex ante and ex post analysis of national experiences and impact evaluations of specific interventions.

The second link is the ability of policymakers to make appropriate policy choices given existing knowledge—in other words, the quality of governance: bureaucratic capability, institutional capacity, checks and balances mechanisms, and so on.

The third link—or, in effect, the beginning point—is between external donors or aid agencies and policymakers or even policies. Agencies provide funds and technical assistance, both of which influence the policy debate. But they often also seek to impose conditionality even though they operate with imperfect knowledge and little control over implementation.

Last year, 12 African countries held elections, including the first general elections in the Democratic Republic of the Congo in more than 40 years.

This year, another 17 countries will do the same, including the continent�s most populous nation, Nigeria, which goes to the polls next month.

At least six dimensions of governance are referred to repeatedly in the literature. These are: (i) voice and accountability, (ii) political stability, (iii) government effectiveness, (iv) regulatory quality, (v) rule of law, and (vi) control of corruption (Kaufmann and Kraay 2002).

 The World Bank ‘Doing Business Report’ provides an insight into the relative ease of
doing business in 145 countries. Of the 20 countries with the most difficult business
conditions, four-fifths are in Sub-Saharan Africa. On average it takes nearly 64 days to
start a business in Sub-Saharan Africa, versus 20 in the OECD countries, and costs the
equivalent of 215% of gross national income per capita. To export goods from Rwanda
requires 14 documents and 27 signatures compared to 6 documents and 7 signatures in
China. What about registering property? 21 procedures and 247 days in Nigeria
compared to 6 procedures and 67 days in India.

tag: bad-news trade barriers 

 Unilever in Ghana sold Knorr stock cubes in a vast range of flavours from prawn to
Dawadawa fruit extract. But a few hundred miles away in Nigeria, people wanted beef
stock cubes and little else − and want them so much that they bought over 2 billion of them in 2004 alone!

Unilever has 1000 managers in Sub-Saharan Africa and well over 90% of them are
African. So it is an African business run for and by Africans yet able to draw on
Unilever’s global know how and technology.

Most of us pay for our mobile phones through monthly service plans. But in countries
without well functioning postal networks and systems to check consumer credit, this is
not a viable option. So most mobile operators sell ‘pay as you go’ cards, often offering as
little as $2 of airtime.
Vodacom, the South African mobile operator, took this one step further by creating
phone shops in disadvantaged communities, where consumers can make cheap phone
calls from mobile phones. Often housed in modified shipping containers, these phone
shops operate as franchises, thereby creating employment and entrepreneurial
opportunity.
Vodacom developed this franchise programme to meet a government mandate to
improve telecommunications services to poor communities and it is an example of
initiatives that are both good for business and the community. For Vodacom, it’s about
building its brand and developing a new distribution channel. For the community, it’s
about job creation and having access to a vital service that allows individuals to manage
their lives and businesses to operate more efficiently.

tags: trade good-news consumers