Entrepreneurship - Atlantic Council

After Vilnius: What’s next on Ukraine’s path to NATO?

Eastern Europe NATO Security & Defense Ukraine

The long-term objective is clear: Ukraine must become one of the world’s leading defense tech countries. This is entirely realistic. After all, Ukraine is already acquiring unique wartime experience on a daily basis and boasts a very large number of highly skilled IT professionals and engineers. Moscow’s full-scale invasion has turned Ukraine into a testing ground for new military technologies. It is also transforming the country into a defense tech superpower.

This process has the potential to profoundly impact Ukraine’s national security and the country’s economy. I am confident that in the coming years, we will witness the emergence of powerful Ukrainian defense tech companies worth billions of dollars. The growth of this sector will play a critical role in Ukrainian defense policy for decades to come and will remain a top national priority.

All that lies ahead. The task now is to defeat Russia. The war unleashed by Vladimir Putin is unlikely to end soon. Instead, it should be viewed as a marathon. Ukrainians must be ready for a long fight. We must play to our strengths as a tech-savvy nation of innovators, and must do everything to maximize effective cooperation between creative minds, state bodies, and the military. Ukrainians have already demonstrated to global audiences that they are some the bravest fighters on the planet. They must now confirm that are also among the smartest.

Mykhailo Fedorov is Ukraine’s Vice Prime Minister for Innovations, Development of Education, Science and Technologies, and Minister of Digital Transformation.

Women entrepreneurs often lack business skills, education, experience, and access to networks in comparison to male peers. Women are also less likely to own bank accounts, take a business loan, and formally register their business, all of which hinder the business’ growth and success rate. The majority of women who do embark on entrepreneurial ventures rely on their own funds or borrow from a family member for startup capital. This naturally restricts access for women from lower-income socioeconomic strata.

In addition to these systemic barriers, women also face societal barriers, including limited agency in household decision-making, restrictions on mobility, and a disproportionate burden of household labor and unpaid care work.

A growing trend of “social media entrepreneurship” is leveling the playing field. Women are able to monetize their skills despite lacking access to business education and male-dominated professional networks. The study also revealed that the ability to run a business from home helps women to circumvent societal barriers and balance their household duties with work. However, in the long run, this increases the risk of entrenching the same regressive gender norms, thus serving as a potential barrier to further growth.

Nevertheless, increasing access to smartphones and the internet remains the most important lever to boost women’s engagement in entrepreneurship.

Making it easier for women to register for fintech products such as mobile wallets as well as promoting the adoption of mobile wallets can drive women’s entrepreneurship. Women who already have entrepreneurial ventures are found to be generally familiar with mobile wallets, which also indicates that these can be leveraged as an avenue to facilitate formal financial inclusion for these entrepreneurs. For instance, public sector banks can encourage women to use mobile wallet credit history to apply for a business loan.

In addition, most women entrepreneurs are unaware of business skill development and startup incubation programs currently being implemented in Pakistan. However, high penetration of social media indicates that these platforms are ideal channels for outreach and awareness generation. Direct linkages between social media platforms and women entrepreneurs can bring needed business skills where the women already are. One aspect of this linkage could also aim to encourage women from lower socioeconomic classes to diversify their presence on social media, encouraging them to take up platforms with wider reach and greater monetization potential.

In the long term, however, it is necessary to promote society-wide, gender-positive norms, and to gender-sensitize the business ecosystem as well as government and banking regulations.

All four authors are pursuing the Master of Arts in International Relations degree at the Johns Hopkins University School of Advanced International Studies. They took on this project as part of their final-year capstone requirements.

Fatimata Ndiaye is currently focusing on states, markets, and institutions, with a regional focus on Africa.

Ishani Srivastava is focusing on development, climate, and sustainability, with a regional focus on Asia.

Estelle Thomas has pursued numerous benevolent ventures as well as forefronted social justice student organizations, in parallel with her academic career.

Yiran Zhan is focusing on international economics and finance, as well as sustainable development.

This research was made possible by the generous support of Seema and Shuja Nawaz on behalf of the Pakistan Initiative of the South Asia Center and the American Pakistan Foundation, in partnership with the School of Advanced International Studies, Johns Hopkins University.

Shuja Nawaz is a distinguished fellow and the founding director of the South Asia Center of the Atlantic Council, Washington DC. His latest book is The Battle for Pakistan: The Bitter US Friendship and a Tough Neighbourhood. On Twitter: @ShujaNawaz

The South Asia Center serves as the Atlantic Council’s focal point for work on the region as well as relations between these countries, neighboring regions, Europe, and the United States.

Issue Brief Mar 27, 2023

The future of women in India: Barriers, facilitators and opportunities

By Amita N. Vyas, Misha Iqbal, Capucine Querenet, Harris Samad, Irfan Nooruddin

This issue brief describes cross-cutting themes, a proposed theory of change, and recommendations that emerged from the Atlantic Council and US Department of State expert convening, “Future of Women and Work in South Asia” on how to foster cross-sectoral collaboration and catalyze knowledge sharing to support women’s economic empowerment in South Asia.

Education India

SouthAsiaSource Sep 26, 2022

To support Afghan women activists, prioritize local knowledge over numbers

By Sophie Mae Berman and Yelena Biberman

Though Afghan women have been included in certain peacebuilding efforts, these experiences were largely tokenist and minimally empowering.

Afghanistan Peacekeeping and Peacebuilding

Report Oct 3, 2022

Pakistan sees growing culture of innovation amid tech startup boom

By Hamna Tariq and Uzair Younus

A tightening global macro environment coupled with increasing domestic political instability is a cause of concern for the sector, especially the domestic startup economy.

Economy & Business Entrepreneurship

Impact investing can help rebuild an inclusive, resilient Turkey after the earthquakes

Selen Ucak — Wed, 12 Apr 2023 20:45:11 +0000

The February earthquakes in Turkey, which also affected Syria, had a staggering, devastating scale. More than fifty thousand lives were lost. In Turkey alone, sixteen million people living in eleven provinces were affected, while the country suffered more than one hundred billion dollars in structural and economic damages, according to the latest reports.

The local economy of the earthquake-affected provinces accounts for 9.8 percent of Turkey’s gross domestic product (GDP), 8.6 percent of exports, and 15 percent of agricultural products. With a lower GDP per capita and a higher unemployment rate than the national average even before the disaster, the region employs over 3.8 million people, primarily in the agriculture, trade, textile, and food sectors, almost 40 percent of whom are employed informally. The local private sector—made up of more than 538,000 enterprises—now needs wide-ranging support to recover from the earthquakes.

Recovery and rebuilding will require a multi-faceted approach prioritizing private-sector support for local development along with social impact. This approach will need to ensure that the region continues progressing toward United Nations Sustainable Development Goals (SDGs) and does not leave vulnerable communities behind, including the displaced. Of the 3.7 million Syrian refugees who fled to Turkey since the Syrian war began, half of them lived in this region, constituting over 11 percent of its overall population, and were affected by the earthquakes. Turkey is now home to over three million internally displaced people, who are looking for economic and social support after this disaster.

One of the essential tools at Turkey’s disposal to tackle these daunting challenges and to design a more sustainable, resilient recovery is impact investing. These are “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return,” according to the Global Impact Investing Network, targeting a spectrum of returns depending on the type of capital and instruments used. As Turkey’s Impact Investing Advisory Board stated in a report published shortly before the earthquakes, urban resilience—which will need to be a priority following this disaster—will benefit from “innovative, sustainable capital allocation and commercial value generation” with an impact focus. Thankfully, the local impact investing ecosystem has been taking root to enable this.

Impact investing can also aim to create self-reliance for refugees and internally displaced people through “refugee lens” investing, which is a framework to qualify and track investments developed by the Refugee Investment Network (RIN), where I work with enterprises and investors focused on impact.

Forced displacement cuts across at least thirteen of the seventeen SDGs around the world, according to RIN. Actively investing in displaced populations leads to new and sustainable solutions. In the aftermath of the earthquakes, that could include supporting the thousands of refugee-owned small businesses in the earthquake region, providing microfinance to local farmers and artisans, or facilitating tech-based remote employment. The goal is to increase displaced people’s livelihoods, financial inclusion, and continued skills development (especially to respond to workforce losses due to the earthquake), thus leading to equitable economic and social revival. Funding the communities and employers around the country that welcome the displaced will also be important.

Having value chains focused on supplier diversity, economic inclusion, and job creation will also help this cause. The public and private sectors can strengthen community resilience by prioritizing local and displaced suppliers affected by the disaster, including social enterprises and cooperatives employing and supporting vulnerable communities through “social procurement.” For instance, Innovation for Development (i4D), a local economic development organization, aims to connect three hundred local producers from the earthquake-affected region with buyers to ensure business continuity and new contracts.

In international trade, proponents of a “Turkiye Compact” call for trade concessions from the European Union, United States, and Canada to incentivize the private sector to hire both Syrian refugees and locals in Turkey with the goal of boosting the local economy and improving social cohesion. According to a United Nations Development Programme feasibility study conducted prior to the earthquakes, such a policy could create 284,000 new jobs (including 57,000 jobs for refugees) and boost exports by 3 percent, primarily of labor-intensive agricultural, processed food, and textile products. Furthermore, local enterprises participating in the Turkiye Compact would become attractive investment opportunities given their tangible impact on displaced communities through employment and sourcing.

Finally, Turkey’s vibrant entrepreneurial ecosystem is more crucial than ever. Accelerators, specialized funds, and growing communities of practice can nurture innovative, impact-driven ventures for earthquake-affected communities and create inclusive solutions. Examples so far have included a waste management start-up facilitating food aid, e-commerce solutions enabling microentrepreneurs, online mental health platforms offering therapy to survivors, and tech innovations in rescue and relief, among many others. Additionally, catalyzing entrepreneurship by underserved communities, especially those experiencing intersectional disadvantages, such as the refugee women entrepreneurs featured in an Atlantic Council documentary last year, will create new pathways to self-reliance.

Bringing all of these solutions together and amplifying their impact through the resources of the global impact investing community, local partnerships, and blended financing—with guarantees, concessional loans, or grants to attract private investments, for instance—will yield tremendous, complementary results.

With such a comprehensive toolbox, it will be possible to rebuild better after this terrible disaster and create more inclusive economies and resilient communities.

Selen Ucak is a social impact professional working at the intersection of private sector and international development. She currently leads a global community of refugee-led and refugee-supporting businesses and social enterprises at the Refugee Investment Network, as well as serving as a consultant on additional projects.

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Sullivan quoted in Arab News on Saudi Arabia’s carbon capture

jjoyner — Mon, 13 Mar 2023 16:21:24 +0000

Nonresident Senior Fellow

The post Sullivan quoted in Arab News on Saudi Arabia’s carbon capture appeared first on Atlantic Council.

Critical connectivity: Reducing the price of data in African markets

Aubrey Hruby — Fri, 03 Mar 2023 20:35:27 +0000

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This report is part of an ongoing partnership on the Power of African Creative Industries between The Policy Center for the New South (PCNS) and the Atlantic Council’s Africa Center.

“Critical connectivity: Reducing the price of data in African markets,” by Africa Center Senior Fellow Aubrey Hruby, analyzes the current state of the digital transformation in Africa and outlines how affordable and accessible data is imperative for further development. Finally, it provides concrete recommendations to the key actors and facilitators of the transition outlined in the Digital Transformation with Africa; a new initiative the Biden administration announced at the 2022 US-Africa Leaders Summit, which emphasizes the importance of reducing data costs in Africa to spur growth and employment.

In outlining why data remains so costly and inaccessible across Africa, Hruby profiles four main detriments: infrastructure, competition, policy, and consumption patterns. Through case studies and success stories from other developing nations who struggled with high-priced data and implemented successful mitigation measures, Hruby develops a framework for reform and showcases how key changes can rapidly reduce data costs, spur development, and transform entire industries. Her recommendations directly address the current US administration, African governments seeking to build and benefit from a digital economy, and global development finance institutions (DFIs) that are already investing and making much needed transformative inroads into African markets.

Throughout the 21st century, African markets have unleashed the globe’s most significant digital revolution, and they are poised to continue doing so over the next few decades as the world’s youngest population reaches maturity. Currently, 40 percent of the continent’s total population is under the age of 15 and represents 27 percent of the entire world population. From 2000 to 2010, the African mobile phone market grew at a rate of 44 percent per year, bringing the number of subscriptions to around 700 million, more than in both the European Union and the United States combined. For African creative and mobile industries, which are emerging at the forefront of this digital revolution, infrastructure and technological systems are critical to the sector’s continued growth. The African Continental Free Trade Area connects 1.3 billion people across fifty-five countries with a combined GDP of over $3 trillion. Digital infrastructure is a vital economic opportunity and a crucial security issue for African nations and their partners.

The African vision is increasingly shaped by the digital tools and platforms African consumers use and the new opportunities that have emerged in a growing start-up ecosystem. According to the UN, the digital economy is set to expand in Africa by 57 percent between 2020 and 2025. With projections by the Alliance for Affordable Internet forecasting that the continent’s digital economy will grow six times over by 2050 to $712 billion and the fact that African startups raised more than $4 billion in venture capital in 2021, it is clear that this sector is booming. Undoubtedly the future is digital, and Africa must be able to access this future affordably if it is to share in the benefits of this global revolution.

The Atlantic Council is the only DC global think tank to have placed African creative industries at the center of its security and prosperity work. The Africa Center’s focus on the creative industries was launched by the Africa Creative Industries Summit of Washington in October 2021 at the Smithsonian National Museum of African Art and was opened by a message from Vice President Kamala Harris. The program is now fully supported by strong sponsors and partners, from ADS Group and Afreximbank to OSF and OCP, allowing the Atlantic Council to continue its leadership in the field by hosting events such as the Sports Business Forum, held in Dakar, and the financial engineering task force for African creative industries. This work was crowned by the Africa Center’s partnership with the US Department of State and its participation in the organization of the African and Young Leaders Diaspora Forum on the first official day of the US-Africa Leaders Summit of December 2022 at the African American Museum of History and Culture in Washington.

Report author

Fellow

Aubrey Hruby

Africa Center

Economy & Business Future of Work

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

AfricaSource Jun 16, 2022

Better data is the key to unlocking major investment in Africa

By Tom Koch

As COVID-19 and the war in Ukraine continue to hurt the African continent, many countries will require significant investment to revitalize their economies. But a persistent attribute of many African markets will continue to be a barrier to private investment: a relative lack of data. This drives up diligence costs, creates difficulties in valuing assets, […]

Africa Digital Policy

New Atlanticist Dec 5, 2022

Can the US and Africa usher in a new era for globalization?

By Katherine Walla

US Trade Representative Katherine Tai discussed the future of US-Africa trade with the African Continental Free Trade Area’s secretary-general, Wamkele Mene, at an exclusive Atlantic Council event.

Africa Trade

AfricaSource Jul 8, 2022

Europe’s Green Deal plan is Africa’s green finance opportunity

By Emilie Bel

Can natural gas and nuclear power be green? “Sometimes, and for a limited period of time,” said the European Parliament on July 6, as part of an ongoing negotiation over the EU taxonomy, a key component of the European Green Deal (EGD). The EGD is the European Union’s ambitious plan to create the first emissions-neutral […]

Africa Climate Change & Climate Action

The post Critical connectivity: Reducing the price of data in African markets appeared first on Atlantic Council.

Vladimir Putin must not be allowed to bankrupt the Ukrainian breadbasket

Andriy Vadaturskyy — Thu, 09 Feb 2023 20:34:20 +0000

While Western countries are providing desperately needed military and economic support to the Ukrainian government, private businesses in Ukraine are struggling largely on their own to survive the devastation caused by the ongoing Russian invasion of their country. This situation is simply not sustainable.

My company, Nibulon, is one of Ukraine’s largest grain producers and exporters. We were enjoying some of the best years in our 30-year history before the start of Russia’s full-scale invasion in February 2022. In a matter of weeks, we went from being a healthy business with a bright future to one battling for survival.

Around 20% of Nibulon’s assets are currently inaccessible in temporarily occupied regions of Ukraine. Other assets including grain elevators, barges, silos, and terminals have been destroyed. In 2022, our exports collapsed because we could no longer access our main export route through the port of Mykolaiv. Thousands of other Ukrainian companies have had similarly grim wartime experiences.

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The liberation of Kherson and the surrounding region in late 2022 revealed the scale of the effort that will be necessary to restore agricultural production in regions of Ukraine subjected to Russian occupation. These regions are now believed to be among the most heavily mined areas in the world. De-mining will add significant costs and delays before farming activities can resume. Experts say that one day of war means one month of de-mining. We are already investing in de-mining equipment and personnel. At present, we calculate that with 20-25 people working ten hours a day, it will take three years to clear our fields in the worst affected areas.

To a greater or lesser degree, these problems are affecting the entire agricultural industry in Ukraine. The UN estimates that this strategically crucial sector of the Ukrainian economy has already suffered damages and losses of over $30 billion. Prior to the full-scale Russian invasion of February 2022, Ukraine had been steadily expanding its global reach as a food exporter and was widely seen as an emerging agricultural superpower. There is now a very real danger that Putin will succeed in bankrupting the Ukrainian breadbasket.

Like so many other Ukrainian companies, we have been adapting our business model to wartime conditions. We have successfully re-routed exports via land and rail and have built a new grain terminal on the Danube close to the Romanian border. However, we need to invest more in order to increase our exports and reduce the much higher transportation costs that farmers are now having to pay.

Eurasia Center events

After Vilnius: What’s next on Ukraine’s path to NATO?

Eastern Europe NATO Security & Defense Ukraine

One of the key problems facing the entire private sector in wartime Ukraine is the lack of access to financing because of prohibitively high borrowing rates domestically and internationally. Not surprisingly, war creates a significant risk premium. As a result, international capital markets are effectively closed for Ukrainian companies. Alternative forms of financing are urgently needed.

The United Nations and Turkey have succeeded in establishing a grain corridor to allow limited exports of Ukrainian grain through the Black Sea. Now is the time to establish a “financing corridor.” Just as the grain corridor has been a lifeline for Ukraine’s agricultural sector, the Ukrainian economy needs a mechanism to help private businesses secure immediate survival and safeguard their futures by investing to become more resilient and competitive.

A financing corridor would help ensure private businesses are not forced to close and can instead go on to underpin Ukraine’s reconstruction and recovery. The requirements are simple. First, lenders should offer Ukrainian businesses a standstill on their existing liabilities. A standstill will provide much-needed flexibility to address some of the immediate challenges to their operations. Second, international institutions should provide fresh financing for urgent working capital needs or strategic investments. Third, G7 countries and international financial institutions should offer partial guarantees to enable Ukraine’s major exporters to issue new debt at acceptable cost levels.

In the agricultural sector, enhanced financial support is essential as businesses look to repair or replace damaged equipment and facilities. The World Bank estimates the sector will require $18.7 billion in new investment over the coming decade. The next agricultural planting season is just around the corner. Without increased access to capital, farmers will not be able to obtain the equipment and fertiliser they need to sow their crops as planned.

If this happens, the consequences will be felt not only in Ukraine but far beyond the country’s borders as well. Reduced yields in Ukraine will impact global food security. The UN World Food Program estimates that the ongoing Russian invasion of Ukraine could increase the number of people at risk of acute hunger by 47 million, with the greatest impact on Sub-Saharan Africa.

Agriculture is a slow-motion business. If producers cannot invest today, the negative effects will be felt for years to come. The survival of the country’s major agricultural exporters is essential for Ukraine’s long-term economic reconstruction and recovery. It is also important for global stability. Good business strategy requires looking to the risks and opportunities that lie ahead. Western governments need to think beyond the immediate challenges of the war today and also consider what will be needed to secure Ukraine’s future.

Andriy Vadaturskyy is the owner and CEO of Ukrainian agribusiness Nibulon.

Kateryna Markevych, the lead expert on economic and social programs at the Razumkov Center think tank in Kyiv, told Reuters in late 2022 that SME activity in Ukraine had worsened considerably as a result of the Russian airstrike campaign against civilian infrastructure. In general, the war has led to higher costs throughout value chains while the volume of bank loans has decreased. This means SMEs are often not able to secure alternative financial resources. As a result, many have been forced to shut down. Other consequences of the conflict such as the closure of ports, disruption of trade routes, power shortages, and widespread material damage have added to the challenges facing Ukrainian business owners.

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It comes as no surprise that Ukraine’s GDP declined by around 35% during 2022, the largest annual drop since the country regained independence in 1991. The International Labor Organization (ILO) has estimated that 4.8 million people lost their jobs in the same time period, while UNDP officials have predicted that if the conflict continues, up to 90% of the Ukrainian population could face poverty.

For SME owners, getting through this crisis period requires resolve and creativity. “The war has dealt a heavy blow to the Ukrainian economy and businesses,” says Dr. Bohdan Ferens, founder of SD Platform, a social-democratic NGO in Ukraine, and SPARK’s liaison in Ukraine. “The losses of entrepreneurs as a result of the war, unfortunately, are growing every day. However, businesses are trying to adapt to new realities, or are looking for new directions and opportunities to work.”

Many Ukrainian SMEs are successfully navigating the new practicalities of doing business during wartime. For some, this means reacting directly to emerging military or humanitarian needs and incorporating them into their business model. A stark illustration of this trend is Yuriy Zakharchuk, who transitioned from manufacturing theatrical costumes to military apparel. Similarly, after closing their shop for a few months, employees of a ceramic studio in Mykolaiv decided to arrange workshops for children in exchange for donations.

For other SME owners, surviving has meant relocating to safer regions in western Ukraine or across the border in the European Union. For instance, dentists Oleksiy Vlasov and Olena Shestakova moved from Kramatorsk in eastern Ukraine to Chernivtsi close to the Romanian border, where they offer free treatment to internally displaced people. This was made possible thanks to a state-guaranteed loan which allowed them to move and helped cover initial rental payments. There are thousands of similar cases across Ukraine. More help is urgently needed in order to support the SME sector. This in turn will allow SMEs to make a meaningful contribution to the revival of the Ukrainian economy.

Eurasia Center events

After Vilnius: What’s next on Ukraine’s path to NATO?

Eastern Europe NATO Security & Defense Ukraine

Local authorities and the existing Ukrainian entrepreneurial ecosystem have long been essential to the development of the country’s SME sector. Support has included initiatives to help entrepreneurs and business owners access production premises, support services, and new technologies. One such example is the CSR Development Center, which promotes the principles of sustainable business and social responsibility in Ukraine. Realizing the need to adapt to the new wartime environment, the center has launched several initiatives to support entrepreneurs, such as the Mentoring Program for Ukrainians Abroad. These initiatives are a direct response to the challenges created by the Russian invasion.

One initiative features a program for women looking to set up an SME or expand their existing business. The program offers a combination of training, networking, and financing opportunities. “During the war, the role of women has changed. As there are currently a lot more men than women serving in the military, women now have more influence on the stability of the Ukrainian economy,” notes Oleksandra Hondiul, Project Manager at CSR Development Center. “At the same time, the demands on these women have increased, such as providing for the family, taking care of children, managing businesses, and so forth.”

At the international level, governments, philanthropists, and institutional donors have joined forces over the past twelve months to help meet Ukraine’s growing humanitarian needs. But while the world’s attention is understandably focused on relief efforts during the ongoing conflict, economic recovery and support for Ukraine’s businesses is also urgently needed.

In July 2022, the Ukrainian government launched its comprehensive National Recovery Plan detailing a pathway to rebuilding the economy once the war is over. Shortly after, Liesje Schreinemacher, Minister for Foreign Trade and Development Cooperation of the Netherlands, pledged significant funds to enable Ukrainian SMEs to invest in their businesses and to rebuild a number of Ukrainian cities.

It is vital that these efforts now continue with an emphasis on support for the SME sector. “It is worth thinking about restoration today, and the support of our Western partners, in particular the Dutch ones, is very important,” concludes Ferens.

Seba Salim is a Communications Associate at SPARK, an international NGO specializing in support for entrepreneurs and SMEs in fragile and conflict-affected regions throughout Eastern Europe, the Middle East, and Africa. Sarah Page is a Communications Manager at SPARK.

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Thanks to the unprecedented support of Ukraine’s international partners, today’s ambitious visions for a new Ukrainian economy are entirely feasible. This will in all likelihood be a green economy at the cutting edge of the digital revolution.

President Zelenskyy had already set Ukraine on the road to a digital future long before the horrors of Russia’s full-scale invasion. In the early days of his presidency in spring 2019, Zelenskyy identified digitalization as a national priority and vowed to create “a country in a smartphone.”

On the eve of the Russian invasion, Ukraine had already made significant progress in this direction. More than 10 million Ukrainians, or around one-third of the entire adult population, had installed the Diia app, which offered a range of public services and documents in digital format. The impact of this digitalization has been evident during the war, with Ukrainians frequently using virtual documents to identify themselves and pass checkpoints.

The tech sector had also established itself as a key engine of the economy in pre-war Ukraine. By the end of 2021, the IT industry was generating around $6.8 billion in annual export earnings, representing approximately 10% of Ukraine’s overall export revenues.

These developments are encouraging and indicate that Ukraine can seize the unique opportunities that may soon emerge. At the same time, the post-war transformation of the country will force the Ukrainian authorities and the domestic tech industry to think on a far larger scale than ever before. International investments alone will dwarf anything seen in Ukraine since the country regained independence in 1991.

Eurasia Center events

After Vilnius: What’s next on Ukraine’s path to NATO?

Eastern Europe NATO Security & Defense Ukraine

Ukraine’s IT industry certainly has the potential to rise to the coming challenges. On the eve of the invasion, there were more than 250,000 IT engineers in the country working for companies that developed advanced solutions for many of the world’s biggest brands. To harness this potential and position the country for future success, Ukraine’s Ministry of Digital Transformation must engage with the world’s leading experts to develop an effective digital transformation strategy.

This strategy must address a series of core issues such as mastering digital skills, engineering digital infrastructure, the digitalization of public services, and the digital transformation of Ukraine’s business environment. Ukraine must adapt its education system to make sure the emerging generation of young Ukrainians are equipped with the necessary English-language and tech skills to drive the country’s transformation forward. Teachers will need to have expert knowledge, while schools must have sufficient internet access and tech tools.

These innovations need to be applied evenly across the country to make sure progress is consistent and no regions are left behind. This is especially important for regions liberated from Russian occupation. Digitalization must also extend to every branch of public services including healthcare, housing, and municipal services.

Even this very brief overview highlights the vast proportions of the undertaking that lies ahead for Ukraine. The envisaged digital revolution will require the involvement of experts in a wide variety of fields including law, education, energy, medicine, and security as well as IT itself.

The experience of the past ten months leaves little room for doubt that the global community will be ready to support Ukraine’s post-war digital transformation. While the Ukrainian Ministry of Digital Transformation will have the task of coordinating the creation of a digital transformation strategy, the Ministry can call on the support of a range of national governments, international financial institutions such as the World Bank and the EBRD, global development agencies, and many of the world’s largest tech companies.

Today, while Ukraine’s heroic defense against Russian aggression is still underway, it is time to create a broad coalition of allies and establish expert working groups to develop a strategy development fund. The platform for this coalition can be the Digital for Freedom initiative already put forward by the Ministry of Digital Transformation in mid-2022.

Ukraine has already demonstrated that with enough military support, it can win the war. The country’s international partners must also be ready to begin the massive task of reconstruction as soon as circumstances allow. A comprehensive and ambitious digital transformation strategy can serve as one of the foundational documents for the coordination of efforts to make the new Ukraine an example of progress for the entire world.

Anatoly Motkin is president of the StrategEast Center, an independent institution working to develop Eurasia’s digital economy in collaboration with international financial institutions, development agencies, global tech companies, and Eurasian governments.

The rise of the country’s tech sector is driving the digitization of Ukrainian society. In recent years, Ukraine has witnessed a dramatic increase in cashless payments and other FinTech innovations. Following his election in 2019, Ukrainian President Volodymyr Zelenskyy established the Ministry of Digital Transformation to facilitate what Zelenskyy has called the creation of “a state within a smartphone.”

Prior to this year’s Russian invasion, the ministry oversaw the launch of digital options to replace a range of bureaucratic processes and secured legal recognition for digital versions of state-issued documents such as passports and driving licenses. With the tech sector now demonstrating remarkable wartime resilience, many believe this ongoing digitalization holds the key to Ukraine’s future.

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The IT industry has played a crucial role in expanding the Ukrainian middle class thanks to average salaries in the range of $3,000 per month compared to a national average of approximately $500. One continuing IT industry trend is the strong market share of IT outsourcing. At present, pure product development accounts for only 16% of the IT industry in Ukraine.

Efforts to find investors for new projects have long been complicated by security concerns related to Russian aggression. Eveline Buchatskiy, VP of Special Projects at Ukrainian IT company airSlate, recalls a time when investing in the next Ukrainian startup was a competitive affair. Unfortunately, she says, the venture capital investment climate deteriorated following the outbreak of hostilities with Russia in 2014. Today, airSlate focuses heavily on Ukrainian-based product development, with Buchatskiy confident that the appeal of Ukrainian tech creativity still outweighs the obvious threats created by Russia’s ongoing invasion.

DroneUA founder Valerii Iakovenko is a good example of this creativity. Iakovenko is a medical doctor, turned insurance banker, turned tech entrepreneur. Nine years ago, he and his business partner set out to create ecosystems that support the use of tech in the agricultural industry. According to his data, use of DroneUA’s agriculture drones helps farmers increase agricultural yield by 4% for corn and 2% for wheat. At scale, these percentages are significant, especially given Ukraine’s status as one of the world’s leading agricultural producers.

Last year, the DroneUA team set their sights on the task of providing additional reliable energy sources, with Iakovenko’s team working toward a sustainable marketplace for energy production. This is easier said than done. Not only are supply chains problematic, but increased production requires a growing network of installers and maintenance techs. Additionally, self-sufficient energy production systems are cost-prohibitive. Iakovenko sees the electric independence segment of the tech sector as ready for investment, “once we win the war.” In the meantime, he is focusing on his current priority of providing self-supporting power for Starlink systems.

In order to reach its true potential, Ukraine’s tech sector requires a suitable legal framework. Former US Ambassador to Ukraine Steven Pifer highlights the need for increased legislative stability moving forward. This is particularly salient in the IT sector where proprietary data protection is a key element of business success.

In 2020, Ukraine established the Ukrainian Intellectual Property Institute to address these concerns. The same year, Ukraine also launched the National Intellectual Property Authority (NIPA). More recently, the Ukraine IT Association formed an IT Law Committee to address IP protection concerns specifically in the tech space.

These efforts are needed for many reasons, but it is also important to acknowledge the risks they create in the current environment. Establishing extensive legal protections places potential limitations on innovation within the tech sector. This is particularly relevant for businesses that are trying to innovate and adapt rapidly to changing circumstances. Businesses are faced with the choice of holding on to the advantages of IP protections or sharing data to support Ukrainian innovation and accepting the risk therein.

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After Vilnius: What’s next on Ukraine’s path to NATO?

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In recent years, there has been significant discussion over how to help the IT sector transition from IT outsourcing to IT service. Recommendations have centered on targeted taxation, sector integration, talent acquisition, and intellectual property protection. Ukraine looked to increase taxes on non-Ukrainian-owned companies in 2022 to promote local innovation. However, increasing taxes on foreign companies willing to accept the risk of operating in Ukraine could further stall progress. Meanwhile, the December 2021 launch of Ukrainian tech hub Diia City aims to offer further taxation incentives. Diia City significantly reduces the tax burden on IT sector businesses and employees. The project looks to create the largest innovation hub in Europe.

Sector integration continues to provide market growth opportunities. The drive for tech solutions is particularly palpable in the Ukrainian agriculture sector. According to Iakovenko, Ukrainian farmers are often young, eager for tech adoption, and unburdened by a bias for traditional practices. Ukrainian farmers are already utilizing satellite data to determine crop fertility and planting schedules. They also lead the world in terms of drone usage in agriculture.

One key problem facing Ukrainian IT companies is finding enough qualified recruits to maintain the tech sector’s robust growth rate. In order to overcome mounting personnel shortages, the sector has previously sought to attract international talent from nearby Poland, Romania, and elsewhere. However, this is currently unrealistic due to the ongoing Russian invasion.

The Ukrainian government can address shortages through scholarships, increased trade school-style education, and an expansion of the Ukrainian IT Creative Fund. These intermediate and long-term solutions make good sense but do not directly address the current situation. With the increase of Ukrainians moving abroad to escape the war, the government could offer tax waivers to Ukrainian workers outside the country continuing to work for Ukrainian companies remotely. While this will not grow the workforce, it will help diminish the talent drain.

The Ukrainian IT industry is moving forward while adapting to the extreme circumstances created by Russia’s invasion. Much still needs to be done in order to maximize the obvious potential of the country’s tech talent, but the mood within the sector remains overwhelmingly optimistic. This optimism is based on the many resourceful and committed people who are driving Ukraine’s digital progress and shaping the country’s future.

Dathan Duplichen is a graduate of the Ford Dorsey Master’s in International Policy program at Stanford University and a European Foreign Area Officer for the United States Department of Defense. Opinions expressed in this article are those of the author and do not represent the United States Department of Defense.

However, a tightening global macro environment coupled with increasing domestic political instability is a cause of concern for the sector, especially the domestic startup economy. To understand the risks and opportunities facing the technology ecosystem, the Atlantic Council’s Pakistan Initiative interviewed several experts within and outside Pakistan. The analysis below highlights the current state of the ecosystem and the impact of ongoing economic and political instability in Pakistan. It also outlines recommendations for key stakeholders including policymakers seeking to further globalize Pakistan’s technology sector to unlock both export earnings and foreign investment opportunities.

The South Asia Center serves as the Atlantic Council’s focal point for work on the region as well as relations between these countries, neighboring regions, Europe, and the United States.

By the Freedom and Prosperity Center

SouthAsiaSource Sep 9, 2022

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More than one-third of Pakistan is underwater amid catastrophic climate change-induced flooding. South Asia Center experts provide their analyses of the situation.

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By Ali Jehangir Siddiqui

Pakistan sits at the crossroads of the abundant resources of Central Asia and the Middle East, and the lucrative markets of China and India. It therefore has the potential to play a significant connecting role, one that enables broader regional interdependency while boosting domestic economic prospects.

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In-Depth Research & Reports Feb 15, 2022

Realizing the promise and potential of “Web3” for Pakistan

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This paper is an initial attempt to frame debate about the Web3 ecosystem in Pakistan – which is a $100+ billion opportunity – and make recommendations on how policymakers should approach regulating this sector.

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Promoting more women in leadership is “a business imperative” and key to unlocking economic prosperity, say top executives

Allison Holle — Tue, 14 Jun 2022 23:40:08 +0000

On June 7, the Atlantic Council’s empowerME Initiative held a workshop to discuss strategies for empowering more women to reach senior leadership positions in Saudi Arabia and the wider Middle East and North Africa (MENA) region. The in-person components were convened in partnership with the American Chamber of Commerce Saudi Arabia’s Women in Business Committee and hosted by KPMG Saudi Arabia.

Balance of power: Promoting more women in leadership featured keynote welcome remarks by US Mission to the Kingdom of Saudi Arabia Chargé d’Affaires Martina Strong, welcome remarks by KPMG in Saudi Arabia and Levant Chairman and CEO Dr. Abdullah Al Fozan, and a panel moderated by Entrepreneur Middle East Managing Editor Tamara Pupic featuring PepsiCo Human Resources Director Rima Al Soraihi, Cisco Vice President for Middle East and Africa Reem Asaad, Boeing Executive Vice President and Senior Advisor Leanne Caret, and UPS President for International Public Affairs and Sustainability Penelope “Penny” Naas.

This was the first in a series of four events for the WIn (Women Innovators) Fellowship, led by the Atlantic Council’s empowerME Initiative in cooperation with Georgetown University’s McDonough School of Business and with support from US Embassy Riyadh, PepsiCo, and UPS.

The key points from the discussion are summarized below.

Challenges for aspiring and established women leaders:

While celebrating the “amazing change” that has taken place over the past six years in Saudi Arabia, Abdullah Al Fozan stressed that “the women’s empowerment movement is new here in Saudi.” He added that Saudi women only entered the professional services industry in 2007, but after a “challenging journey” over three hundred women are now part of KPMG’s national workforce.
Rima Al Soraihi identified “lack of mobility,” particularly due to caregiving obligations and family restrictions, as “one of the biggest challenges that women are facing” that limit their labor force participation in Saudi Arabia. Gender discrimination and exclusion of women from decision making processes are additional barriers; Al Soraihi advised women facing the latter to ask male colleagues to recap key conversations until eventually they are included.
Reem Asaad argued that barriers to women in leadership “are not specifically a Saudi issue, but more of a global issue,” and Leanne Caret concurred that “more times than not, the conversations are identical” in Europe, the United States, and Saudi Arabia.
Asaad pointed to three obstacles that can contribute to the disparity between the amount of women holding entry-level positions versus senior roles. First, age-old stereotypes about women’s leadership styles persist: women are perceived as “confrontational, aggressive, too emotional, or weak.” Second, unconscious bias can hinder women’s professional growth, especially since research indicates that “in many cases for career progression men are judged based on their potential, whereas women are judged on their past performance.” Third, women have a responsibility to “take a moment to look within” and identify ways they might hold themselves back, in order to challenge the limitations of societal and cultural conditioning.
Caret emphasized the importance of top leadership representing the organization’s entire workforce and the community in which they work: “We can talk all day about how we believe in inclusivity, diversity, and equity, but if the leadership doesn’t reflect that type of a world, then you’re not going to believe that it exists for you.” Boeing’s work has yielded positive results, as minority representation has increased since the start of the pandemic, and 2021 was the first year in decades that women have not left the workforce at a higher rate than men.

Role of the public and private sectors in driving change:

Penny Naas explained that setting mandates on gender representation in countries like Saudi Arabia can be “really impactful in shifting cultural norms.” She commented that “the threat of quotas on boards has really moved the needle in a lot of countries,” and a similar government policy in Saudi Arabia “might be very helpful” for companies to realize it is in their best interest to have diverse boards. However, she cautioned that another focus must be structuring systems to attract “the best talent for the job” because women will struggle to feel a sense of belonging and to advance in their careers if they are not a good fit and have simply satisfied a quota.
Asaad said that while the private sector “should hold itself to account” and provides expertise that shapes government policy, it is the public sector that “in many ways often sets the tone.” She highlighted how Saudi Arabia is “leading the way” with its Vision 2030 goal to increase women’s labor force participation from 22 percent to 30 percent. The private sector is following suit, including the Arab Institute for Women’s Empowerment, which recently announced its plan to invest in training Saudi women, which is expected to have a “return on investment of $400 billion by 2030.” Asaad also praised the UAE Gender Balance Council as “setting a great example of how businesses should work.”
Al Fozan stressed the “power of legislation” when first established by the government and then applied to a company-specific context. From 2015 to 2020, he oversaw an internal version of the Nitaqat program, which resulted in a boost in nationalization from 20 percent to 42 percent. He also set a quota for women’s representation at KPMG; the firm now has ten female directors and three female partners.

