The Real Exchange Rate,Foreign Aid and Macroeconomic Transmission Mechanisms in Tanzania and Ghana

Abstract

A recent study of 36 sub-Saharan African countries found a positive impact of aid in the majority of these countries. However, for Tanzania and Ghana, two major aid recipients, aid did not seem to have been equally beneficial. This study singles out these two countries for a more detailed empirical investigation. The focus is on the effect of aid when allowing external and nominal factors to play a role in the macroeconomic transmission mechanism. We conclude that when monetary and external factors are properly accounted for, then aid has been pivotal to growth in both real GDP and investment.     

‘We are Scared to Say No’: Facing Foreign Timber Companies in Sierra Leone's Community Woodlands

In recent years, ‘decentralisation’ has become an increasingly prominent theme in Sub-Saharan African development theory and practice, particularly around woodland management. Although much research has illuminated challenges arising in project design and implementation, ‘external’ threats to decentralised resource management initiatives have received little attention. At the same time, however, there has been a massive increase in foreign, particularly Chinese, corporate investment in the extraction of African resources. This paper examines the importance of the interaction between these two trends to local livelihoods and resource management through a case study of illegal logging by Chinese companies in Sierra Leone.     

Aid and Resource Mobilisation in Sub-Saharan Africa: the Role of Reverse Flows

This article seeks to ascertain the role of ‘reverse flows’ in explaining the observed limited impact of aid on resource mobilisation in Sub-Saharan Africa. It departs from the previous empirical literature on aid and resource mobilisation by abandoning the pervasive, but untenable, assumption that aid either displaces domestic saving (increases consumption) or increases investment. Some aid is, in fact, used to finance reverse flows (debt servicing, capital flight, and reserve accumulation). The evidence suggests that, for the period covering 1980 to 2006, nearly 50 per cent of aid to Sub-Saharan African countries was used to finance reverse flows.     

War-torn countries,natural resources,emerging-power investors and the UN development system

The unsustainable aid dependency of war-torn countries – most of which are rich in natural resources – makes it imperative to start gradually replacing aid with foreign direct investment (fdi) and exports. This article identifies ways in which stakeholders – governments, the international community, including the UN development system, foreign investors, and local communities – could work together in a ‘win-win’ situation. Most crucial is avoiding conflict-insensitive policies that fuel discord by putting governments and foreign companies, often from emerging markets, in direct confrontation with local communities. The control of natural resources is often a root cause of conflict, and the latter’s exploitation can become a major challenge as wars end. The peculiarities of war-torn countries are discussed along with the specific impediments to attracting fdi into the exploitation of natural resources. An effective and fair legal framework is necessary to ensure that investors do not operate as ‘enclaves’, creating new conflicts.     

Aid,the Real Exchange Rate and Why Policy Matters: The Cases of Morocco and Tunisia

Abstract

Every form of foreign-exchange inflow, including aid, can potentially cause real-exchange rate appreciation, with adverse consequences for the production of tradables (‘Dutch Disease’). Whether it does so depends on the policy response to the inflow. This paper investigates the issue for Morocco and Tunisia, over 1980–2009. We find that aid led to a real appreciation in Morocco, but had no effect on Tunisia’s real exchange rate. This confirms the importance of the macroeconomic framework in which aid is provided, and the key role for infrastructure and other supply-side improvements in determining the final real-economy impact of aid and other inflows.     

Special drawing rights and development aid

This article examines the case for establishing a link between the creation of Special Drawing Rights and development aid, analyses the various objections that have been raised against the idea, and describes several possible mechanisms for making the link operative. It then considers the national burden sharing, balance of payments and foreign exchange reserve implications of an ‘organic’ link. Finally, it suggests how, in the context of international monetary reform, the disposal of the large outstanding dollar and sterling reserve‐currency holdings of the developed countries could also be linked with aid to the developing countries.     

Resources and Rent Seeking in the Democratic Republic of the Congo

By examining the Congolese political economy through the lens of the ‘resource curse’ theory, this article aims to advance our understanding of the chronic underdevelopment of the Democratic Republic of the Congo (DRC). Proceeding in three distinct phases the article examines the effect of resource rents, foreignn aid and the likely effect of Chinese investment. It finds that a political tradition of patrimonialism and corruption based on large inflows of easily corruptible resource rents was established in the Mobutu period. In the post-conflict period the source of revenue shifted from resource rents to foreign aid, while the political tradition remained essentially unchanged. The model of the Congolese political economy established in these first two sections will then be used to make an informed assessment of the Sicomines deal. The article finds that the structured nature of the deals means that it is unlikely to perpetuate the ‘resource curse’ condition.     

