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How does social development affect FDI and domestic investment?
Get PDFCreating a favourable investment climate is crucial for economic development. In this study, we explore the impact of social development variables on FDI and private domestic investment, using panel data from 75 countries for the period 1989-2000. Our results show that reducing corruption leads to an increase in domestic investment.
Though we do not find a significant impact of corruption on FDI, previous studies have established a similar relationship for FDI. Thus there is evidence to suggest that combating corruption can have a beneficial effect on both domestic and foreign investment.
Our results indicate that improvements in political rights and civil liberties tend to increase FDI. In contrast, political freedom appears to have a negative effect on domestic investment. However, other studies suggest that democratization has a positive impact on corruption, which makes the total effect of political freedom on domestic investment ambiguous.
A few other social development variables are found to have an impact on one of the two types of investment. Religious tensions appear to deter FDI, but have no impact on domestic investment. In addition, socioeconomic conditions could affect domestic investment through savings
Poverty reduction strategy processes in Malawi and Zambia
Get PDFMalawi and Zambia are poor and heavily indebted countries whose dependence on foreign aid is pronounced. They both qualify for debt relief in terms of the Heavily Indebted Poor Country (HIPC) initiative under the auspices of the Bretton Woods institutions, provided they formulate a Poverty Reduction Strategy Paper (PRSP) that satisfies the new ‘process’ conditionality which emphasises broad participation. In grappling with the PRSP process the stakeholders (the state, non-state actors, and donors) appear to have produced credible policy documents with a measure of ‘national ownership’. On a comparative note, it is significant that civil society organisations played an active role in both Malawi and Zambia in formulating the PRSP and thus lent the outcome some legitimacy. It is also significant that in both countries the national assemblies were marginalised in these policy-making exercises, which were driven by the respective executive branches of government, notably the Ministries of Finance. In the case of Malawi the modest involvement by parliament was attributable mainly to its general subordination to the executive in a presidential system of government, while the coincidence of the PRSP process and the 2001 elections was the main explanatory factor in Zambia. The donors found themselves in an ambivalent position. On the one hand, in the interest of creating national ownership of the PRSP they were expected to keep their hands off. On the other hand, they were apprehensive that the substantive nature of the final document would not satisfy the World Bank and IMF eligibility criteria for debt relief. Hence, they took active part in the process
Towards feasible social security systems in sub-Saharan Africa
Get PDFThe international community is devoting increasing attention to social security issues in developing countries as part of its preoccupation with poverty reduction. This paper discusses social security arrangements in place in sub-Saharan African countries to mitigate the contingencies of their citizens, with emphasis on the masses of poor people, including the ways in which the poor themselves try to tackle unexpected adversity. The basic argument is that for a social security system to be feasible in the current circumstances of widespread economic crisis, formal and informal mechanisms will have to be combined.
While recognising the normative foundation of social security in the international human rights regime and taking its point of departure in the vulnerability of poor households the paper looks at various definitions of social security. It proceeds with an enumeration of formal state-based and market-based systems, as well as informal membership-based systems in civil society and traditional kinship-based systems. Taking into account the demographic impacts of the HIV/AIDS pandemic the paper concludes that the feasibility of social security arrangements in the present economic circumstances of sub-Saharan Africa hinges on the combination of formal and informal sub-systems
Risk and disintermediation in tourism
Get PDFTourism is an information-intensive market, characterised by asymmetric information between service providers and the customer. Intermediaries have traditionally played an important role as certifiers of products, and the revenue retention rate has been low, particularly for service providers in developing countries. This article analyses the conditions under which direct marketing on the Internet facilitates disintermediation in tourism.
Disintermediation and the profitability of using the Internet differ across markets according to available complementary factors such as human capital, technology and social capital. I will show that direct marketing on the Internet must be complemented by trust-enhancing institutions. These institutions do not exist in many developing countries, making disintermediation less likely.
I have conducted an econometric analysis of the hotel industry in 120 countries, examining the relationship between direct marketing and risk. Direct marketing decreases with uncertainty, when controlling for third variables (such as income level, PC penetration and education).
A previous version of this article was presented at the Nordic Conference in Development Economics, Göteborg, 17-18 June 2004. I am grateful for comments from Henri de Groot, Magnus Hatlebakk, Christer Ljungwall, Zijian Steven Wang, Ivar Kolstad, Espen Villanger, Gaute Torsvik and Hildegunn Nordås. Any remaining errors are mine alone. Arild Spissøy has provided research assistance
Decentralisation and corruption. A review of the literature
Get PDFThe main objective of this study is to assess existing knowledge on decentralisation and corruption. Major controversies within and across disciplines are discussed. The review concludes by identifying some areas in most need for further research with an emphasis on questions relevant for development policy
SADC in 2003: Restructuring and Progress in Regional Integration
Get PDFThe present desk study was commissioned by the Norwegian Agency for Development Cooperation. It traces recent developments in the Southern Africa Development Commu nity
(SADC), organisational restructuring and progress in regional integration.
The report follows up two earlier reports from the Chr Michelsen Institute (CMI), Assessing the Restructuring of SADC – Positions, Policies and Progress (R2001:6) and Restructuring SADC – Progress and Problems (R2002:15).