Top leadership skills that women must develop:

Noting the global period of transition and prime opportunity for innovation during the pandemic, Naas stressed that women should align with “the people who are ready for the change” and who will “help build your confidence and your career,” while purposefully disregarding the opinions of “the people you’re never going to be able to convince.” Naas also underlined that humor can be used to “disarm situations” that are potentially demeaning to women to “take back the power, elevate your status, and be seen as a leader.”
In order to reach their full potential, Asaad advised aspiring women leaders to practice self-belief and “become your own champion”; “learn to ask for help” and as a byproduct, expand your professional network; and “continue learning at every stage of your career.”
Al Soraihi highlighted the need to “own your career” by taking initiative to create and add value, asking for critical experiences and for support in developing new skills, and quickly adapting to change as multinational corporations continue to evolve.
Caret shared the “Four G’s” that have been imperative throughout her career: grit (being known for delivering on your commitments); gumption (transcending imposter syndrome to put yourself out there); grace (giving yourself and others a break, which then dictates how others treat you); and gratitude (how you comport yourself and thank others).

Strategies to ensure more women reach leadership positions:

Reflecting on the success of PepsiCo’s global Work That Works program, Al Soraihi advised companies to offer “greater flexibility on where or how work can happen,” so that women and mothers in particular have the option to telework. Caret added that organizations should give both men and women the option “to step away from their careers” and come back later without starting over completely.
Asaad stressed that formal mentorship programs are “one of the underused and underrated resources” for aspiring women leaders, while Caret emphasized that informal, casual mentorship from colleagues outside of your traditional reporting structure can also have a profound impact. According to Naas, sponsorship is another key tool, and having more than one advocate at talent discussions can propel your career forward.
Caret emphasized that it is crucial to have women in leadership “who can identify microaggressions and call them out” and women on hiring teams to ensure highly-educated women graduates—who are now the majority—join the workforce, especially in STEM fields.
Pupic lauded the critical role that male allies play in championing women’s advancement to leadership roles, while Naas cautioned that “we need to bring men with us” so they see women’s empowerment as “expanding the pie as opposed to swapping out a piece of the pie.” Research reveals that across the G7 countries, the people who support female leadership the least are men between the ages of eighteen and thirty-five.
Ultimately, empowering more women to reach positions of senior management and leadership is “a business imperative,” according to Caret, who cited that diverse boards lead more profitable companies. Asaad concurred that “it’s not just about moral duty or diversity and inclusion—it’s really about economic prosperity for a nation.”

Allison Holle is assistant director of the Atlantic Council’s empowerME Initiative. Follow her @AllisonHolle.

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Do countries need freedom to achieve prosperity?

Dan Negrea, Joseph Lemoine, Matthew Kroenig, Joel Kesselbrenner — Wed, 01 Jun 2022 17:36:54 +0000

Do countries need freedom to achieve prosperity?

Introducing the Atlantic Council Freedom and Prosperity Indexes

The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

Freedom and Prosperity Center

Freedom and Prosperity around the world

See how scores have changed over time

Explore the data

downloaD data set

Executive Summary

The Atlantic Council’s Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries—and to explore the nature
of the relationship between freedom and prosperity in both developing and developed nations.

To aid in this task, this report introduces the new Atlantic Council Freedom and Prosperity Indexes.

The Freedom Index measures economic, political, and legal freedoms for nearly every country in the world, using the latest available data when the index was constructed at the end of 2021. The Prosperity Index measures economic wellbeing and human flourishing for the same countries and time period. In addition, we collected historical data to allow us to track and analyze change over time. We constructed the same indexes going back in five-year increments for the years 2006, 2011, and 2016; 2006 is the earliest date for which data on our indicators are available.

To be sure, there are limits to any data-collection effort. The world changes quickly, and the data we collected at the end of 2021 may not still represent current realities in every case. Russia, for example, is less free today than when we collected the data, due to Vladimir Putin’s invasion of Ukraine and his related crackdowns at home. In addition, we needed to choose indicators that could be applied across all countries and over time, but these generalized measures may not always fit neatly with the unique circumstances in every country. Still, despite these limitations, we believe that these indexes provide new and valuable information on global freedom and prosperity.

Going forward, we plan to update the indexes annually. The methodology to produce the indexes is straightforward and transparent, and is described in detail in the appendix.

We have built on the work of several comparable country indexes. Many of these measure one aspect or another of freedom or prosperity. Some combine freedom and prosperity indicators and produce a single index. Our approach in designing the Atlantic Council Freedom and Prosperity Indexes was different in a few ways.

We defined freedom comprehensively. Many existing indexes measure economic, political, and legal freedoms separately, whereas we combine all three in our Freedom Index.
We defined prosperity comprehensively. We also take a broad view of what constitutes a prosperous country. We go beyond material measurements like income per capita and healthcare. We argue that a truly prosperous country should also score well on the quality of the environment, its treatment of minorities, and the general happiness of the population.
We constructed separate indexes for freedom and prosperity. By creating two distinct indexes, we hope to give researchers a better opportunity to analyze the relationship between freedom and prosperity. We also offer policymakers and other thought leaders clearer benchmarks for reforms and tracking results over time.

The indexes demonstrate that there is a strong relationship between freedom and prosperity. This report draws on the trajectory of the results over time, and other historical evidence, to argue that freedom tends to result in prosperity. In other words, freer countries tend to be more prosperous, and we have reason to believe that improvements in freedom will, over time, lead to greater and more durable prosperity.

The report also shows that autocracies generally do not deliver prosperity for their people. All countries rated Prosperous in our index (except for Singapore and Israel) also rank as Free. All countries in our Free category fall in either the Prosperous category or in the upper half of the Mostly Prosperous category. Both China and Russia rank lower in the Prosperity Index than Free countries do.

These findings lead us to recommend that governments, international organizations, private-sector companies, philanthropic organizations, and others concerned with prosperity promote economic, political, and legal freedoms.

The center will use the indexes and supporting data for its own research, and will also make them available for other researchers. All the research and resources used to produce the indexes and this report are publicly available. The Freedom and Prosperity datasets are accessible on the center’s website. The indexes will be updated annually, allowing thinkers and doers to track progress over time. Through our work and the work of others, we hope to make the world freer and more prosperous.

Summary and key takeaways

We hope that scholars and practitioners can use these data to conduct a wide range of analyses and to forge practical recommendations. In this section, we present some of our own preliminary analysis to explore the central question of this project: what is the relationship between freedom and prosperity? To be sure, this has been the subject of enormous scholarly debate, and we will not be able to resolve this question in a single report. Still, this analysis brings new data to bear on this question. The data and analysis in this report indicate that freedom and prosperity are correlated, and provide further support for the thesis that freedom contributes to prosperity.

Prosperity is highly correlated with freedom

A central finding of this report is that prosperity and freedom are highly correlated. The correlation coefficient between the indexes is 0.81. High values of Freedom are associated with high values of Prosperity, and low values of Freedom are associated with low values of Prosperity. The R² statistic shows that 66 percent of the variation in prosperity around the world can be explained by freedom (Table 5).

The strong relationship between freedom and prosperity can also be seen in simple descriptive statistics. With the exception of Israel and Singapore, every country in the Prosperous category is also in the Free category. Israel and Singapore (due to the latter’s high levels of economic freedom) occupy the two highest positions in the Mostly Free category (Table 4).

Moreover, no Free countries in 2021 are Mostly Unprosperous or Unprosperous; they are either Prosperous or Mostly Prosperous. The forty-one countries that comprise the top category of the Freedom Index also all rank in the top fifty for the Prosperity Index, except for Romania (fifty-one in the Prosperity Index) and Cabo Verde (eighty-one).

In addition, all Unfree countries in our Freedom Index rank in the Mostly Unprosperous or Unprosperous categories in our Prosperity Index—except for Cuba, which scores above fifty on Minority Rights and Health.

Continuing with the descriptive statistics, we find that citizens in Free countries are five times richer in per capita income ($36,142) than citizens in Mostly Free countries ($7,246) (Table 3). They are six times richer than citizens in Mostly Unfree societies ($5,791).

Table 3: Descriptive statistics across Freedom Index categories

Category	Country counts	Freedom Index			Population covered			GNI per Capita (US$)			Health Score
Category	Country counts			Mean	Median	Mean	Median	Mean	Median	Mean	Median
Global	174	56.7	55.7	7,686	100%	13,312	5,070	62.2	67.2
Free	41	83.2	82.3	1,131	15%	36.142	32,290	87.5	89.9
Mostly free	67	60.8	59.7	2,824	37%	7,246	7,246	60.6	65.9
Mostly unfree	55	39.7	40.5	3,570	46%	5,791	5,791	49.1	47.1
Unfree	11	18.3	18.9	157	2%	2,775	2,775	43.7	42

Table 3 Continued: Simple statistics across Freedom Index categories

Category	Country counts	Environment Score			Happiness Score			Minority Rights Score			Prosperity Index
Category	Country counts			Mean	Median	Mean	Median	Mean	Median	Mean	Median
Global	174	45.4	46.1	62.2	56.1	79.1	87.6	51.2	49
Free	41	80.7	89.2	79.4	78.4	94.6	95.9	76.9	79.1
Mostly free	67	38.7	41.6	52.1	52.4	85.3	88.9	48.2	47.7
Mostly unfree	55	30.4	27.1	47.0	45.3	66.7	70.0	40.0	38.3
Unfree	11	29.4	29.5	27.5	22.6	47.6	45.6	30.5	31.3

The quality of life is also different in Free and Unfree societies. As can be seen in Table 3, Health, Environment, Happiness, and Minority Rights improve as a country moves toward greater freedom. The average Health score jumps from 60.6 to 87.5 when moving from the Mostly Free to the Free category. The average Environment score drops by more than 50 percent when moving from the Free group to the Mostly Free group. People in Free countries are almost three times happier than people in Unfree countries. For Minority Rights, the gap is smaller between the Mostly Free and Free groups (nine points), but the score drops significantly as freedom decreases, with gaps of almost twenty points between Mostly Free and Mostly Unfree, and again between Mostly Unfree and Unfree. These results suggest that more freedom is associated with a better life for the average person.

Table 4: Overlap between freedom and prosperity categories

This table shows the percentage of countries in each overlapping category. Shown in parentheses is the number of countries.

Evidence suggests that freedom contributes to prosperity

In this section, we examine whether freer countries tend to become more prosperous over time. Scholars have long debated the direction of the relationship between freedom and prosperity. The insight that freedom promotes prosperity goes back at least to Adam Smith’s The Wealth of Nations, which argues that laws and institutions that protect the liberty of individuals to pursue their own interests result in greater prosperity for the larger society.

Others argue the relationship goes in the opposite direction. Barrington Moore, for example, argues that a country cannot sustain democracy without a thriving middle class. People acquire property and material wealth first, and then demand a voice in government, including the freedoms to protect their wealth. This hypothesis goes all the way back to Aristotle, who posited that a large, prosperous middle class may mediate between rich and poor, creating the legal foundation upon which political freedom may function. A century ago, Max Weber extended this line of thought, proposing that the middle class defends its economic power by enshrining it in laws and institutions.

A third possibility is that there is a positive feedback loop; freedom begets prosperity, which, in turn, begets more freedom.

The idea that institutions are the key to long-run economic growth is well established in contemporary economic theory. Institutions provide the rules of the game. Rules that incentivize entrepreneurship, hard work, long-term planning, and broad access to economic opportunities tend to produce wealthier societies. Rules that stifle innovation, discriminate against certain segments of society, and do not guarantee that individuals will be able to enjoy the fruits of their labors and creations tend to produce poorer societies.

In theory, both democratic and autocratic countries could put in place sound economic institutions to produce long-run growth. But, in practice, democracies are much more likely to do so. Dictators often establish rules that maximize their political control and benefit themselves and their supporters, to the detriment of broader segments of society. On the other hand, because democratic leaders are drawn from, and represent, broader cross sections of society, they tend to put in place institutions that benefit wider swaths of that society.

We will not be able to definitively resolve this complex debate in a single report, but we do bring new data to bear on these questions. We believe that our data and associated analysis provide evidence that freer countries tend to become more prosperous.

In an effort to disentangle this relationship, we examined the strength of the correlations between freedom and prosperity over time. Using the same methodology, we re-created the 2021 Freedom and Prosperity Indexes for 2016, 2011, and 2006. We examined whether measures for freedom in prior years are associated with levels of prosperity in subsequent years. After all, changes in prosperity do not happen overnight. If freedom drives subsequent prosperity, then we should see the correlations between freedom in prior years more strongly associated with levels of prosperity in subsequent years.

This is what we found. Indeed, as one can see in Table 5 and Figure 6, the longer the time lapses between our measures of Freedom and Prosperity, the stronger the association. A country’s level of Prosperity today is better explained by its level of Freedom in 2006 than by its current Freedom. In this analysis we are concerned with the general trend over time, not the absolute differences from year to year. The correlation and R2 statistics are higher the further one goes back in time, indicating a stronger fit between past Freedom and future Prosperity. The 2006 Freedom Index, the earliest measure of Freedom calculated for this report, is most strongly associated with levels of Prosperity in 2021. While the relative differences may seem small, they are in a consistent direction. This rough test does not provide definitive proof that advances in freedom produce subsequent prosperity, but it is suggestive of such a dynamic and worthy of further investigation.

Table 5: Historical correlations

Prosperity 2021
Freedom Index Year	R2	Slope	Simple Correlation
2021	0.656	0.762	0.810
2016	0.662	0.771	0.814
2011	0.673	0.809	0.821
2006	0.677	0.834	0.823

Note: The table is based on the results of simple ordinary least squares regression, in which Prosperity Index 2021 is the dependent variable and time series of the Freedom Index are the explanatory variables.

We also tested the alternative hypothesis. Are past levels of Prosperity more strongly associated with current levels of Freedom? While there is a relationship, it is weaker than the link between Freedom and subsequent Prosperity. For example, the R2 statistic between Prosperity in 2006 and Freedom in 2021 is 0.613, while the same statistic for Freedom in 2006 and Prosperity in 2021 is 0.677. Freedom in a given year is more strongly associated with subsequent prosperity than the reverse. This simple test suggests that the relationship is driven more by a country’s level of freedom shaping its subsequent level of prosperity than by the reverse.

As we plan to update the data annually, we look forward to conducting further analysis on the direction and magnitude of the relationship between freedom and prosperity, and we encourage others to do the same.

We also analyzed the countries with the biggest score changes in the Freedom Index between 2006 and 2021. If our hypothesis is correct, we should expect big shifts in the independent variable (Freedom) to be associated with meaningful changes in Prosperity.

Two countries stand out for big changes in freedom over this period, and we found that their prosperity levels changed in the same direction.

Bhutan had the biggest jump in Freedom of any country between 2006 and 2021, and also showed an increase in Prosperity. In 2008, Bhutan experienced a transition from an absolute monarchy to a constitutional monarchy, including the establishment of an elected legislature. Bhutan’s Freedom Index score reflects these changes, with a 74-percent increase in Legal Freedom and a whopping 166-percent increase in Political Freedom between 2006 and 2021. Bhutan’s income score increased by 91 percent, and there was a 35-percent increase in its Environment score.

Venezuela, by contrast, is the country that lost the most freedom and prosperity between 2006 and 2021—a result with roots in Hugo Chávez’s increasing political repression and embrace of socialist and populist economic policies as he consolidated power. The country dropped more than 42 percent in its overall Freedom score. The fall in its Political Freedom score was most pronounced—a 68-percent drop. On the Prosperity Index, Venezuela’s score plummeted 24 percent from 2006 to 2021. The country was once among the wealthiest and most developed in Latin America, but now scores poorly on Health, Income, and Happiness.

Divergent development paths for formerly communist countries in Eastern Europe

As our next test, we look to the divergent paths of countries’ political and economic transitions after the end of the Cold War. The fall of communism in Central and Eastern Europe in the 1989–1990 period can be viewed as a kind of natural experiment. Before the fall, these countries had similar levels of freedom and prosperity. Some countries, like Estonia, Latvia, Lithuania, and Romania, chose democracy and free markets. Others, such as Belarus and Russia, came to be ruled by autocratic regimes over the following years. What was the result of these choices on the trajectories of their subsequent economic development?

These six countries had divergent economic paths between 1995 (the first year for which all countries had comparable data) and 2020. As we can see in Table 6, the countries that chose freedom are between seven and nine times wealthier today, while the countries that remained autocratic are only between three and five times richer.

Table 6: Increase of GDP per capita in selected former communist countries (1995–2020)

	GDP per capita (current US$)
	1995	2020	Multiplier
Estonia	3,134	23,027	7.3
Latvia	2,330	17,726	7.6
Lithuania	2,168	20,234	9.3
Romania	1,650	12,896	7.8
Belarus	1,323	6,424	4.9
Russia	2,666	10,127	3.8

The data from our Freedom and Prosperity Indexes show similar results, as can be seen in Table 7. Russia (ranked eighty-eighth) and Belarus (ranked eighty-second) underperform in the Prosperity Index relative to their freer neighbors.

Divergent development paths for people living under communist and democratic governments

Table 7: Scores of selected former communist countries

	Freedom 2021		Prosperity 2021
	Score	Rank	Score	Rank
Estonia	87.2	14	65.6	36
Latvia	81.7	25	62.6	42
Lithuania	81.8	24	63.9	39
Romania	76.3	36	59.8	51
Belarus	39.4	139	50.0	82
Russia	41.2	135	49.0	88

We can draw similar conclusions by looking at World War II as the starting point for a new development period. For decades after World War II, China, Germany, and Korea were divided. Some people lived in communist countries, while others lived in countries with free markets and with political regimes that either were democratic from the beginning (West Germany), evolved into a democracy (South Korea and Taiwan), or had a wide range of freedoms (Hong Kong).

This provides us with another natural experiment. Did people living in freedom become more prosperous over time?

We begin with Germany. According to Organisation for Economic Co-operation and Development (OECD) data, democratic West Germany’s gross domestic product (GDP) per capita in 1950 was only about 1.5 times larger than that of communist East Germany ($4,280 vs. $2,796). But, by the reunification of Germany in 1990, West Germany’s per capita income had grown to be 3.6 times larger ($19,441 vs. $5,403) than that of East Germany.

Let us now turn our attention to the Korean Peninsula. North and South Korea were both exceptionally poor in 1950. While both countries lacked political freedom from the end of the Korean War until 1980, they selected very different paths regarding economic freedom. South Korea’s dictators chose capitalism and secure property rights, while North Korea’s leaders selected a state-planned communist economy. By 1980, South Korea’s per capita income ($1,589) was more than double that of North Korea ($768).

Starting in the 1980s, South Korea transformed itself into a democracy, while North Korea remains a dictatorship. The addition of political freedoms in South Korea resulted in an even larger divergence in the economic paths of these two nations. United Nations data for 2021 show GDP per capita of $31,947 for South Korea and $639 for North Korea. Today, people living in the free South Korea are fifty times wealthier than those living in the unfree North Korea.

North Korea is not ranked in our indexes because it does not provide sufficient data. South Korea ranks thirty-fifth and Free in our Freedom Index and twenty-fifth and Prosperous in our Prosperity Index.

How does this story look when examining Chinese people living under different political and economic systems? The People’s Republic of China (PRC) has been under the control of the Chinese Communist Party (CCP) since 1949. China has never had political freedom, although it started instituting liberalizing economic reforms in the 1980s under Deng Xiaoping. Until its takeover by the PRC in 2020, Hong Kong was either under British control or an autonomous PRC region, enjoyed some democratic freedoms, and ranked among the freest markets in the world. Taiwan was established as a dictatorship at the end of World War II, but adopted free markets. It started transitioning to democracy after 1975. What were the results of these institutional choices?

The PRC, Taiwan, and Hong Kong were all poor in 1961, with GNI per capita of $76, $163, and $437, respectively. But, their different levels of freedom resulted in different levels of prosperity by 2020. Free Taiwan and Hong Kong were able to break out of the middle-income trap, while unfree China, at least to date, has not. The middle-income trap, a measure created by the World Bank in 2006, refers to a situation in which a developing country moves from the poor to the middle-income category, but gets stuck below the high-income threshold—currently calculated by the World Bank as $12,695 GNI per capita. In 2020, per capita income in China, Taiwan, and Hong Kong was $10,055, $25,055, and $46,324, respectively. These differences are also clear in our indexes. Taiwan ranks Free and Mostly Prosperous, while China ranks Mostly Unfree and Mostly Unprosperous. We have chosen not to rank Hong Kong because it is now under the control of the PRC.

Autocracies are generally not prosperous

Some might think that an autocratic ruler can guarantee stability and push through needed economic reforms. They might point to Singapore as an example of a prosperous non-democracy. But, such examples are few and far between.

Authoritarian leaders like to centralize power, and dislike strong economic institutions that may check their power. While authoritarian leaders may sometimes make good economic decisions, they frequently make catastrophically bad ones. For example, the collectivization of agriculture led to mass famine in Joseph Stalin’s Soviet Union, in Mao Zedong’s China, and in Kim Il-Sung’s North Korea. More recently, and less dramatically, bad financial decisions by Turkey’s leaders led to high inflation and currency collapse, while in Kazakhstan the long-lasting kleptocracy of former President Nursultan Nazarbayev and his family led to social unrest. Even if a country has a wise authoritarian leader who makes consistently good decisions, like Lee Kuan Yew of Singapore, there is no guarantee that his successor will be equally wise. Moreover, a model that might work for a small city-state like Singapore does not easily apply to larger countries.

Autocracies are also subject to rapid and dramatic reversals along the path toward greater prosperity. Venezuela, for example, a country rich in natural resources and with a democratic tradition, adopted authoritarian and socialist policies in the early 2000s. As a result, Venezuela lost two-thirds of its GDP from 2014 to 2019. This is comparable to the 60-percent drop in GDP Syria experienced during its civil war. Bad authoritarian leaders curtailing freedoms can devastate a country as much as a civil war.

Unfree societies do not depend on rules and institutions but, rather, on authoritarian decisions. These decisions may, at times, redirect capital and people toward more productive outlets and have a positive impact in the short term. But, over the long term, if these decisions are not accompanied by greater freedoms, these autocrats are likely to undermine any progress they achieve.

Likewise, the authoritarian tendency to accumulate power makes leaders reluctant to allow free markets, which, when properly regulated, reflect the decisions of numerous economic agents and are a sounder path to economic development than the decisions of an autocrat or central bureaucracy.

Figure 7: Comparative rankings in the components of the Prosperity Index

Note: We use the rankings of China and Russia and the average rankings of all countries included in the Free category. The five axes represent the five indicators forming the Prosperity Index. The center point represents a rank of one hundred and seventy-four, the worst possible performance. The outer line represents a rank of one, the best possible performance on each indicator.

China

China is often cited as a model of successful economic development, but our indexes do not bear this out. After seventy-three years of Communist Party leadership, China ranks one hundred and fortieth in the Freedom Index and one hundred and fourteenth in the Prosperity Index.

To be sure, China’s economic growth has been impressive in many ways, but it is still far from achieving broad-based prosperity. Looking at the components of the Prosperity Index, China ranks only fifty-seventh on the Income score, with a GNI per capita just over $10,000. This puts it squarely in the middle-income range, well below other Asian countries such as Japan, Taiwan, South Korea, and Singapore. While elites in China’s coastal cities are wealthy and there are far fewer Chinese living in poverty than in the past, the country’s interior remains largely poor.

China’s low position on the Prosperity Index is also explained by its Minority Rights rank of one hundred and sixty-seven out of one hundred and seventy-four (Figure 7). This score, part of our comprehensive view of prosperity, reflects China’s brutal policies in Tibet and genocide in Xinjiang.

There are also real questions about whether China’s state-led capitalist model can continue to deliver income growth. Xi Jinping prioritizes political control over economic growth, and has been backtracking on liberalizing reforms, as seen in his crackdowns on the Chinese tech sector. Moreover, China’s past path to growth was driven largely by exporting cheap manufactured goods and major infrastructure investments by the CCP.

To break out of the middle-income trap, however, China will need to become a true innovation leader and develop a consumer-based market. It is unclear whether it can make that transition without more freedom.

Furthermore, China has many other structural deficiencies, including high levels of pollution, massive corruption, a shrinking of the working-age population as a result of the failed one-child policy, excessively harsh yet ineffective COVID-fighting policies, and an international community that is becoming more fearful of economic dependence on China. The CCP announced in March 2022 that China’s GDP growth target for the year was “around 5.5 percent,” the lowest in thirty years. But, just a month later, the International Monetary Fund projected a 4.4 percent growth rate and some economists predict growth rates of under 4 percent. Even Xi Jinping has admitted that slow growth in China is “the new normal.”

Russia

Russia is a prototypical example of a Mostly Unfree and Mostly Unprosperous country. It ranks one hundred and thirty-fifth on the Freedom Index and eighty-eighth on the Prosperity Index. This is the result of more than seven decades of communism and two decades of authoritarianism after the fall of the Soviet Union in 1991 (with a brief period of experimentation with freer markets and political pluralism in the 1990s).

Russia enjoyed strong economic growth in the early years of the 2000s, thanks largely to high oil prices and more open markets. Russia, like China, is a middle-income country with a GNI per capita of approximately $10,000. Russia is similar to China on many metrics of Prosperity, with the exception of Minority Rights (one hundred and forty for Russia), where China ranks even worse. The data for our analysis were collected before Russia’s invasion of Ukraine. As Vladimir Putin clamps down on Russian society during the war, we expect Russia’s freedom and prosperity to decline further in the coming years.

Oil-extracting autocracies

The major exception to our finding that autocracies cannot produce prosperity comes from oil-rich states, like the Gulf monarchies. Oil revenues have allowed these autocracies to provide their citizens with some of the highest per capita incomes in the world.

Gulf monarchies

The Gulf monarchies, with the exception of the United Arab Emirates (UAE), all fall into the Mostly Unfree category.

Due to their ability to generate large revenues from oil extraction, however, these countries rank highly in one of the key prosperity indicators, GNI per capita. Their scores on our Prosperity Index, however, suffer because they rank poorly in other prosperity indicators like Environment and Minority Rights.

While Gulf monarchies have seen record income from high oil prices over the preceding decades, the world may be moving away from fossil fuels and toward cleaner forms of energy. To succeed in such an environment, oil-producing states will need to liberalize their economies and allow their people more freedoms.

Some Gulf monarchies are already taking limited steps in this direction. In Saudi Arabia, for example, the government has recently granted women greater rights and further opened to foreign investment.

United Arab Emirates

The UAE has been leading the way toward more freedom in the Gulf region. It outperforms all the other Gulf monarchies in both freedom and prosperity. While its Political Freedom measures are quite low, it does allow a wide range of Economic and Legal Freedoms. Indeed, taken together, these freedoms are sufficient to move the UAE into the Mostly Free category—the only country in the Gulf to receive this distinction. These greater freedoms have also resulted in superior economic performance. The UAE bests its neighbors to rank as the thirty-fourth most prosperous country globally in our index.

Singapore

Singapore is often mentioned as the leading example of how autocratic systems can provide economic prosperity. Our Freedom Index reveals, however, that the secret to Singapore’s success is quite straightforward. While Singapore ranks poorly on Political Freedom, it has among the highest levels of Economic and Legal Freedoms. Indeed, Singapore ranks as a Mostly Free country, and barely falls short of our threshold for fully Free.

Singapore demonstrates, therefore, that this model can work, but its example may be sui generis: Singapore is a small city-state. Indeed, there is much evidence that small countries open to international trade can prosper. But, it would not be easy to run a larger country in such a centralized manner.

In addition, Singapore has been governed, so far, by fairly wise autocrats who have continually prioritized economic and legal freedoms. Given that political power in the country is concentrated, however, there is always the risk that future leaders would choose to rein in these freedoms. While it may seem foolish to kill the goose that laid the golden egg, there are many examples of autocratic leaders doing just that if they feel that it is necessary to protect their political power. Allowing more political freedom in Singapore would provide guardrails against arbitrary changes to Singapore’s successful economic model, and better ensure its future prosperity.

Methodology and FAQ

2021 methodology

In depth Methodology

FAQs

Frequently Asked Questions

1. What are the Atlantic Council Freedom and Prosperity Indexes?
The Freedom Index measures economic, political, and legal freedoms for nearly every country in the world. The Prosperity Index measures economic wellbeing and human flourishing for the same countries. The indexes can be used to inform policymakers about real-world reform opportunities in developing countries.

2. What time period does the report cover?
The 2021 Freedom and Prosperity Indexes use the most recent data available. Most of these data are from 2021. Where data from 2021 are not available, data from the most recent year available are used instead.

In addition, we collected historical data to construct the indexes for the years 2006, 2011, and 2016. This allows us to track national trajectories over time, even in the first year of the indexes. Going forward, we plan to update the indexes annually.

3. How are the data collected?
The Freedom Index and the Prosperity Index are constructed on a diversified data and analytical basis, comprising different databases produced by the American Economic Journal, the Center for Economic and Policy Research, the Credendo Group, the Fraser Institute, Freedom House, the Fund for Peace, the Heritage Foundation, NASA, Transparency International, the United Nations, the V-Dem Institute, the World Bank, and the World Justice Project.

4. What do the scores capture?
The Freedom Index and Prosperity Index are two separate indexes that rank 174 countries around the world according to their levels of freedom and prosperity. The Freedom Index measures Economic Freedom, Political Freedom, and Legal Freedoms. The Prosperity Index measures Income, Environment, Health, Minority Rights, and Happiness.

For more details on the construction of the indexes, please refer to the Methodology section.

5. How does the scoring system work?
All measurements in the indexes are weighted equally and the score for each index is the simple average of its parts. Scores range between zero and one-hundred, with higher values indicating more freedom or prosperity. Where appropriate, raw data are converted to a 0-100 scale.

6. What are the different scoring categories?
Countries on the Freedom Index are divided into four categories based on their overall score: those above a 75-point score (Free), those with scores between 50 and 74.9 (Mostly Free), those with scores between 25 and 49.9 (Mostly Unfree), and those with score from 0 to 24.9 (Unfree).

The same categorization is used for the Prosperity Index: those above a 75-point score (Prosperous), those with scores between 50 and 74.9 (Mostly Prosperous), those with score between 25 and 49.9 (Mostly Unprosperous), and those with scores from 0 to 24.9 (Unprosperous).

7. How is the ranking constructed?
We rank Freedom and Prosperity separately, and countries are ranked according to their score. Scores range between zero and one-hundred, with higher values indicating more freedom or prosperity.

8. Where can I view past years’ scores?
All the data are accessible on this website and can be downloaded.

9. Is there a link between Freedom and Prosperity?
We find that freedom and prosperity are highly correlated. The correlation coefficient between the indexes is 0.81. High values of Freedom are associated with high values of Prosperity, and low values of Freedom are associated with low values of Prosperity.

We find that the strength of this relationship increases the further one goes back in time. A country’s level of Prosperity today is better explained by its level of Freedom in 2006 than by its current Freedom, suggesting a relationship that is worthy of further investigation.

10. What makes the indexes different from other existing indexes?
There are several existing indexes that measure freedom and prosperity around the world, and our research built on these efforts. But the Atlantic Council Freedom and Prosperity Indexes are unique.

We define freedom comprehensively. Existing indexes measure economic freedom, political freedom, and legal freedoms separately, but no other index combines those measures to offer a comprehensive measure of freedom. It is our belief, supported by scholarship and historical evidence, that countries with all three types of freedom, working together in a manner that is mutually reinforcing, are best able to secure durable development.

We define prosperity comprehensively. We go beyond material measurements like income per capita and healthcare. We argue that a truly prosperous country should also score well on environmental performance, treatment of minorities, and the general happiness of the population.

We constructed separate indexes for freedom and prosperity. By creating two distinct indexes, we hope to give researchers a better opportunity to analyze the relationship between freedom and prosperity. We also offer policymakers and other thought leaders clearer benchmarks for implementing reforms and tracking results over time.

11. How do you prevent political bias?
The methodology used to produce the indexes is straightforward and transparent. We provide all the information to replicate them.

We did our best to collect the most reliable information available. The objective of these indexes is to provide standardized measures that can be applied to every country. One might argue that the methodology or the data collected is irrelevant to certain types of political situations or specific countries. That might be the case in some instances, but rarely so. Moreover, there is an inherent tension between generalizable and specific knowledge. We self-consciously opted for the former. We would encourage other researchers to explain how our indexes illuminate or obscure country-specific dynamics.

12. What are the limitations of the indexes?
Ensuring comparability of the data across a global set of countries was a central consideration. When selecting sources to be included in the indexes, coverage was the determining factor. In the rare case of missing data for a certain year, we have replaced the missing data with data from the closest available year. All these instances are described in the dataset.

Data were collected over the past year, using the most recent information available. They might not reflect the latest political or economic developments. These indexes should not necessarily be taken as an accurate reflection of the most recent current events. We will, however, update the indexes over time to capture real-world changes on an annual basis.

Authors

Staff

Dan Negrea

Senior Director

China Economy & Business

Staff

Matthew Kroenig

Vice President and Senior Director, Scowcroft Center for Strategy and Security

Scowcroft Center for Strategy and Security

China Defense Policy

Technical Advisers

Staff

Joseph Lemoine

Deputy Director

Freedom and Prosperity Center

Africa Economy & Business

Former staff

Joel Kesselbrenner

Freedom and Prosperity Center

Economy & Business Inclusive Growth

The post Do countries need freedom to achieve prosperity? appeared first on Atlantic Council.

Ahmad joins 966 to discuss Saudi Arabia’s rapidly growing startup ecosystem

Atlantic Council — Wed, 06 Apr 2022 19:49:00 +0000

The post Ahmad joins 966 to discuss Saudi Arabia’s rapidly growing startup ecosystem appeared first on Atlantic Council.

Engagement Reframed #4: Securing America’s demographic and economic future

Mathew Burrows — Tue, 08 Mar 2022 18:38:32 +0000

What is the opportunity?

Throughout US history, many American entrepreneurial heroes have been immigrants or the children of immigrants—from Alexander Graham Bell and Andrew Carnegie, both born in Scotland, to Intel’s Andy Grove and Google’s Sergey Brin, originally from Hungary and Russia, respectively. Indian immigrants comprise only about 1 percent of the US population but 6 percent of Silicon Valley’s workforce, and, as the appointment of Twitter Chief Executive Officer Parag Agrawal exemplifies, they disproportionately dominate the top echelons of tech corporate leadership. With increasing competition from China and elsewhere, immigrants are even more critical today to the future of US technology excellence. According to the nonpartisan National Foundation for American Policy (NFAP), “Immigrants have started more than half of America’s startup companies valued at $1 billion or more and are key members of management or product development teams in more than 80 percent of these companies.”

The United States can maintain its competitive edge by revising its immigration laws. Ironically, there is no reliable way under current law for immigrants to start a business and remain in the country after founding a company. Successful immigrant entrepreneurs must be refugees who qualify for staying, or be sponsored by employers, or have family ties in the United States. A “startup” visa, for example, which would allow foreign nationals to start companies and create jobs, would be an important addition to the US immigration system. The long wait for employment-based green cards prevents many individuals in H-1B status from having the employment status that allows them to start a business.

The relatively low cap on the number of annual H-1B temporary visas—65,000 plus 20,000 for those with advanced degrees—can make it difficult for startup companies to hire new personnel in their fast-growing businesses or for international students to remain in the United States. Moreover, restrictions on H-1B immigration have caused multinational companies eager for talent to hire US-educated foreign scientists and technologists at their foreign affiliates when these individuals cannot attain H-1B visas for employment in the United States. In these situations, the other countries where the affiliates are located reap the benefit. Many of the companies facing the most difficulty in obtaining H-1B visas for their employees are concentrated in highly H-1B-dependent and R&D-intensive sectors operating offshore tech service sectors. In most cases, the affiliates to which the new hires are sent are in Canada, India, or China.

Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy.

Distinct from nonimmigrant foreign workers with H-1B visas, another important avenue for immigrants coming to the United States has been as international students. A quarter of the “unicorn” founders in the NFAP study originally enrolled in top US universities. Like foreign jobseekers requiring a work visa, international students have faced hurdles in the past few years. In 2018, the Trump administration reduced the duration of student visas from five years to one. Even more harmful was President Donald Trump’s anti-immigrant rhetoric, which many experts believe dampened international students’ interest in studying in the United States (while raising parental fears for their children’s safety). “After years of phenomenal expansion starting in the mid-2000s, enrollment growth [of international students at US universities] slowed to less than 1 percent by 2019-2020.” Arguably, the pandemic—which led to a halting of immigration for a time—took a bigger toll on the number of international students coming to the United States than Trump’s anti-immigrant policies. Some 2 million fewer working-age immigrants are living in the United States today than in 2019. Pandemic restrictions also caused “a staggering 15-percent decline in international students in the 2020-21 academic year.” Fortunately, enrollment partially rebounded in fall 2021 with a 4-percent increase over last year’s earlier level. If enacted by Congress, proposals to reduce the number of Chinese students coming to US shores could substantially affect US universities because the Chinese comprise the largest group of foreign students in the United States, approximately 30 percent.

Going forward, the economic damage to universities from lowered enrollment could be substantial. International students represented nearly 60 percent of all student population growth in 2000–2018. Today, with a declining youth population in the United States, the concurrent drop in the number of international students studying at US universities will be an extra burden on academic budgets. Many science, technology, engineering, and math (STEM) PhD programs depend on international students for their survival. A pre-pandemic study found that 70.3 percent of all full-time graduate students in electrical engineering; 63.2 percent in computer science; 60.4 percent in industrial engineering; and more than 50 percent in chemical, materials, and mechanical engineering, as well as in economics, were international students. If US immigration law is not overhauled to attract more international talent to study in the United States, university funding will not only decrease, but US innovation will stall as well. A World Bank report warned that any reduction in the number of “foreign graduate students” could significantly reduce US innovative activities; conversely, the report assessed that a 10-percent increase in the number of foreign graduate students would raise patent applications by 4.7 percent, university patent grants by 5.3 percent, and non-university patent grants by 6.7 percent. Although the United States remains a top destination for international students, other countries are increasingly competing for such students, particularly those in the STEM field. In trying to recover from the COVID-19 pandemic, Canada has opened additional pathways for enticing older graduates with work experience and others who are French-speakers to apply for permanent residency. Australia—another popular destination for Indians and others—offers permanent residency possibilities for postgraduates, although the process is considered more complex than in Canada. Germany, which has an active program for attracting and retaining highly skilled workers in areas experiencing shortages, is providing a fast track to permanent residency for both international graduates (after two years) and those recruited for their skills (four years). With such competition, US complacency could spell a slow decline in attracting the best and brightest.