Mechanisms of the ‘Aid Curse’: Lessons from South Korea and Pakistan

Recently scholars have argued that, far from contributing to development, foreign aid hinders development. But in the 1960s the East Asian countries developed rapidly despite receiving large amounts of aid. To examine why aid seems to undermine development in some cases but not in others, we conduct a detailed comparison of the mechanisms of the ‘aid curse’ in South Korea and Pakistan. We show that South Korea saw astonishing levels of corruption, but this did not hinder its development; and Pakistan had a strong bureaucracy, which did not help it to grow. The key difference between the two countries was in the strength of their tax systems: foreign aid in the context of underdeveloped tax administration leads to increasing cycles of debt that undermine development. When foreign aid arrives in the context of commitment to strong taxation, a country can avoid the ‘aid curse.’     

On Tax Efforts and Colonial Heritage in Africa

One commonly observed phenomena about taxation in Africa are regional differences and the fact that southern African countries have higher levels of shares of taxation in GDP. This article argues that the major source of differences in ‘tax effort’ is the colonial histories of various countries. Using standard measures of ‘tax effort in a panel data framework and dividing colonial Africa along forms of incorporation into the colonial system, it shows that African countries and others with similar colonial histories have higher levels of ‘tax effort’. However, the difference disappears when we control for the colonial factor. These results hold under different model specifications.     

What Drives Japanese INGOs to Operate in Latin American Countries?

International nongovernmental organizations (INGOs) provide essential aid and public services to less-developed countries. Although most literature focuses on Western INGOs, Asian INGOs have also become globally active. Little is known about what motivates INGOs to provide services in other regions, such as Latin America. In this study, we seek to identify the criteria Japanese INGOs use to select Latin American recipient countries. We propose that Japanese INGO operational location decisions are a function of Japanese foreign policy agenda, Japan-recipient country business relations, and recipient country’s need and liberalization. Using data from Japanese INGOs working in Latin America and 24 Latin American countries on contextual, macroeconomic, and demographic indicators, we find that the significant factors driving INGO decisions to operate in Latin American countries are need and the presence of Japanese businesses in the recipient country. Results have practical implications for foreign aid targeting and economic development.     

The politics of ownership in policymaking: lessons from healthcare delivery in post-conflict Timor-Leste

Abstract

This article examines the political economy of national ownership, focusing on the reconstruction of the healthcare system in post-conflict Timor-Leste in relation to the shift from aid dependence to oil dependence. Considering three main approaches to development policymaking, it argues that, from 2002, the government generally used patronage-based strategies that benefitted elite political networks, increasing corruption. Based on empirical research, the study demonstrates that, in several areas, the government of the Revolutionary Front for an Independent East Timor (2002–2007) could exercise some autonomous decision-making despite being heavily aid dependent. Later, under the National Congress for Timorese Reconstruction government (2007–2017), empowered by oil resources, elites had greater control over development. However, the creation of a ‘modern’ healthcare system was central to the elites’ political ideology, involving populist rather than patronage-based politics. Analysis of this research indicates that ownership regarding healthcare has become concentrated among powerful groups, while health professionals, who advocate a neoliberal approach, lack a political voice. Thus, the paper problematises the Paris Declaration’s focus on country ownership to ensure better aid delivery as unrealistic because ‘ownership’ becomes subject to contestation.     

The Challenges for Developing Countries in International Tax Justice

Developing countries face three main challenges in international tax cooperation. The most widely known are the twin problems of tax avoidance by foreign investors and tax evasion by domestic actors, which have become a major focus of debate in international organisations and of civil society activism in recent years. The second problem, tax competition, incorporates a range of issues from the ‘prisoners’ dilemma’ facing countries competing for inward direct investment through to the harmful tax rules used by tax havens that enable tax avoidance and evasion. This article reviews four recent monographs that analyse these problems at an international level. While they contain much useful discussion of the problems and potential technical solutions, there remains a need for political economy research to understand why certain technical solutions have not been adopted by governments. A third challenge faced by developing countries, barely considered in the tax and development literature up to now, leads to a note of caution: international tax institutions tend to be designed in ways that place disproportionate restrictions on capital-importing countries’ ability to tax foreign investors.     

Public funds for private enterprise: The international finance corporation 1

In a recent article Helleiner [1974: 351] argues that the Special Drawing Rights (SDR) scheme has operated in such a way as to transfer real resources from developed countries (DCs) to less developed countries (LDCs). Helleiner attempts to substantiate this claim empirically by examining the net acquisition of SDRs which has been made by DCs, and the net use of SDRs which has been made by LDCs since the SDR facility was established. In this article it is suggested that, although the SDR agreement has, indeed, served to create an ‘informal’ SDR/aid link, net use data taken at face value do not necessarily reflect the extent or nature of this informal link.     