The last year has seen a number of important milestones for SADC restructuring, the adoption of a Regional Indicative Strategic Development Plan (RISDP) and a Strategic Indicative Plan for the SADC “Organ” (SIPO). The first meeting of the Integrated Council of Ministers took place and a study on SADC organisational structure was completed.
Other important events in 2003 were the signing of a Charter of Fundamental Social Rights and a SADC Mutual Defence Pact. The Democratic Republic of the Congo has been excluded for non-payment and Seychelles, which has not paid up, has given notice of its withdrawal from SADC.
The impending hunger catastrophe of 2003 did not become as serious as had been expected, but the region still suffers from the severe HIV/AIDS epidemic. While the SADC Free Trade Area is being implemented, the forthcoming trade negotiations under WTO and the formation of an EU –SADC EPA will be challenging issues in the near future, not least because of the criss-cross of overlapping trade blocs in the region. A major outstanding issue is the important Protocol on Finance and Investment
Palestinian State-Formation: Prospects and Challenges. Report from a Symposium at Chr. Michelsen Institute, Bergen, Norway 24-25 May 2004
Get PDFThe CMI - Muwatin symposium, held in Bergen on 24-25 May 2004, addressed both internal and external Internal challenges that were addressed were the problem of corruption, institutional mismanagement and the emergence of neopatrimonial structures within the Palestinian Authority. These institutional developments combined with the collapse of the peace process and the failure to achieve Palestinian independence by way of negotiations has undermined the legitimacy of the Palestinian Authority and facilitated a resurgence of political Islam in Palestinian society. The growing support of Islamic movements such as Hamas, must also be explained with reference to its provision of health and welfare services, and its encouragement of female activism within the organisation.
Israeli policies and political conditions set by the Oslo Agreement were pointed out as external challenges to Palestinian state-formation. Within the framework of Oslo, the PA has been subject to a strategy of asymmetrical containment in relation to Israel, involving an exclusion of Palestinian labour and production from Israel and a continued building of Israeli settlements in the occupied territories. This has undermined the political and economical viability of the PA, created a situation of stagnation and political crisis in Palestine and strengthened the internal challenges to Palestinian state-formation.
Future research will be focused on the prospects and viability of a two-state solution as the road towards Palestinian statehood. A high priority for further research will be to examine the political and economic conditions under which the Palestinian Authority can function as a governing body in Palestinian society. If the two-state-solution is dismissed, future research must focus on alternative scenarios for the political and institutional development in Palestine
Social development and industry level foreign direct investment
Get PDFInvestment is crucial for economic development. A number of empirical studies document a relationship between social development and aggregate foreign direct investment (FDI). This study complements aggregate studies by conducting an econometric analysis of the relationship between social development variables and FDI flows at the industry level.
We find that democratic accountability has a negative association with FDI in the secondary industries, but a positive one in the tertiary ones. This result suggests a more nuanced relationship between democracy and FDI than indicated by aggregate studies.
Law and order is found conducive to investment in both the secondary and tertiary industries. Internal conflict deters investment in the secondary sector. Neither law and order nor internal conflict affect FDI in the primary industries, which might reflect an ability to effect private security arrangements in the extractive industries.
Corruption increases FDI flows in the tertiary sector, but is unimportant elsewhere. This relationship can be traced to the trade industry, possibly reflecting the frequency with which this industry encounters bureaucratic obstacles.
Finally, increased ethnic tensions are associated with greater FDI flows. However, we find evidence of a causal relationship in the secondary industries only.
Moreover, the relationship depends on the inclusion of certain countries in the sample
Powerful donors and foreign policy: The role of multilateral financial institutions
Get PDFThe opportunity for a powerful donor country, such as the United States, to use a multilateral financial institution (MFI) strategically in order to promote its own foreign policy goals has received little attention. The gain to a donor that is able to make the World Bank or other MFIs adapt to this donor’s view on an issue can be substantial. In that case, all the contributions from the other member nations will also stand behind the
MFI’s stance on the particular is sue, and recipients may feel compelled to comply with this massive counterpart. As a result, influencing MFIs may give much more leverage to a donor’s foreign assistance in the foreign policy arena than pursuing the same goals bilaterally with the same amo unt of aid. We present a model where a donor tries to influence a MFI to put pressure on a recipient to comply with the foreign policy interests of the donor. This game-theoretic multi-agent model with one donor, two MFIs and one recipient illustrates the virtue of using the multilateral as an instrument in foreign policy as seen from the powerful donor’s point of view. Similarly, we show how this strategic behavior is damaging for the recipient in particular and for development in general
"Looking for Trouble...". An evaluation of International Media Support (IMS): Exploring a model for rapid response to threatened media
Get PDFThe report was commissioned by the Royal Danish Ministry of Foreign Affairs and a team was put together comprising Helge Rønning and Kim Brice as external consultants and Hugo Stokke from CMI. International Media Support is an international NGO, based in Copenhagen, which provides support to media in conflict. The mandate covers media reporting on conflict situations, in particular armed conflict.
Threatened media organisations are also covered by the mandate. The evaluation credited IMS for being experimental, innovative and willing to take risks in an often uncertain environment. Among critical points, there were uncertainties about the criteria for intervention, the organisational setup of IMS and their monitoring and evaluational capacity. The evaluation team concluded positively that IMS should be extended with additional funding and made a number of specific recommendations