Why now?

Trump cited the hardships suffered by American workers who lost their jobs because of the pandemic as justification for suspending new work visas. Today, unemployment is low, and companies are facing a new crisis in trying to fill vacancies: too few skilled workers for the number of jobs. Shortages exist at all levels: lower-skilled workers are in high demand in the agriculture, construction, hotel, restaurant, and hospitality sectors.

Even before the pandemic, tech-skilled workers were scarce. A New American Economy report found that “computer-related jobs . . . made up 69.6 percent of all foreign labor requests in FY 2020, a slight increase from FY 2019 despite the COVID-19 pandemic.” Despite lingering criticism that foreign workers threaten to take jobs away from Americans, “The unemployment rate for computer- and mathematics-related occupations was 2.3 percent. By 2020, that had only increased by 0.7 percentage points, to 3.0 percent. By March 2021, the unemployment rate for workers in these occupations was 1.9 percent, lower than it was before the pandemic.” Computer and highly skilled mathematics-based jobs have traditionally been filled in high proportions by immigrants on H1-B and other temporary worker visas. Business groups, such as the US Chamber of Commerce, assess that the need to increase immigration is urgent. Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy. Angering many traditional Republican supporters, US Chamber of Commerce CEO Suzanne Clark, has, in fact, called for “doubling the number of legal immigrants.”

Despite sharp partisan differences, public views of immigrants have shifted toward greater acceptance, according to a mid-2021 Pew Research Center survey. The share of people who see being Christian and being born in the United States as critical for being “truly American,” Pew found, “has significantly decreased between 2016 and November 2020.” Moreover, this has been the case regardless of a respondent’s party leaning, although less so for Republicans.

How to make it happen

Most every immigration reform has been controversial and has required a modicum of bipartisanship to secure passage. While the post-COVID recovery, tight labor market, and growing worries about competitiveness with China on technology make today a propitious moment for reform, the sharp partisan divide in Congress, as well as the upcoming midterm elections, make even limited legislative efforts parlous. The Biden administration still has some means to address the tech-worker shortage and the declining number of international students coming to the United States and could lay the groundwork for more substantial immigration reform over the long term.

Short-Term Expedients: The Biden administration downplayed H-1B visas in its original Citizenship Act in favor of increasing the number of green cards from 140,000 to 170,000, exempting STEM doctoral candidates. Biden hoped to make H-1B visas less attractive to employers, while promoting the chance of permanent residency, which has traditionally been more appealing to students and workers. The Citizenship Act, which included these changes, has stalled, prompting the administration to expand the types of degrees qualifying for STEM recognition and to allow STEM graduates to remain in the country for up to 36 months. University officials have commended the executive measure, which will help them re-attract the world’s STEM talent.

Under the House’s COMPETES Act, holders of doctorates in certain STEM fields would be exempt from numerical caps on green cards, regardless of whether they earned their degree in the United States or abroad. Whether those provisions will survive the reconciliation process is unclear: the bill’s Senate counterpart contains no analogous STEM immigration provisions and, to become law, at least 10 Republican senators would need to support it to avoid a filibuster.

The Biden administration should consider asking Congress to raise the cap on the number of H1-B visas. The base number of 65,000 was set more than 30 years ago, in 1990, and the additional 20,000 visas for advanced-degree-holders from US universities was added in 2006. Last year’s (FY 2021’s) H1-B lottery attracted more than 300,000 candidates, representing a 12-percent increase from FY 2020. Raising the cap is not unprecedented: it was raised to 115,000 in 1999–2000 and to 195,000 in 2001-2003. Encouraging more temporary visas can help keep the channel open for needed skilled immigrants in case the provisions favoring STEM PhD candidature for green cards in the COMPETES Act fail. Even if those provisions were enacted, more technically skilled workers would be required than those with PhDs. Expanded H-1B visas would provide such an avenue for a wider spectrum of highly skilled workers to come to the United States.

Needed Long-Term Solution: Close observers of the immigration debates on Capitol Hill believe that Democrats should invest more in building a consensus because there have been potential opportunities to forge common ground with Republicans. In March 2021, the House passed two bipartisan immigration bills to legalize the so-called DREAMers (individuals living in the United States illegally, but who first came to the United States as minors) as well as farmworkers. Nine Republicans joined Democrats to pass the Dream and Promise Act by a vote of 228-197. The Farm Workforce Modernization Act also passed, by a vote of 247-174, backed by 30 Republicans.

The need for immigration reform is more pressing than ever. During the past decade and a half, demographers, economists, and other experts have grown increasingly worried about the declining birth rate and accelerating aging in the United States. Many had believed that the United States, with its large number of immigrants—who typically have higher birth rates than native-born Americans—would not see its birth rate decline so precipitously. The United States’ birth rate is now more in line with the low birth rates found among US allies and partners in Europe and Asia. Meanwhile, since 2008 the birth rates for immigrant groups in the United States have also dropped. In 2020, according to the Centers for Disease Control (CDC), the general fertility rate in the United States was about 56 births per 1,000 women—the lowest rate on record and about half of what it was in the early 1960s. Moreover, the decline in birth rates is seen across all measured racial and ethnic groups. Births dropped by 4 percent among white, black, and Latina women; 9 percent for Asian women; 3 percent for Hawaiians and other Pacific Islanders; and 7 percent for Native American and Alaska native women.

Beginning in 2030, immigration is projected to overtake natural increase as the principal driver of US population growth, according to the US Census Bureau. In the absence of any immigration, the US population would stagnate, if not decline starting in 2030. With no population growth, the United States could experience permanently lowered economic growth; this is already occurring in rural counties, whose populations are shrinking. Not only is there a strong argument to allow an increased number of immigrants, but there is also a need to attract immigrants with special skills that could help the United States sustain its competitive edge. Conservative Republicans have been particularly vociferous in calling for skills-based immigration, which could help form the basis for a compromise on other issues that Democrats support—and Republicans largely oppose—such as providing a pathway for the United States’ 11 million undocumented immigrants to obtain citizenship.

The question is: how long does Washington want to wait to reform US immigration policies? The year 2030—when the US population could begin to decline—is only eight years away, and the last major reform of US immigration law was in 1990. Congress needs to better understand the demographic implications of inaction and consider the effects of a shrinking population on the United States’ ability to compete globally. With public attitudes becoming more accepting of immigrants, the Biden administration should begin educating the public on the demographic and economic future awaiting the United States if its immigration policies are not reformed soon.

Photo by Go Nakamura. Migrants seeking asylum in the US from India, walk to turn themselves in to the US border patrol after crossing the border from Mexico at Yuma, Arizona, US, January 23, 2022. REUTERS

Explore NAEI

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The New American Engagement Initiative’s Assumptions Testing series explores some of the foundational beliefs that guide US foreign policy. By questioning the conventional wisdom, and exposing these assumptions to close scrutiny, the series aims to open a new seam in the policy debate and generate a more lively, fruitful, and effective strategic dialogue – one that is capable of producing a sustainable, nonpartisan strategy for US global engagement.

Reality Check Series

The New American Engagement Initiative’s Reality Checks are short briefs dedicated to exploring a particular policy or set of policies, assessing their efficacy, and, where appropriate, proposing alternatives. Reality Checks are published regularly and tied to the news of the day or derive from NAEI’s Assumptions Testing series. All are succinct and straight-to-the-point. The briefs are designed for busy professionals anxious for pragmatic and timely policy options.

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The National covered empowerME’s entrepreneur tracker launch

Atlantic Council — Tue, 08 Feb 2022 19:43:00 +0000

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Al Monitor covered empowerME’s entrepreneur tracker launch

Atlantic Council — Mon, 07 Feb 2022 19:46:00 +0000

View the middle east entrepreneurship program tracker here

The post Al Monitor covered empowerME’s entrepreneur tracker launch appeared first on Atlantic Council.

Atlantic Council releases Middle East Entrepreneurship Program Tracker

Nicole Meir — Mon, 07 Feb 2022 18:07:27 +0000

State-of-the-art tool reveals concerted action and investment from regional governments to nurture innovation in six entrepreneurship ecosystems

WASHINGTON, DC – February 7, 2022 – Today, the Atlantic Council’s empowerME Initiative at the Rafik Hariri Center for the Middle East launched the Middle East Entrepreneurship Program Tracker in partnership with Imagine Labs. The new interactive tracker maps out the organizations that regional governments have founded, funded, or partnered with to support entrepreneurs, startups, and small- and medium-sized enterprises (SMEs). The cutting-edge visualization allows users to explore networks nurturing innovation in Bahrain, Egypt, Jordan, Qatar, Saudi Arabia, and the United Arab Emirates (UAE), and features 312 programs and initiatives offered by 122 organizations across six ecosystems.

“Government support is a critical component of entrepreneurship ecosystem development. We will track how these programs develop over time to glean insight into which are the most impactful, and craft policy recommendations accordingly,” said Amjad Ahmad, Director and Resident Senior Fellow of the Atlantic Council’s empowerME Initiative.

Government support is a critical component of entrepreneurship ecosystem development. We will track how these programs develop over time to glean insight into which are the most impactful, and craft policy recommendations accordingly.

Amjad Ahmad, Director and Resident Senior Fellow of the Atlantic Council’s empowerME Initiative

This tool is geared towards aspiring and established entrepreneurs looking to take their business to the next level, startups and SMEs in need of targeted government services, policymakers aiming to spur innovation, and investors seeking a deeper understanding of these six ecosystems. Bahrain, Egypt, Jordan, Qatar, Saudi Arabia, and the UAE are seeking—to differing degrees—to create jobs for their rapidly growing youth populations and to diversify their economies due to the global shift away from fossil fuels. The tracker maps out each country’s strategic approach. The five content filters enable users to make inter-country and cross-country comparisons of program beneficiaries, sectors of interest, stages of investment, and available services.

Findings from the Tracker reveal that regional governments have identified two beneficiary groups in particular need of support: 18 organizations offer programming targeted at youth, and 14 organizations have designed initiatives for women. Opportunities offered to sector-specific startups and SMEs reflect the growing importance of digitization for Middle East businesses: 33 organizations aim to support technology startups, with an emphasis on Financial Services/Fintech (14), Healthcare/Healthtech (11), and Agriculture/Agritech (8). Other key findings show that seed funding is the most widely available stage of funding for entrepreneurs and business owners (offered by 15 organizations), who can also apply to participate in a wide array of incubators (17) and accelerators (29).

The empowerME Initiative will update the tracker on an ongoing basis as the six ecosystems develop and plans to add additional categories of analysis. Feedback on this project is encouraged and can be sent to Atlantic Council empowerME Assistant Director Allison Holle at aholle@atlanticcouncil.org.

About empowerME

The empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East is shaping solutions to empower entrepreneurs, women, and the private sector and building influential coalitions to drive regional economic integration, prosperity, and job creation.

The research team behind the Tracker includes Atlantic Council empowerME Assistant Director Allison Holle, Atlantic Council empowerME Project Assistant Hezha Barzani, and Atlantic Council Rafik Hariri Center and Middle East Programs Project Assistant Yaseen Rashed.

Follow their work on Twitter at @ACMideast and connect with them using #ACempowerME.

About Imagine Labs

Imagine Labs, a leading communications and technology agency, is helping brands across the world deliver value to their customers through insight driven creativity and technology innovations.

To know more about their work, please visit https://imaginelabs.me/ or follow them on LinkedIn.

The post Atlantic Council releases Middle East Entrepreneurship Program Tracker appeared first on Atlantic Council.

Rodriguez in Dark Reading on cybersecurity

Atlantic Council — Tue, 01 Feb 2022 21:00:00 +0000

Forward Defense Scowcroft Center for Strategy and Security

On February 1, Forward Defense senior advisor Stephen Rodriguez was quoted in a Dark Reading article titled “7 red flags that can stop your company from becoming a unicorn.” Rodriguez states that more cyber companies must build the capability to respond to cyberattacks rather than just analyzing them after the fact.

There are a ton of companies out there that monitor or assess or analyze, but very few that actually alert and then fix a cyber-risk or attack.
Stephen Rodriguez

Fellow

Stephen Rodriguez

Senior Advisor

Defense Policy Defense Technologies

Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

The post Rodriguez in Dark Reading on cybersecurity appeared first on Atlantic Council.

New opportunities for MENA women to plug into global commerce

Stefanie Hausheer Ali — Mon, 18 Oct 2021 19:44:06 +0000

On October 13, the Atlantic Council’s empowerME Initiative held a workshop on “Women in the global supply chain: The importance of increasing women’s access,” featuring a keynote fireside chat with UPS International Public Affairs and Sustainability President, Penelope “Penny” Naas, and a panel discussion with Facebook Vice President for the Middle East, Africa, and Turkey, Derya Matras, PepsiCo Vice President and General Manager for GCC-Levant Foods, Tamer Mosalam, and Chalhoub Group Chief Innovation Officer, Dina Sidani. Atlantic Council empowerME Director and Resident Senior Fellow, Amjad Ahmad, moderated the workshop.

This workshop is part of the Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia program led by the Atlantic Council’s empowerME Initiative in partnership with the US Mission to Saudi Arabia, the American Chamber of Commerce Saudi Arabia, and Quantum Leaps. The program brings US entrepreneurs, experts, and business leaders together with their Saudi counterparts to build relationships, share knowledge, and develop partnership opportunities via hybrid workshops and networking sessions.

Key takeaways:

Women’s inclusion in supply chains and business in Saudi Arabia

Penny Naas noted that “the data is a bit mixed. In some places, women have been disproportionately impacted by COVID. We’ve had to balance home responsibilities with work responsibilities. In certain countries, women are doing better, but in most countries, women are facing more challenges.” She said UPS leverages its expertise and resources to help women-owned companies and female business leaders pivot to the new normal of business and build resilience across their operations and supply chain management. She added that “resilience goes hand-in-hand with diversity. When you think about the most dynamic ecosystems in nature, they are also the most diverse. As we think about supply chains and how we build back and re-design after the pandemic, it seems to me a fantastic time to think about how to diversify our supply chains.”
Tamer Mosalam said: “I think Saudi Arabia is a great example of a vision that decision-makers are very vocal and disciplined about. Both the government and the private sector are engaged on this. Within the vision, women’s empowerment is happening fast. This gives confidence and creates an impact on society and the growth of economy. This is happening at the government level and spilling over to the private sector.” He mentioned the newly announced Saudi investment strategy, which has a goal of 60 percent GDP growth from the private sector. He said this emphasis on the private sector’s expansion would also help with gender equality.

Corporate programs to support women entrepreneurs

Naas outlined UPS’s three-pronged approach to helping more women engage in to global trade and supply chains since the majority of small and medium enterprises (SMEs) don’t start out exporting. The first step is helping people understand the requirements to export their goods, followed by learning how to effectively market oneself as a woman-owned business, and the final step is ensuring that the laws and rules are not discriminatory. She pointed to barriers to women’s access to digital tools for business opportunities and said the private sector should work to break them down.
Naas praised steps governments are taking to ensure women are included in the workplace and can succeed as entrepreneurs. She mentioned that UPS partnered with Saudi Arabia’s General Authority for Small and Medium Enterprises (Monshaat) this month to launch the first women exporters e-commerce boot camp for fifty women-owned companies to learn skills and knowledge about exporting globally.
Matras mentioned the challenges small and medium businesses have faced during the pandemic, pointing to the 2020 Global State of Small Business Report that revealed 70 percent of small businesses reduced sales in the Middle East and North Africa and 40 percent reduced employment. Matras pointed out that “the most resilient digitalized quickly,” and so the question is how to educate small businesses and upskill their workers, especially for business to consumer models and in terms of reaching the right consumers. She said that “marketing costs are the biggest expense, so they need to use these tools effectively, especially in the initial stages.” She noted that Facebook’s #LoveLocal campaign in the Middle East has trained more than ten thousands SMEs and given voice to them to tell their stories.
Sidani explained that the Chalhoub Group tries to understand the pain points of their organization and the opportunities these offer. She said one point they identified is smaller brands, which lack adequate corporate support, accelerators, and incubators at the regional level. As she put it, “I could see [a] gap in how we handle those smaller brands—they were falling through the cracks. These brands needed support.” She explained that Chalhoub Group got some of these brands involved in “test quickly, scale quickly, or fail quickly” programs via their retail tech accelerator, and “then we used that methodology to say why not test smaller brands and give them market access, which is the biggest value proposition we can give them.” Part of the support they provide is earmarked funding for content creation and marketing, Sidani added. She mentioned the fashion lab Chalhoub Group launched in Saudi Arabia focused on designs coming from Saudi that will hopefully go global, and explained that they are also working with Facebook to support these smaller brands via content creation and marketing, including learning how to tell the right story and have the right content.

New digital opportunities and challenges

Naas commented that these days a “physical presence is no longer sufficient” for a business. She added that the “omni channel world presents tremendous opportunities” and that she has been extremely impressed with social media usage in Saudi Arabia. Naas noticed that Instagram in particular is very helpful in sales because businesses can sell directly to consumers. She added that “as people pivot to new digital realities, thinking about how you use these new channels is something more companies have to think about and take advantage of.”
Matras emphasized Saudi Arabia’s “highly connected and mobile population,” stating that “metrics show they are very engaged and have some of the highest consumption levels globally, especially video.” She argued that this situation presents a substantial opportunity to diversify businesses in the non-oil economy.
Matras also discussed the messaging trend, saying that “consumers want to talk to businesses like talking to their friends. They don’t want to wait on a call center line or write emails. This trend is picking up in the Middle East. We call it conversational commerce.” She also described the future of “communication becoming much more immersive,” building on the text, photo, and video evolution online to what will soon become more immersive videos like augmented reality filters and then eventually virtual reality and the metaverse. Matras noted that “these experiences are changing the business and consumer relationship and offer exciting opportunities for businesses and talent.”

Business sectors to watch

Matras highlighted numerous exciting business opportunities such as in e-commerce and the ed tech space as seen with the WhatsApp program for low-tech distance learning in Africa. In coming years, other sectors she expects to thrive include telemedicine, the FinTech industry, gaming, tourism, quick commerce in the food and beverage industry, ride-sharing models such as Careem, and real estate. She added that “the overarching opportunity in the region is remote work. Tech used to be clustered in a few places and access to talent is tough. Remote work showed us we can work online.” There is now a great opportunity to employ remote engineers, break down clusters, remove borders, and help talent in the region, Matras said, noting that “a tech giant in the United States can now recruit engineers in Saudi Arabia and Dubai.”
Mosalam underscored the immense opportunities in the food and beverage sector, predicting that in the next two to three years, families in Saudi Arabia “will eat out once a day, not once a week or once a month” because the “younger generation is on the go.” He pointed to the success of the HungerStation app and how many consumers got registered. Mosalam also pointed out that childcare and education needs in the country will change as more women join the workforce, which will present business opportunities.
Sidani emphasized the “massive opportunity in fashion in Saudi Arabia” because “as the kingdom opens up, people want to reflect their identity through art and fashion and going back to their roots.” She shared her view that “innovation doesn’t mean having a crystal ball. It’s having the right team and process in place to experiment and stay ahead of the game.” Sidani said she that is “seeing more entrepreneurs trying to be more local, and I love that we are starting to be more proud of where we come from.”

Advice for entrepreneurs and leaders

Naas explained UPS’s approach to attracting and growing great women leaders, and she pointed out that UPS has a woman CEO, Carol B. Tomé, “There is no greater thing than to see leadership in action,” she said. Naas also discussed two critical elements for women to thrive in the workplace: mentorship and sponsorship. She defined mentoring as a practice to support women business leaders to develop new skills, and sponsorship as someone or a group of people who will talk about women in talent and personnel meetings when a woman isn’t in the room. She emphasized that women need to have allies – not just their boss – who will ask the company to invest in them. She advised women to work with a mentor to plan how to cultivate those sponsor relationships. She said that finding a great boss is really important for female talent and added: “If you don’t have a great boss, go be your own boss or find a new boss.”
According to Naas, “finding niche markets is key.” She shared the story of a woman-owned honey business owner in Mexico that UPS works with. Shipping honey is expensive, and the company’s biggest market was in the Middle East, so the owner came to the region and found a distributor. Honey products are very valuable in the region, and her high-quality products exceeded expectations. Naas added that for Saudi Arabia, the Gulf Cooperation Council (GCC) is a phenomenal market opportunity because of the common language, although the GCC does needs to do more to make the customs union function better and improve the flow of goods to tap into the full economic potential.
Matras shared that the highest growth she sees comes from cross-border businesses that bring more language capabilities and better targeting capabilities. For example, she said, “a conservative fashion brand can target audiences in Germany and the United States” using optimized language and marketing tools.

Poll Results

At the workshop, attendees took a poll related to global supply chains and the results indicate that more programs and information about this topic are needed to ensure women can plug into regional and global business opportunities.

Stefanie H. Ali is deputy director of the Atlantic Council’s empowerME Initiative. Follow her @StefHausheer.

MENASource Sep 29, 2020

Absence of PhD programs contributes to weak research and development in the Gulf

By Omar Al-Ubaydli

The production of new knowledge is a very complex process and many factors contribute to the low levels of innovation exhibited by the Gulf countries. One factor that plays a role is the structure of tertiary education—particularly PhD programs.

Education Middle East

MENASource Sep 20, 2021

‘Investing in women is just good business’: Ways to increase funding for women-led ventures in the Middle East

By Stefanie Hausheer Ali

On September 14, 2021 the Atlantic Council’s empowerME Initiative held a workshop on “Venture Capital Financing: How to Increase Funding for Women-led Ventures.”

Middle East The Gulf

MENASource Sep 13, 2021

Defusing Saudi Arabia-UAE tensions through economic rebalancing

By Hani Findakly

By identifying the economic imbalances contributing to the breakdown, recalibration is possible to rebuild a more balanced relationship that circumvents the zero-sum game that has given rise to the Riyadh-Abu Dhabi dispute.

The post New opportunities for MENA women to plug into global commerce appeared first on Atlantic Council.

The path to 25 healthcare breakthroughs by 2025

Atlantic Council — Tue, 12 Oct 2021 15:04:32 +0000

In Season 2, Episode 3 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with Pfizer Regional President for Africa and Middle East Patrick van der Loo about the COVID vaccine rollout in the region, prospects for machine learning and AI to revolutionize healthcare, policies that will promote innovation, and ways companies can nurture women leaders in the workplace.

While there has been considerable adoption of digitization across our industry, there’s plenty of room to drive greater efficiencies across the health care sector.”

Patrick van der Loo, Pfizer Regional President for Africa and Middle East

Download transcript

Key Takeaways

0:00 Intro
1:30 Patrick talks about his observations of what is happening in Africa and Middle East regions after rolling out the vaccine and other initiatives and what they are focused on
5:33 Patrick talks about the significant areas specifically in the Middle East that they are present in in the 19 country portfolio
7:39 Patrick talks about how the pandemic has affected their strategy or way of operating in the region
11:11 Patrick talks about the current trends and the role that Pfizer is playing in the SME and entrepreneurship and what he would tell the entrepreneurs to focus more on
15:53 Patrick talks about some of the interesting models of distribution that he is seeing in the Middle East
17:48 Patrick talks about the establishment of a manufacturing hub for the vaccine and where he sees that playing out during the pandemic
22:48 Patrick also explains if there is a more important than the other in terms of regulations to drive change in the positive direction
23:59 Patrick talks about what he has found to be interesting managing Middle East and Africa region and he is from Asia
28:07 Patrick talks about what it is about Pfizer that made him the most attractive place for women in the Middle East to work for and why they actively encourage the exchange of talent
34:30 Patrick talks about policies that are instrumental in allowing for retention of women employees at Pfizer and what other leaders should do
37:55 Patrick talks about what he thinks the government needs to do to increase the talent base in the Middle East region and specifically in his sector
41:08 Patrick talks about what he is expecting to see in the near future with regards to new variants of the pandemic popping up and with the manufacturing of the vaccine

Find the empowerME podcast on the app of your choice

The empowerME Conversations podcast features conversations with business and government leaders shaping the Middle East. The podcast sheds light on key opportunities and challenges for companies and governments, and Season 2 will focus on CEOs in the region.

empowerME Conversations Oct 5, 2021

Democratizing commerce

By Atlantic Council

In Season 2, Episode 2 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with Facebook Managing Director for the Middle East and North Africa Ramez Shehadi on digitization, the future of e-commerce, supporting SMEs, and changes needed to improve the region’s entrepreneurial ecosystem.

Economy & Business Middle East

empowerME Conversations Sep 28, 2021

Transforming logistics

By Atlantic Council

In Season 2, Episode 1 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with UPS President for Indian Subcontinent, Middle East, and Africa Jean-Francois Condamine about the e-commerce boom in the Middle East, promoting sustainability in the logistics industry, and empowering small and medium enterprises to become regional and global exporters.

Economy & Business Middle East

empowerME Conversations Mar 2, 2021

Must see (Saudi) TV

By Atlantic Council

On episode 6 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with Telfaz 11 and C3 Films CEO Alaa Fadan about his trailblazing efforts to produce TV and media content with Saudi talent, the recent Netflix deal, and the culture change that is boosting entrepreneurship and women’s economic empowerment in Saudi Arabia.

Economy & Business Middle East

The post The path to 25 healthcare breakthroughs by 2025 appeared first on Atlantic Council.

Peek quoted in Digital Journal on the launch of Delphia’s new alternative investment newsletter, “Alt Class”

Atlantic Council — Fri, 24 Sep 2021 19:26:00 +0000

Former Nonresident Senior Fellow

Former fellow

Andrew L. Peek

Iraq Initiative Rafik Hariri Center & Middle East programs

Conflict Defense Policy

The post Peek quoted in Digital Journal on the launch of Delphia’s new alternative investment newsletter, “Alt Class” appeared first on Atlantic Council.

Cybersecurity of Space-Based Assets and Why this is Important

the GeoTech Center — Mon, 12 Jul 2021 22:13:50 +0000

Space is quickly becoming the new frontier to be explored by national governments and private sector actors. In the process, the different parties are preparing themselves for an environment with the same competition and collaboration that are typical on Earth, which will require new regulations and international norms and will create novel opportunities for industry and innovation, from transportation and satellite communications to data sharing, artificial intelligence, and national security.

On a recent joint Georgetown and Atlantic Council masters’ class, GeoTech Director Dr. David Bray shared his insights on the seminar’s question: “Cybersecurity of Space-Based Assets and Why This Is Important.” This masters’ class also featured GeoTech Fellows and experts Dr. William Jeffrey, Chuck Brooks, and Dr. Divya Chander.

We invite you to watch the informative recording below:

Link to the Video

Saudi Gazette covered empowerME’s Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia workshop

Atlantic Council — Tue, 29 Jun 2021 14:37:00 +0000

The post Saudi Gazette covered empowerME’s Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia workshop appeared first on Atlantic Council.

Princess Reema tells Saudi women entrepreneurs to dream big

Stefanie Hausheer Ali — Mon, 28 Jun 2021 04:01:00 +0000

On June 23, 2021 the Atlantic Council’s empowerME Initiative held a workshop featuring a keynote fireside chat with Saudi Ambassador to the United States, Her Royal Highness Princess Reema Bint Bandar Al Saud, which was moderated by US Embassy Riyadh Chargé D’Affaires Martina Strong, and a panel discussion with Endeavor Saudi Arabia Managing Director Lateefa Alwaalan, 500 Startups MENA Partner Amal Dokhan, S&P Global Chief Public & Government Affairs Officer Courtney Geduldig, and UPS Vice President for Community Relations Esther Ndichu, which was moderated by empowerME Director and Resident Senior Fellow Amjad Ahmad.

This workshop was part of the Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia program and was led by the Atlantic Council’s empowerME Initiative in partnership with the US Mission to Saudi Arabia, the American Chamber of Commerce Saudi Arabia, and Quantum Leaps. The program is bringing US entrepreneurs, experts, and business leaders together with their Saudi counterparts to build relationships, share knowledge, and develop partnership opportunities via hybrid workshops and networking sessions.

Key takeaways:

Saudi Arabia’s Changing Entrepreneurial Ecosystem

Amjad Ahmad discussed the importance of more US-Saudi partnerships and knowledge sharing to bring entrepreneurs, business leaders, and experts from both countries together to promote economic prosperity, and added that “Saudi Arabia has embarked on an essential economic transition with a substantial rise in entrepreneurship and with women playing a greater role in the country’s economy.”
Martina Strong emphasized the United States’ desire to see Saudi women equipped to take full advantage of the rapid pace of change: “In today’s Saudi economy, one can sense the dynamism, the creativity, new sectors and opportunities are being generated and expanded every single day…We want to see many more women take their rightful place of leadership in the economy and across Saudi society.”
Her Royal Highness Princess Reema Bint Bandar Al Saud emphasized that: “Vision 2030 changed everything…today, when I look at these young female entrepreneurs, the challenge isn’t regulatory anymore. The challenge isn’t really even financial anymore because the opportunities are there for financial development and support and growth. Mentorship is available. The limitation today is your dream.” She added that Vision 2030 has unlocked so many opportunities for women to not just dream but bring their dreams to fruition. “That is the profound difference” from the past, she said, and it is a “fundamental shift.”
Her Royal Highness Princess Reema Bint Bandar Al Saud also shared an anecdote illustrating the rapid pace of change in the Kingdom and the importance of timing for a business to be successful. In 2005 when she co-founded Yibreen, a women’s gym chain, she struggled to expand it because of the legal, regulatory, and cultural environment at that time. Then, a few years ago in her role working for the Saudi General Sports Authority, she was asked to deregulate that very same sector, which has enabled women’s gyms to flourish.
Lateefa Alwaalan noted that “there is a rise of a subsector of women getting into their own businesses enabled by technology, delivery apps, and e-commerce solutions to put their innovative ideas out there and start sourcing.” She added that internet penetration and digital access is also helping.
Amal Dokhan highlighted the positive funding trajectory in the MENA region and in Saudi Arabia, with the MENA region passing the $1 billion funding mark in 2020 even amidst the COVID-19 pandemic. She added that Saudi Arabia had $156 million in startup funding in 2020 and there was a 56 percent increase in startup funding in 2021 year-to-date. These trends are positive and demonstrate investor interest, Dokhan added.

Challenges for Women Entrepreneurs & Strategies to Address Them

Her Royal Highness Princess Reema Bint Bandar Al Saud discussed an ongoing challenge for women entrepreneurs: access to funding. She noted that this is an issue not just in Saudi Arabia but worldwide, since there have been more men than women entrepreneurs historically, meaning that investors are more accustomed to funding men entrepreneurs. She urged women entrepreneurs to get advice and support on structuring and running their business to ensure their endeavors are competitive and viable.
Her Royal Highness Princess Reema Bint Bandar Al Saud emphasized the importance of financial literacy and financial security for all women entrepreneurs to ensure that financial insecurity does not become a significant stress factor that derails a business endeavor.
Lateefa Alwaalan noted that, while more and more women are launching businesses, scaling and turning them into a sustainable venture is a challenge. Courtney Geduldig expanded on this point, stating that there has been a 72 percent increase in companies founded by women in the past few years, but scaling is not happening at the same rate in part because more venture capital funding goes to men. According to Geduldig, getting more women into venture capital firms will help address this issue since gender diversity brings diversity of thought no matter the field.

When asked about the percentage of women founders in the region, Amal Dokhan stated that approximately 14 percent of the MENA startups are women-led. She emphasized that there is not a lack of women entrepreneurs and that there are more and more every day, but there is a need for more women-led technology startups. According to a 2019 report, 16 percent of startup founders in Saudi Arabia are women.

Courtney Geduldig shared findings from research for her book: Where the Jobs Are: Entrepreneurship and the Soul of the American Economy. Challenges she discovered for women entrepreneurs in particular include: lack of financial literacy, lack of confidence, difficulties finding access to funding and access to loans, and the heavy burden of caregiving responsibilities. Geduldig emphasized that these challenges are ongoing in the United States and it would be prudent for us all to learn lessons from other countries working to address these issues. She added that there is a need for more access, guidance, and support focused on opening doors and creating a more inclusive network for women business founders.

Programs to Support Women Entrepreneurs

Her Royal Highness Princess Reema Bint Bandar Al Saud directed women entrepreneurs to visit the Saudi Ministry of Commerce and the General Authority for Small and Medium Enterprises (Monshaat) websites for further resources on funding opportunities for their businesses.
Esther Ndichu pointed to corporate programs such as UPS’s work with the American Chamber of Commerce in Saudi Arabia, UPS’s recently signed memorandum of understanding with the Saudi General Authority for Small and Medium Enterprises (SME) (Monshaat) to promote and engage with SMEs in Saudi Arabia, and UPS’s partnership with the International Trade Center’s SheTrades Initiative, to provide channels for women entrepreneurs around the world to access global markets. She discussed UPS’s approach to promoting SME growth around the world through three focal areas: (1) capacity building to close the gap to ensure women entrepreneurs have the skills to access global markets, such as factoring in real costs, (2) market access to bring in private sector partners, and (3) providing logistics perspectives to governments to ensure that the MENA countries’ legal and regulatory frameworks encourage women to become entrepreneurs.

Advice for Women Entrepreneurs

Her Royal Highness Princess Reema Bint Bandar Al Saud encouraged women entrepreneurs to:
- Take public speaking and debate classes and get advice from experts on core business competencies in areas where they are weak. She also challenged would-be entrepreneurs to make the case for why they are the best person to take the idea forward since having a great idea is not enough.
- Move forward despite rejections and recognize that rejections and “nos” from funders help hone a business idea.
- Get a job in the industry related to their business idea and learn from a person in the field and develop their concept from there.
Amal Dokhan urged women entrepreneurs to look at the gaps and find a team that complements their capabilities and ask themselves if the market for their idea is big enough to scale and has enough customers. “It’s about finding the right formula,” she added.

Amal Dokhan also underscored the importance of having the courage to speak in public and share success (and failure) stories: “I meet female entrepreneurs in different parts of the world, but something repeated in every culture is that we don’t want to be out there until we are absolutely perfect. If you get the chance, allocate maybe four times a year, every quarter, to get out there and share your story, or at least offer mentorship.” She added that storytelling is critical and makes you a role model for other would-be women and men entrepreneurs and mentoring is a great way to give back and help the next generation.
Lateefa Alwaalan emphasized the importance of surrounding yourself with the right networks because those can be enablers that help an entrepreneur find success faster. She added that it is wise to build a team of co-founders and co-investors rather than going it alone, saying: “You will face roadblocks and it is good to find people smarter than you or those who complement you to help you on this journey.”
Courtney Geduldig shared that one learning from her research with women entrepreneurs and entrepreneurs in general is that they need to find opportunities for mentorship, relationship building, and insider knowledge in order to obtain not just access to finance and credit, but to leverage that access and build on it successfully.
Esther Ndichu urged women entrepreneurs to check out UPS’s Women Exporter’s Program, which provides information and builds capacity for women-led SMEs. She added that UPS has found that, in the age of tech and ecommerce, businesses can leapfrog the normal process of distribution only in the local community and go straight to global product distribution.

Poll Results

At the workshops, we polled attendees on the following questions related to women’s entrepreneurship in Saudi Arabia. As the results below indicate, the environment for women entrepreneurs in Saudi Arabia is improving, but more access to support and training is still needed.

Stefanie H. Ali is deputy director of the Atlantic Council’s empowerME Initiative. Follow her @StefHausheer.

MENASource Mar 15, 2021

Here’s how Amman can boost women’s workforce participation

By Stefanie Hausheer Ali

Jordan must climb out of an economic pit exacerbated by the COVID-19 pandemic. One key to promoting long-term economic growth is achieving greater female labor force participation.

Economy & Business Education

MENASource Mar 8, 2021

Celebrating MENA women entrepreneurs and business leaders

By Atlantic Council

In honor of International Women’s Day, the Atlantic Council’s empowerME asked Middle East business leaders and government officials to share a “shout out” about a woman entrepreneur or business leader who inspires them

Economy & Business Middle East

MENASource Feb 26, 2021

Senior State Department official says US is committed to supporting entrepreneurship in the Middle East

By Allison Holle

The Biden Administration is committed to supporting entrepreneurship in the Middle East and deepening economic cooperation between the United States and the region

Economy & Business Middle East

The post Princess Reema tells Saudi women entrepreneurs to dream big appeared first on Atlantic Council.

No longer neglected: DAS Cook forecasts more robust engagement with Africa under the Biden administration

Africa Center — Mon, 14 Jun 2021 22:05:47 +0000

“You are going to see more robust engagement than what we have seen with Africa over the past couple of years,” according to Deputy Assistant Secretary of State for African Affairs Ms. Akunna Cook. Speaking at an Atlantic Council event as part of the Africa Center’s African Conversations Series hosted by Africa Center Director Amb. Rama Yade, Cook promised a turnaround in US-Africa relations under the Biden administration, avoiding the “neglect” shown in recent years and in contrast embracing African nations as partners across critical global challenges.

Cook voiced her hope that this reengagement can also translate to US interest outside of just hotspots on the continent, recognizing countries where progress is being made as well as those “middle” countries where engagement has often been lacking. She affirmed that the US interest and role in Africa goes far beyond strategic competition with China, while noting that “There are natural ties between the US and Africa and. . . that by exploiting those opportunities, exploiting those strengths, that we are going to be able to compete with anyone in Africa.”

This starts with leveraging areas of US competitiveness, including ties to the African diaspora, trade and development linkages, ingenuity and innovation, and the creative industries. Admitting to a personal bias, Cook explained that she is most excited by opportunities in the creative industries, reflecting that she has “seen the potential of creative industries to transform economies here in the United States.” For example, the state of Georgia, and more specifically the city of Atlanta, have brought in significant investment and shifted the locus of the US film industry thanks to deliberate public policy decisions that support job creation. To Cook, there is no reason the same cannot be done in markets across Africa, and to African creative industries champion Ms. Laureen Kouassi-Olsson, founder and CEO of Birimian Ventures, the creative industries are also a vehicle to communicate African values, culture, heritage, and history firsthand.

Kouassi-Olsson went further by saying that, “The diaspora has a tremendous role to play in redefining the economic relationship with our continent,” to which Cook agreed. On broader business issues, Cook reiterated the administration’s full support for the African Continental Free Trade Area (AfCFTA) agreement. “One integrated market makes Africa a much more attractive place to do business,” and the United States is providing targeted technical support, including exchanges and workshops, to contribute to the AfCFTA’s success wherever possible.