The African ‘oil rush’ and US national security

The world's major oil-consuming nations, led by the USA, China and the Western European countries, are keenly interested in the development of African oil reserves, making huge bids for whatever exploration blocks become available and investing large sums in drilling platforms, pipelines, loading facilities and other production infrastructure. Indeed, the pursuit of African oil has taken on the character of a gold rush, with major companies from all over the world competing fiercely with one another for access to promising reserves. This ‘oil rush’ has enormous implications both for African oil producers and for the major oil-importing countries. For the producing countries it promises both new-found wealth and a potential for severe internal discord over the allocation of oil revenues (or ‘rents’); for the consuming countries, it entails growing dependence on imports of a vital substance from a region of chronic instability, with obvious national security overtones. Both these trends are reflected in US policy towards African oil. Desperate to procure additional supplies of foreign oil (to make up for the decline in domestic output), the Bush administration has made strenuous efforts to increase the role of US energy firms in African production. But because instability in Africa is an obstacle to such investment, it has sought to boost the internal security capacity of friendly African states and has laid the groundwork for direct US military involvement in Africa. At the same time Washington has become deeply concerned by China's growing interest in African oil, provoking an intense competitive contest between the two, with growing military overtones. In the end African societies will most probably suffer from this competition as an influx of arms bolsters the capacity of entrenched African regimes.     

International comparisons of income levels and growth rates

Development literature contains the hypothesis that middle income countries grow faster than other countries. This proposition has been related to a second hypothesis of stages and rates of growth, as well as to an ‘automatic mechanism’ for the reduction of international income disparities. This article examines the relevant evidence and finds the propositions unsupported by either theory or empirical data.     

COMPARING BUSH–CHENEY AND CLINTON–GORE PERFORMANCE MANAGEMENT STRATEGIES: ARE THEY MORE ALIKE THAN DIFFERENT?

Successful performance management strategies are intrinsically linked to the political environment in which public policy‐making occurs. Since the mid‐1990s, many governments have re‐examined how to simultaneously reduce costs, increase performance and achieve results. Public agencies are experimenting with performance measurement and management systems designed to meet public policy goals and respond to citizen demands. Various reform models have been proposed and public administrators now expend considerable time, effort and resources exchanging ‘best practices’, finding ‘best value’, and ‘rethinking’ government operations. Although equally important, less effort has been devoted to performance management (PM) within increasingly complex, ideologically charged and politicized decision‐making environments. Despite significant increases in productivity, more theoretical and empirical research is needed to assist public managers in applying private market‐based alternatives to public service delivery structures. This article compares the PM initiatives of the Clinton–Gore Administration in the United States, known as the National Performance Review (NPR), with President Bush‘s Presidential Management Agenda (PMA). Following the comparison, a theory‐based research agenda is proposed to determine which of many approaches best ‘fits’ the varied and often contradictory systems for delivering public services in a decentralized governance system.     

Grading greatness: evaluating the status performance of the BRICS

An impressive portfolio of case-study research has now demonstrated how and through what means the BRICS (Brazil, Russia, India, China, South Africa) countries have sought higher social status. However, this field of research lacks systematic means of evaluating this status-seeking. This article fills this lacuna by developing a mixed-methods framework enabling scholars to zoom in and compare individual states’ relative status performance. Using diplomatic representation as a proxy for status recognition and comparing it to a country’s status resources (wealth), the framework indicates how successfully countries have generated recognition from the international society. The findings show that China’s economic ascent has been matched by increased recognition, and that South Africa enjoyed an almost immediate ‘status bounce’ following apartheid, turning it from a pariah to a significant overperformer. Russia should be understood as an ‘overperforming status-dissatisfied power’ while India’s status performance has been around ‘par’ for a country of its economic resources. Lastly, Brazil underperforms more than any of the other BRICS, especially since its democratic transition. The findings highlight considerable variance in the type and duration of gaps between status resource and recognition and suggests that rather than treating these as ‘inconsistencies’ awaiting correction, they can and should be accounted for by case study analyses.     

Natural resources and corruption in post-war transitions: matters of trust

Many ‘post-conflict’ countries face difficulties in reaping the full benefits of their natural resource wealth for reconstruction and development purposes. This is a major issue given these countries’ needs and the risk of seeing ‘mismanaged’ primary sectors undermine a transition to peace. Bringing together debates about the ‘inequality-mistrust-corruption’ trap and relationships between natural resources and corruption, this paper suggest that some resource sectors may be more likely to foster inequalities, and thereby increase corruption and distrust, while others are less likely to do so. Reviewing arguments and empirical evidence, I point to the relative importance of transition contexts, stakeholder incentives and resource sector characteristics, and suggest how resource-related corruption may be better understood in relation to trust-building and reconciliation processes.     

Migrants’ Remittances and Home Country Elections: Cross-National and Subnational Evidence

Elections in developing countries have increasingly become international events. Previous scholarship identifies many examples in which migrants from developing countries have played a role in financing elections in their home countries and provides cross-national evidence that migrants increase remittances in election years. However, previous cross-national analyses have been limited by their reliance on annual national-level data. This article provides statistical analyses of quarterly subnational data of remittance inflows to Mexican states and new monthly national-level data on remittance inflows for nine countries. These analyses demonstrate that political remittance cycles appear in the quarter prior to an election, can exist both for national and subnational elections, and are influenced by both economic conditions in migrants’ host countries and political conditions in their home countries.