Feker Tadesse, MPA
Coming back to Princeton from JFK airport, an Indian gentleman struck up a conversation with me, inquiring where I was from. When I told him I was from Ethiopia, he proceeded to talk positively about the recent developments in the country, particularly leasing of land to foreign investors. Relieved as I was that the mention of “Ethiopia” didn’t automatically prompt him to lament about droughts and famine, nevertheless I was hard pressed to share his optimism for what’s been dubbed “The Land Grab of Africa.”
The Prime Minister of Ethiopia, Meles Zenawi, recently expounded on what leasing land to foreign investors would mean to the country’s economy. His argument was simple enough: there was plenty of idle land in the countryside that communities had neither agricultural nor settlement use for. Hence, foreign investors would transfer technology, create jobs for the locales, and increase government revenue. Thus far, some regions such as Benishangul Gumuz have leased around 2 million hectares to Saudi investors.
Critics are quick to point out the irony of a country that is dependent on food aid leasing out masses of fertile land so that countries like Saudi Arabia can ensure national food security. Moreover, the premise that the land being leased is idle land is under strong scrutiny. Stories regarding displacement of local populations have been circulating in the media. Secondly, environmental degradation is a real concern, particularly with the introduction of intensive agricultural ventures like horticulture that leave the land no longer viable for agricultural purposes. Finally, the prime minister’s argument that the agricultural sector in Ethiopia will not grow unless large scale mechanized farms come to its rescue is far from convincing. There are countless studies that claim quite the opposite: increasing the productivity of smallholder farmers is by far a better strategy to tackle rural poverty.
Given that the “land grab” issue is fairly recent, there is a lack of clear information on what exactly is taking place on the ground. While the PM’s arguments make sense theoretically, if recent allegations, particularly those on displacement of the local population hold true, this can hardly be praised as a government’s initiative towards foreign direct investment.
Showing posts with label FDI. Show all posts
Showing posts with label FDI. Show all posts
Sunday, October 9, 2011
Wednesday, March 23, 2011
How to make the most of $40 million: The Clinton-Bush fund should re-direct its energies towards attracting FDI in Haiti
LaSean Brown, MPA
Thousands of NGOs and other notable entities in the international community are still trying to figure out how to effectively deliver aid and promote economic development in Haiti, now 14 months after the catastrophic earthquake that struck in January 2010. Given that Haiti is one of the Western Hemisphere’s poorest and most fragile states, it stands to reason that help from the international community is not only necessary, but has the potential to be highly effective given the resources available to international donors. Unfortunately, outside of providing immediate humanitarian assistance, aid agencies have done precious little over the last 14 months to address the systemic economic challenges in Haiti that prevent a business-friendly environment to take root.
Enter the Clinton Bush Haiti Fund (CBHF), an organization that raised a meager $40 million, but earned the immediate international attention and respect given its presidential namesakes. The Fund’s literature asserts that it wants to make tangible long-term differences in Haiti, but how can this be done effectively given the limited funds available to the organization? To date, CBHF has provided small grants of no more than $500,000 to projects with specific service delivery goals. Some of the grants do indeed promote some business activity, but the impact of these programs will be moderate at best.
The CBHF is thus wasting a prime opportunity to use the support of two American presidents to do something for Haiti that isn’t already being done by the plethora of NGOs on the ground; namely, encouraging foreign direct investment (FDI). What is missing in Haiti is not aid, but FDI. Clearly, “aid” is not working.
Case studies suggest that FDI leads to better economic performance in developing countries. Rwanda is an excellent example of the power of foreign direct investment as an instrument of stable economic development. President Kagame has been adamant about encouraging FDI while simultaneously refusing most forms of aid that is typically provided to developing countries by the international community. This combination has led Rwanda to experience many years of high economic growth.
CBHF can also take note of the way Kagame courts investors. The president commissioned a team of international “experts” to fly around the world and meet with potential investors to pitch them on the idea that Rwanda is no longer a high-risk investment market and that returns-to-investment in developing contexts are generally very high. (This has even been demonstrated in Haiti, as Digicel, a large telecommunications firm, operates in Port-au-Prince with a significant profit margin. This suggests that despite its infrastructural issues, Haiti is capable of successfully hosting multi-national corporations.)
Therefore, CBHF should spend its remaining funds devising and implementing a strategy to court FDI on behalf of Haiti. President Clinton has already demonstrated his fund-raising prowess through his foundation’s annual Clinton Global Initiative summits. Successfully attracting foreign direct investment could not only provide Haiti with a much more sustainable economic development strategy, but could encourage even more investment in the country, producing a cycle of ever-growing influxes of investment capital.
The question remains whether such a strategy will be successful in Haiti. Sure, CBHF could play it safe and continue to fund small projects that will have a moderate effect at best. Or, it could choose to gamble, re-purpose itself and commit its resources to encourage FDI, knowing that such a strategy could prove a monumental triumph (or colossal failure).
Thousands of NGOs and other notable entities in the international community are still trying to figure out how to effectively deliver aid and promote economic development in Haiti, now 14 months after the catastrophic earthquake that struck in January 2010. Given that Haiti is one of the Western Hemisphere’s poorest and most fragile states, it stands to reason that help from the international community is not only necessary, but has the potential to be highly effective given the resources available to international donors. Unfortunately, outside of providing immediate humanitarian assistance, aid agencies have done precious little over the last 14 months to address the systemic economic challenges in Haiti that prevent a business-friendly environment to take root.
Enter the Clinton Bush Haiti Fund (CBHF), an organization that raised a meager $40 million, but earned the immediate international attention and respect given its presidential namesakes. The Fund’s literature asserts that it wants to make tangible long-term differences in Haiti, but how can this be done effectively given the limited funds available to the organization? To date, CBHF has provided small grants of no more than $500,000 to projects with specific service delivery goals. Some of the grants do indeed promote some business activity, but the impact of these programs will be moderate at best.
The CBHF is thus wasting a prime opportunity to use the support of two American presidents to do something for Haiti that isn’t already being done by the plethora of NGOs on the ground; namely, encouraging foreign direct investment (FDI). What is missing in Haiti is not aid, but FDI. Clearly, “aid” is not working.
Case studies suggest that FDI leads to better economic performance in developing countries. Rwanda is an excellent example of the power of foreign direct investment as an instrument of stable economic development. President Kagame has been adamant about encouraging FDI while simultaneously refusing most forms of aid that is typically provided to developing countries by the international community. This combination has led Rwanda to experience many years of high economic growth.
CBHF can also take note of the way Kagame courts investors. The president commissioned a team of international “experts” to fly around the world and meet with potential investors to pitch them on the idea that Rwanda is no longer a high-risk investment market and that returns-to-investment in developing contexts are generally very high. (This has even been demonstrated in Haiti, as Digicel, a large telecommunications firm, operates in Port-au-Prince with a significant profit margin. This suggests that despite its infrastructural issues, Haiti is capable of successfully hosting multi-national corporations.)
Therefore, CBHF should spend its remaining funds devising and implementing a strategy to court FDI on behalf of Haiti. President Clinton has already demonstrated his fund-raising prowess through his foundation’s annual Clinton Global Initiative summits. Successfully attracting foreign direct investment could not only provide Haiti with a much more sustainable economic development strategy, but could encourage even more investment in the country, producing a cycle of ever-growing influxes of investment capital.
The question remains whether such a strategy will be successful in Haiti. Sure, CBHF could play it safe and continue to fund small projects that will have a moderate effect at best. Or, it could choose to gamble, re-purpose itself and commit its resources to encourage FDI, knowing that such a strategy could prove a monumental triumph (or colossal failure).
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