Turning to democracy, Cook responded to a question from Senior Fellow Dr. Pierre Englebert on how the Biden administration will approach the erosion of democracy on the continent. She acknowledged that this is both a priority abroad and domestically, saying that “I think you’re going to see in this administration a real emphasis on working with our partners in a way that recognizes the leadership role the United States has played. . . with the humility of understanding that we’ve got our own challenges and we can work in partnership with African countries and countries around the world.” She made specific reference to Nigeria, noting that the recent “Twitter suspension was very concerning and remains a source of concern,” with any signs of the closing of political space or restrictions on free speech being “deeply concerning.”

Making reference to Pride Month and LGBTQI+ rights, she also noted that “human rights are universal, they are not cultural.” On this issue and others, the United States will “continue to stand tall as allies,” insisting that “all human beings have rights that have to be respected.”

Above all, speakers, including Atlantic Council Board Director Amb. Mary Carlin Yates, took the opportunity to echo Amb. Yade’s statement that Africa must be viewed as a land of opportunity and not of risk. Stay tuned for further conversations in this series as the Atlantic Council continues to shape this narrative.

Missed the event? Watch the webcast below and engage us @ACAfricaCenter with any questions, comments, or feedback.

WATCH THE WEBCAST

Linda Thomas-Greenfield on Africa’s most overlooked crises and opportunities

By Katherine Walla

Thomas-Greenfield spoke about US President Joe Biden’s outlook on Africa with Ambassador Rama Yade, director of the Atlantic Council’s Africa Center, at an event celebrating Africa Day and introducing the Africa Center’s new team and mission.

Africa Crisis Management

Event Recap May 25, 2021

Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

By Africa Center

Speaking at the Atlantic Council’s Africa Day celebration, White House official Dana Banks responded to topical issues in African affairs, including the coup in Mali, calling for “the unconditional and immediate release of the president and the prime minister.”

Africa Democratic Transitions

Report Apr 19, 2021

Priorities for US-Africa commercial policy in the Biden Administration

By Aubrey Hruby

This new decade has created a unique moment for the Biden administration to reset US-Africa policy. A more multifaceted and nuanced engagement with African states will set a foundation for stronger US-Africa partnerships, support mutual economic growth, and contribute to strengthening US global leadership.

Africa Economy & Business

The post No longer neglected: DAS Cook forecasts more robust engagement with Africa under the Biden administration appeared first on Atlantic Council.

Can AgriTech entrepreneurs save the Middle East’s food supply?

Hezha Barzani and Matthew Goodman — Fri, 11 Jun 2021 09:15:00 +0000

On June 9, the Atlantic Council’s GeoTech Center and empowerME Initiative hosted a private, on-the-record roundtable featuring Vita F&B Capital Managing Director Kamel Abdullah, Pure Harvest Smart Farms CEO & Co-Founder Sky Kurtz, and GeoTech Center Nonresident Senior Fellow and Founder of Bold Text Strategies Daniella Taveau, moderated by empowerME Director Amjad Ahmad and GeoTech Center Deputy Director and Senior Fellow Stephanie Wander.

Below is a summary of the discussants’ key points.

AgriTech Innovation

Wander initiated a conversation tying emerging data capabilities and technologies directly to agriculture and food production: “Data capabilities and new technologies will heavily impact geopolitics, global competition, and global opportunities. The GeoTech Center recently released a new report, which offers practical and implementable recommendations that will enable the world to peacefully employ data capabilities and new technologies for beneficial purposes, including transforming agriculture and food security.”

Ahmad presented the current state of Agritech in the Middle East and North Africa (MENA): “Given the scarce arable land and water supply, the region’s food security is vulnerable with many highly dependent on imported agricultural products. Add climate changes and rapid urbanization to the mix, and the region represents a ripe environment for innovation.”

Kurtz emphasized that the Middle East has the opportunity to create food cheaply because it is abundant in the essential resources at the core of food production: sun, CO2, nutrients, water, land, energy, taxation, and capital. In his view, “If you can solve for issues like climate, source capital, and collaborate across all sectors including government, there is an opportunity for MENA to be the cheapest food producer in the world.”

Abdullah highlighted three areas where we must improve the efficiency of farming: seed technology, to consume less water and sustain plants in higher temperatures; watering technology, to plant with saltwater and reduce evaporation losses; and digital technology, to spotlight the best land areas for planting.

Abdullah underscored the cross applicability of existing research and development institutions. Governments can incentivize R&D from farmers through payments and, if we connect well-funded local universities with farmers, we can integrate new technologies into the existing marketplace.

According to Abdullah, “The waste of food in this region is still among the highest in the world. Governments have recognized that they need to mandate a shift in people’s minds about healthy food consumption as important and about food waste patterns. Culturally, our social occasions revolve around abundant food displays which end up being thrown, especially during the holy month of Ramadan. We can use new technologies to convert disposed food into animal feed and partially address this issue.”

Food loses half of its shelf life before it reaches the supermarket, and supermarkets will not risk selling a product in the last few days, so they throw the food away. Taveau pointed out that inefficiencies at ports are the reason for much of the lost shelf life. Overhauling the ports and streamlining efficiency will be important to preserving the longevity of the food supply.

To maximize the utility of data, we have to harness existing technology. We don’t need one specific piece of technology designed to capture data from farmers when we have phones that each farmer already possesses. Agromovil CEO and GeoTech Center Non-resident Senior Fellow Andrew Mack emphasized that distributing more technology or resources is not the key to capturing more data—we must maximize the existing technological infrastructure of small-scale farmers.

Investing in Domestic and Local Farming

Abdullah noted that governments lack major budget services, especially post-pandemic, and cannot maintain exorbitant expenditures on importing food. Governments must create a sustainable agriculture system by supporting local farmers.

Kurtz added that the private sector is also trending towards local farming. He believes market forces will move us towards a world with more locally produced food.

Abdullah highlighted that we still have a lot to do to ensure local food production. Supermarkets make the most money because they are closest to the end customer, while the farmer takes on the greatest risk.

Mack emphasized the importance of protecting local farmers in the marketplace. He pointed out that farmers are going out of business. The average age of a farmer in multiple countries is 58, and they are telling their kids to get a degree and look for a job in another field. There are 1.5 billion people in the farming sector around the world and 570 million of them are small farmers. Small farmers are too important politically and economically to ignore.

Ahmad added that consumer behavior will drive the capability of agricultural technologies to be relevant, profitable, and investable. He questioned consumer trends and preferences, particularly for locally-sourced fresh products and the willingness of consumers to pay a premium for these products.

Kurtz responded by pointing out that there has to be someone to sell and buy this stuff from the commercial side. Right now, this trend is highly relevant on socioeconomic disparity. For the middle and upper class, the calories of a product and the knowledge that their food is locally grown is becoming more important.

International and Regional Cooperation

Taveau argued that we must accept that the MENA region will continue to receive a large amount of their food supply from neighboring countries like India, which is a close ally of many MENA countries and possesses sizeable amounts of arable land. Therefore, food security for the Middle East requires investments in other nations in addition to investing in the region itself.

According to Taveau, “it is always important, as we are developing greater independence in supply chains, that we ensure independence in a way that is globally-minded. We cannot survive without one another and should resign ourselves to the fact that we will get the greatest food security when we work with our partners.”

Kurtz emphasized that regional players should continue coordinating their efforts within and beyond the GCC to build a sustainable food market. Adopting technology and improving food production drives profitability, making this shared goal more appealing.

When describing the importance of cooperation versus competition, Abu Dhabi Investment Office Director General H.E. Dr. Tariq Bin Hendi stressed how critical building partnerships is and how competition between nations is healthy, as it allows for more creative solutions to pressing issues in the AgriTech field.

Recommendations

Taveau strongly believes that we need long-term economic viability in order to combat food insecurities in the MENA region. Sustained attention is required to progress in tackling this persistent issue. Taveau cautioned that people can be reluctant to accept and adopt new technology. The Agritech industry needs a good, segmented marketing strategy to combat social issues that arise on the path to innovation.
Abdullah concluded that we must have a method of consumption changes equal to that of production changes.
From a capital perspective, an individual’s ability to access capital, especially risk capital, is key to developing solutions, commercializing them, and creating new companies that can create jobs and economic prosperity in these countries, said Kurtz.
Futurity CEO Jack Bobo defined efficiency as “reducing the friction in the system.” This can happen in terms of regulation and technology, as well as across the entire food chain. During the COVID-19 pandemic, efficiency means short-term arrivals when inventory is dwindling. He recommended a balance between slack and reducing friction in the system.
According to Zuaiter Capital Holdings Managing Member Abbas Zuaiter, long-term investments, such as a thirty-year green bond, could result in investors being more likely to commit and remain in the region.

Hezha Barzani is an intern with Middle East Programs. Matthew Goodman is a consultant with the GeoTech Center. Follow him @matt_goodman22.

MENASource Apr 5, 2021

US Mission to Saudi Arabia announces new women’s entrepreneurship program in partnership with Atlantic Council, AmCham Saudi Arabia, and Quantum Leaps

By Allison Holle

On March 31, the Atlantic Council’s empowerME initiative hosted an event in partnership with the US Mission to Saudi Arabia, AmCham Saudi Arabia’s Women in Business Committee, and Quantum Leaps to mark the launch of their new joint program: IGNITING Women’s Entrepreneurship and Innovation in Saudi Arabia.

Civil Society Education

MENASource Mar 25, 2021

‘It’s not a zero-sum game’: MENA officials agree that regional integration is key to growth

By Heba Malik

Atlantic Council’s empowerME initiative and the King Faisal Center for Research and Islamic Studies co-hosted an event that discussed strategies for building regional cooperation to create a more attractive investment landscape and productive entrepreneurial ecosystem. These are some key takeaways.

Economy & Business Middle East

MENASource May 10, 2021

Want resiliency in MENA? Invest in women-led startups

By Nadereh Chamlou

As MENA assesses how to rebuild better after the pandemic, women-led startups could be part of the solution.

Economy & Business Middle East

Building the GeoTech Decade ahead

The GeoTech Report

The GeoTech Center, in partnership with a bipartisan group of leaders from industry and government, has launched the Report of the Commission of Geopolitical Impacts of New Technologies and Data. This report provides an extensive set of recommendations for the U.S. and its allies to thrive in a decade defined by data and technology collaboration and competition. The report is premised on the arrival of the “GeoTech Decade,” in which new technologies and data capabilities will have an outsized impact on geopolitics, economics, and global governance.

Read the full report

Press Release May 26, 2021

Atlantic Council releases landmark recommendations on the geopolitical impacts of new technologies

Findings based on bipartisan study groups of U.S. government officials and senior figures in tech industry.

New Atlanticist May 27, 2021

New technologies will reshape the world in the next decade. What does that mean for the US?

By Katherine Walla

What can the United States do to reap the benefits of the GeoTech Decade and tame the era’s threats? Here are the key takeaways from the conversation.

Cybersecurity Disinformation

New Atlanticist May 27, 2021

How to solve today’s tech challenges: secure data, close the digital divide, boost leadership

By Rose Butchart

The decade to come will be the “GeoTech Decade,” in which the technology trends that began in previous years will become fixed in their impact on society. The Commission on the Geopolitical Impacts of New Technologies and Data launched its first report with recommendations to guide leaders as they make choices regarding technology and data.

Cybersecurity Disinformation

The post Can AgriTech entrepreneurs save the Middle East’s food supply? appeared first on Atlantic Council.

Atlantic Council releases landmark recommendations on the geopolitical impacts of new technologies

Nicole Meir — Wed, 26 May 2021 13:00:00 +0000

Findings based on study groups of US government officials and senior figures in tech industry

WASHINGTON, DC – MAY 26, 2021 – The Atlantic Council’s bipartisan Commission on the Geopolitical Impacts of New Technologies and Data today released a landmark report proposing recommendations for the US government and like-minded allies on global technology and data development policy.

The report’s recommendations are designed to maintain US and allied leadership in science and technology; ensure the trustworthiness and resilience of physical and IT supply chains, infrastructures, and the digital economy at large; improve global health protection; assure commercial space operations for public benefit; and create a digitally fluent and resilient workforce.

The report was developed over months of intensive study and debate by an esteemed panel of commissioners comprised of senior representatives from Congress, academia, industry, and former officials from recent administrations. Sens. Mark Warner (D-VA) and Rob Portman (R-OH) and Reps. Suzan DelBene (D-WA) and Michael McCaul (R-TX) served as honorary co-chairs of the commission. John Goodman, Chief Executive Officer of Accenture Federal Services, and Teresa Carlson, President and Chief Growth Officer of Splunk, served as co-chairs. The commission was housed within the Atlantic Council’s GeoTech Center, which was launched in 2020 to champion positive paths forward to ensure new technologies and data empower people, prosperity, and peace.

Today’s report comes amid the “GeoTech Decade,” in which new technologies and data capabilities will have an outsized impact on geopolitics, economics, and global governance. However, no nation or international organization has created the appropriate governance structures needed to grapple with the complex and destabilizing dynamics of emerging technologies. As a result, new approaches are required for developing and deploying critical technologies, cultivating human capital, rebuilding trust in domestic and global governance, and establishing norms for international cooperation.

Key recommendations from the report include:

Global science and technology leadership: Develop a National & Economic Security Technology Strategy
Secure data and communications: Strengthen the National Cyber Strategy Implementation Plan and accelerate quantum information science technologies operationalization
Enhanced Trust and Confidence in the Digital Economy: Demonstrate AI improvements to delivery of public- and private-services
Assured Supply Chains and System Resiliency: Broaden federal oversight of supply chain assurance
Continuous Global Health Protection and Global Wellness: Launch a global pandemic surveillance and warning system
Assured Space Operations for Public Benefit: Harden security of commercial space industry facilities and space assets
Future of Work: Create the workforce for the GeoTech Decade and equitable access to opportunity

“The work of the bipartisan GeoTech Commission was 14 months in the making, representing the consensus of public and private sector leaders on practical steps forward for Congress, the White House, private industry, academia, and like-minded nations,” said Dr. David Bray, director of the Atlantic Council’s GeoTech Center. “The sophisticated, but potentially fragile, data and tech systems that now connect people and nations mean we must incorporate resiliency as a necessary foundational pillar of modern life. It is imperative that we promote strategic initiatives that employ data and tech to amplify the ingenuity of people, diversity of talent, strength of democratic values, innovation of companies, and reach of global partnerships.”

“The U.S. stands at a crossroads. New technologies and ready access to data offer exciting opportunities to tackle the world’s greatest challenges. Yet there are also risks that threaten to undermine peace and prosperity in unanticipated ways,” said John Goodman, CEO of Accenture Federal Services. “For the US and its partners to remain economically competitive and protect national security, we must work together to build trust in the digital fabric of the GeoTech decade. We must act now to invest in these new technologies, to develop and expand our skilled workforce, and to establish norms to ensure that technology emerges as a powerful force for good.”

“The GeoTech Decade impacts all countries, people, communities, and businesses from global safety to security and more,” said Teresa Carlson, President, and Chief Growth Officer at Splunk. “The recommendations in this independent report are necessary for innovation in the years to come. With bi-partisan buy-in from U.S. Congress and top industry leaders, executing on these seven areas will help us combine the data and technologies required for success in this new age.”

“We’re in the midst of a titanic technological shift, from IT modernization to artificial intelligence, as organizations from all industries look to harness the power of data to solve complex challenges,” said Max Peterson, Vice President, Worldwide Public Sector, Amazon Web Services. “Advanced computing systems, faster and higher-bandwidth communications networks, and increasingly sophisticated technologies are digitizing the information around us and transforming the way we live, learn, and do business. Together, government and the private sector should work to ensure we grasp the innovative opportunities before us in ways that promote security, trust, and inclusion.”

Commission on the Geopolitical Impacts of New Technologies and Data

Co-Chairs:
John Goodman, Chief Executive Officer, Accenture Federal Services
Teresa Carlson, President and Chief Growth Officer, Splunk

Honorary Co-Chairs:
Sen. Mark R. Warner (D-VA)
Sen. Rob Portman (R-OH)
Rep. Suzan DelBene (D-WA)
Rep. Michael T. McCaul (R-TX)

Commissioners:
Max R. Peterson II, Vice President, Worldwide Public Sector, Amazon Web Services
Paul Daugherty, Chief Executive – Technology & Chief Technology Officer, Accenture
Maurice Sonnenberg, Guggenheim Securities
Michael Chertoff, Former U.S. Secretary of Homeland Security
Michael J. Rogers, Former Chairman of the U.S. House Permanent Select Committee on Intelligence
Pascal Marmier, Head, Economy of Trust Foundation, SICPA
Ramayya Krishnan, PhD, Director, Block Center for Technology and Society, Carnegie Mellon University
Dr. Shirley Ann Jackson, President, Rensselaer Polytechnic Institute
Susan M. Gordon, Former Principal Deputy Director of National Intelligence
Vint Cerf, Internet Pioneer & “Father of the Internet”
Zia Khan, PhD, Vice President for Innovation, The Rockefeller Foundation
Anthony Scriffignano, PhD, Senior Vice President, Chief Data Scientist at Dun & Bradstreet Corporation
Frances F. Townsend, Executive Vice President, Activision Blizzard
Admiral James Stavridis, USN, Ret.

Executive Director:
David Bray, PhD, Director, GeoTech Center, The Atlantic Council

The Commission on the Geopolitical Impacts of New Technologies and Data was made possible by support from Accenture Federal Services and Amazon Web Services. The report’s full findings and recommendations can be found here.

For media inquiries, please contact press@atlanticcouncil.org.

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Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

Africa Center — Tue, 25 May 2021 20:59:32 +0000

On the day after an apparent military coup in Mali, Dana L. Banks, special assistant to the president and National Security Council senior director for Africa, said the White House is “deeply concerned of the reports coming out of Mali.” Speaking at the Atlantic Council’s Africa Day celebration, a series of signature conversations with US and African officials, Banks said the Biden administration is working with partners to “call for the unconditional and immediate release of the president and the prime minister, as well as the defense minister, who we understand was also illegally taken into custody.”

Banks told the director of the Atlantic Council’s Africa Center, Ambassador Rama Yade, that “Instability in Mali leads to greater instability in the Sahel. I think this makes the case for why we have to work together with like-minded partners in the region to ensure that stability is maintained.”

Banks highlighted Africa’s place in Biden administration foreign policy amid a broader strategy of global reengagement and relations rooted in mutual respect. She said that Africa’s importance goes well beyond strategic competition with China, and instead put forth a vision of “Africa not as a continent or as a problem to be solved, but rather a partner engaging in mutual respect.”

When asked about the pandemic and debt relief, Banks said “When you talk about economic recovery from the COVID-19 pandemic, we stand ready to partner with African countries to ensure that they are rebuilding their economies through various methods. One tool that we have in our toolbox is Prosper Africa,” referring to the United States’ existing flagship commercial policy. She went on to say that the administration is finding ways to give Prosper Africa “the teeth” it needs to succeed, while hinting at forthcoming US programs in support of Africa’s digital economy and the African Continental Free Trade Area.

Ambassador of the African Union to the United States Hilda Suka-Mafudze sounded similar notes of collaboration in her remarks, pointing to the US government’s strong bipartisan support for Africa. “I strongly believe that all the stars are aligned today to take US-Africa relations to a higher and strategic level of engagement for the best interests of both sides,” she said. Suka-Mafudze highlighted the African Union’s 2021 theme of “Arts, Culture, and Heritage,” affirming the creative industries’ ability to support sustainable job creation and social inclusion.

Banks, too, underlined how “culture has always been a wonderful way to connect” and that cultural connections “will continue and have always been one of the bedrocks of our engagement with Africa.”

Atlantic Council Executive Chairman Emeritus Gen. James L. Jones Jr. opened the session by saying Africa Day—which commemorates the founding of the African Union’s predecessor in 1963—represents a moment of optimism as well as reflection. He added that, “We are reminded of the importance of multilateral institutions and the important role that the African Union has played in the continent’s political and economic development and its global relationships.” Also joining the conversation with Banks were Africa Center fellows Didier Acouetey, Abdoul Salam Bello, Cameron Hudson, and Aubrey Hruby, as well as Africa Center partner Admassu Tadesse, the group managing director and CEO of the Eastern and Southern African Trade and Development Bank.

The session closed with Yade bringing the conversation back to Banks’ personal ties to the continent, for a discussion of building bridges between cultures and diasporas. Reflecting on her connection and fascination with the continent, Banks said “I know that there are many other African Americans who feel the same and that’s who we would like to work with, the diaspora, to get them to become more engaged economically as well as culturally with the continent because it makes for stronger policy.”

Missed the event? Watch the webcast below and engage us @ACAfricaCenter with any questions, comments, or feedback.

WATCH THE WEBCAST

Linda Thomas-Greenfield on Africa’s most overlooked crises and opportunities

By Katherine Walla

Africa Crisis Management

Event Recap May 25, 2021

Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

By Africa Center

Africa Democratic Transitions

Report Apr 19, 2021

Priorities for US-Africa commercial policy in the Biden Administration

By Aubrey Hruby

Africa Economy & Business

The post Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister appeared first on Atlantic Council.

Yade joins the House Foreign Affairs Committee to speak on African innovation and leadership

Atlantic Council — Tue, 25 May 2021 17:05:00 +0000

To mark the occasion of Africa Day, Africa Center Director Amb. Rama Yade joined the US House Foreign Affairs Committee on Tuesday, May 25 for a roundtable on African entrepreneurship, innovation, and leadership and how to build stronger US-Africa ties. Panelists included H.E. Ellen Johnson Sirleaf, former president of Liberia; H.E. Dr. Ngozi Okonjo-Iweala, director general of the World Trade Organization; and Ms. Isis Nyong’o Madison, Kenyan-American media and tech entrepreneur.

View more Africa Day content

AfricaSource May 25, 2021

Africa is America’s greatest geopolitical opportunity. Does the US know it?

By Rama Yade

Biden can further build ties with Africa: He should do so not only because these countries have long been underrepresented within leading multilateral organizations, but also because they offer innovative solutions to global challenges including terrorism, climate change, migration, debt, and COVID-19.

Africa Economy & Business

New Atlanticist May 25, 2021

Linda Thomas-Greenfield on Africa’s most overlooked crises and opportunities

By Katherine Walla

Africa Crisis Management

Event Recap May 25, 2021

Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

By Africa Center

Africa Democratic Transitions

The post Yade joins the House Foreign Affairs Committee to speak on African innovation and leadership appeared first on Atlantic Council.

How does big tech impact U.S. national security?

Borja Prado — Mon, 03 May 2021 15:03:41 +0000

Tarun Wadhwa, Nonresident Fellow at the GeoTech Center, participated in a recent Foreign Affairs survey on the relationship between big tech companies and US national security. The publication asked dozens of experts, from national security practitioners to law professors, whether they agreed or disagreed with the follow statement: “Breaking up big tech companies would strengthen U.S. national security.” Mr. Wadhwa took issue with the debate proposition: in his view, “big threats require big investments—and these companies have the technical talent, computing resources, and data sets that make them best equipped to deal with today’s sophisticated online adversaries.” Mr. Wadhwa was not alone in this perspective, but not all experts agreed. Indeed, a plurality of those surveyed took a neutral stance, highlighting both the complexity and uncertainty of regulating Big Tech.

Read all the expert opinions at the link below.

View Original Source

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The Role of the Private Sector in Catalyzing Inclusive Economic Opportunities in the Northern Triangle

María Fernanda Bozmoski and Domingo Sadurní — Wed, 31 Mar 2021 18:00:00 +0000

Introduction

Formalizing the Northern Triangle Economies: How Can the Private Sector Help?

Keeping up with Talent: How Can the Private Sector Help?

Preparing the Northern Triangle for the 21st Century Economy: How Can the Private Sector Help?

In Summary: Working toward a Shared Vision for Sustainable Economic Opportunities in the Northern Triangle

Download pdf

Introduction

As in every democratic country in the world, the private sector in Central America’s Northern Triangle (Guatemala, Honduras, and El Salvador) has a central role in generating employment, driving economic growth, and spurring innovation. But in a region plagued by one of the highest levels of economic informality, weak government institutions, and pervasive corruption, private enterprises—both decades-old industry behemoths and newer startups—can have a more positive influence in steering the Northern Triangle toward inclusive and sustainable economic development. This is not to say that business leaders in Guatemala, Honduras, and El Salvador have been absent in unlocking growth and innovation in the countries, especially since the end of the civil wars in the late 1990s. But in this unique moment of global crisis and renewed attention from the United States, the Northern Triangle’s private sector should seize the opportunity to further position itself as a committed, trusted partner and galvanizing force for positive change.

Seeking to address the root causes of unauthorized migration to the United States—including lack of quality economic opportunities, weak rule of law, and violence—the Biden administration’s four-year, $4-billion plan for the Northern Triangle seeks to implement a whole-of-society approach to improve the living conditions of Guatemalans, Hondurans, and Salvadorans. The plan comes at a time when Central America, already reeling from structural institutional challenges to its ability to govern and improve its economies, grapples with the effects of the COVID-19 pandemic and two back-to-back hurricanes. As conditions deteriorate on the ground and create additional push factors for would-be migrants, the US government should devote special energy and attention to laying the groundwork for strategic partnerships with private sector actors who are positioned—despite contending with pandemic-induced burdens of their own—to catalyze economic opportunities for their fellow citizens. The business community can be a pivotal player in long-term change that seeks to improve the rule of law, tackle corruption, and open new opportunities for inclusive economic growth.

This issue brief takes a deep dive to unpack why a lack of sustained and inclusive economic opportunities—among the three main drivers of unauthorized migration—have eluded the Northern Triangle and how the private sector can help reduce informality, invest in employment-generating sectors, resolve the human capital paradox, and catalyze greater infrastructure investment and digital connectivity.¹ While there is an emphasis on high levels of informality causing economic insecurity, it is also true that economic insecurity and lack of investment in economic development also drives informality.

This is the first of three issue briefs as part of the Adrienne Arsht Latin America Center’s latest Central America initiative, in partnership with the DT Institute, to inform and mobilize key stakeholders at the national, regional, and international levels behind new policy solutions to tackle the Northern Triangle’s most pressing issues. This issue brief is the outcome of a meeting with the Center’s Northern Triangle Advisory Group, which met in February 2021, and will meet regularly during the first six months of 2021 to help inform the three issue briefs.

Formalizing the Northern Triangle Economies: How Can the Private Sector Help?

The Challenge: According to official government data from Guatemala, Honduras, and El Salvador, the pre-pandemic average unemployment rate in the Northern Triangle was relatively low, at 3.9 percent in 2019, eight percentage points lower than that of Costa Rica.² So, why are sustainable economic opportunities lacking in the Northern Triangle when the unemployment rate is less than that of a soon-to-be Organisation for Economic Co-operation and Development (OECD) country? While more than eight million people of the total (active) labor force are calculated to be formally employed, around 60 percent—higher than the average across Latin America—have informal, low-quality jobs with no safety net.³ In Guatemala and Honduras alone, four in five people work as street vendors, as domestic workers, in unregistered microenterprises, in service sectors (mainly restaurants or hotels), and in agriculture.⁴ These low-paying jobs are insecure, inconsistent, often involve long hours in poor working conditions, and barely provide for basic family needs. As nontaxable employment, informal work cannot guarantee access to government pensions or credit from financial institutions.

Informal jobs in the Northern Triangle are also highly vulnerable to minor demand shocks, climate disasters, and, most recently, the health effects of a pandemic and the stringent measures used to combat it. Due to lockdowns, curfews, and restrictions on public gatherings, informal workers—most of whom cannot afford to work remotely—have been unable to generate income. One consequence: the skyrocketing rise in food insecurity across the region, which became even more dire with the destruction of one hundred thousand hectares of crops during the 2020 Atlantic hurricane season. In Guatemala, the number of households with insufficient food during the pandemic nearly doubled compared with pre-pandemic levels, and in Honduras, food insecurity increased by more than 50 percent.⁵

A swollen informal economy in the Northern Triangle has created a vicious cycle that is partly responsible for the lack of inclusive economic advancement, and for productivity levels among the lowest in the world.⁶ Guatemalan and Honduran informal sector jobs do not pay much-needed income taxes, thereby further cash-strapping national governments that were already struggling to provide quality public services before they had to mitigate the effects of the coronavirus pandemic and the hurricanes. Regional estimates from the United Nations Economic Commission for Latin America and the Caribbean indicate that the Northern Triangle loses billions of dollars in fiscal revenue due to the high levels of informality. In a region where the average poverty rate surpasses 30 percent,⁷ lack of quality public services and social protections for the most vulnerable populations increases social inequality and widens the wealth gap.

People shop at a fresh produce market during the outbreak of the coronavirus disease (COVID-19), in Guatemala City, Guatemala. Picture taken on May 21, 2020. A large informal economy in the Northern Triangle has created a vicious cycle that is partly responsible for the lack of inclusive economic advancement, and for productivity levels among the lowest in the world. Source: REUTERS/Luis Echeverria

How the Private Sector Can Help: A more engaged private sector is not a panacea for eliminating informality in the Northern Triangle, but private businesses can apply lessons learned from other countries in Latin America and the OECD, and collaborate with the public sector to take low-cost, high-reward steps that can help pave the way for job formalization. Employers can take a more proactive approach and leadership role in the following three areas: working with governments to design and execute active labor market policies (i.e., workforce training, apprenticeships, employability courses, labor counseling, and job matching), helping the informally self-employed and jobseekers navigate through administrative costs and requirements for conducting formal work, and participating in civil society–led pledges that commit businesses to support formalization of their own supply chains and clients. To effectively promote private sector leadership in tackling informality, governments and civil society can provide the right mix of incentives, including through tax exemptions and benefits associated with corporate social responsibility.

Active labor market policies (the combined set of government programs to aid the unemployed and boost formal employment) have had limited success across Latin America, but case studies from formalization and vocational training programs in Argentina and Colombia offer lessons learned for similar policies implemented in the Northern Triangle.⁸ Despite the obvious country differences, both programs can offer best practices for implementing incentives that boost participation based on the specific labor and productivity needs of the Northern Triangle countries and establishing a framework for evaluating the programs’ impacts. Private companies in Guatemala, Honduras, and El Salvador—especially industry leaders in manufacturing, logistics, energy, agriculture, biomedical production, and information technologies—can cooperate with governments to provide buy-in for the design, implementation, and monitoring and evaluation of job training schemes and microenterprise entrepreneurship programs. To minimize the potential pitfalls of such programs, private sector participation can help identify gaps in the labor market for the unemployed or informally employed, ensure that a large portion of spending for the programs is directed to training for sectors that add to overall productivity, and guarantee that the programs meet specific objectives for increasing formal employment and building core skills rather than being used for one-off public sector projects. Private sector participation should be coupled with civil society initiatives and input to ensure that historically marginalized population groups in geographical areas known for would-be migrants, such as secondary cities, will benefit.

Employers—both existing and new businesses—can also be more proactive in guiding jobseekers and individuals running their own informal businesses through complex tax forms and extensive bureaucratic processes. But to do so, incentives for all parties must be aligned. Governments seeking to promote formalization can offer temporary tax benefits to new ventures or existing firms that will partner with fiscal agencies to promote formalization in their own supply chains and commit to delivering their products or services to clients who are formally registered or employed. To ensure sustainability and minimize reliance on government, civil society organizations such as think tanks and universities (both at the national and international levels) can organize pledging conferences that seek active participation from companies to formalize their business lines as part of a broader effort to promote stronger social responsibility reputations in the private sector. In Guatemala, local think tank Fundación para el Desarrollo’s “Cruzada por la Formalización”—Crusade against Informality—can offer early indicators of success and lessons learned for formalization efforts in the Northern Triangle.

Keeping up with Talent: How Can the Private Sector Help?

The Challenge: As identified in a previous Atlantic Council report, Central America’s demographic bonus represents a limited-time opportunity that the United Nations forecasts will disappear by 2050.⁹ While a young national population does not automatically translate into a young and skilled workforce, a young population that contributes to the economy is a prerequisite for creating a skilled workforce for decades to come. In each of the Northern Triangle countries, only about a quarter of the potential labor force has completed upper secondary school, and only about one in ten has completed any type of tertiary education.¹⁰ Thus, the region has limited time to double down on policies that will ensure a full capture of its human capital potential. But research by the World Bank shows that, over the last few years, the more-skilled labor has been most likely to migrate.¹¹ This trend puts key stakeholders in a difficult position: Why invest in workforce training for higher-quality jobs if workers will take those skills elsewhere?

If the countries and the private sector are unable to align job opportunities with a growing set of skilled workers—and are unable to attract country-wide (much less regional) large-scale and labor-intensive investments—there is little incentive for investment in the national workforce. In this vicious cycle the private sector lacks the tools and ability to increase productivity and improve the region’s competitiveness. This human capital paradox where worker skills are quickly outgrowing the job market continues to contribute to the region’s brain drain—a loss of much-needed skills and talent for Northern Triangle economies. Finding sustainable solutions to the misalignment of offer and demand in the labor market must be a shared priority across sectors and industries in the three countries.

Honduran migrants walk toward El Florido border crossing point to return to their country after Guatemalan security forces cleared a road where they were camping after authorities halted their trek to the United States, in Vado Hondo, Guatemala. Picture taken on January 18, 2021. The region has limited time to double down on policies that will ensure a full capture of its human capital potential. But research by the World Bank shows that, over the last few years, the more-skilled labor has been most likely to migrate. Source: REUTERS/Luis Echeverria

How the Private Sector Can Help: In any growth-oriented and innovative economy, training (through active market labor policies mentioned in the previous section or directly from private businesses) and education must be accompanied with compatible and attractive opportunities in the job market. Jobs must evolve with the growing skills of workers, and the market must be nimble enough to adapt to an increasingly sophisticated workforce. Private sector alliances with the government and public universities or educational institutions can go a long way. Specifically, the private sector can commit to guaranteeing jobs for reskilled workers as it is in the best economic interest of businesses to retain employees. Government, educational institutions, and the private sector—including chambers of commerce and business councils—must all be at the table to determine the economy’s needs and gaps. In a context of weak labor demand, a low-skilled workforce, and high informality, labor force participation is especially low for women. Hence, any public-private partnership must include a gender lens. For example, support with childcare—on-site or through subsidies—could help more women seize these opportunities. Costa Rica’s CEN CINAI program is an example of this. Multilaterals and the international community may also play an important role in this alliance by providing technical assistance and loans and sharing best practices from around the globe.

Likewise, recent trends in supply chain reconfiguration may offer a window to disrupt and break away from conventional educational models that may be too lengthy and unrealistic for a region where many citizens are looking for a way to make a living as soon as possible. In this respect, governments at the national and local levels can work to offer vocational training earlier in life, with programs that prepare men and women for labor-intensive positions or help them create their own businesses. These institutions may have agreements in place with companies to churn out workers who reach different specialization levels for jobs in customer service, information technology, or other industries. If a harmonized regional framework existed, the region could build an extensive, large-scale value chain that could greatly foster the Northern Triangle’s competitiveness.

Preparing the Northern Triangle for the 21^st Century Economy: How Can the Private Sector Help?

The Challenge: National and international investors, the private sector, and multilaterals have long seen the infrastructure (energy and transport, specifically) and digital sectors in the Northern Triangle as having the largest potential for generating regional economic opportunities through increased connectivity, access to new and scalable markets, and improved overall competitiveness. The development of transport infrastructure is critical to connect isolated towns and provide them with access to the global market, especially in Guatemala –most recently ranked at the bottom of the World Bank’s 2018 Logistics Performance Index.¹² Given the existing bilateral trade agreements, increasing commercial integration, and close cultural ties among Northern Triangle countries, efforts that enhance regional connectivity are not beyond reach. But investment in large-scale infrastructure has been significantly limited in the Northern Triangle, both at the national and intraregional levels. In Guatemala alone, the International Monetary Fund calculated that the country must raise infrastructure expenditure to at least 15 percent to reduce poverty and increase economic opportunities.¹³ From politics and policy to mismanagement and corruption, there are many reasons infrastructure investment has been limited, including insufficient fiscal revenue due to tax evasion and informality. According to the World Bank’s Doing Business 2020 report, the three Northern Triangle countries rank lower than 90 of 190 countries studied worldwide.¹⁴ Among thirty-two of their Latin American neighbors, Guatemala, Honduras, and El Salvador received a significantly lower collective ranking on contract enforcement at 30, 27, and 21, respectively. Dealing with construction permits and protecting minority investors are also top challenges for the three countries, especially for Honduras, which performed the lowest overall among Northern Triangle countries. Taken together, these indicators reflect a business environment in need of improved regulatory frameworks, safeguards against graft, and stronger transparency requirements. By taking serious steps in generating a more business-friendly environment, the Northern Triangle will not only be more attractive for investment in infrastructure, but also ensure the full and efficient execution of critical projects in this sector.

A worker walks past newly installed solar panels at the Honduran Solar Energy Company SA (COHESSA) and Solar Power SA (Soupy) solar power plant in Nacaome, Honduras. Picture taken on May 12, 2015. The Biden administration’s regional plan intends to focus on large-scale energy projects, but private business leaders in this sector must work together toward a shared regional vision, overcome short-term political agendas, and commit to the highest transparency standards. Source: REUTERS/Jorge Cabrera

How the Private Sector Can Help: The Northern Triangle private sector can position itself as an indispensable partner to the Biden administration for transformative infrastructure projects in the region. Leveraging existing projects in energy and infrastructure funded by the US International Development Finance Corporation in the three countries—including $1 billion commitments in Honduras and Guatemala—would be an important step in this process. But any new partnerships under the Biden administration’s regional strategy will require that capable partners not only demonstrate their commitment to abiding by the rule of law, but also take actions to implement anti-corruption measures, integrate climate-mitigating strategies beginning at project inception, and prioritize efforts that directly benefit Indigenous communities as well as rural populations most likely to migrate. One first step to consider for interested private sector companies in each Northern Triangle country is collectively organizing a road show (both virtual and in-person) to Washington, DC, to publicly demonstrate their commitments to guaranteeing transparency and fighting corruption in infrastructure projects. With increased visibility, this could, at the very least, pave the way to build confidence between US-based and international investors and in-region businesses operating in the infrastructure sector. A second step would be to identify regional infrastructure efforts with the best potential to impact the most people—and especially the most vulnerable populations in the three countries. One such ongoing initiative is the Central American Electrical Interconnection System, an ambitious program set out by Central American countries (including Panama) to develop their power infrastructure and create an energy-integrated market that could be more efficient and attractive for new investments. The project envisioned the creation of the Regional Electricity Market (MER in Spanish), which was completed in 2014. However, several deficiencies have emerged since, including a lack of clarity in the sector’s development strategy.¹⁵ The Biden administration’s regional plan intends to focus on large-scale energy projects, but private business leaders in this sector must work together toward a shared regional vision, overcome short-term political agendas, commit to the highest transparency standards, and develop dispute-resolving mechanisms that provide predictability and certainty to all parties involved.

The same applies for a regional digitization policy that has gained renewed urgency in the context of the coronavirus pandemic. The private sector is positioned to lead—with public sector and multilateral collaboration—in the development of an innovative digital agenda that promotes the region’s competitiveness and helps fight corruption.¹⁶ This is a challenge, since most rural areas in the Northern Triangle do not have access to information technologies or the internet. Digitization, however, would also help micro, small, and medium-sized businesses and the agricultural sector (which provides more than 60 percent of employment) by presenting them with commercial opportunities beyond their immediate markets through the use of e-commerce and online applications. Broad digitization can also broaden the access to loans and financing through financial technology (fintech) applications and blockchain technologies.¹⁷

In Summary: Working toward a Shared Vision for Sustainable Economic Opportunities in the Northern Triangle

Reducing informality, strengthening human capital, and generating confidence that can draw regional infrastructure investment are only three key areas where the Northern Triangle private sector can lead and—always in collaboration with governments and civil society—help create economic opportunities and improve living conditions in the region. To do so, the Biden administration can be a catalytic partner that can galvanize support from a broad spectrum of regional and international players, from multilateral regional institutions and international financial organisms to in-region civil society leaders and youth organizations. Below are two concluding opportunities for US government engagement with the Northern Triangle private sector:

Develop a shared vision for economic advancement. This is not a new task for President Biden. This is as important today as it was back in 2014 when, as vice president, he led the Plan for the Alliance for Prosperity in the Northern Triangle. In this new global context, the Biden administration must apply lessons learned from that program, plan for contingencies, and ensure sustainability by building long-term trust with the regional private sector. Importantly, a shared vision must include a common understanding of what success looks like and how strategic engagement can work toward that goal. Beyond the business perspective, the administration must leverage its convening power to include voices and participation from civil society groups in the Northern Triangle, with a special focus on integrating the economic development visions of Indigenous peoples in the region (44 percent of Guatemalans self-identify as Indigenous).
Establish clear anti-corruption and transparency standards for economic opportunity partnerships. Corruption manifested in all its forms has hindered progress in the region for too long; the fight to reduce it must include advancing on parallel efforts that can address US national security interests. The Biden administration should establish and clearly communicate the anti-graft standards that it will require from potential private sector partners in economic opportunity efforts. The administration’s Central America plan is rightfully prioritizing the fight against corruption transversely across its regional engagements. But to ensure viability and sustainability, the administration must ensure that this conversation includes buy-in, not only from the private sector, but also from civil society organizations that have been on the ground and have a more nuanced perspective for how to understand corruption in the region and how to fight it. Clear anti-corruption and transparency standards are an important consideration for potential foreign investors; without certainty or rules, it will be hard to attract any significant or transformative levels of foreign direct investment.

Acknowledgements

This issue brief is the first of three publications as part of the work of the Adrienne Arsht Latin America Center’s Northern Triangle Advisory Group (members listed below), a high-level group of policymakers, business leaders, and civil society from the Northern Triangle that seek to create a basis for consensus and galvanize support for strengthening the rule of law and mitigating corruption, increasing productivity and enabling sustainable economic development, and reducing conflict in Guatemala, Honduras, and El Salvador. Thank you to Jason Marczak, María Fernanda Bozmoski, Domingo Sadurní, and Eva Lardizábal at the Adrienne Arsht Latin America Center for leading this effort and to the Center’s in-region consultant Gina Kawas for her research support. This publication was produced with the generous financial support of DT Institute. Thank you to DT Institute for their insights and collaboration.

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About the Authors

María Fernanda Bozmoski is deputy director, programs at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Mexico, USMCA, and Central America, and contributes to projects on regional trade integration as well as disinformation in Latin America. Bozmoski has co-led the Center’s Central America Task Force, managed the Center’s trade portfolio, and programmed events in Asia for US policymakers. She speaks native Spanish, English, and French, fluent Italian, and near fluent Portuguese.

Domingo Sadurní is assistant director at the Adrienne Arsht Latin America Center, where he covers Venezuela and Central America. Sadurní joined the Council as an intern in February 2018, previously working at J.P. Morgan’s private bank and Banco Popular de Puerto Rico. Sadurní earned a bachelor’s degree in finance and political science from Boston College. He speaks native English and Spanish.

Northern Triangle Advisory Group

Northern Triangle Advisory Group members have provided critical insight and ideas as part of the drafting of this issue brief. Findings and recommendations of this brief, however, do not necessarily reflect the personal opinions of the individuals listed below or the organizations to which they are affiliated.

El Salvador

María Eugenia Brizuela de Ávila

Adrienne Arsht Latin America Center/Former Minister of Foreign Affairs, El Salvador

Diego de Sola

Grupo de Sola/Glasswing International

Roberto Rubio

Fundación Nacional para el Desarrollo (FUNDE)/Transparency International, El Salvador

Javier Simán

Asociación Nacional de la Empresa Privada (ANEP)

Marjorie Trigueros

Fundación Salvadoreña para el Desarrollo Económico y Social (FUSADES)

Claudia Umaña Araujo

Fundación Salvadoreña para el Desarrollo Económico y Social (FUSADES)

Guatemala

Marcos Antil

XumaK

Ricardo Castaneda Ancheta

Instituto Centroamericano de Estudios Fiscales (ICEFI)

Víctor Juárez

TuConsejería

Salvador Paiz

PDC Capital/Fundación para el Desarrollo de Guatemala (FUNDESA)

María Tuyuc

Global Network of Indigenous Entrepreneurs of Guatemala

Edgar Villanueva

US Guatemala Business Council

Honduras

Gabriela Castellanos

Consejo Nacional Anticorrupción (CNA)

Jacqueline Foglia

Consejo Nacional de Inversiones (CNI)

Carlos Hernández

Asociación para una Sociedad Más Justa/Transparency

International, Honduras

Guillermo Peña Panting

Fundación Eléutera

Juan Carlos Sikaffy

Consejo Hondureño de la Empresa Privada (COHEP)

United States

Mari Carmen Aponte

Former Assistant Secretary of State for Western Hemisphere Affairs

David Holiday

Open Society Foundations

Irasema Infante

Inter-American Development Bank

Jason Marczak

Atlantic Council

Jenny Willier Murphy

Centro de Estudios de Justicia de las Américas (CEJA)

Enrique Roig

Creative Associates

Matthew M. Rooney

George W. Bush Institute–SMU Economic Growth Initiative

Santiago Sedaca

DT Global

Mary Ann Walker

Adrienne Arsht Latin America Center Advisory Council

Beyond the Northern Triangle

Enrique Bolaños

INCAE Business School

Jaime Roberto Diaz

Central American Bank of Economic Integration (CABEI)

The Adrienne Arsht Latin America Center broadens understanding of regional transformations through high-impact work that shapes the conversation among policymakers, the business community, and civil society. The Center focuses on Latin America’s strategic role in a global context with a priority on pressing political, economic, and social issues that will define the trajectory of the region now and in the years ahead. Select lines of programming include: Venezuela’s crisis; Mexico-US and global ties; China in Latin America; Colombia’s future; a changing Brazil; Central America’s trajectory; Caribbean development; commercial patterns shifts; energy resources; and disinformation.

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1 Seven of every ten migrants—74 percent—list economic reasons as one of the main motivations behind their decision; this is a stronger reason for migrants from Honduras (75 percent) and Guatemala (87 percent) than for those from El Salvador (68 percent). See Emmanuel Abuelafla, Giselle Del Carmen, and Marta Ruiz-Arranz, In the Footprints of Migrants: Perspectives and Experiences of Migrants from El Salvador, Guatemala and Honduras in the United States, Inter-American Development Bank and the US Agency for International Development, 2019, https://publications.iadb.org/publications/english/document/In-the-Footprints-of-Migrants-Perspectives-and-Experiences-of-Migrants-from-El-Salvador-Guatemala-and-Honduras-in-the-United-States.pdf.

2 Statista, “Unemployment Rate in Latin America and the Caribbean in 2019 and 2024, by Country,” Statista, April 2019, https://www.statista.com/statistics/1009557/unemployment-rate-latin-america-caribbean-country/.

3 Statista, “Latin America & the Caribbean: Employed Population Share by Status and Country 2019,” Statista, November 2019, https://www.statista.com/statistics/862286/distribution-employed-population-status-latin-america-country/.

4 Susana M. Sanchez, Kinnon Scott, and J. Humberto Lopez, “Guatemala: Closing Gaps to Generate More Inclusive Growth,” World Bank, 2015, http://documents1.worldbank.org/curated/en/425151468327849352/pdf/106770-REVISED-PUBLIC-GTM-Report-English.pdf, 109, and “Informal Economy Diagnosis: The Commercial Sector in the Northern Triangle: El Salvador, Honduras y Guatemala,” International Labor Organization, 2020, http://www.oit.org/wcmsp5/groups/public/—americas/—ro-lima/—sro-san_jose/documents/publication/wcms_752182.pdf.

5 World Food Program, “Battered by Climate Shocks and Bruised by Economic Crisis Millions More in Central America Face Hunger,” World Food Program, February 2021, https://www.wfp.org/news/battered-climate-shocks-and-bruised-economic-crisis-millions-more-central-america-face-hunger.

6 Among the worst-performing countries with the lowest informal labor productivity relative to formal labor productivity are located in Central America: There are 6.9 informal sector workers to 1 formal sector worker in Guatemala. The ratios are 8 to 1 in Nicaragua and 14 to 1 in Honduras. See International Labour Organization, “Tackling Vulnerability in the Informal Economy,” Organisation for Economic Co-operation and Development, 2019, https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_711804.pdf.

7 Inter-American Development Bank, The IDB Group in the Central American Isthmus and the Dominican Republic, Activities Report 2019, 2020, https://publications.iadb.org/publications/english/document/The_IDB_Group_in_the_Central_American_Isthmus_and_the_Dominican_Republic_Activities_Report_2019.pdf.

8 International Labour Organization, “What Works: Active Labour Market Policies in Latin America and the Caribbean,” International Labour Organization, 2016, https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_492373.pdf

9 María Eugenia Brizuela de Ávila, Laura Chinchilla Miranda, María Fernanda Bozmoski, and Domingo Sadurní, “Central America Economic Reactivation in a COVID-19 World: Finding Sustainable Opportunities in Uncertain Times,” Atlantic Council, September 2020, https://www.atlanticcouncil.org/in-depth-research-reports/issue-brief/central-america-economic-reactivation-in-a-covid-19-world-finding-sustainable-opportunities-in-uncertain-times/.

10 Liliana D. Sousa and Andrés García-Suaza, Remittances and Labor Supply in the Northern Triangle, World Bank, September 2018, http://documents1.worldbank.org/curated/pt/946781540836424906/pdf/131471-NWP-172-Remittances-and-Labor-Supply.pdf.

11 Giselle Del Carmen and Liliana D. Sousa, “Human Capital Outflows: Selection into Migration from the Northern Triangle,” World Bank, 2018, https://openknowledge.worldbank.org/bitstream/handle/10986/29368/WPS8334.pdf?sequence=1&isAllowed=y.

12 Maria Fernanda Bozmoski and Pablo Reynoso. “Transport infrastructure in southern Mexico and Guatemala: A step toward development,” New Atlanticist, October 25, 2019, https://www.atlanticcouncil.org/blogs/new-atlanticist/transport-infrastructure-in-southern-mexico-and-guatemala-a-step-toward-development.

13 International Monetary Fund, “Guatemala: More Investment and Social Spending Needed,” International Monetary Fund, June 8, 2018, https://www.imf.org/en/News/Articles/2018/05/30/NA060118-Guatemala-More-Investment-and-Social-Spending-Needed.

14 World Bank Group, “Doing Business 2020,” World Bank, 2020, http://documents1.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf

15 Maria Andrea Higueros Trujillo, “Integrating the Power Sector in Central America: Myths and Realities,” Italian Institute for International Political Studies, October 23, 2019, https://www.ispionline.it/en/pubblicazione/integrating-power-sector-central-america-myths-and-realities-24234.

16 Matthew Rooney, “Fighting Coronavirus with Digitization in Central America,” The Bush Institute, April 8, 2020, https://www.bushcenter.org/publications/articles/2020/04/fighting-coronavirus-with-digitization-in-central-america.html.

17 Arnoldo López and Marta Ruiz Arranz, “LAC Post COVID-19: Challenges and Opportunities for Central America, Haiti, Mexico, Panama and the Dominican Republic,” Inter-American Development Bank, September 2, 2020, https://reliefweb.int/report/costa-rica/lac-post-covid-19-challenges-and-opportunities-central-america-haiti-mexico-panama.

The post The Role of the Private Sector in Catalyzing Inclusive Economic Opportunities in the Northern Triangle appeared first on Atlantic Council.

Event recap: “Post-pandemic South Asia: How the COVID-19 pandemic will affect Pakistan’s economy and regional environment”

Atlantic Council — Sat, 13 Feb 2021 22:40:39 +0000

On February 12, 2021, the Atlantic Council’s South Asia Center hosted an event on Pakistan’s economic and regional environment in a post-pandemic world. Mr. Shuja Nawaz — Distinguished Fellow of the South Asia Center – moderated the event and began by introducing the esteemed list of panelists that included Dr. Vali Nasr, Professor of International Affairs and Middle East Studies and former Dean at Johns Hopkins-SAIS and Non-resident Senior Fellow at the South Asia Center; Dr. Adil Najam, Inaugural Dean of the Frederick S. Pardee School of Global Studies, Boston University; and Dr. Huma Baqai, Associate Professor of Social Sciences & Liberal Arts, and former Associate Dean Institute of Business Administration.

Dr. Adil Najam began by talking about his endeavor of interviewing 100 prominent scholars, leaders and thinkers about what COVID means for the world. Based on this, his insight was that global politics was turbulent even before the pandemic, and the pandemic is going to shape political realities in Pakistan, especially in the sphere of International affairs. He said that the internal dynamics of Pakistani politics remain the same, but the one external factor–US-China rivalry–has become even more apparent. We would also see effects on Pakistani domestic society.

Mr. Nawaz then brought up the issue of employment increasing not only in India, but also in Pakistan. Based on this using a wider lens, he asked Dr. Vali Nasr to talk about the turbulence in the Middle East, possible changes in the region between the United States and Iran, and how that would influence the region, in particular Pakistan. Dr. Nasr responded that the US-China relationship is going to be even more prominent where Pakistan finds itself closely involved in the frontlines. COVID-19 has shown that terrorism or Muslims are no longer the moving factor of US foreign policy. The existential threat shaped by COVID-19 and its internal politics has propelled the United States to leave the Middle East and Afghanistan, which changes the parameters of how the Pakistan military operates. He also mentioned that the economic impact of the pandemic has led Saudi Arabia to look away from Pakistan and religion to look westwards, along with economic entrenchment in the UAE, which would result in the departure of Pakistani expatriates from those countries. The United States policy of leaving the Middle East would encourage it to end the war in Yemen, Libya and maybe Syria, which would mean that Pakistan will have to find a new direction to look to.

After this, Mr. Nawaz turned to Dr. Huma Baqai to talk about her new book on COVID. Dr. Baqai’s insights included Pakistan viewing China as a means of increasing its foreign policy options as opposed to the stringent conditions that Saudi Arabia had provided. Pakistan recognizes that there is a change in its relationship with Saudi Arabia, while also looking eastward at Iran. While it is still affected by India, there is a change in Pakistan wanting to shift from being a geopolitical state to a geoeconomic state, which has been influenced by its growing relationship with China. While hesitant to put Pakistan in camp politics, Dr. Baqai argued that at the end of the day, Pakistan is uneasy about growing ties between the US and India. Pakistan feels like it is being pushed into the camp of China, whereas it needs space to balance its relationship with the United States.

Mr. Nawaz then turned to Ambassador Cameron Munter to inquire about the US-India-Pakistan relationship. Ambassador Munter emphasized that the context in which Pakistan’s foreign policy operates has transformed as the dynamics of its three patrons– the US, China, Saudi Arabia–have changed. It would be wise for Pakistan to get out of the trap of pitting one country against the other and deriving the most gains from where it can. Ambassador Munter voiced his concern that the issue is not whether the United States might pressure Pakistan to act in a particular way, but that it won’t care about what Pakistan does at all, which he believes to be “an enormous mistake. He advised Pakistan to use this time as an opportunity to invest in high-value industries and escape the stronghold of textile and low-value agricultural industry, thereby harnessing the US’s attention.

Mr. Nawaz then took up Dr. Rabia Aktar’s question on how Pakistan’s threat landscape is going to look in the aftermath of COVID-19 and against the backdrop of the Sino-US rivalry and US-India strategic partnership. Afterwards, Dr. Najam shifted the conversation from Pakistan to Pakistanis. He did not think that the US’s receding attention is necessarily a bad thing. He also mentioned that, while the pandemic shook up the global economy, because Pakistan’s economy was more insulated, Pakistan’s economy or unemployment numbers were not terribly impacted when compared to international labor statistics, and that it encouraged the e-commerce economy to grow in unprecedented ways. On the other hand, the drawback of this insulation has been that Pakistan was unable to take reins of some of the supply chains affected by COVID-19.

Dr. Najam mentioned the importance of youth education during the pandemic, as 60% of Pakistan’s population is 30 years or less. Mr. Nawaz then highlighted the importance of the question of who is going to provide facilities for the growing youth in Pakistan. Ambassador Munter suggested that, if a possible US withdrawal from Afghanistan leaves Pakistan in a less needed position in the eyes of the United States, then Pakistan should be proactive in attempting to creatively engage with Iran and China in a way that builds diplomatic bridges between the United States and Iran, and even the United States and China. Dr. Baqai challenged the previous comment by bringing forth the Pakistani view that every conversation in the United States advocates for Pakistan to change its relationship with China while Washington consistently shows that Pakistan is a priority. She cautioned that this attitude, if continued, will only elevate camp politics further, and questions Pakistan’s ability to mend relations in the background of President Biden adopting a harsh policy toward China as some critics argue to be the case.

In conclusion, Mr. Nawaz pointed out the importance of continuing this very important topic, and thanked all the panelists for their attendance and valuable contributions. The post-pandemic world offers Pakistan the opportunity to reevaluate its foreign policy, diversify its economic investments, as well as figure out ways to effectively follow through on its desired shift from a geopolitical state to a geoeconomic one.

The South Asia Center serves as the Atlantic Council’s focal point for work on the region as well as relations between these countries, neighboring regions, Europe, and the United States.

Online Event Fri, February 12, 2021 • 9:00 am ET

Post-pandemic South Asia: How the COVID-19 pandemic will affect Pakistan’s economy and regional environment

A conversation about the post-pandemic future of Pakistan and the greater South Asia region.

Economy & Business Pakistan Politics & Diplomacy South Asia

New Atlanticist Feb 12, 2021

Reboot or repeat? US-Pakistan relations after the Daniel Pearl ruling

By Safiya Ghori-Ahmad

Pakistan was likely hoping for a reset with the new Biden administration, one that could refocus relations on the country’s most pressing issues. But those hopes have been dashed by The Supreme Court of Pakistan’s recent decision on the Daniel Pearl case.

International Norms Media

New Atlanticist Feb 10, 2021

Biden needs a new Pakistan policy. This is what it should look like.

By Shamila N. Chaudhary, Vali Nasr

The United States has an opportunity to move on from the sordid history of US-Pakistan relations. Strategic imperatives in both Islamabad and Washington have provided a rare opening, one that if explored effectively could serve US regional interests positively and also provide impetus for change in Pakistan.

China Pakistan

SouthAsiaSource Feb 8, 2021

The dynamics of South Asia: A roadmap for the Biden administration

By Safiya Ghori-Ahmad and Kyle Gardner

South Asia offers the Biden administration opportunities to elevate US diplomacy and strengthen partnerships in capitals from Delhi to Dhaka. But doing so will require navigating five dynamics at play across this important region.

Digital Policy Economy & Business

The post Event recap: “Post-pandemic South Asia: How the COVID-19 pandemic will affect Pakistan’s economy and regional environment” appeared first on Atlantic Council.

Startup Acts are the next form of policy innovation in Africa

Jordan Wolken — Wed, 09 Dec 2020 16:42:30 +0000

African nations have surprised the world with the ableness of their defense against COVID-19. But even as most African countries have escaped the high mortality rates experienced in the West, they have suffered disproportionately from the parallel plague of the global economic depression. Africa is expected to face its first recession in twenty-five years.

That recession certainly hasn’t hit Africa’s tech industry. In fact, as countries adapt to the expanding digital universe created by COVID-19, technology ecosystems across the continent are booming—and global investors have noticed. Africa-focused startup funding finally crossed the $1 billion dollar mark last year (at $1.3 billion), already a big increase from previous years (total investment in African startups was just under $200 million in 2015). The better news is that, eight months into 2020 and in the midst of the coronavirus pandemic, total funding had still increased by 8 percent compared to 2019, according to Africa-focused fund Partech, making the tech sector an undeniably lush spot in Africa’s parched economic landscape.

A string of recent investment milestones clearly indicates a sector on the rise. In April 2019, Jumia made history by becoming the first startup from Africa to list on the New York Stock Exchange. Two months ago, Stripe acquired Nigeria’s fintech darling Paystack for over $200 million: the largest exit for an African startup, ever. And just last month, Bezos Expeditions—the personal venture capital fund of Amazon CEO Jeff Bezos—participated in a $30 million Series B round investment for the fintech startup Chipper Cash, which offers cross-border payments in seven African countries. Many US investors once viewed Africa as too risky, but African tech—although still small compared to the global tech sector—is drawing increased attention from Silicon Valley executives and Fortune 500 CEOs.

It’s no surprise that Nigeria, Kenya, and Egypt—big economies home to the continent’s most vibrant startup hubs (Lagos, Nairobi, and Cairo)—have benefitted the most from this surge in investment activity. Because startups are universally recognized to be a vital engine of economic growth, fostering a vibrant innovation ecosystem is a chief goal of governments across the globe. And while countries like the United States, China, Israel, Sweden, and Singapore have taken slightly different approaches to nurturing a ‘startup culture’ (one that encourages risk-taking and rewards talent), these approaches have consistently included both heavy government investment in local ecosystem support organizations and startup legislation that simplifies business transactions. In Africa, successful startup ecosystems have also benefitted from government engagement, too, though there have been far fewer resources available and more red tape for entrepreneurs to wade through. There’s even an argument to be made that the emergence of Africa’s top startup ecosystems is more a function of size than anything else: Egypt, Kenya, and Nigeria have three of the top seven largest populations on the continent, replete with large diaspora talent networks and growing youth populations eager to adopt mobile technology.

Attempting to cash in on the growing global surge in investment, smaller African countries have tried to bolster their own innovation ecosystems through supportive legislation. Italy passed the world’s first-ever Startup Act—a law specifically designed to spur innovation demand and foster entrepreneurship—all the way back in 2012, and since then plenty of African governments have considered following suit. The passage of Startup Acts in Tunisia and Senegal, in 2018 and 2019 respectively, paved the way for multiple proposals in other African countries that reflect growing interest in improving the enabling environment for startups and investors. Rwanda and Ghana, home to two of Africa’s fastest growing economies, have both kickstarted discussions with key stakeholders in the last few months. Even larger economies, such as Kenya, Ethiopia, and Uganda, have jumped on the bandwagon and are in various stages of passing their own versions.

African entrepreneurs have long suffered from unfavorable regulatory environments that can make it harder to start, grow, and scale an innovative business. Endeavor Nigeria CEO Elohu Giban-Mbelu recently made this point in a TechCabal interview, saying that “…the lack of clarity and the time or cost spent on lobbying efforts around policy and regulation can take away from time and cost injected into growing the business instead.” For many entrepreneurs—especially in countries like Nigeria where elderly politicians rule over a young populace—tech-savvy individuals tend to view the government as out-of-touch with their demands. Changing this perception by reviving trust between lawmakers and entrepreneurs, an important first step, requires new policy formation with the interest of entrepreneurs, investors, and other stakeholders at heart.

Startup Acts could help do the trick. Designed to make it easier for startups to operate, Startup Acts include an amalgamation of policies intended to increase the incentives for young people to start a venture, investors to put their money into promising companies, and other ecosystem actors to lend their support where it’s needed. For Tunisia and Senegal—the two first movers in this arena—these policies are part of broader government strategies to position their countries as innovation hubs by leveraging an emerging tech scene to improve economic development.

Ideas put forth in the Tunisia and Senegal acts were developed through an innovative policy hackathon hosted by i4policy, a multi-stakeholder group promoting policy reforms in Africa’s startup space. Key elements of Tunisia’s Startup Act include state salaries for up to three founders per company during the first year of operations, generous tax breaks, and a one-year leave period for both public and private sector employees to start a company with the right to return to their old jobs. Additional incentives encourage potential entrepreneurs to launch new ventures, including available startup grants, fast-track licenses to obtain startup registration documents, and increased state support for covering patent licenses. Similar to Tunisia, Senegal’s version aims to help position the country as the Francophone leader in tech and entrepreneurship on the continent. The country’s policy includes three tax-free operational years for startups, training for youth and female entrepreneurs, and a startup registration platform easily accessible on a government website.

Two years after being passed, Tunisia’s Startup Act has paid off and the country’s digital economy has deepened. 2019 Q4 data obtained from Entrepreneurs of Tunisia (EOT)—a new organization formed after the Startup Act passed—shows that the country had over 165 new startups registered, twenty-four new co-working spaces opened, and $18.5 million fundraised in a one-year period. In an April 2020 profile by WeeTracker, some Tunisian entrepreneurs expressed concerns about how the pandemic will affect business, however they largely credit the Startup Act for solving the ecosystem’s main bottlenecks by making it easier to focus on growing their venture. This is a very promising indicator that undoubtedly influenced other countries to consider following suit and enacting their own version. If implemented more broadly across the continent, Startup Acts could further catalyze a positive change in the broader business environment by improving local support for entrepreneurs and signaling to global VC investors that African innovation is here to stay.

While it’s still too early to tell how Senegal’s Startup Act will impact its fledgling tech ecosystem, the increasing appetite among governments in signing pro-startup legislation is encouraging. Enacting this type of legislation to provide more support and runway for startups—a key engine for job growth in African economies—could prove even more important during economic downturns when businesses suffer and credit dries up. Perhaps this is a sign that governments recognize how intertwined growth in African tech ecosystems are with GDP; data from TechCabal found that, in Nigeria, the technology sector contributed more to the country’s overall GDP than the oil and gas sector did between 2010-2019. Put simply: growth in technology innovation can boost overall economic growth at a time when Africa faces its first continent-wide recession in over two decades. A key component to expanding startup ecosystems, keep an eye on the Startup Act trend to continue across Africa after Tunisia’s success, and expect more countries to sign similar pro-startup legislation to spur innovation, create jobs, and grow trust between governments and entrepreneurs.

Jordan Wolken is an intern with the Atlantic Council’s Africa Center. Follow him on Twitter @WolkenJordan.

AfricaSource Dec 4, 2020

Data remains a weak spot for African elections, but Ghana can lead the way

By Luke Tyburski

Ghana, with elections slated for December 7, may be the most robust environment for domestic election monitoring on the African continent. But fieldwork conducted in January 2020 confirmed that most stakeholders still find that data is a “weak spot.” This is not to say that peace and credibility are in doubt in Ghana’s election, but by better leveraging existing data resources, Ghana has an opportunity to champion transparency and set an example for regional peers.

Africa Elections

New Atlanticist Dec 8, 2020

Mo Ibrahim: Why Africa must emerge more resilient from the COVID crisis

By David A. Wemer

A well-known Afro-optimist, Ibrahim has invested in the continent’s democratic progress and has focused on tackling practical governance issues. While the pandemic has exposed such problems across the world, he noted, one of its lessons is that Africa must be “more self-sufficient” and “resilient.”

Africa Coronavirus

Report Nov 30, 2020

African agency in the new Cold War: Traditional power competition in the post-COVID-19 African landscape

By Bronwyn Bruton

In a resource-scarce post-COVID environment that will accelerate competition between traditional external powers on the African continent, some African nations will find themselves in the crosshairs of a new Cold War mentality that could threaten African agency, regionalization, and the blooming ethos of pan-Africanism. African leaders’ pursuit of collective interests will be decisive in setting the continent’s trajectory—toward a new African Century, or another period of thwarted ambitions.

Africa Economy & Business

The post Startup Acts are the next form of policy innovation in Africa appeared first on Atlantic Council.

Event recap | AI, gene editing and guaranteeing a stable seed supply

GeoTech Center — Tue, 24 Nov 2020 15:09:01 +0000

As a part of the GeoTech Center’s AgriTechAction 2020, Mr. Jeff Rowe, President of Global Seeds for Syngenta, was interviewed by Ms. Daniella Taveau, Nonresident Senior Fellow at the GeoTech Center and expert in developing global business and regulatory strategies.

Mr. Rowe first described the complexity of the seed industry and of the large chain that hides behind the production of a ‘simple’ bag of seeds. At the same time, he reinforced the importance of collaboration necessary within the industry, and the need to constantly explore potential partners as it innovates and develops new technologies.

The development of resilient seed is critical as the impact of climate change on the agriculture sector worsens, and farmers faces increasingly variable environmental conditions. These challenges put immense stress on local and global supply chains and threaten the global food supply, but developing seeds that can adapt to these more severe weather patterns is one necessary tool to mitigate these negative effects. Gene editing will be an important part of the effort to guarantee crops are not lost.

Mr. Rowe and Ms. Taveau also discussed the importance of data management innovation for crop growth sustainability. Mr. Rowe listed artificial intelligence, data science, and new algorithms as technologies with the potential to revolutionize farmers’ traditional decision-making process of deciding when, where, and what seed to plant.

The post Event recap | AI, gene editing and guaranteeing a stable seed supply appeared first on Atlantic Council.

Unexpected competition: A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition

John Blocher — Mon, 23 Nov 2020 03:15:39 +0000

FORWARD DEFENSE

REPORT RELEASE

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New Report:

Unexpected Competition

A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition

By Col John W. Blocher, USAF

Reprioritizing American soft power

The United States has successfully identified China and Russia as major threats to the rules-based order in an era of great-power competition. However, it has failed to articulate and implement a comprehensive strategy on exactly how to counter these threats. Through its inaction and its disengagement with Central and Eastern European allies, the United States has left a gap for Russia and China to fill. Recent US behavior and policy, particularly that of rejecting allies to varying degrees, has been self-defeating and goes against the very ideals that it strives to fulfill. Regaining a strategic foothold in the Central and Eastern European region will be crucial to pushing against Chinese and Russian bellicosity worldwide.

Growing Chinese and Russian influence

In the face of growing Russian and Chinese influence across all domains, the United States must develop a strategy that efficiently and effectively strengthens its position as a partner of choice for Central and Eastern European countries. While the United States depends on the post-World War II and post-Cold War assumption that it is the most desirable ally, China and Russia are sprinting to take advantage of the lack of US engagement in a changing region. The United States has defined and acknowledged the effects of great-power competition, but it has yet to develop a strategy to reestablish connections with Central and Eastern European allies as a great-power competitor.

Case study: Hungary

Hungary provides a pressing and relevant case study to draw from as a model for US engagement in Central and Eastern Europe. US-Hungary relations have shifted drastically over the past thirty years, and Russia and China are exerting increasingly pressure on Hungary in all sectors. However, the United States can regain this crucial relationship by reengaging in strong diplomacy and economic cooperation with Hungary. It is no longer enough to simply rely on passive engagement; an active, deliberate approach to foreign policy is necessary to counter threats from the greatest US adversaries.

In Unexpected competition: A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition, Col John W. Blocher details how to effectively develop relationships, with the case study of Hungary, to maintain a competitive advantage against China and Russia. The report fills a critical gap by providing a strategy of how the United States can and needs to engage with its allies and partners in Central and Eastern Europe to counter China and Russia’s growing influence in those regions.

The strategy focuses on six elements that work together to provide lines of effort to ensure the success of the strategy as a whole:

Bolstering foundations by renewing American commitments to NATO, open markets, information-sharing, and foresight.

Tailoring engagement to cater to the individual diversity of each nation and the populations within each allied nation.

Committing to patience and consistency by championing bipartisan agendas and pursuing civil-society engagement.

Engaging and empowering the public by exposing disinformation in the native language of allied countries, thereby building internal resilience to Russian and Chinese influence.

Providing alternatives to Chinese and Russian economic sources by investing in infrastructure and facilitating defense procurement with US allies in Central and Eastern Europe.

Showing respect for allies by engaging in courteous diplomacy and supporting strategic equality with its partners.

READ THE REPORT to learn more.

A new report by:

Col John W. Blocher, USAF

2019-20 Senior US Air Force Fellow, Scowcroft Center for Strategy and Security

Atlantic Council

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The post Unexpected competition: A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition appeared first on Atlantic Council.

Event recap | The global impacts of democratized tech and remote work

GeoTech Center — Wed, 04 Nov 2020 14:27:00 +0000

Find the full GeoTech Hour Series here.

Event description

The COVID-19 pandemic has drastically accelerated the trend democratization of technologies and of humans working remotely. Together, these trends are affecting markets, education, governments, and how human societies operate.

Developing new ways of operating in these environments is critical in order to balance digital and real-world interactions at scale. This episode of the GeoTech Hour, which takes place every Wednesday from 12:00 – 1:00 pm Eastern, will highlight the democratization of technologies and what it means for entrepreneurs and investors. This discussion addresses how more remote work affects communities, organizations, nations, and the planet and identifies the action steps to ensure these two trends are forces for good in the world.

Join us for another lively discussion to consider how the world is changing and how we each can be a part of the #GoodTechChoices needed to rebuild a better world together.

Speakers

Esther Dyson
Executive Founder
Wellville

Brad Feld
Managing Director
Foundry Group

Derry Goberdhansingh
CEO
Harper Paige

Christopher M. Schroeder
Co-Founder
Next Billion Ventures

Daniella Taveau
Nonresident Senior Fellow, GeoTech Center
Atlantic Council

Previous episode

Event Recap

Oct 28, 2020

Event recap | Data, tech, and geopolitics in 2021 and beyond

By Hannah Biggs

In this episode of the GeoTech Hour, hosted Wednesday, October 28, 12:00 – 1:00 p.m. EST panelists examined data, tech, and geopolitics as we approach 2021 and beyond. The discussion considered actions that could uplift societies and populations as a whole. The world will, we hope, be more stable in this upcoming year, and as a result, it is the ideal time for governments to learn lessons from 2020 and adjust course accordingly.

Digital Policy

The post Event recap | The global impacts of democratized tech and remote work appeared first on Atlantic Council.

Event recap | Entrepreneurs and accelerating startup ecosystems amid the pandemic

GeoTech Center — Wed, 21 Oct 2020 18:30:57 +0000

Find the full GeoTech Hour Series here.

Description

The United States’ Silicon Valley has long been associated with scrappy technology companies, eccentric founders, and a breakneck rate of change. The region is home to a vibrant startup ecosystem that boasts of more funding, companies, and prominence than any other geography. Startup ecosystems provide more than just cultural touchstones—they create economic resilience, develop cutting-edge technologies, project geopolitical soft power, hone competitive advantage, and foster growth. Join the GeoTech Center as it convenes an expert panel to discuss the benefits of developing this sector of the economy; the different tools and challenges for the public and private sector trying to grow it; and its role in geopolitics, protectionism, innovation, industry lifecycles, and the pandemic recovery. The discussion considers how venture capital and entrepreneurs can accelerate local start-up ecosystems globally to help the pandemic recovery, to rebuild economies, and work towards a future that is more prosperous and peaceful for us all.

Speakers

Alexandre Lazarow
Investment Director
Cathay Innovation

Tobin Richardson
President and CEO
Zigbee Alliance

Tiffany Vora, PhD
Faculty and Vice Chair, Medicine and Digital Biology
Singularity University

Harry Wingo, JD
Faculty Member, Cybersecurity Studies
National Defense University

Hosted by

David Bray, PhD
Director, GeoTech Center
Atlantic Council

Previous episode

Event Recap

Oct 14, 2020

Event recap | Climate, tech, and security: Achieving greater power collaboration

By GeoTech Center

On Wednesday, October 14, the GeoTech Center convenes experts to discuss new technology opportunities regarding climate change and national security. What can we turn to or develop to help bring about the required changes in human behavior and consumption, and how can great powers around the world collaborate to create that change?

Climate Change & Climate Action Security & Defense

The post Event recap | Entrepreneurs and accelerating startup ecosystems amid the pandemic appeared first on Atlantic Council.

Belarus protest crackdown sparks IT industry exodus

Peter Dickinson — Mon, 05 Oct 2020 01:57:21 +0000

Ukrainian President Volodymyr Zelenskyy signed a decree on October 4 introducing new measures designed to help his country attract the growing number of Belarusian IT professionals who are seeking to relocate abroad. Ukraine is just one of many countries in the region looking to benefit as thousands of individual tech sector specialists and entire companies flee the ongoing authoritarian crackdown in Belarus.

This scramble for Belarusian IT professionals should come as no surprise. In recent years, Belarus has earned a reputation as home to one of the most vibrant IT industries in Eastern Europe. With approximately 50,000 employees and a long client list of marquee names from the global tech industry, the sector is responsible for around 5% of Belarusian exports and accounted for almost 6% of GDP in 2018. The country’s Economy Minister Dzmitry Krutoi had earlier predicted that this GDP share could rise to as high as 10% within the next few years. However, expectations of further rapid expansion have been derailed in recent months by the biggest political crisis to hit Belarus since the collapse of the Soviet Union.

The current unrest began on August 9 in the immediate aftermath of a deeply flawed presidential election. Incumbent Alyaksandr Lukashenka had rigged numerous previous votes since taking power in 1994, but this time was to prove different. During the election campaign, it became increasingly apparent that large sections of Belarusian society were tired of the man often dubbed “Europe’s last dictator” and hungry for change. They took to the streets on the evening of the election, and have continued protesting ever since.

The Lukashenka regime has responded to this unprecedented nationwide protest movement by unleashing a heavy-handed crackdown. Over ten thousand people have been detained, with hundreds reportedly subjected to human rights abuses and torture. Opposition leaders have been targeted and either jailed or forced to flee the country, while protesters face the prospect of everything from losing their jobs to having their children taken into care.

This hard line approach has served to galvanize the protest movement, with weekly mass rallies calling for an end to the regime showing no signs of abating as they approach their third month. However, the crisis is taking its toll on the Belarusian economy, with the IT sector among the most vulnerable.

The most obvious and immediate threat to the Belarusian IT industry has come from the regular internet blackouts instigated by the authorities since August 9 as part of efforts to stifle opposition and limit the ability of protesters to mobilize. These unpredictable cutoffs have proved disastrous for an industry that depends heavily on international accessibility and connectivity. The reputational damage for companies operating in Belarus has been catastrophic.

The IT sector has also attracted considerable unwanted attention amid accusations from the authorities that it has provided protesters with technological and financial support. This has included online tools to help track detainees. As a result, numerous individual IT companies have been subjected to office searches and other forms of official harassment.

The industry made its position clear from the very start of the protests. Around 300 CEOs of IT companies based in Belarus issued a joint declaration on August 12 threatening to leave the country unless there were fresh elections and an end to police violence. Many are now looking to follow through on this threat. The CEO of global telecoms and messaging app Viber, Djamel Agaoua, captured the prevailing mood among IT industry leaders in an August 21 interview with the Russian edition of Forbes magazine. “We cannot invest in a country where people live in fear. It’s impossible,” he commented.

Eurasia Center events

After Vilnius: What’s next on Ukraine’s path to NATO?

Eastern Europe NATO Security & Defense Ukraine

As more and more IT companies begin looking to leave Belarus or downsize their presence, individual specialists are also seeking alternatives.

The rise of the IT industry in recent years has helped create a new class of young Belarusians with a strikingly global outlook and significantly higher than average incomes. Unsurprisingly, these IT professionals have often been at the forefront of the current demands for greater democracy and an end to a post-Soviet dictatorship that has lasted for the past quarter of a century. “The protesters are generally very sweet, polite, and peaceful,” noted Atlantic Council non-resident fellow Vladislav Davidzon while in Minsk during the early weeks of the crisis. “Many are young, middle class Belarusians who work in the country’s booming IT industry and come to rallies dressed in form-fitting hipster ensembles.”

Inevitably, numerous IT company employees have been among the victims of police brutality. With no end in sight to the protests and little sign of compromise from the authorities, others have become pessimistic about their professional prospects. This is helping to fuel the current wave of departures and sparking a contest between rival countries seeking to benefit from Belarus’s brain drain.

Since the protests began in August, around 2,000 Belarusian IT professionals have relocated to neighboring Ukraine, according to Ukrainian Digital Transformation Minister Mykhailo Fedorov. The new measures confirmed by Ukrainian President Volodymyr Zelenskyy on October 4 will significantly simplify the bureaucratic process for Belarusian IT sector specialists looking to settle in the country. Meanwhile, Poland has established a 24-hour hotline and promised to fast-track visas. Other countries competing for Belarusian tech talent include the Baltic states and Kazakhstan.

This trend will have significant negative consequences for the Belarusian economy, but the impact could go far beyond a drop in GDP. The IT industry is a rare pocket of private industry and entrepreneurial endeavor in a Belarusian economy that remains remarkably faithful to the Soviet model and is still largely state-owned. The decline of the country’s IT sector will mean fewer opportunities for young Belarusians looking to build their futures at home. Unless the current crackdown comes to an end and the prospects for a democratic breakthrough improve, today’s IT exodus may come to represent the beginning of a much wider wave as a new generation of Belarusians loses hope in the country.

Peter Dickinson is the Editor of the Atlantic Council’s UkraineAlert Service.

As the coronavirus pandemic rages on, countries around the world face an unprecedented test: concurrent public health and economic crises coupled with the resulting political and social reverberations. In Central America, the collective test of survival is no different—at least on its surface. But, as a region plagued by weak institutions, migration, violence, and lack of economic opportunities, Central America has to not only meet this unprecedented moment, but leapfrog beyond it.

COVID-19 is shining a spotlight on historic challenges and inequalities now accentuated by pandemic fallout. But, can the policy response to this public health and economic emergency also accelerate long-needed transformations in Central America? It must. Actions taken by countries today in response to COVID-19 will set the national development trajectory for perhaps the next decade. Bold, new actions and public-private cooperation can help to avoid another “lost decade.”¹

Consider two pre-pandemic variables in Central America: a highly favorable demographic trend that will continue to churn out a large and young labor force in the next decade, and advances toward greater regional economic integration. When the pandemic hit, a third external variable came into the mix: in an ever-disrupted global economy, companies in China are seeking to relocate supply chains closer to the US market. As free-trade partners of the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama have a unique opportunity to capture production and prominent roles in reconfigured global supply chains.

That is only possible through swift action to strengthen historically weak public institutions—long a roadblock to inclusive growth. Also, the rule of law must become the norm, not the exception. A 2017 Adrienne Arsht Latin America Center binational and bipartisan task force outlined a policy blueprint as to how Guatemala, Honduras, and El Salvador—in partnership with the United States—could improve the rule of law, provide sustainable economic opportunities, and address insecurity. While many task-force policy recommendations have been implemented, a renewed push is urgently needed to revisit other policy prescriptions that have yet to be addressed, but are fundamental for long-term recovery.

Since its founding, the Adrienne Arsht Latin America Center has advanced a different narrative on Central America—a narrative that does not see its entrenched problems as intractable. Rather, the Center promotes sustained, long-term, and multidimensional thinking that counts on the buy-in and collaboration of both the public and private sectors to help set a new direction for the region. This is not easy, but is necessary to set the region on a more prosperous path.

For all its ills, this publication argues that COVID-19, if addressed correctly, could be the catalyst to inspire long-needed policy reforms. The following pages highlight specific opportunities for Central America’s economic recovery at a time of increasing global uncertainty. Once travel opens up again, the Center looks forward to working hand in hand with Central American friends to advance the ideas presented in this paper; until then, it will work virtually to turn ideas into action.

Jason Marczak

Director, Adrienne Arsht Latin America Center

Atlantic Council

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Introduction

When the coronavirus pandemic began to rattle developed nations in the West, experts warned it was only a matter of time before the virus reached emerging economies. By mid-September 2020, Latin America and the Caribbean—a region that accounts for only eight percent of the world’s population— reported more than a third of global COVID-19 deaths.² As Latin American countries begin to ease lockdown restrictions—even as the number of new infections continues to rise in some countries—a grim outlook remains for public health, fiscal solvency, and economic growth and stability. In 2020, the combination of a stalled informal economy, a drop in tourism, capital flight, and climate disruptions will cause the region’s largest-ever economic contraction, according to the International Monetary Fund (IMF).³ More worrisome, the United Nations World Food Program estimates that “severe food insecurity” in the region will quadruple, from 3.4 million to 13.7 million, during 2020.⁴ Perhaps one of the few silver linings is that remittance flows, after falling drastically in April, have since increased compared to 2019 despite the economic crisis.⁵ If Latin America is to successfully recover from this unprecedented crisis, leaders from across all sectors must work together to rethink how to shape a sustainable recovery that weaves short-term solutions with long-term strategies. Central America is uniquely positioned to be an integral part of a robust and sustainable recovery.

With a combined population of forty-nine million, Central America reported an average of 8,202 coronavirus cases per million residents in August 2020, compared to the global average of 3,500.⁶ As seen across Latin America, Central American countries—with the notorious exception of Nicaragua—have implemented a combination of measures to respond to the pandemic, including lockdowns and curfews, additional funding and equipment for public health services, direct payments to individuals and families, and stimulus packages for small and medium-sized businesses, all with varying degrees of success.⁷ While the risk of a second wave of infections is still high as the region begins partial or full reopenings of economic activity (with a patchwork of health protocols implemented in different countries), leaders are faced with a challenge that can very well determine the prosperity of their nations: how to sustain reactivation of their economies in a COVID-19 world, especially given the preexisting institutional vulnerabilities that have hindered inclusive growth for too long?

“…leaders [across Central America] are faced with a challenge that can very well determine the prosperity of their nations: how to sustain reactivation of their economies in a COVID-19 world, especially given the preexisting institutional vulnerabilities that have hindered inclusive growth for too long?”

Amid a global crisis forcing countries and private enterprise to recalibrate how they do business and how they cooperate on issues of common interest, this unprecedented moment calls for national and regional action on how Costa Rica, El Salvador, Guatemala, Honduras, and Panama can seize existing opportunities and find new ones to generate economic reactivation while addressing citizens’ pressing health issues. The Adrienne Arsht Latin America Center of the Atlantic Council has identified three key areas of opportunity: a demographic bonus of a large working-age population; nearshoring of multinational firms to Central America; and a renewed push for regional economic integration. At the same time, a concerted effort to improve the rule of law in these countries and reduce corruption is imperative. The direct payoffs of properly executing on these opportunities include inclusive economic growth, foreign investment, job creation, and an overall improved rule of law and governance. Migration pressures and security concerns would also be ameliorated as living conditions improve over time, offering would-be cross-border migrants a better future in their own countries.

Central America must act now to pursue these opportunities and set forth an economic reactivation plan in a COVID-19 world. What policies should governments in Central America enact to create and effectively communicate the incentives to attract nearshoring opportunities? How can the public and private sectors work together to train and empower low-income youth in Central America? How has the pandemic triggered new momentum for regional integration? What is the role of the international community and partners of Central America in promoting the conditions to bolster economic growth and investment?

The Adrienne Arsht Latin America Center of the Atlantic Council has identified three key areas of opportunity: a demographic bonus of a large working-age population; nearshoring of multinational firms to Central America; and a renewed push for regional economic integration.

The Isthmian Ocelots: Mapping Central America’s Opportunities for Reactivation in a COVID-19 World

At a glance, the economic outlook does not bode well for Central America. The IMF anticipates a 3.5-percent average contraction for the region in 2020, albeit less than the projected drop for Latin America and Caribbean, which includes tourism-driven economies and larger countries such as Brazil, Mexico, and Peru that have been particularly hard hit by the coronavirus. The national recovery plans deployed by Central American countries to respond to the immediate and short-term effects of the pandemic, while necessary to mitigate unprecedented health and economic crises, are also demanding increasingly high levels of public expenditure. This poses a threat to fiscal stability, and could weaken the governments’ ability to address rising poverty and inequality. For the informal sector—which employs around 70 percent of the workforce in Central America—the impact is already catastrophic, as public resources are very limited for those outside of the formal economy. The pandemic has also produced external shocks as prices of commodities—the principal exports of Central America—have plunged. As Central American economies are net importers of refined petroleum, the low prices of oil are one of a handful of factors helping them stay afloat.

There are opportunities in the wreckage, though owing less to the nature of the crisis than the political capital for strong response. The severity of this moment should unite Central American leaders from all sectors to develop strategies that seize opportunities for growth, diversification, and integration that have been put aside due to lack of political will or long-term vision, and new ones arising from pandemic-induced global shifts.

Central America: A New Hub for Global Supply Chains?

The US-China trade war has forced companies with China-based supply chains to consider the risks of tariffs, and their effects on imports and exports, against the low costs of Chinese manufacturing. In 2020, the pandemic further accelerated momentum for US companies seeking to diversify their supply chains and potentially relocate closer to the US market to hedge against future global disruptions. According to a recent report analyzing trends in global manufacturing, a significant amount of US firms are moving their supply chains to other low-cost Asian countries or away from Asia entirely, with Mexico becoming a top destination in Latin America as businesses and investors seek the predictability and investment security granted in the recently ratified United States-Mexico-Canada Agreement (USMCA).⁸

As the Americas become an increasingly attractive alternative, Central America has an opportunity to position itself as the region of choice for nearshoring and foreign investment that can ramp up job creation in the formal sector, while offering companies supply-chain resilience at a competitive cost. To do so, Central America must strategically leverage existing trade relations as well as a large—and growing—young working-age population. Importantly, to become a global supply-chain hub and attract the capital inflow that requires, Central America must significantly improve the rule of law—possibly the largest deterrent for foreign investment in the region.

Central America has an opportunity to position itself as the region of choice for nearshoring and foreign investment that can ramp up job creation in the formal sector, while offering companies supply-chain resilience at a competitive cost.

The most salient value proposition for Central America to become a new center for global supply chains is its unique economic ties to two of the world’s largest economies. Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica—along with the Dominican Republic—are among the few countries in the world that are parties to regional trade agreements with both the United States and the European Union. Under the Central America-Dominican Republic (CAFTA-DR) free-trade agreement and the Association Agreement with the European Union (which also includes Panama), total two-way trade in 2019 was $59 billion and $14 billion, respectively.⁹ Both trade deals have helped to advance economic growth and create new jobs in Central America, while providing the United States and the European Union with a key export market and an opportunity to promote—though not without significant challenges—regional economic integration, cooperation on democratic values, and the rule of law.¹⁰

For US firms and other multinational corporations with operations in Central America’s signatory countries, the regional trade agreements (as well as Panama’s free-trade agreement with the United States) offer a well-established blueprint—unlike any other in the region—for exporting goods and services to two of the world’s largest consumer markets. The labor, customs, and rules-of-origin provisions provide the security and stability that firms are seeking, especially at a time of increasing global uncertainty. Specifically, nearshoring firms in the businesses of textiles, agriculture (foodstuffs), and electronics—the main exports under the agreements—have ample opportunity to expand and increase the volume of goods in these sectors using established transportation routes and logistics. Exports to the US market can benefit from even greater supply-chain resilience derived from advantages in strategic geographical proximity to the North American trading bloc. As well, services such as call centers can leverage young bilingual speakers, who will continue to grow in numbers as part of the region’s demographic window that closes around 2033 (see section on Central America’s demographic dividend).

While competitive wages, a young working-age population, and preferential trade access are strong magnets for nearshoring to Central America, they alone will not be enough to successfully attract and sustain the investment needed to fully capitalize on this opportunity. According to the World Bank’s Doing Business 2020 Rankings, Central American economies lag well behind their global peers in the following areas: starting a business, enforcing contracts, dealing with construction permits, registering property, getting electricity, protecting minority investors, and paying taxes.¹¹

While competitive wages, a young working-age population, and preferential trade access are strong magnets for nearshoring to Central America, they alone will not be enough to successfully attract and sustain the investment needed to fully capitalize on this opportunity.

Policymakers across the region must be intentional about fostering a more business-friendly climate for multinational firms. Reducing red tape as well as modernizing and decentralizing key government processes to ensure efficiency and accountability are relatively low-cost (both politically and financially) first steps with a high potential upside. Properly enforcing public contracting laws—a longstanding challenge in Central America and across Latin America—will be critical, especially at a time of increased fiscal and monetary challenges due to the pandemic. But, if Central America is to lock in foreign investment over the long term, leaders from across the public and private sectors must come together to implement integral and viable solutions to address deep-seated impediments for growth, including economic informality, politicization of justice, violent crime, and insecurity, and—in the particular case of Nicaragua—political instability and widespread social repression.

Costa Rica in Focus

The restructuring of value chains through nearshoring offers a distinct opportunity for Costa Rica. Companies are looking for certainty in today’s context. Shortening the supply chains is an option, but that alone does not necessarily improve resilience.¹² Instead, diversification of supply-chain location and suppliers can provide the best results. Costa Rica has a long-standing track record of a highly qualified and healthy workforce. According to the World Economic Forum, Costa Rica ranks as the top country in Latin America in human capital; the top country in innovation efficiency; the number-two country in the region in the Global Innovation Index (after Chile); and the top-ranked country in Latin America in university-industry collaboration in research and development (R&D).¹³ Costa Rica recently became a member of the Organisation for Economic Co-operation and Development (OECD)—the first one in Central America—which will mean more competitive laws and practices, better education policies, and improved governance.

Costa Rica recently became a member of the Organisation for Economic Co-operation and Development (OECD)—the first one in Central America—which will mean more competitive laws and practices, better education policies, and improved governance.

Costa Rica’s free-trade-zone regimes—which currently include a total of seven manufacturing parks and twenty-five service parks—offer 100-percent tax exemption (with no expiration) on custom duties for imports and exports; interest income; withholding tax on royalties, fees, and dividends; sales tax on local purchases of goods and services; and stamp duty. For all sectors outside the greater metropolitan area, the benefits expand to a complete income-tax exemption for the first twelve-year period, followed by a 50-percent income-tax exemption for the subsequent six years.¹⁴

Transportation infrastructure and costs, as well as the country’s fiscal situation, are obstacles that companies looking to relocate will have to face. The 2018 World Economic Forum ranks Costa Rica’s road quality and infrastructure as second to last.¹⁵ The poor quality of Costa Rica’s road network also results in significant losses for companies, sometimes up to 12 percent of the value of exported goods.¹⁶ In 2020, Costa Rica will invest 1 percent of its gross domestic product (GDP) in transportation infrastructure; the investment should be at least three times that in order to help the country’s competitiveness.¹⁷ In addition to the high costs of transportation and low investments in infrastructure, Costa Rica’s long-term fiscal health is worrisome. The fiscal deficit for 2019 reached 7 percent of the country’s GDP, the highest in almost forty years. The precariousness of the situation has not gone unnoticed by Fitch and Standard & Poors, which have downgraded the country rating to B with a negative outlook, while Moody’s has downgraded its rating to B2 with negative outlook for 2020.¹⁸ The result: despite Costa Rica’s many advantages, heightened country risk may keep investors away.

Central America’s Demographic Bonus

For Central American countries, the second half of the twentieth century was marked by internal conflicts, natural disasters, and start-and-stop attempts to scale their economies by moving toward greater regional integration. During this time, countries relied mostly on agricultural and primary exports. But, important shifts in demographic patterns that have translated to visible economic and social progress in other industrialized countries and regions are now occurring in a non-armed conflict in Central America—where the working-age population, and therefore the workforce, grows more rapidly than the older and younger populations. The “economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population is larger than the non-working-age share of the population” is what the United Nations Population Fund has defined as the demographic dividend. An Atlantic Council report, Latin America and the Caribbean 2030: Future Scenarios, found that “the dependency ratio in Central America will peak in 2033.¹⁹ Other forecasts place the average year for Central America to reach this milestone around 2042, and the United Nations (UN) predicts the population pyramid in Central America will flatten by 2050.²⁰ With domestic product growing at a 3.5-percent average rate, Central America has experienced the strongest growth in Latin America for the past decade.²¹

A participant prepares a miniature robot during the World Robot Olympiad at a convention center in San Rafael de Alajuela, Costa Rica November 10, 2017. REUTERS/Juan Carlos Ulate

On the other hand, the socioeconomic progress from the last few years—in large part, derived from the increased productivity that normally accompanies the demographic bonus—is at risk of evaporating as Central America grapples with the pandemic and economies are paralyzed over sanitary concerns. However, compared to its Latin American peers, Central America has both a distinct demographic opportunity and threat (varying by country), which it must address by putting people to work in the formal labor markets. Failure to employ and occupy a large young workforce can be a security and welfare risk, as young men and women may turn to illicit activities to create a livelihood, and will not contribute to the state’s coffers, which depend on tax revenue and social-security collections to support retirees and public services.

Failure to employ and occupy a large young workforce can be a security and welfare risk.

Seizing the Demographic Window

The rest of Latin America, for the most part, has already seen the demographic window of opportunity come and go, and the trend will not be reversed anytime soon. The fertility-rate average, meaning “the average number of children that would be born per woman if all women lived to the end of their childbearing years and bore children according to a given fertility rate at each age,” in Latin America is 2.05, below the replacement rate of 2.1 and the 2020 global fertility rate of 2.4.²² For 2035, the estimate is that Latin America’s fertility rate will drop to 1.81.²³ Fertility rates are an important and telling data point for the demographic bonus described in the previous section. As fertility rates decline, the first part of the pyramid to shrink is the base, which translates into fewer young dependents for a nation to support.²⁴ The middle section of the pyramid, comprising working-age citizens, budges out as this section of the population grows as a result of a country’s past fertility rates, as does the tip of the pyramid, although at a slower pace.

The current population forecasts and trends bode well for Central America’s future, but a robust young workforce does not necessarily translate into economic growth. If unoccupied, working-age men and women can turn to criminal activities and pose a security risk for the region and hemisphere. Likewise, if countries fail to think and invest in a long-term strategy with a focus on increasing productivity, they may end up with an aged and burdened population.

The experience of East Asia, including Japan, South Korea, Taiwan and Singapore, is considered one of the first and most successful examples of a region exploiting the demographic bonus, and offers best practices for how to capitalize on the demographic bonus. For example, at the beginning of the twenty-first century, the aforementioned countries focused on creating high-value jobs in “the service and manufacturing sectors of the economy.”²⁵ Central American countries, for the most part, have been incapable of keeping job creation and opportunities at pace with the growing workforce numbers. In 2017, the annual labor-force increase in Guatemala, El Salvador, and Honduras surpassed 350,000 people, with only 34,500 jobs created in the formal economy, and more than 290,000 in the informal economy.²⁶

Likewise, in the East Asian “tiger economies,” of Hong Kong, Singapore, South Korea and Taiwan which underwent rapid industrialization and maintained high growth rates of more than seven percent a year starting in the 1960s, reforms were introduced to attract women to the labor market.²⁷ These high-income economies took advantage of the growing taxpayer base and declining number of young dependents to invest in education, without having to increase taxes.²⁸

Migration

Economies need young workers to grow. As populations grow older, the state relies on each working-age person to pay taxes to cover social services for a growing number of older citizens, and to guarantee a functioning state and public services. Europe, for example, would be in trouble and the social welfare overburdened if the region was unable to attract immigrants. Currently, the European Union’s average fertility rate is 1.59, well below the global replacement rate of 2.1.²⁹ For the past decade, immigrants have accounted for more than 70 percent of Europe’s increase in workforce. In the United States, according to Census Bureau projections, immigrants are poised to “overtake natural increase (the excess of births over deaths) as the primary driver of population growth for the country” by 2030, though this is primarily due to the low birth rates from the US-born population and not necessarily because of increased immigration levels.³⁰ Already today, immigrants are responsible for more than 47 percent of the increase in workforce.³¹ A study by the OECD finds that “in most countries, except in those with a large share of older migrants, migrants contribute more in taxes and social contributions than they receive in individual benefits.”³² For this reason, seizing Central America’s demographic bonus and successfully employing its native young workforce at home, or within the region, is crucial.

“…seizing Central America’s demographic bonus and successfully employing its native young workforce at home, or within the region, is crucial [for the region’s recovery].”

In 2017, more than 4.4 million Central Americans emigrated, representing almost 10 percent of the region’s total population.³³ Currently, the working-age population in Central America (between twenty and thirty-nine years old) is among the most likely to emigrate—primarily to the United States.³⁴

Nicaraguans, however, mostly migrate to neighboring Costa Rica and are important contributors to their southern neighbor’s GDP. While they make up around 9 percent of Costa Rica’s total population, Nicaraguans contribute more than 11 percent of their southern neighbor’s GDP. These emigration patterns—driven by different factors in each of the countries, but mostly due to citizen insecurity, violence, and lack of economic opportunities—are preventing Central America from making the most of its demographic bonus. In addition, recent studies suggest that migration can be “self-reinforcing.”³⁵ In other words, as citizens leave and settle in a new country, they may encourage friends and family to migrate as well. This is especially true with the power and reach of social media today.³⁶ While the brain drain has proven detrimental to Central American countries, the remittances sent back home help offset some of the economic losses from a smaller workforce. Remittances sometimes make up one fifth of Central America’s individual economies.³⁷ Although remittances dropped sharply as a result of the COVID-19 pandemic in the first half of 2020—especially in April, when much of the United States, the main destination of Central American immigrants, was closed down—a recent analysis by the Pew Research Center shows that remittances are slowing picking up again, though they will probably not reach 2019’s record levels.³⁸

Officials of the National Migration Institute (INM) register migrants from Central America and Cuba for humanitarian visas to cross the country on their way to the United States, in Acacoyagua, in Chiapas state, Mexico March 27, 2019. REUTERS/Jose Torres

Guatemala in Focus

More than half of the population in Guatemala is in the productive age category, but almost six in ten people live in poverty. This is, in part, because of the high rate of informality, where more than 70 percent of the population that is active in the economy is in the informal sector, as street vendors or in domestic or non-remunerated labor, which hardly contribute to the country’s productivity.³⁹ For comparison, the Latin American average for labor informality is 53 percent.⁴⁰ The 2.8-percent official unemployment rate is low compared even to developed economies such as Spain (14-percent unemployment), but the real concern lies in the size of the country’s informal economy.⁴¹ Urgent reforms in Guatemala will translate into a transition into formal economic activities that will employ young men and women for the jobs of tomorrow—including in digital—and will pay dividends down the road. Currently, in Guatemala, the service sector represents the largest share of GDP (62.1 percent) and employs more than half of the formal working population in key sectors including tourism, customer-service (call centers), financial-services, banks, and retail. The table below shows the breakdown of economic activity by sector in Guatemala in 2019. As a matter of comparison, while almost one quarter of the country’s GDP is generated by the industrial sector, the number jumps to 40 percent for the United States.⁴²

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	29.2	20.6	50.2
Value Added (in % of GDP)	10.0	24.6	62.1
Value Added (Annual % Change)	2.5	2.8	3.3

Source: Santander Trade Markets

The demographic window of opportunity for catalyzing economic growth and development will not remain open indefinitely—and, as discussed in this paper, is not enough to alleviate the impending economic recession and difficulties of the coming years, or to guarantee economic growth and development.

People shop at a fresh produce market during the outbreak of the coronavirus disease (COVID-19), in Guatemala City, Guatemala May 21, 2020. REUTERS/Luis Echeverria

Now is the time for Central American nations to invest in policies, new sectors, and industries that will reduce educational and economic disparities, help train citizens for productive work in the changing economic landscape, create jobs for the growing labor force, attract women to the labor market, and prepare countries to care for an elderly population. Estimates from the Inter-America Development Bank show that an improvement in emerging human capital in the region could translate into a 33-percent increase in GDP per capita with respect to a base scenario, an especially important investment in a difficult COVID-era.⁴³

The Case of Nicaragua

By: Enrique Bolaños

The coronavirus pandemic in Nicaragua is amplifying an already-strained economy due to the political instability experienced in recent years. The United Nations Economic Commission for Latin America and the Caribbean estimates a GDP contraction of 8.3 percent in 2020, after it contracted by 4 and 3.9 percent in the previous two years.⁴⁴ The pandemic is aggravating existing tensions generated by the country’s traditional institutional and competitiveness challenges.

Nicaragua’s lag in development is largely explained by the historical instability of its democratic system. After more than forty years of the Somoza family dictatorship, the 1979 Sandinista revolution promised new hope. But, a decade of economic mismanagement from the Sandinista government caused the country’s GDP per capita to regress to the same level as twenty-five years earlier. Following three democratic governments from 1990 to 2006, the Sandinistas came back to power in 2007. Since then, democratic institutions and the rule of law have eroded, and Nicaragua is now considered an authoritarian regime. Meanwhile, the economic structure has remained relatively stagnant during this period, characterized by low levels of competitiveness and concentration on a few exports of primary products and apparel manufacturers, with little value added.

An economic recovery in the face of COVID-19 requires short- and medium-term interventions and, once the emergency is over, structural changes for sustainable development. The immediate priorities must be to protect employment and avoid company closures. In the short term, this involves strengthening the liquidity of companies and helping them prepare to operate under a “new normal,” in which there is no coronavirus vaccine widely available for the next twelve to eighteen months. Fiscal support and policies aimed at increasing financing for the productive sector, especially for small and medium-sized enterprises (SMEs), is crucial, as is technical support for companies to implement special operating protocols that guarantee the safety of workers and clients. Finally, adoption of basic digital capabilities into the operating model of companies is essential to recover lost sales and improve efficiency.

In the medium term, Nicaragua needs to stimulate engines of growth. Public investment and agri-food exports seem to be the most promising ones. The government should activate an investment plan in infrastructure that can catalyze productivity. First, it should focus on border crossings and better customs processes to facilitate trade. Second, it should invest in broadband infrastructure to improve access, cost, and quality of Internet connectivity. Third, it should prioritize investment in technology to streamline and digitize specific processes aimed at minimizing red tape. At the same time, the country should implement a development plan for the agri-food sector that encourages export growth and adoption of new technologies for precision agriculture.

In the long term, in addition to strengthening the democratic system, generating prosperity requires a transformation of the economic structure. This transformation must diversify the existing basket of exports and evolve toward activities with higher value added. The country must take advantage of the changes in globalization patterns in the post-COVID-19 era, its geographical position, and its preferential access to the main markets in the United States, Europe, and Asia. It is essential to implement programs in strategic sectors that allow for enhancing competitiveness and sophistication in production models, seeking synergies with world-class players. Policies and investments are also required to develop the human and physical capital to support this transformation.

A Renewed Push for Central American Economic Integration

The pandemic and its devastating economic effects have also given advocates of Central American integration a renewed opportunity for a project as old as the region’s independence. Despite clear benefits for economic growth and regional prosperity, integration has been stalled due to lack of coordinated political alignment and long-standing technical and practical hurdles. The unprecedented and unforgiving shock of COVID-19 can restart a serious, comprehensive, and strategic public debate on Central American economic integration, in spite of existing schisms among the countries.

The unprecedented and unforgiving shock of COVID-19 can restart a serious, comprehensive, and strategic public debate on Central American economic integration, in spite of existing schisms among the countries.

Central America integration has been talked about over the past sixty years. In 1960, Guatemala, Honduras, El Salvador, and Nicaragua (and later Costa Rica) signed a UN-backed agreement aimed at creating an EU-style single market. Following ratification of the General Treaty of Central American Economic Integration (GTCAEI), Central America saw its intraregional trade increase by seven times, and saw significant advances in industrialization and manufacturing.⁴⁵ But, the integration project saw a twenty-year hiatus due to the armed conflicts across the region. Integration discussions were picked up again during the early 1990s under the Tegucigalpa Protocol, which established the institutional framework—the Central America Integration System (SICA)—to carry forward integration based on a vision of “peace, democracy, and development.”⁴⁶ In 1993, under the Guatemala Protocol, parties to the 1960 GTACEI “committed themselves to achieve, on a voluntary, gradual, progressive and complementary way, the Economic Union of Central America.”⁴⁷ Since then, major wins toward Central American economic integration include a semi-completed customs union (Guatemala, Honduras, and El Salvador currently have one), a common external tariff, and some advances in the free movement of people, capital, and services.⁴⁸ Unfortunately, short-term vision and rivalries between Central American political leaders have not supported GTCAEI’s full implementation.

Full economic integration in Central America can better position the region for sustained economic growth and competitiveness in a global economy adapting to disruptions from the coronavirus pandemic. The region’s second-largest trading partner—after the United States—is Central America itself. Intraregional trade between Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica accounts for 27 percent of total exports and 13 percent of total imports. With a combined population of forty-five million producing $400 billion in GDP—ranking fourth in Latin America and nineteenth in the world, respectively—an integrated Central America can more efficiently allocate economic resources and investment, access new intraregional markets, boost foreign trade, improve commercial agreements and enter new ones with increased bargaining power, increase market diversification, attract foreign direct investment, and build supply-chain resilience. Economic integration is also an opportunity—especially at a time when countries in the region face the same external shocks, from global health and trade to climate change and geopolitics—to deepen political, security, social, cultural, and environmental ties. While advances on these fronts have been made through SICA, the coronavirus pandemic has alerted the region to the importance of forging stronger relations on public health, good governance, and economic resilience.⁴⁹

Full economic integration in Central America can better position the region for sustained economic growth and competitiveness in a global economy adapting to disruptions from the coronavirus pandemic.

SICA and other regional forums at the presidential, ministerial, and central-bank levels have facilitated important integration discussions and helped to set the agenda for alignment and coordination on specific integration issues. But actual adoption and implementation remains a challenge. An integrated Central America will have increasead absorptive capacity to withstand the unprecedented global disruptions and unparalleled uncertainty in trade and supply chains. Can the coronavirus pandemic provide renewed momentum to advance the implementation of regional economic integration? Political leaders must put their differences aside, prioritize the integration agenda, and take collective action toward implementation. This means taking specific steps at the regional and country levels to advance implementation in policy, fiscal, and monetary coordination; tax harmonization; adoption of common standards and regulations; and financial sector integration. At the country level, leaders should prioritize investment in cross-border infrastructure for secure and reliable transportation and energy connectivity, with financial and technical assistance from regional and international banks, such as the Central American Bank for Economic Integration (CABEI) and the World Bank.

Central America Customs Union: A Requisite for Success?

By: Salvador Paiz

Individually, Central American countries are relatively small markets. In the past, as companies saturated a market in their respective industries, they looked to domestic diversification as a source for growth. The main competency was being able to thrive despite the nuances of their home country. Nevertheless, roughly forty years ago, companies began to expand differently: relying less on diversification, but growing the core business throughout Central America, where the size of the addressable market is more attractive, roughly equivalent to Chile in terms of GDP or Colombia in terms of population.

The private sector has been a longtime champion for Central American integration. Governments, on the other hand, have lacked leadership and vision for this ambitious project. Of course, there are a few initiatives that foster regionalization, such as the Secretariat for Central American Economic Integration (SIECA), which are important, but are also insufficient. What policy actions can Central American governments introduce in the short term to accelerate regional integration?

Customs offices in Central America are notoriously slow, and there is a lack of coordination between them. Digitalization of customs offices, including their integration into a common systems platform, would significantly speed up the transportation process and reduce waiting times at borders. Customs offices should have a list of “known shippers” and receive digital cargo documents ahead of time, akin to the US-Mexico Free and Secure Trade (FAST) Card program, “a commercial clearance program for known low-risk shipments entering the United States from Canada and Mexico.”⁵⁰ This would allow for contactless and uninterrupted flow through the borders, while enhancing traceability and collection of duties.

Companies have to pay, at each national border, taxes for services, transit, import duties, and value-added taxes—and they have to pay differently in each country. Of course, the optimal result would be achieved with a customs union in which goods can move freely and be exempt from heterogenous duties. At a minimum, a unified value-added tax code would reduce the complexities and economic distortions of having different rates and exempt goods. Lastly, there should be no retention of income tax or double taxation for services provided to other companies, or even among subsidiaries of the same company within a region.

Another idea is to centralize sanitary licenses and trademark registrations. Authorities should be able to create and centralize one—and only one—process when it comes to these types of records. A “single window” to register in all countries of Central America at the same time would be a great incentive for companies to relocate to the isthmus.

The size of Central America should, in theory, make it an attractive market. The lack of uniformity and consistency in conducting cross-border trade and business leads to multi-step bureaucracies that hinder economic integration, and therefore, diminish the prospects for economic development. If the countries of Central America act as one, they could finally become a market that offers the economies of scale that can lead to new market opportunities, job creation, and enhanced regional competitiveness.

Fostering the Minimum Conditions for Growth: Recommendations for Governments, the Private Sector, and the International Community

The pandemic has forced countries to look inward as they scramble to strike the right balance between saving lives and saving the economy. In Central America, countries have a unique opportunity to also look beyond their borders for dialogue and cooperation, especially on how to unite in the face of external forces impacting the entire region. Central American nations can take the following concrete steps—on a national and regional level—to embark on a united path toward recovery and growth.

Governments

Convene multisectoral task forces to propose policy actions for kickstarting economic recovery. Central American countries must unite around the national cause of economic reactivation. This means convening multisectoral task forces—from current and past administrations, private-sector leaders, multilateral representatives, and other sectors—to jointly discuss how to best kickstart economic reactivation in their countries. National task forces should then filter into cross-border discussions on regional issues. Key agenda items could include lifting investment restrictions to effectively attract supply chains and potential new businesses, offering special visas for foreign nationals working remotely to incentivize and support tourism, enacting legislation to combat corruption in procurement and public contracting with innovative digital technologies and processes, and informing on best practices from economic-recovery strategies in other countries outside of the region. These task forces should also propose specific actions for longer term and sustained economic recovery such as bridging some of the political and policy gaps around implementation of regional economic integration.
Tackle long-standing barriers to business investment to encourage nearshoring. Governments in the region should improve governance, increase transparency and public accountability, and promote business-friendly environments. If Central America is to have economic growth, especially in a post-pandemic world, it must continue the long-term work toward building public trust, respecting the rule of law, transparency, and strengthening institutions. The independence of the judiciary—a particular challenge in Guatemala—must be protected to ensure trust in the judicial system. At a time when emergency powers provide ground for executive overreach and loosened regulations and supervision around procurement, anti-corruption missions—especially those in Guatemala, El Salvador, and Honduras—must show they are serious about tackling graft. Federal prosecutors and judges require additional capacity building and technical assistance to effectively conduct and process corruption investigations. Reducing red tape and streamlining key bureaucratic processes related to business and investment—with the help of digital technologies—must also be at the top of the agenda. Tax and regulatory reform must be aimed at reducing informality, which accounts for more than 60 percent of the Latin American workforce and is a major impediment for sustained, inclusive growth.
Invest in developing the human capital needed for a changing global economy. Governments should prioritize investment in workforce training and capacity building for jobs in the manufacturing and services sectors, in accordance with global demand, especially those tied to nearshoring opportunities. In the short term, governments must partner with the private sector and civil society, with the specific resources and know-how to maximize the impact and scale of workforce training and foster entrepreneurship and innovation. In the medium to long term, governments should promote and invest in education and vocational programs tailored to developing the knowledge and skills that meet the demands of the labor market and prepare workers for the jobs of the future. Developing human capital and increasing productivity in Central America are the most important variables for taking full advantage of the demographic dividend over the next decade.

Private Sector and Civil Society

Invest in new workforce and on-the-job training programs that align with business demands. The Central American private sector must be a crucial player in rapidly developing human capital before the relatively narrow demographic window closes in 2033. Private-sector leaders have the capability to implement long-term strategies—as opposed to short-term government-led efforts—focused on workforce development, education for the jobs of tomorrow, and vocational and technical programs with real-life skill trainings (education-to-employment programs). The public sector must help these private-sector leaders in facilitating these opportunities, engaging in public-private partnerships, and removing red tape for private-sector-led capacity-building efforts. Support and buy-in from civil society groups is key here, especially in longer-term education in science, technology, engineering, and math (STEM). Civil society buy-in can help to ensure that education and capacity building efforts are gender and racially inclusive.
Partner with governments on anti-corruption efforts. Weak rule of law continues to be a major impediment for investment in Central America. The private sector can be a crucial partner in helping to decentralize, modernize, and digitalize key procurement and public contracting processes that are most vulnerable to graft. A private sector that can drive growth and is committed to transparency and accountability is an important sign for foreign investors seeking business opportunities in Central America, especially now with multinational firms exploring supply-chain relocation.

International Community

Provide financial and technical assistance amid pandemic response. As with other countries hard hit by the pandemic, Central American countries have seen weakened fiscal positions and strained public resources. Multilateral development banks and international financial institutions must play a critical role in providing necessary finaning to Central American economies. For example, the IMF can provide financial assistance, and support for debt restructuring processes. The World Bank (WB) and the Inter-American Development Bank (IDB) should expand their technical and financial support in various areas of the public and private sectors. This assistance will be necessary to keep Central American economies afloat and must be complemented by local economic recovery strategies by local leaders, but both external and internal plans must be tied to assurances in strengthening the rule of law.
Enhance intraregional connectivity to attract investment and drive integration. To attract foreign investment and encourage regional integration and sustainable economic growth, the international community can be a key ally and help governments determine infrastructure and energy investments to enhance intraregional connectivity as well as transregional connectivity—for example, in northern Guatemala along Mexico’s southern border. Political leadership at the national level must support regional financial institutions such as the IDB and Development Bank of Latin America—with strategic advice and support from international organizations such as the World Bank—to deploy the required capital and the technical capabilities to lead infrastructure investments. CABEI must also be a key player in financing infrastructure and energy projects to improve regional economic integration. Fast and secure transportation routes and cheap, reliable energy are top requirements for foreign investment and economic integration.
Deepen and expand foreign investment partnerships in Central America. The United States, as Central America’s most important trade and investment partner, must target investments aimed at generating new employment opportunities and supporting sectors crucial for inclusive economic growth and regional integration. Local leaders from the public and private sectors must provide buy-in and support for local and foreign investment efforts in infrastructure and energy projects accompanied by strategic investments to reduce insecurity and strengthen the rule of law, with clear benchmarks and metrics for measuring impact. These metrics must be effectively communicated to ensure full transparency and long-term support. Bilateral agencies must also play a critical role, such as the U.S. government’s development finance institution, the Development Finance Corporation (DFC). Beyond the United States, any international investment to Central America must further the rule of law, create job opportunities for local communities, and provide viable terms and conditions for loan repayments.

Central America’s much-needed reforms are not only relevant in today’s pandemic-shocked world, but also necessary for the region to effectively seize unique opportunities for long-term, sustained growth. The urgency of the moment and the magnitude of the multi-dimensional crisis from COVID-19 punctuates the need for Central America to address historic challenges and traditionally weak institutions from all angles and sectors—public, private, civil society, and the multilateral and international community. For Central America to emerge like a phoenix from its ashes, concerted action must happen now.

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1 “Alicia Bárcena Calls for Implementing Universal, Redistributive and Solidarity-Based Policies to Avoid Another Lost Decade,” Economic Commission for Latin America and the Caribbean, April 2, 2020, https://www.cepal.org/en/news/alicia-barcena-calls-implementing-universal-redistributive-and-solidarity-based-policies-avoid.

2 “WHO Coronavirus Disease (COVID-19) Dashboard by the World Health Organization,” accessed September 23, 2020, https://covid19.who.int/?gclid=EAIaIQobChMIzLfU9d3C6gIVhJ-zCh2wng1jEAAYASAAEgJvGPD_BwE.

3 “A Joint Response for Latin America and the Caribbean to Counter the COVID-19 Crisis,” International Monetary Fund, June 24, 2020, https://www.imf.org/en/News/Articles/2020/06/24/sp062420-a-joint-response-for-latin-america-and-the-caribbean-to-counter-the-covid-19-crisis.

4 Austin Horn, “14 Million People in Latin America, Caribbean at Risk of Hunger, U.N. Report Says,” NPR, May 28, 2020, https://www.npr.org/sections/coronavirus-live-updates/2020/05/28/864076929/14-million-people-in-latin-america-caribbean-at-risk-of-hunger-u-n-report-says.

5 Luis Noe-Bustamante, “Amid COVID-19, Remittances to Some Latin American Nations Fell Sharply in April, Then Rebounded,” Pew Research Center, August 31, 2020, https://www.pewresearch.org/fact-tank/2020/08/31/amid-covid-19-remittances-to-some-latin-american-nations-fell-sharply-in-april-then-rebounded/.

6 “COVID-19 Dashboard by the Center for Systems Science at Engineering (CSSE) at Johns Hopkins University,” accessed September 9, 2020, https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6.

7 Maria Fernanda Perez Arguello and Isabel Kennon, Nicaragua’s Response to COVID-19 Endangers Not Only Its Own People, but Also Its Neighbors, Atlantic Council, May 7, 2020, https://www.atlanticcouncil.org/blogs/new-atlanticist/nicaraguas-response-to-covid-19-endangers-not-only-its-own-people-but-also-its-neighbors/.

8 “Trade War Spurs Sharp Reversal in 2019 Reshoring Index, Foreshadowing COVID-19 Test of Supply Chance Resilience,” Kearney, https://www.kearney.com/documents/20152/5708085/2020+Reshoring+Index.pdf/ba38cd1e-c2a8-08ed-5095-2e3e8c93e142?t=1586876044101.

9 “CAFTA-DR (Dominican Republic-Central America FTA),”Office of the United States Trade Representative, https://ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta; “EU-Central America,” European Commission, https://ec.europa.eu/trade/policy/countries-and-regions/regions/central-america/.

10 Since its passing, the CAFTA-DR trade agreement has not gone without challenges. The United States has submitted three labor complaints under CAFTA-DR dispute-settlement provisions, alleging that the Dominican Republic, Honduras, and Guatemala failed to comply with their commitments. This remains an issue that must be solved among the parties. See more here: “Submissions under the Labor Provisions of Free Trade Agreements,” U.S. Department of Labor’s Bureau of International Labor Affairs, https://www.dol.gov/agencies/ilab/our-work/trade/fta-submissions.

11 “Doing Business 2020: Comparing Business Regulation in 190 Economies,” World Bank Group, 2020, https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf.

12 “Why Costa Rica is a Strategic Destination for Supply Chain Rethinking,” Costa Rican Investment Promotion Agency (CINDE), July 30, 2020,”https://www.cinde.org/en/news/news/why-costa-rica-is-a-strategic-destination-for-supply-chain-rethinking.

13 “The Global Competitiveness Index 2017-2018: Costa Rica,” World Economic Forum, http://www3.weforum.org/docs/GCR2017-2018/03CountryProfiles/Standalone2-pagerprofiles/WEF_GCI_2017_2018_Profile_Costa_Rica.pdf.

14 “Incentives,” Costa Rican Investment Promotion Agency (CINDE), https://www.cinde.org/en/why/incentives.

15 “The Global Competitiveness Index 2017-2018: Costa Rica,” World Economic Forum.

16 Jordan Schwartz, et al., “Logistics, Transport, and Food Prices in LAC: Policy Guidance for Improving Efficiency and Reducing Costs,” World Bank, August 2009, http://documents1.worldbank.org/curated/en/751921468270863216/pdf/879330WP0Box380ssionalPapers0August.pdf.

17 Esteban Arrieta, “Costa Rica Debería Invertir el Triple para Superar Rezago en Infraestructura,” La Republica, November7, 2019, https://www.larepublica.net/noticia/costa-rica-deberia-invertir-el-triple-para-superar-rezago-en-infraestructura.

18 “Costa Rica—Credit Rating,” Trading Economics, https://tradingeconomics.com/costa-rica/rating#:~:text=Standard%20%26%20Poor’s%20credit%20rating%20for,at%20B%20with%20negative%20outlook.

19 ”Jason Marczak, et al., Latin America and the Caribbean 2030: Future Scenarios, Atlantic Council, 2016, 55, https://publications.atlanticcouncil.org/lac2030/wp-content/uploads/2016/12/LAC2030-Report-Final.pdf.

20 Daniela González, “Caracteristicas Demograficas de los Paises de Mesoamerica y el Caribe Latino,” Comision Económica para America Latina y el Caribe, https://www.cepal.org/sites/default/files/events/files/caracteristicas_demograficas_mesoamericaycaribelatino.pdf; Andres Cadena, et al., “Unlocking the economic potential of Central America and the Caribbean,” McKinsey & Company, April 12, 2019, https://www.mckinsey.com/featured-insights/americas/unlocking-the-economic-potential-of-central-america-and-the-caribbean.

21 Marczak, et al., Latin America and the Caribbean 2030: Future Scenarios.

22 Alicia Bárcena, “America Latina Envejece,” Comision Económica para America Latina y el Caribe, January 7, 2011, https://www.cepal.org/sites/default/files/article/files/43934-2011.07.01-cambios-demograficos-americaeconomia.pdf.

23 González, “Caracteristicas Demograficas de los Paises de Mesoamerica y el Caribe Latino;” Cadena et al. “Unlocking the economic potential of Central America and the Caribbean.”

24 To illustrate the different demographic stages for Central America, consider the following 2018 fertility rates: 2.87 in Guatemala, 2.48 in Honduras, 2.46 in Panama 2.42 in Nicaragua, 2.05 in El Salvador, and 1.76 in Costa Rica.

25 Andrew Mason, “Capitalizing on the Demographic Dividend,” University of Hawaii, 2002, http://www2.hawaii.edu/~amason/Research/UNFPA.PDF.

26 Manuel Orozco, “Central American Migration: Current Changes and Development Implications,” Inter-American Dialogue, November 2018, thedialogue.org/wp-content/uploads/2018/11/CA-Migration-Report-Current-Changes-and-Development-Opportunities1.pdf.

27 Simon Rabinovitch and Simon Cox, “After half a century of success, the Asian tigers must reinvent themselves,” The Economist, December 5, 2019, https://www.economist.com/special-report/2019/12/05/after-half-a-century-of-success-the-asian-tigers-must-reinvent-themselves.

28 Ibid.

29 “Over 5 million births in EU in 2017,” EuroStat, March 12, 2019, https://ec.europa.eu/eurostat/documents/2995521/9648811/3-12032019-AP-EN.pdf/412879ef-3993-44f5-8276-38b482c766d8#:~:text=In%202017%2C%205.075%20million%20babies,compared%20with%201.60%20in%202016.

30 Jonathan Vespa, et al., “Demographic Turning Points for the United States: Population Projections for 2020 to 2060,”United States Census Bureau, February 2020, https://www.census.gov/library/publications/2020/demo/p25-1144.html.

31 “Is migration good for the economy?,” Organization for Economic Cooperation and Development, May 2014, https://www.oecd.org/migration/OECD%20Migration%20Policy%20Debates%20Numero%202.pdf.

32 Ibid.

33 Infographic Migration and Remittances in Central America,” BBVA Research, October 8, 2019, bbvaresearch.com/en/publicaciones/infographic-migration-and-remittances-in-central-america/.

34 Ibid.

35 “Central American Migration: Root Causes and U.S. Policy,” Congressional Research Service, June 13, 2019, https://fas.org/sgp/crs/row/IF11151.pdf/.

36 Maria Fernanda Perez Arguello, “What Drives Migrant Caravans? Violence, Impunity and Social Media,” TheHill, January 17, 2019, https://thehill.com/opinion/immigration/425667-what-drives-migrant-caravans-violence-impunity-and-social-media.

37 “Infographic Migration and Remittances in Central America,” BBVA Research, October 8, 2019, bbvaresearch.com/en/publicaciones/infographic-migration-and-remittances-in-central-america/.

38 Luis Noe-Bustamante, “Amid COVID-19, Remittances to Some Latin American Nations Fell Sharply in April, Then Rebounded,” Pew Research Center, August 31, 2020, https://www.pewresearch.org/fact-tank/2020/08/31/amid-covid-19-remittances-to-some-latin-american-nations-fell-sharply-in-april-then-rebounded/.

39 Cecilia Barria, “Elecciones en Guatemala: Qué es el ‘Bono Demográfico’ y por qué Puede ser Clave en el Futuro de la Economía de ese País,” BBC Mundo, June 12, 2019, https://www.bbc.com/mundo/noticias-48589321; Hugo Maúl Rivas, “Bajo Desempleo y Alta Informalidad,”CIEN, April 9, 2019, https://cien.org.gt/index.php/bajo-desempleo-y-alta-informalidad/.

40 “OIT: Cerca de 140 Millones de Trabajadores en la Informalidad en América Latina y el Caribe,” Organización Internacional del Trabajo, September 25, 2018, https://www.ilo.org/americas/sala-de-prensa/WCMS_645596/lang–es/index.htm#:~:text=La%20tasa%20de%20informalidad%20de,ni%20por%20la%20seguridad%20social.

41 Barria, “Elecciones en Guatemala.”

42 Geldi Munoz Palala, “El Bono Demográfico se Escapa de la Región,” Periódico, October 22, 2018, https://elperiodico.com.gt/inversion/2018/10/22/el-bono-demografico-se-escapa-de-la-region/.

43 Jordi Prat, et al., “Inclusive Growth: Challenges and Opportunities for Central America and the Dominican Republic,” Inter-American Development Bank (IDB), February 2018, https://publications.iadb.org/publications/english/document/Inclusive-Growth-Challenges-and-Opportunities-for-Central-America-and-the-Dominican-Republic.pdf.

44 “Fitch Affirms Nicaragua at ‘B-’; Outlook Revised to Negative,” FitchRatings, June 17, 2020, https://www.fitchratings.com/research/sovereigns/fitch-affirms-nicaragua-at-b-outlook-revised-to-negative-17-06-2020; “The World Bank in Nicaragua: Overview,” World Bank, https://www.worldbank.org/en/country/nicaragua/overview.

45 Dominique Desruelle and Alfred Schipke, “Central America: Economic Progress and Reforms,” International Monetary Fund, 2008, https://www.imf.org/external/pubs/ft/dp/2008/dp0801.pdf.

46 “Propósitos del SICA,” Sistema de Integración Centroamericana, https://www.sica.int/sica/propositos

47 “Tegucigalpa Protocol to the Charter of the Organization of Central American States (ODECA),” Sistema de Integración Centroamericana, December 13, 1991, https://www.sica.int/documentos/tegucigalpa-protocol-to-the-charter-of-the-organization-of-central-american-states-odeca_2_320.html.

48 “Unión Aduanera,” Sistema de Integración Centroamericana, https://www.sica.int/iniciativas/aduanas.

49 “Algunos Logros del SICA,” Sistema de Integración Centroamericana, https://www.sica.int/Iniciativas/inicio.

50 “FAST: Free and Secure Trade for Commercial Vehicles,” US Customs and Border Protection, https://www.cbp.gov/travel/trusted-traveler-programs/fast.

The post Central America Economic Reactivation in a COVID-19 World: Finding Sustainable Opportunities in Uncertain Times appeared first on Atlantic Council.

Ukraine’s booming IT sector can drive positive change

Yuliya Rimsky and Filip Sasic — Wed, 23 Sep 2020 22:33:00 +0000

Ukraine’s thriving IT industry is already an increasingly important driver of economic growth. With the right support, it can also have a transformative effect that will further strengthen Ukrainian democracy and consolidate the country’s Euro-Atlantic trajectory. US private sector involvement in the Ukrainian IT sector can help this consolidation process while also offering extremely attractive economic returns.

Today’s Ukraine faces a myriad of challenges hampering its progress. These include an active conflict with Russia in the east of the country, systemic corruption, weak rule of law, and an economy dominated by oligarchs. While there are no easy solutions to these complex issues, one of the most immediately obvious low-hanging fruits is support for Ukraine’s IT sector.

Potential backing for the IT sector could involve bringing together entrepreneurs, successful startups, small and medium enterprises (SMEs), and trade groups from Ukraine, the US, and partner countries with the goal of creating new opportunities for investment, jobs, partnership, and collaboration.

Ukraine’s IT industry is an ideal candidate for this type of engagement. Over the past decade, it has become a vital part of the country’s export service economy and a significant contributor to the global tech scene. With 26 percent annual growth, it remains the fastest-growing sector in Ukraine and far exceeds the average global growth rate for the industry. According to a recent poll conducted by the American Chamber of Commerce in Ukraine, IT is already the second most attractive Ukrainian industry for foreign investment.

The country’s IT sector workforce is dominated by progressive, young, business-orientated, and tech-savvy professionals who are collectively re-defining the future direction of the Ukrainian economy. From 2011 to 2016, the number of IT specialists in Ukraine increased by 144%.

Today, the industry employs over 200,000 highly educated professionals who form Ukraine’s new high-earning middle class. Ukraine’s IT professionals typically earn up to eight times the national average. Additionally, the expansion of this demographic is driving growth in other sectors of the Ukrainian economy including the real estate, retail, and leisure industries.

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While the ongoing conflict with Russia has had a major detrimental impact on the Ukrainian economy, the IT sector stands out. It has been somewhat insulated from the impact of the war and has rapidly expanded over the past six years. IT grew from 1.7 percent of Ukraine’s GDP in 2014 to four percent in 2019. It is expected to more than double and reach 10 percent of GDP in the coming years.

Unlike other sectors of Ukraine’s economy, oligarchic interests have not permeated the IT industry, with 80 percent of the sector consisting of SMEs. Additionally, COVID-19 has not significantly affected the industry due to its virtual ecosystem.

The US already has a significant interest in the Ukrainian IT industry. American customers are the largest consumers of Ukraine’s IT services, accounting for 50 percentof clients nationally. In total, Ukrainian IT firms do business with over one hundred Fortune 500 companies.

More than one hundred international R&D centers already operate in Ukraine including Boeing, Siemens, Oracle, Cisco, Apple, Samsung, Microsoft, Deutsche Bank, Skype, eBay, IBM, and Huawei. In 2019, Ukraine’s IT sector attracted over USD 544 million in investments, with US venture capital firms well-represented among investors.

Investing in Ukraine’s IT industry can help to unlock potential in other sectors of Ukraine’s economy. One good example is AgriTech, or the use of technological solutions in the agricultural sector.

Ukraine sits on between one-quarter and one-third of the world’s black soil reserves and its agriculture sector is highly attractive as a destination for foreign investments. However, productivity is only at around 50 percent of projected maximums in most spheres of the farming industry, while only 10 percent of Ukrainian agribusinesses use innovative technologies. Joint ventures between US partners and Ukraine’s agrarians, engineers, and IT experts could rapidly grow Ukraine’s AgriTech industry. These ventures could potentially create enormous returns for US investments and contribute to Ukraine’s economic prosperity.

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The further development of Ukraine’s IT ecosystem can also have a positive impact on US security objectives in the region. Innovative public-private partnerships and international investment can boost Ukrainian startups that focus on countering disinformation, improving cyber security, and developing defense technology solutions. This would enable Ukraine to better address Russian disinformation and cyber attack threats. Any gains could also be exported to other countries that also find themselves facing Kremlin-style hybrid aggression.

Greater US investments and focus on the IT industry in Ukraine would potentially boost the growth of SMEs in the Ukrainian economy and strengthen the position of an emerging middle class of high-earning and Western-oriented Ukrainians. These SMEs are the basis of a stable, vibrant, and competitive knowledge-based economy that would allow Ukraine to move beyond the current concentration of wealth in a limited number of oligarchic hands.

Ukrainian IT sector investment would boost modernization and help push the adoption of tech-based solutions. The use of digital instruments and modern technologies in the public sector, with the involvement of domestic IT companies, could provide prompt results and speed up the much-needed reform of what remains in many cases an archaic bureaucracy. This would also signal a shift towards greater compliance and transparency that would be welcomed by the international community.

Ukraine’s IT sector has already demonstrated its huge potential to transform the nation in ways that closely align with US interests. The industry also presents tremendous economic opportunities for future US investments. As the international community seeks ways to strengthen Ukraine’s Euro-Atlantic integration, private sector investment in the country’s attractive IT industry could have a significant and positive role to play.

Yuliya Rimsky was a Network 20/20 Ukraine Fellow in 2019. Filip Sasic is a Deputy Director at Network 20/20.

Today, of course, the Middle East is nowhere near as important to the US economically as Europe is. But a transformation of the Middle East can eventually put it on par with Europe in terms of economic partnership with the United States. While Europe represents only 6.9 percent of the world population today, its GDP contribution to the world economy stands at 15.6 percent—over twice its population. On the other hand, the Middle East has 6 percent of the world’s population and accounts for only 4.6 percent of world GDP. There is a lot of room to grow.

As we have witnessed in China in the past two decades, accelerating population productivity can reap significant rewards. The young and growing population of the Middle East entering significant household formation in the next decade can be an economic powerhouse. These favorable demographics can lead to significant consumption-led economic growth only if coupled with appropriate job creation levels. A more pragmatic and targeted strategic investment approach is required through public and private partnerships to empower entrepreneurs, women, and youth.

Many companies have already made a bet on this investment thesis through substantial acquisitions, including Coca-Cola, Amazon, and Uber. Financial institutions such as Blackstone, Carlyle, Blackrock, Goldman Sachs, and a host of other investment banks and hedge funds have reaped billions from regional sovereign wealth funds, family offices, and high net-worth individuals. Luxury groups like Cartier, LVMH, Hermes, Richmond, and Rolex have invested heavily to reach well-heeled consumers in Middle East markets. Energy groups such as Total, ExxonMobil, Shell, and BP enjoy large contracts in the region. Boeing, Airbus, Lockheed Martin, Bechtel, Halliburton, and others have been doing a brisk business in aerospace, security systems, and infrastructure. Twitter, Facebook, Amazon, and Apple have seen significant market share gains and profits from the Middle East’s highly penetrated mobile markets.

Key corporations that have put in the effort to navigate and meaningfully enter these markets have reaped attractive returns. They went beyond the negative headlines to invest in the long term. Middle East markets are ripe for enduring economic growth if there is a willingness to invest in the people of the region.

Stable and fair oil prices are important for US economic health

The stability of global energy prices will continue to impact the US economy for the foreseeable future. Despite the rhetoric regarding renewable energy and energy conservation, demand has been relatively stable, and 80 percent of the world’s energy supply continues to come from fossil fuels. The US shale industry has been a strategic success from a supply perspective but not without high volatility. In a boom and bust cycle reminiscent of the airline industry, companies have gained and lost fortunes thanks to oil price fluctuations. The latest decline from the Saudi-Russia oil price standoff in April was a case in point. A wave of bankruptcies and bond downgrades have bogged down the industry, causing economic damage and increasing unemployment. Counter to the conventional wisdom that low prices are a boon for the US economy, they are a bust for the US energy industry.

While the Organization of Petroleum Exporting Countries (OPEC) may no longer be relevant in controlling prices, the institution still holds sway. It has expanded its influence through various cooperation agreements with non-OPEC countries, such as Russia and Mexico, known as OPEC+. In fact, during the OPEC+ meeting in April, the Group of Twenty joined with Brazil, Norway, and Canada in also agreeing to oil production cuts. The United States should join this informal group to ensure a balanced oil market.

In terms of US national energy policies, the Middle East will continue to be important. Given the outsized reserves and oil extraction costs of the oil-producing countries in the Middle East, the region plays a critical role in balancing global energy markets and helping maintain a stable and fair price.

Building a counterbalance to China is key to global stability

China is filling many vacuums created by US disengagement or neglect. From Pakistan to Iran to Nigeria, China is striking economic deals to bolster its international power. It has established itself in the Middle East and continues to expand its connections and power. China is already the UAE’s second-largest trading partner and the recent nuclear deal between China and Saudi Arabia is the tip of the iceberg. The complimentary large-scale initiatives of China’s Belt and Road Initiative and Saudi Vision 2030 are leading to further economic integration between the two nations.

China has not only dazzled countries with its mega infrastructure projects and loans, but has also made inroads through its technology companies such as Alibaba and Huawei. Alipay is as pervasive as Apple Pay in the Middle East while Huawei is winning the 5G network upgrade war in the Gulf and beyond. In addition to corporate activity, Chinese investors are beginning to invest in regional startups. While venture capital activity is still limited, Chinese investment firms are becoming increasingly active in key markets.

Concerning energy, China and other Asian countries make up a majority of OPEC exports. Given the projects and ties mentioned above, it is only natural that China is pursuing closer economic relations with Gulf Cooperation Council (GCC) countries. China will be the clear beneficiary should the United States continue to limit its engagement in the Middle East, adding to its sphere of influence. When China expands its economic relationships further, OPEC will likely keep Chinese interests in mind during the next oil crisis. US support to strengthen Middle Eastern economies can counterbalance the rising economic power of China that has already engulfed most of Asia and Africa and is knocking on the doors of Europe.

Security without economic prosperity is fragile

Hopelessness and youth are a dangerous combination. This explosive mixture combusted in the 2011 Arab Spring. While it may seem that the call for change has lost steam, it simmers in many corners of the Middle East. And, though most governments in the Middle East are authoritarian, there is increasing pressure to stay attuned to the people’s needs to maintain power. As the social contract between rulers and the citizenry continues to evolve, ensuring an engaged and productive populace will be critical to stability. While political reform is unlikely in the near term, reforming the economy to decrease unemployment and increase prosperity is high on the agenda.

Most countries in the Middle East are plagued with a large public sector and a weak private sector. This economic mix is unsustainable and will lead to failed states. Public sector finances are under extreme pressure even in the oil-exporting countries of the Gulf. Most of these economies require a significant transformation. Practically, this means more open and dynamic economies to drive private sector development and investment. Governments must start by changing antiquated laws and regulations and by investing in strategic growth sectors to drive economic diversification and job creation. In the meantime, unleashing the population’s power by empowering entrepreneurs, women, and youth will have a marked improvement on economic growth.

As the Middle East makes this delicate transition from public largess to private sector development, the United States should support efforts to drive economic prosperity. Entrepreneurship, regional economic integration, educational transformation, women’s economic participation, and fostering innovation are all worthwhile pursuits that will ultimately lead to economic growth and job creation.

Investing in security is necessary, but not at the expense of investing in economic prosperity. The lack of economic diversification is as dangerous as the security threats posed by certain non-state and state actors in the region. Indeed, the most significant threat for most Middle East countries is a disgruntled, young, and growing population more attuned to the world around them than any generation before and impatient for basic educational and employment opportunities.

A more hopeful future

By changing the terms of engagement with the Middle East and prioritizing investment in the economic and human prosperity of the region, US national interests will be better served. The pandemic has provided a unique opportunity to take unprecedented actions to build more dynamic and agile economies. In partnership with regional players, the United States, along with its allies, can shape a better future for the Middle East and its people.

Amjad Ahmad is director and resident senior fellow of empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East. Follow him on Twitter: @amjadahmadVC.

MENASource Sep 18, 2020

Liberalizing capital, trade, and labor markets are keys to accelerating post-pandemic recovery in Middle East

By Stefanie Hausheer Ali

At a private CEO Dialogue on post-pandemic challenges and opportunities in the Middle East, there was agreement among participants that the region presents appealing demographics for economic growth and that the pandemic has underscored the need to accelerate economic diversification.

Coronavirus Entrepreneurship

MENASource Sep 18, 2020

UAE-Israel accord will drive economic growth in the Middle East, says Emirati Minister of Economy

By Lucy Grathwohl

On September 16 empowerME Director Amjad Ahmad and Al Mari discussed how the historic signing of the Abraham Accords will facilitate the UAE and Israel to open their economies.

Economy & Business Israel

MENASource Sep 1, 2020

Energy cooperation in the Middle East is a necessary step toward regional security

By Ariel Ezrahi

Mutual energy dependencies can help mitigate political tensions, creating incentives to cooperate and possibly facilitating a positive momentum towards solving some of the MENA region’s thornier outstanding political conflicts

Middle East Politics & Diplomacy

The post The Middle East is a growing marketplace, not just a war zone appeared first on Atlantic Council.

Liberalizing capital, trade, and labor markets are keys to accelerating post-pandemic recovery in Middle East

Stefanie Hausheer Ali — Fri, 18 Sep 2020 13:26:45 +0000

At a private CEO Dialogue on post-pandemic challenges and opportunities in the Middle East—convened by the Atlantic Council’s Rafik Hariri Center for the Middle East in partnership with the World Government Summit and Majid Al Futtaim—there was agreement among participants that the region presents appealing demographics for economic growth and that the pandemic has underscored the need to accelerate economic diversification.

The CEO Dialogue held on September 10 brought together a group of approximately forty senior private sector leaders with interests in the Middle East, as well as the United States and regional government officials. A key point made at the discussion is that the region has untapped potential that presents a substantial opportunity for entrepreneurial and innovative endeavors. Likewise, the Middle East has a sophisticated investor class and a rising entrepreneurial community. Many in attendance stressed that a fundamental shift is needed and that international investors should see the region as a market to deploy capital rather than simply as a place to extract it. In a poll conducted during the meeting, the majority of participants (58 percent) said that liberalizing capital, trade, and labor markets are the policy actions that would be most effective in accelerating the post-pandemic recovery. (The poll was conducted on September 10, 2020 with a sample size of 38 respondents.)

Key insights from the meeting included the need for regional economic integration to allow for companies to consolidate and scale effectively in order to compete on a global level. Sustainable commitments between nations in the Middle East would also enable them to reap the opportunities present in the region as a whole. Just as importantly, taking steps to more closely link regional economies and remove economic barriers would drive more entrepreneurship. These actions will lead to a more competitive and open market that will result in job creation. Indeed, a majority of participants polled at the event (40 percent) indicated that integrating regional economies would have the most significant impact on long-term regional job creation.

Private sector leaders in attendance highlighted the entrepreneurial set of opportunities the region presents, as well as the importance of investing not just financially in the Middle East, but also in terms of expertise, training, and upskilling. The importance of the digital transformation currently underway was also discussed and a majority of participants polled (65 percent) believe that artificial intelligence and machine learning have the potential to have the greatest impact on the region out of several major technological trends. Participants also emphasized that building digital infrastructures and capacity are essential for capitalizing on the region’s opportunities.

The importance of strengthening the private sector was also underscored. Government officials noted that governments cannot solve the region’s economic and human development challenges without a robust private sector and that more must be done to create ecosystems where the private sector can flourish. Participants also noted that harnessing the creative and productive power of the region’s youth is an area of untapped opportunity, especially since the region is blessed with favorable demographics. Participants agreed that more concerted efforts are needed to foster public-private partnerships that create pathways to entrepreneurship and employment opportunities for the young and tech-savvy population in the region.

The economic benefits of increasing women’s participation and leadership roles in workplaces throughout the region was another key theme. Some countries in the region are making significant progress on these efforts and private sector representatives stressed that investors increasingly want to know that their financing supports women’s economic empowerment, whether through employment, training, or leadership opportunities.

Similarly, the role of environmental, social, and corporate governance factors have become paramount in investment decisions. Private sector representatives noted that investors increasingly want to understand the sustainability credentials of investee companies; indeed, this is now a pre-requisite for investment allocation.

While the meeting identified numerous areas of opportunity in the region, a majority of participants (50 percent) indicated that they believe it will take between twenty-four and thirty-six months for regional economies to recover from the economic decline caused by the coronavirus pandemic. Government officials and private sector leaders affirmed the importance of economic diplomacy and multilateralism to address shared challenges that impact everyone due to the connectedness ushered in by globalization.

Stefanie H. Ali is deputy director of empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East. Follow her @StefHausheer.

MENASource Sep 1, 2020

Energy cooperation in the Middle East is a necessary step toward regional security

By Ariel Ezrahi

Middle East Politics & Diplomacy

New Atlanticist Jul 14, 2020

COVID-19 could set back Mideast economies for years

By Larry Luxner

The coronavirus pandemic is causing widespread suffering throughout the Middle East, but its long-term impact on the region’s economy and its vulnerable populations will be felt for years to come.

Coronavirus Middle East

MENASource Jul 14, 2020

After the coronavirus and low oil prices, Oman’s future is more global

By Phillip Cornell

With the onset of COVID-19 and an economic crisis that is bound to accelerate history, Oman’s commitment to steady progress and political neutrality will face new tests and leverage the country’s wider global relationships.

Middle East Politics & Diplomacy

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The post Liberalizing capital, trade, and labor markets are keys to accelerating post-pandemic recovery in Middle East appeared first on Atlantic Council.

Digital crossroads: How to pilot data trusts for good

Borja Prado — Fri, 21 Aug 2020 19:49:25 +0000

Data sets are essential for the commercial success of a personal data-dependent consumer society where customization is key. Much-needed development of innovative solutions in health, education, the environment, and city management depend on data. Building national economic resilience and accelerate recovery depends on data.

While much of public discussion has focused solely on the debate of data privacy protection versus deregulation and economic productivity, data trusts (also known as data commons or data cooperatives) represent legal, technology-enabled constructs that allows for more equitable ways of sharing the profits among different stakeholders. In this structure, a relationship of fiduciary responsibility would exist not only with the shareholders, but also towards the data owners and producers, and where the data economy would happen “with people” instead of “to people”.

On Wednesday, August 12, 2020 at 12:00pm EDT, the Atlantic Council’s GeoTech Center hosted a panel of experts in the fields of data analytics, AI and data governance, neuroscience, engineering, and digital transformation that discussed practical steps to build and pilot data trusts. The panel included Michael Ingrassia, president and general counsel of Truata; Wally Trenholm, chief executive officer of Sightline Innovation; and Atlantic Council nonresident senior fellow Dr. Divya Chander, also neuroscience faculty chair at Singularity University. Dr. David Bray, Director of the GeoTech Center, and Mr. George Zarkadakis, Atlantic Council nonresident senior fellow and digital lead at Willis Towers Watson, moderated the discussion.

Participants in the panel first explained the value that data trusts adds to the marred public debate around data regulation and, especially, how these mechanisms could help protect the democratic systems in which we live, while successfully reducing the growing ethical, social, and economic tensions inherent in a world of technology-induced changes. Following that logic, Mr. Zarkadakis argued that data trusts “turn the table on the status quo” and introduces two game-changing ideas. First, data trusts separate the collection of data from its processing. Second, data trusts create a new form of governance around data collection, where the governance – a group of trustees or another form of a centralized administrative body – has a responsibility towards the data owners, unlike what usually happens in regular corporations, which respond exclusively to their shareholders.

The funding dilemma

With data trusts it is essential to recognize and unravel the dilemmas inherent to how a data trust operates and is funded. This requires answering: who owns the data? Is a data transaction irrevocable or can the ‘original owner’ recover it? If the latter is true, how can a data trust help carry out longitudinal studies?

Complicating the equation, Mr. Ingrassia explained that data are “both an asset and a contingent liability,” – unlike common currencies, the more data one gathers, the more that owner will need to put in place the necessary mechanisms and technology to protect the privacy and rights related to that data.

The panel also discussed how, when protecting data privacy and rights, companies or data trusts face two main decisions: do they limit their investment to comply with the applicable legal regimes, or are they up to a higher moral standard? And, how to build a data trust so that it is large enough that it works, but simple enough so that users have the necessary clarity to be able to exert their rights?

“Let’s start with non-profits”

Panelists emphasized the importance of determining who are the real beneficiaries of a data trust. Panelists emphasized that protection of privacy must happen throughout the data collection process and not as an afterthought. As a way to avoid misuse or abuse of collected data, the panel agreed it would be best to decentralize that data as it is being collected and then provide the access keys “to those we really trust”. With this same logic, the experts suggested a launching a data trust pilot with a non-profit as a first step.

Dr. Chander advised on educating public participants both on the data sources employed and empowering public participants to be informed regarding choices associated with data-related transactions. Dr. Chander insisted on the idea of data literacy, especially highlighting the sensitivity of biometric data, which often not only includes information about the source, but also the genetic codes of its family.

Meeting the global challenge of COVID-19

In addition to the debate around transparency and ethical responsibility, the panel also discussed the value of data ownership as means to facilitate accountability and enable ethical management of that data. These principles become even more important with the shock of the ongoing pandemic, and the additional opportunities and challenges that it brings to the data industry.

When asked, Mr. Trenholm highlighted how the greatest business opportunity before the hit of COVID-19 came from monetization of data assets — while the top tier companies make large profits from the data they collect, Trenholm believes there is still a large number of entities, ranging from hospitals, medical systems, or cable networks, that have a “direct relationship with the costumer”, but lack the technology to process and successfully exploit the data gathered. He strongly believes there is opportunity to build a collaborative framework between these entities, add financial value to their data assets, and make them attractive in the market.

The panel, however, agreed that, since the start of COVID-19, urgent need has arisen to increase collaboration between the different jurisdictions and stakeholders regarding data. Through the shared use of data, the aim is to leverage the health crisis to create better detection and proactive responses to waves of this and other disease outbreaks, while also finding solutions to large-scale unemployment linked to the disruption caused by COVID-19.

Data, a public good

A common goal in the debate around data governance is the idea of capturing the value of data trusts and empowering innovation, while protecting their privacy. To achieve this, Mr. Zarkadakis suggested thinking of data as a common good, as opposed to the idea of an individual’s asset often impossible to both track and tailor. During the event, he envisioned a future where data trusts both deliver value to society and enable stakeholders to share the profits associated with a data trust activity equitably. As an example, the experts imagined data trusts helping to generate revenue to fund basic income to support workers in the gig economy.

The panel further called on society to self-organize and claim its part in the data economy; they invited governments, social entities, businesses and entrepreneurs to lead the change, decide together what they stand for, build a legal structure, and find the way to solve the problems associated with technology-induced changes in the world.

Next steps

Government budgets a shrinking, labor markets are turbulent, and concerns regarding privacy loss and excessive surveillance are growing. Liberal democracies will have to act soon, if they wish to prevail in the face of the growing, technology-induced pressures they are subject of – and piloting data trusts response a great first step to address these dilemmas.

Full Event:

GeoTech Cues

Jul 1, 2020

We can increase public participation in data and avoid surveillance states: Here is how

By David Bray

The world needs a collective effort to gather and share data to steer society and nations back to full operations, and to provide early indicators and warnings of future pandemics. Current methods for accessing data owned by public and private institutions and private citizens today are not able to guide COVID-19 recovery. The new data access frameworks in this initiative can succeed while strengthening societal welfare, prosperity, and peace around the world.

Civil Society Coronavirus

Practical steps societies can take to pilot data trusts

ONLINE EVENT – A live discussion on how societies can pilot Data Trusts for public good.

Cybersecurity Digital Policy Education Resilience

The post Digital crossroads: How to pilot data trusts for good appeared first on Atlantic Council.

Why a well-intended ‘Digital Platform Agency’ may not fit our global, networked world

Atlantic Council — Fri, 21 Aug 2020 16:30:54 +0000

Recently a proposal posted by authors linked with the Harvard Shorenstein Center on Media, Politics, and Public Policy surfaced that proposed the United States consider creating a Digital Platform Agency focused on regulating what digital platforms provide as services, do with data, and interact with customers.

The proposal that was posted is part of an analysis that concludes “Statutes and Regulatory Models Adopted for the Industrial Era are Insufficient for the Realities of the Internet Era”. Such a conclusion seems sound and appropriate for the challenges of the last five years that the U.S. and other countries have faced. However, the conclusion of creating a ‘Digital Platform Agency’ may not fit our global, networked world for three reasons:

This is a nation-state focused proposal, potentially appropriate for the 20th century when the world was not as networked as it is now, instead of a networked-focused one. Specifically, other nations, such as Estonia where one can become an e-Resident of Estonia without having been born or residing in Estonia or the European Union’s General Data Protection Regulation (GDPR) where the EU expects other countries respect the data rights and choices of members of the EU regardless of where they are located in the world, already have pivoted to a networked world. Any solution that U.S. or other countries pursue in this space must be network-centric instead of nation-state specific.
This is a government-led solution, which while not inherently inappropriately by itself, risks perpetuating challenges where solutions in this space are done *to* people instead of *with* people. By creating a government entity at the federal level, potentially removed from the local circumstances and different community needs of the U.S. public, this agency risks trying to find a one-size fits all for the different parts of the United States (much less the world). As readily apparent by the polarizing issues of the last five years, what communities in California want from digital platforms differ from what Texas want, both of which may differ from what New York wants, etc. In an era in which people were not connected as directly as they are now with their government — when news and information flowed at the essentially one-way speed of radio and newspapers — U.S. federal government agencies had the luxury of time to consider and work solutions that spanned the nation. Now, however, everyone is awash in a deluge of news, media, and information — and social media permits anyone (or any bot) to post news, media, and information of varying degrees of accuracy. This dramatic change in the media landscape calls into question any single-agency solution attempting to find a one-size fits all for the United States that does not involve regional and community differences.
A Digital Platform Agency would appear to be platform-centered solution to the problems discussed in the aforementioned proposal, focused on regulation of said platforms even though it would appear data is at the root of these challenges. To its credit, the proposal notes “enormous power of data control in the hands of a limited few tech platforms, is further harming innovation” yet by focusing on the platforms, the proposal might be missing the metaphorical forest for the trees. Data sets ultimately are what give the platforms revenue, influence, and power. If the public were more involved in data activities, and had a locus of choice involving their data, then regulation of platforms might not be necessary. It could be the authors of the proposal intend for the agency to focus on data and approach solutions from a data lens, however by calling for a Digital Platform Agency it seems that the focus on Platforms vs. improving better practices, norms, and choice around data is not an adequate fit. The proposal also notes the volumes of data that would require sensemaking to inform any policy action, yet glosses over this saying “artificial intelligence” would resolve this — omitting what would be the appropriate training data sets to apply machine learning or other AI techniques.

The new geopolitical realities of data and tech might make a nation-state approach to a ‘Digital Platform Agency’ not fit the changing world.

New digital crossroads

Ultimately, when considering the reality that “Statutes and Regulatory Models Adopted for the Industrial Era are Insufficient for the Realities of the Internet Era”, any solutions must consider where the metaphoric puck is going vs. where the puck is. Any solutions must also consider how to achieve shared partnerships, shared outcomes, distributed implementations — which includes five key questions:

Should each nation have its own Digital Platform Agency? Does this make sense in a connected global world?
Should the networked platforms be allowed to be free to do whatever they want, without some community or national oversight? Does laissez faire make sense either?
Is anyone empowering the people to have a voice? How do we work to find solutions different, diverse communities while also avoiding a “one-size fits all” approach either for regions of the United States or other parts of the world wanting to work together?
How do we advance Internet availability, affordability, and digital accessibility recognizing that most of these services, in a free market, are done by transnational, private sector companies? Challenges of Internet availability and affordability for humans persist in the United States and globally — as do challenges of Internet accessibility for those who need the Internet to be accessible for those with different visual or auditory needs. This must be addressed in tandem with any solution involving the public, industry, and governance of digital platforms.
How can we *do* technology and policies *with* people and communities, vs. to people and communities in a timely fashion? We are now in an era requiring create public involvement in activities that used to be done “behind a curtain” in industry or government, recognizing that public involvement needs to avoid exploitation by different lobbying groups attempts to apply pressure by selective mobilization of a large group. Such involve would need to be done recognizing challenges of both scale and timing as well for public involvement too.

One unclear question about the Digital Policy Agency proposal is how would such an entity interact with private sector entities regarding the challenges of misinformation and disinformation? These challenges are inherently linked to the flows of finance and influence tied to media and politics as highlighted in this Financial Times article. Right now there is too much money to be made and political advantages afforded to misinformation online — and those who strive to point it out and counter misinformation have their voices lost to the more pervasive sentiments of anger, fear, and division. Effectively countering misinformation and disinformation requires taking a systemic look at shared partnerships, shared outcomes, distributed implementations tied to:

Incentivizing a large community to work together and in so doing, create a set of shared desired outcomes and goals tackling misinformation and disinformation. This includes producing signals to which global markets will respond.
Ensuring that the diverse interests are incorporated into digital products, services, and most importantly data. Development of such products, services, and data activities also must be distributed and engage the public.

We also need to recognize the challenges associated with an increasing number of automated bots, algorithms, and other digital “things” that can appear to be human, influence humans, and trigger human actions. Approximately 2014 marked the year that people became the minority for Internet-based traffic (41% people vs. 59% bots).

GeoTech Cues

Jul 1, 2020

We can increase public participation in data and avoid surveillance states: Here is how

By David Bray

Civil Society Coronavirus

Pragmatic next steps

Perhaps a better first step to address these issues is to start listening and learning tours with different parts of the United States and other countries as to what people want when it comes from digital platforms, digital choice, data rights, and data obligations.

A second, parallel step, would be to require existing digital platforms to clearly post their methods and ways the public can see how the platform’s services, algorithms, and data collection activities operate at a level to be sufficiently informed and exercise human choice. Either the government or a non-profit could assemble all these methods in one place — similar to the AnnualFreeCreditReport.com website that allows the public to “one stop shop” their credit reports from TransUnion, Experian, and Equifax — as an easy to view, easy to use service for the public.

Lastly a third step would be to pilot Data Trusts (also known as Data Commons or Data Cooperatives) with the public focused specifically on digital platform-related activities and positive social outcomes. A specific initiative would establish a Data Trust for Good to provide regional information associated with platform-related services and activities. The information contained within the trust would inform, for example, whether the services were increasing the polarization and distrust in societies or helping to inform societies and promote a net positive good? The pilot project would involve multiple stakeholders seeking to demonstrate a cross-sector, cross-country approach to creating and governing a Data Trust in partnership with the platforms themselves in a way that did not result in surveillance states nor less than agile, top-down solutions.

We must find ways in the United States and other open societies to do data *with* people instead of *to* people. The proposal that the authors linked with the Harvard Shorenstein Center on Media, Politics, and Public Policy proposed should be applauded for its focus, even if the target might need to be adjusted. Hopefully some of the suggestions here might better vector the cursor-on-target to address the geopolitical realities of our global, networked era.

Be Benevolent,
Be Bold, and
Be Brave in our challenging times.

We all can lead. Positive “change agents” — individuals willing to work across sectors and nations to help illuminate better ways through the shared turbulence we are experiencing — are needed now more than ever.

The post Why a well-intended ‘Digital Platform Agency’ may not fit our global, networked world appeared first on Atlantic Council.

Potential trouble ahead: predictions from 2010 now are real in 2020

David Bray — Thu, 20 Aug 2020 02:15:00 +0000

In 2010, the Dr. David Bray provided an unclassified briefing to the U.S. national security and defense communities on “Why Future Policy Leaders Will Need to Know Science, Technology, Global Business, and National Security”. Now, 10 years later, it is worth revisiting those slides – especially in light that those slides raised concerns about the use of small commercial drones and do-it-yourself drones back then and recently we have seen elevated concerns about what these could do to commercial airplanes in flight.

Below are images from the original 2010 “Trouble Ahead” set of predictions.

The concerns raised in 2010 opened with:

Worlds are colliding: Science + Technology + Business + National Security

Looking at the last decade, as well as current projected trends, these world continue to collide. The reason why the GeoTech Center exists is to explore how to ensure that data and tech efforts benefit people, prosperity, and peace and ideally do not harm.

The concerns and predictions continue with:

Science and technology advances + Greater global information sharing
= Cheaper commercial products + Challenges with maintaining national security

Which also proves to have been true for the last decade and what seems to be continued projected trends as well. The good news is data and technologies are becoming democratized and widespread. Yet this is also bad news because now such capabilities can be used for purposes that are less than benevolent in the world. This underscores even more the mission of the GeoTech Center to encourage what we call: #GoodTechChoices

The slides and predictions from 2010 continue with predictions for the next five years, to include:

Consumers increasingly will have their space-time movements tracked, and consumers will love the “ease” of the accessing the “free” things they get in return, not realizing privacy loss

Which also appears to have matched what happened, as well as recognizing that about the middle of the last decade there was a bit of a “techlash” where some become concerned about privacy loss and did not want to become a surveillance state. The question for 2020, especially given the current COVID-19 reality where so many people are working online, is whether people who are working remotely recognize the potential privacy concerns of such work? Do remote works prefer ease and free at the loss of agency over personal data?

At the GeoTech Center, we firmly believe that the United States and other open societies face data coordination challenges. This is why Data Trusts (also known as Data Cooperatives) need to be pursued. Without these we won’t find a way to involve people in data – to “do data with people” instead of to people. We must find a way for great public participation with the choices associated with data at community and larger population scales.

The post Potential trouble ahead: predictions from 2010 now are real in 2020 appeared first on Atlantic Council.

Event recap | A fireside chat about the future of space

Henry Westerman — Wed, 19 Aug 2020 06:35:52 +0000

On Wednesday, July 29, the Atlantic Council’s GeoTech Center hosted Ms. Teresa Carlson, Vice President at AWS’s Worldwide Public Sector, and United States Representative Will Hurd of the 23rd District of Texas. Congressman Hurd spoke about his mission to make space relevant to his constituents, as the commercial space industry plays an increasingly important role in his community and the nation. With thousands of jobs created in Texas and nationwide by companies such as Blue Origin and SpaceX, Congressman Hurd emphasized that it’s time for governments to step out of the way, to ensure that outer space can become a secure and accessible arena for visionaries and pioneers. Ms. Carlson commented on the productive potential of private-public partnerships in space commercialization, as well as on the many innovative enterprises in the market and the need to invigorate the pipeline of talent feeding the scientific community.

Watch the video above to hear Representative Hurd’s full commentary on the future of space.

Henry Westerman joins the GeoTech Center as a Project Assistant, having served as an intern with the team this past summer. He is a member of the Class of 2021 in the Georgetown University School of Foreign Service studying Science, Technology, and International Affairs with a concentration in Security. Henry has previously interned with the Library of Congress Digital Strategy team, and at the Department of State Office of Science and Technology Cooperation. Henry’s primary academic interests include geospatial analysis, emerging technologies, and digital sensemaking; he also dabbles in Spanish and Philosophy.

The post Event recap | A fireside chat about the future of space appeared first on Atlantic Council.

How to overcome Ukraine’s IT industry brain drain

Bill Brown — Mon, 03 Aug 2020 21:36:26 +0000

Google Ukraine’s CEO sees great growth ahead for Ukraine’s booming tech sector, but says this potential is being diminished because software companies still tend to leave the country in search of more favorable conditions in the West.

“Ukraine grows faster than many countries in Eastern Europe,” Google’s County Director Dmytro Sholomko, 43, recently told the Kyiv Post. However, he also notes that the market remains undersized and needs more small tech companies that are willing and able to stay in the country.

“There is a rule here,” Sholomko says. “If you want to become a ‘unicorn’ or just a big company, you will have to move (abroad).” A unicorn is a startup valued at USD 1 billion. He cites Grammarly, founded by Ukrainians in Ukraine, but now headquartered in San Francisco.

Sholomko believes weak copyright laws, overbearing bureaucracy, and corruption are the key factors pushing tech companies to leave Ukraine and establish their legal entities in the US, EU or elsewhere.

While these opinions are uncontroversial, not all Ukrainian software companies seek to be unicorns, and not all IT workers want to leave Ukraine. At least half of the young tech professionals I polled earlier this year actually want to stay.

“I agree that if you want to become a unicorn you have to move. And the best place to move to is the US,” says Andrew Mukha, a young Ukrainian who is co-founder and CEO of Dnipro-based IT company Flyaps. The US is the biggest market in the world and the best place to find investors, while English is easier to learn than Chinese, Japanese, or German, he says. However, Mukha’s personal experience has taught him that the allure doesn’t always match the reality.

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That experience is one reason why he chooses to stay in the rough-edged Ukrainian city of Dnipro, a six-hour train ride southeast of Kyiv. In the Soviet era Dnipro, then called Dnipropetrovsk, was a closed city and home to the USSR’s missile and rocket industry. Today’s Dnipro is a hub for Ukrainian IT companies working in the outsourcing or “off-shore” market.

Off-shore companies do contract work including software development, games and other apps, automation, accounting, customer service, and website design for mostly US and EU companies, saving their clients the cost of doing it in-house. The price is low by Western standards, but the salaries are high for Ukraine. The national average salary in Ukraine is currently around USD 350 to USD 450 a month. Junior software engineers can earn around USD 600 a month or more. Senior software engineers average USD 3000 to USD 4000 a month. It’s not unusual to meet Ukrainian senior developers in their 20s or early 30s.

Mukha started in rocket science before transitioning to IT. He studied rocket engineering at Dnipro National University. As a student, he worked in a local plant producing Satan intercontinental ballistic missiles, originally designed as a nuclear-armed weapon.

Mukha says he initially expected to continue working at the missile plant after university. But lingering Soviet-style inefficiency, low salaries, and lack of business savvy were “a nightmare,” he says. Instead, he chose to move into the growing IT market. It was new and dynamic, with salaries far higher than those on offer at the missile plant.

Mukha’s career trajectory is typical of Ukraine’s IT sector. In his third year of university, he began to study software engineering before landing a job as a software tester after graduation. In 2013, Mukha, whose nickname is “Fly”, and co-worker Alex Arhipenko, nicknamed “Aps”, founded Flyaps.

Mukha lived in New York for six months in 2018 and has many friends who have moved there. The practicalities of life in the US have not always lived up to their dreams, he says. “The people who want to live abroad are often going by what they see in movies and TV shows. They have never tried living in another country. They don’t know the pains that every foreigner experiences,” says Mukha. “You must start to build your life over again.”

Based on his own experience, Mukha says Ukrainians abroad tend to live in expat communities while working as hard as they would at home with just as little leisure time. “It is all the same as here, but with better roads,” he quips.

In my role as an English-language teacher to IT professionals in Dnipro, I polled 28 students in February 2020 on their career plans. Most were in their twenties or thirties and part of the demographic that is typically seen as most eager to leave Ukraine. However, the reality is less straightforward. I found that while they all want better lives, they are divided on whether to stay in Ukraine or go. And not all of those who want to leave plan to go permanently.

The young IT professionals I spoke to were more or less evenly split on whether to stay in Ukraine or leave the country. Around 40% said they want to move to an EU country or the US, while the same percentage said they would prefer to remain in Ukraine.

The other 18.5% were open to working abroad, but not on a long-term basis. As one student explained, “I don’t mind living abroad as an experience, but I want to remain connected to my country. I see my career and my business developing here. I want Ukraine to join the EU and stay away from Russia. This is the key for our future.”

Less than a quarter of this sample intend to stay in Dnipro itself, despite the convenience and economies the city is able to offer. For those who want to stay in Ukraine, this generally means moving to Kyiv and joining the largest IT cluster in the country.

My students in Dnipro expressed opinions that are often echoed throughout the Ukrainian IT sector. For many of the country’s IT professionals, the appeal of the EU is not merely a matter of higher salaries. Instead, they cite better living standards, greater protection of individual rights, and a more comfortable day-to-day environment among the key factors that attract them.

Eurasia Center events

After Vilnius: What’s next on Ukraine’s path to NATO?

Eastern Europe NATO Security & Defense Ukraine

There is also considerable uneasiness within the Ukrainian IT industry over the legal status of employees. The IT sector has mushroomed over the past decade to become one of the engines driving the Ukrainian economy, but a significant percentage of Ukraine’s approximately 200,000 IT professionals operate as private entrepreneurs in order to benefit from preferential tax rates.

This approach is the subject of considerable ongoing public debate, with many industry insiders concerned that Ukrainian government efforts to regulate the sector could eventually undermine its success. At present, the industry is internationally competitive and able to offer generous packages to staff. The fear is that greater government involvement would lead to smothering bureaucracy and creeping corruption.

Brain drain clearly represents a significant challenge for the Ukrainian IT sector, but it is far from insurmountable. Many young IT professionals are attracted to the prospect of working abroad, but others see their futures in Ukraine. In order to prevent the loss of this emerging generation, the Ukrainian authorities must strive to match the social conditions on offer in the EU.

The IT industry itself is already on the right track and is currently able to provide both career opportunities and attractive salaries. The government’s main task is to bring the country’s growing army of IT professionals out of the legal shadows without slashing salaries via taxation or placing an incapacitating bureaucratic burden on the industry as a whole.

Ukraine’s IT sector is a major strategic asset and a national calling card that is fueling economic growth and transforming international perceptions of the country. The future of the sector now depends on creating a professional climate that will convince talented young Ukrainian IT professionals to stay.

Bill Brown currently teaches English in Kyiv at the Bill Brown Agency. He was previously managing editor of the Takoma Voice newspaper (2012-2016).

The post David Bray on #LeadersWhoCare appeared first on Atlantic Council.

Event recap | Identifying and fixing disruptions to the global food system

Henry Westerman — Thu, 23 Jul 2020 10:00:55 +0000

On Thursday, July 16, 2020, the GeoTech Center a discussion about food security and creating a disruption-proof agricultural industry. The panel, moderated by Dr. David Bray, Director of the Atlantic Council’s GeoTech Center, considered the current weaknesses in the global food landscape, both within developing countries and more developed economies as well as what could be done to fix such issues. Amidst the crisis of COVID-19, which has disrupted so many aspects of the global economy, some of the glaring vulnerabilities of the food industry and agricultural trading networks have come to light and threatened to starve certain regions of the world and segments of the population of vital sustenance. In the face of this dire threat, the panelists highlighted ways that technology can be applied, even at the individual level to achieve greater connectivity, resilience, and value production for farmers and consumers alike.

The panel of experts included Mr. Derry Goberdhansingh, CEO of Harper Paige LLC, Mr. Andrew Mack, Founder and CEO of Agromovil, Ms. Daniella Taveau, Principal of Bold Text Strategies, and Ms. Sara-Jayne Terp, Senior Advisor to the GeoTech Center. Each brought to the discussion knowledge of the food and agriculture industry’s vulnerabilities and experience working to create a more equitable, resilient, and data-informed agricultural economy.

The panel was quick to point out some of the weak links in the global food supply chain. Though some of the flaws have existed for generations, the COVID-19 pandemic has exposed them acutely, particularly in instances where its disruption of international commerce or product flows threatened certain areas with starvation. Market visibility remains a major problem for most small-scale farmers in both developing and developed economies. Many farmers, particularly in hard to reach areas or in regions recovering from conflict, are cut off from access global markets. When their production exceeds the demand of local communities, their food goes to waste, and they struggle to capture the full value of their goods with such a limited body of consumers. In some cases, the lack of visibility is compounded by a lack of infrastructure, both in terms of the roads for transporting products and the connectivity linking farmers with distant consumers.

Accordingly, small farmers struggle to compete with massive, corporate-controlled agricultural systems, which readily buy out competitors and block access to markets. These large-scale farms weaken the resiliency of nearby communities by selling non-consumable products to outside buyers rather than producing commodities necessary for the community’s survival. And, when international supply chains are disrupted, these communities are doubly struck: small farmers cannot find sufficient demand for their products, and other communities cannot access distant markets for food that could have been produced locally.

Each of the panelists has devoted their careers to pursuing different technologies to address the food industry’s vulnerabilities and allow better use of data both by the individuals and in systems. Andrew Mack’s company, Agromovil, works to address the lack of visibility of small farmers in global markets by providing an online marketplace to connect farmers directly to consumers with a need for their goods. Agromovil allows farmers to advertise their products and their locations, facilitating the purchase and transport of these goods. The other panelists are addressing longer-term issues that plague the global food economy. The panel emphasized that leveraging the troves of data available on farming best practices and agricultural trade will be key to creating a more just and resilient food system. more equitable and transparent sharing of food-related data between farmers of all sizes, governments, and organizations alike is essential to securing the future that the panelists envision.

The post Event recap | Identifying and fixing disruptions to the global food system appeared first on Atlantic Council.

Younus in his podcast “Pakistonomy,” episode 26: Fueling Pakistan’s startup ecosystem

Atlantic Council — Mon, 20 Jul 2020 20:15:49 +0000

The post Younus in his podcast “Pakistonomy,” episode 26: Fueling Pakistan’s startup ecosystem appeared first on Atlantic Council.

Welcoming our GeoTech Fellows

David Bray — Thu, 16 Jul 2020 10:00:31 +0000

Prime Minister Malcolm Turnbull

GeoTech Fellows are #ChangeAgents providing expertise and tackling the most pressing problems in technology and data. They afford the GeoTech Center access and opportunities to collaborate with the private, public, nonprofit, and academic sectors across the world to champion positive paths toward prosperity. We are honored by the support of our GeoTech Fellows and excited to continue our work with them. Here, we recognize a few of them and the vital role they play at the GeoTech Center.

Several of our Fellows will be crucial for advancing the GeoTech Center’s international collaborations. Former Prime Minister of Australia Malcolm Turnbull joins the Atlantic Council GeoTech Center as a Distinguished Fellow to inform our work on how technology and data affect geopolitics. Lord Tim Clement-Jones, Co-Chairman of the All-Party Parliamentary Group on Artificial Intelligence, will support the GeoTech Center’s research on ethical AI. Dr. Dame Wendy Hall, Regius Professor of Computer Science and the Executive Director of the Web Science Institute at the University of Southampton, is another key figure on AI. Widely recognized as one of the founders of the Internet, she brings to the GeoTech Center significant experience with AI in the United Kingdom.

Dame Wendy Hall, PhD

From the United States, we have gathered Fellows across a wide range of backgrounds to support the GeoTech Center’s broad vision. Several will provide key defense perspectives. Dr. Joseph T. Bonivel Jr. contributes expertise in areas related to the Pentagon. He was recently awarded “Technologist of the Year” by the Southern New England Association of Technical Professionals and was profiled by Black Enterprise Magazine as one of its 100 Modern Men. Amy Webb, a quantitative futurist and award-wining author, brings strategic insights from her experience advising military leaders. She is a professor of strategic foresight at the New York University Stern School of Business and the Founder of the Future Today Institute.

GeoTech Fellows from Silicon Valley stand at the forefront of technology and innovation. Entrepreneur, writer, and AI cybersecurity startup founder Charles Jennings brings a wealth of knowledge from his private sector perspective. Similarly, Paul Saffo offers insight into AI and ways that Silicon Valley can better collaborate based on his work at Stanford University and Singularity University.

The GeoTech Center is also proud to host eminent Fellows from the academic sphere. Dr. Pari Esfandiari provides expertise in AI, the Internet of things, blockchain, clean-tech, data centers, and 5G, as well empowering women through sustainable development. Bobbie Stempfley, Director of Carnegie Mellon University’s CERT Division in the Software Engineering Institute, comes to the GeoTech Center with a wealth of knowledge on cybersecurity.

Joseph T. Bonivel Jr., PhD

These are only a few of the many GeoTech Fellows. We are continuing to onboard additional Fellows who will be featured on our website and look forward to showcasing a growing network of critical perspectives. Our Fellows, from the private, public, nonprofit, and academic sectors, help the GeoTech Center build bridges for civic innovation—needed now more than ever.

The GeoTech Center strives to advance and promote people, prosperity, and peace, an effort that will require bringing together thought leaders and decision makers willing to share their experiences, ask critical questions, and collaborate. Fellows, therefore, will not only expand the GeoTech Center’s network, but also encourage and lead the next generation of #ChangeAgents in the face of resistance to change. Some of our Fellows are jointly appointed with other Centers and Programs at the Atlantic Council, giving the GeoTech Center and its Fellows the opportunity to collaborate between regional and functional initiatives.

The GeoTech Center connects leaders from all over the world through videos, events, blog posts, writing, and round table discussions. We capture their ideas and passions, connect them with other like-minded organizations and leaders, publish reports and analyses, provide policy recommendations, and engage across multiple platforms to continue driving change.

Pari Esfandiari, PhD

Action Council Member

GeoTech Center

Cybersecurity National Security

The post Welcoming our GeoTech Fellows appeared first on Atlantic Council.

Research and development still key to competitiveness: But for whom?

Robert A. Manning, David Bray — Fri, 03 Jul 2020 05:14:55 +0000

“The best way to predict the future is to invent it.”

Quote ascribed to Alan Kay

As the 4^th of July nears and the United States prepares to celebrate Independence Day, it is worth reflecting that the year 2020 and the decade ahead must be spurred on by a new “Sputnik moment” for the country, this time inspired by the swift growth of China’s technological capability over the past decade and its overt, all-out push to surpass the United States as a technological and geopolitical leader. At present, there is too much national posturing about China and too little competition with it. No sense of urgency has yet rippled through the country, as one did in the late 1950s.

The United States’ innovative edge has been ebbing for several years now. In total yearly research and development (R&D) spending for 2018 (the most recently tallied year), the United States still narrowly led China at $582 billion to $554 billion. However, there are vast differences in growth: China’s R&D spending has been growing by about 17% annually since 2000, while the United States’ annual R&D growth has been stuck at about 4%. US federal government R&D funding has shrunk steadily both as a percentage of GDP and in relation to private sector R&D, which now accounts for nearly 70% of all R&D spending. Notably, only 17% of all US R&D spending is for basic research.

However, in a world connected by the Internet, can national spending on R&D still translate into national competitive advantage? For societies that are closed or more restrictive of digital information flows, the answer might be yes, due to the facts that intellectual property is less likely to be lost and outside actors are less able to emulate innovations. For open societies, it is unclear, though, especially when companies operate trans-nationally and when global venture capitalists can simply buy innovative and their intellectual property.

Further, the type of research nations fund, as well as the quantity, is notable. Outside of the Defense Advanced Research Projects Agency (DARPA), the long-term mindset that has historically been key to US innovation—from the Manhattan Project to computer chips, the Internet, and GPS—is less common. Some US companies are still haunted by the ghosts of historical R&D efforts that produced great innovation, like Xerox’s Palo Alto Research Center, which helped develop the modern graphical user interface, mouse-based computer interactions, object-oriented programming, laser printing, Ethernet networking, and large-scale integration for semiconductors but did not profitably commercialize its inventions.

Industry is mostly focused on the development side of R&D, leaving the basic research required for developing novel products to others, either in academia or government research labs. With US federal government R&D spending on basic research only at 32% of total federal R&D spending, breakthroughs in fields other those already being commercialized may occur elsewhere in the world, or US researchers may lured outside of the country if foreign basic research creates novel fields of study that remain unfunded within the United States.

All told, it should be no surprise that at the center of US-China competition is a battle over technology. The world is in the midst of multiple technological revolutions – digital synergy of the Internet of Things, the gathering of massive amounts of data, advances in machine learning, developments in additive manufacturing and 3-D printing, production of new composite materials, commercialization of space and small satellites, and further advances in bioengineering and personalized medicine. These revolutions will increasingly define geopolitical standing. The question is whether these advances will define national strength or something different.

For decades, tech innovation has been the secret sauce in US economic prosperity and global predominance. Much of it –including the Manhattan Project, Project Corona and satellite reconnaissance, the semiconductors that spawned Silicon Valley, TCP/IP and the Internet, and GPS and geolocation services – grew from federal R&D funding for basic research.

However, all such game-changing technologies took years of and multiple “learning through experimentation” trials – otherwise known as learning from failure – and were the result of basic research funding and the strategic patience of US federal R&D spending. Now only 17% of US R&D spending is in basic research, and 40% of that is federally funded. Federal R&D spending has fallen to just over 0.6 % of GDP, the lowest level since the Sputnik era, and far below the peak period it inspired, which reached above 1.8%. The good news is that private sector R&D is booming, reaching nearly 70% of the US total spending in 2018. Still though, the bulk of private R&D spending (78%) is on applied development instead of basic research—in other words, aimed at commercial success in a two- to three-year timeframe. Business, necessarily focused on the bottom line, fears that basic research breakthroughs might be taken advantage of by competitors.

Pre-competitive basic research is not necessarily efficient. It often takes many years to yield results – five years in the case of the Manhattan Project, urgent as it was. Federal and university R&D is best positioned to support basic research. A US penchant for instant gratification, or more specifically, Congressional impatience, has tilted federal R&D spending toward funding the “doable.” Though spending on basic research is at an all-time high, as a portion of GDP it has fallen to levels unseen since 1962 (notably, only about 5.5% of Chinese R&D spending goes to basic research in 2018). Outside of DARPA, which has been a key driver of US innovation in the past, it has become more difficult for scientists and engineers working on non-military research with abstract concepts, often called “blue sky research,” to obtain funding.

Part of this might also be a consequence of the Internet itself. Specifically, the Internet now allows rapid dissemination of ideas and insights globally. This includes scientific papers as well as direct emails, chats, and videos with researchers. Ideas are no longer as geographically bounded as in the past.

Similarly, the Internet has accelerated the global diffusion of new technologies. It took more than 25 years for 50% of US households to adopt the washing machine. Personal computers took about 18 years to be adopted by 50% of households. Cell phones took about 10 years. Tablet devices took about 6 years. On one hand, this means commercialization, if successful, can go global much faster than ever before. On the other hand, with the rapid diffusion of new technologies, innovators in other countries can remix any new device or development and come up with something better fast. This means any long-term R&D effort risks being out of date by the time it is done. The lifespan of the competitive advantage afforded to a nation or company by investing in blue sky research seems to be getting shorter and shorter.

Market dynamics also apply. For the last decade, it has become too expensive to commercially research and develop new semiconductors in the United States, partly because of the United States’ high standard of living and the competitiveness of the US dollar globally. There are cheaper places to do the R&D, often subsidized by governments hoping to attract research and create jobs in their own nations.

The United States faces hard questions regarding its desire for open and free markets, but the reality is that such markets may encourage the offshoring of research away from the United States, either for expense reasons or because research institutions cannot attract foreign researchers to the United States if immigration costs and policy prevent it.

Lastly, in open societies, it is unclear whether national spending translates into competitive advantage. Employees who develop breakthrough ideas can simply be offered higher salaries or better stock options to work somewhere else. Yes, intellectual property laws exist, but with the right lab setup and funding, star researchers can take their ideas one level higher, working around any strong intellectual property protections. This also may explain why companies focus so much more on applied development than on basic research. However, there is growing bipartisan understanding of these issues, and pending legislation to provide a range of incentives for US firms to reshore R&D and production domestically offers new promise.

Policy implications

To maintain independence as a technology leader and regain the competitive momentum that has made the United States a prolific innovator, policymakers need to ask whether they are playing the right game for the 21^st century: that of increasing competitiveness through R&D spending. From a strategic perspective, while R&D spending does still provide advantages to certain players, it is less clear how those advantages benefit open nations in an era of globally connected societies and companies.

If the United States is handicapping itself and its companies in its R&D strategy, then policy makers must consider changing how they play the game.

Action points

Identify new approaches to incentivizing and funding the innovation that creates jobs, increases profits, and uplifts people and communities.
Identify new ways of linking basic research done in the United States to “first mover” advantages created by applied development. Potential action includes funding to lure overseas R&D back to the United States, particularly in certain industries like semiconductor fabrication and telecoms hardware manufacturing.
Develop research alliances across nations that also value open societies, creating a political bloc for R&D funding with shared values, focus, and professionalism for its research community members.
Incentivize US students at the high school and college levels to pursue science and engineering degrees.

During the Cold War, the United States scouted for, recruited, and supported talent across the nation – including from both rural areas and inner cities. Now, in an era of budget cuts and historical sequestration, that mandate seems adrift. A growing number of science and engineering PhDs are foreign students, led by China and India – now approaching half of STEM PhDs. To a degree, this is simply a product of the numbers, as both China and India have approximately four times as many people as the United States. The United States needs to identify and attract talent both internally and from other nations if it is to address the raw population gap and secure a more innovative future for the United States and all nations that stand for openness, freedom, and choice.

It is worth reflecting on the second part of the Alan Kay quote that began this paper:

“The best way to predict the future is to invent it. Really smart people with reasonable funding can do just about anything that doesn’t violate too many of Newton’s Laws!“

Are the US government and industry putting sufficient funding into the R&D that will invent the future?

Note: the figures on R&D spending used for this article generally reflect 2018 spending, the most recent completely available year, and are inflation adjusted for current PPP USD. Other estimates for funding can vary significantly due to different definitions in spending and different base years, but generally reflect the same trends.

The post Research and development still key to competitiveness: But for whom? appeared first on Atlantic Council.

We can increase public participation in data and avoid surveillance states: Here is how

David Bray — Wed, 01 Jul 2020 21:34:14 +0000

Encouraging the use of “Data Trusts for Good” could be the most effective way to overcome the lack of sufficient data to tackle the COVID-19 crisis, without creating a surveillance state in the process. Data Trusts can inform COVID-19 recovery activities of all types and be used to train AI and algorithms in a way that ensures proprietary and personal data is protected and deleted after a certain point. Working alongside both industry and government partners, the Atlantic Council can help develop, implement, and assess COVID-19 Data Trusts.

A specific initiative would establish a Data Trust for Good to provide regional information about data associated with a detailed COVID-19 recovery plan. The information contained within the trust would inform, for example, where it is safe to return to work, when facilities have been cleaned, whether there effective safety protocols in place, or even where public transportation is working and where it needs to be improved.

In collaboration with partners in the selected region of importance, the project would seek to demonstrate a cross-sector, cross-country approach to creating and governing a Data Trust to help workers return to their jobs safely amid COVID-19.

Leveraging “Data Trust for Good” to combat COVID-19 comprises three key tasks:

First, we must transparently develop frameworks for data access, including both data trusts and other contractual agreements, that will make the needed data available for defined COVID-19 recovery initiatives. The frameworks—data trusts and contracts—will also specify standards for the ethical use of the data and the how data governance will be formulated. The operationalization of the data access will have both a normal mode during which COVID-19 recovery continues to improve, and a mode when exigent circumstances require special cooperation and data access among public and private institutions in the region.

Second, we must collect data on how well access to data is performing in aiding the region’s recovery, and how fully users are adhering to the ethical standards and governance agreements. To maintain public trust, the system’s performance must be audited, and standards for this evaluation must be developed. Professional auditing organizations will help formulate this portion of the initiative.

Third, we must educate all public and private institutions and all people on the benefits and risks that result from the data trusts and other data sharing. These benefits comprise the health and economic recovery, and the independent assessment that privacy, ethics, and data ownership standards are adhered to. To establish confidence in the sustainability of this approach, we must evaluate risks that appear during implementation and alternative solutions that should be considered.

Onwards and upwards together.

Transcript Jun 23, 2021

Brian Deese on Biden’s vision for ‘a twenty-first-century American industrial strategy’

By Atlantic Council

National Economic Council Director Brian Deese spoke about how the Biden administration can strengthen US economic recovery by working with the private sector and global allies.

Economy & Business Future of Work

GeoTech Cues Aug 10, 2021

Contextualizing COVID-19 and its implications for the future of work

By Matthew Gavieta

Digital Policy Future of Work

Blog Post Jul 27, 2021

The time for US immigration reform is now

By Jeff Goldstein

Future of Work Macroeconomics

New technologies and data are tools. It is upon the choices we make, both as individuals and as communities, that ensure that they are used as a force for good in the world.

Dr. David Bray, Director, GeoTech Center

The post We can increase public participation in data and avoid surveillance states: Here is how appeared first on Atlantic Council.

Central bank digital currency can contribute to financial inclusion but cannot solve its root causes

Nikhil Raghuveera — Wed, 10 Jun 2020 22:01:03 +0000

The Atlantic Council GeoTech Center Central Bank Digital Currency Series seeks to provide public and private sector leaders insight into how Central Bank Digital Currencies (CBDCs) will affect nations, economies, and societies. The previous Part I provides an overview of CBDCs and how they will transform digital payments and geopolitics.

In Part II of this series, the GeoTech Center examines how CBDCs can contribute to financial inclusion in a post-COVID-19 world. The analysis concludes with a call for nations that plan to launch a retail CBDC to establish a national right to a CBDC account that is inclusive to all residents.

CBDCs can usher in new monetary systems that are more inclusive for people who have been historically excluded and marginalized. If CBDCs are to contribute to financial inclusion in the post-COVID-19 world, leaders in the public, private, and nonprofit sectors must:

understand how CBDCs can address the needs of unbanked and underbanked people;
identify and address the root causes of financial exclusion that cannot be solved by CBDCs; and
establish principles for an inclusive CBDC design that is centered on the financial needs of people rather than institutions.

Introduction

Despite a burgeoning technology industry and the emergence of financial technology (fintech) companies, financial exclusion remains a persistent problem. 1.7 billion people do not have access to a bank account and are unable to tap into financial institutions to borrow, save, or invest. This forces them to turn to alternative institutions that charge high fees and profit off of financial exclusion. The result: the unbanked with the greatest need are “trapped in a cycle of poverty” and debt without affordable financial products.

COVID-19 has only exacerbated this problem, with over 3 billion people seeing their workplace fully or partially close. In response, governments worldwide have directed stimulus checks/transfers to households and micro, small, and medium-sized enterprises (MSMEs). To get resources to those in need, governments turned to traditional financial institutions and fintech companies. Additionally, people worldwide are being encouraged to use online financial products to maintain social distancing. In the post-COVID-19 world, these practices are likely to carry on. Bangko Sentral ng Pilipinas (Philippine Central Bank) Governor Benjamin Diokno said it best: “Our aspirations for a more inclusive and prosperous post-COVID world necessitate putting in place the critical pillars of a digital economy, including robust digital infrastructure, digital skills, e-government, digital ID, and an enabling legal and regulatory framework.”

Retail CBDC has been highlighted by international and national institutions, like the International Monetary Fund and central banks, as a tool to promote an inclusive digital economy. The Atlantic Council has also made the case for digitizing the dollar in the age of COVID-19. In a retail CBDC payments system, a central bank would issue a national digital currency directly to people who hold accounts with the central bank. The analysis examines how CBDCs can promote financial inclusion and their limitations in a post-COVID-19 world, concluding with a call for countries that do decide to launch a CBDC to make retail CBDC accounts a national right. While an assortment of initiatives is needed (e.g. easy to access IDs, new financial products, Internet expansion), CBDCs can contribute to countries’ efforts to create a new financial system that centers the needs of people.

The rise of central bank digital currencies

Access the tracker of new digital currency projects from the Atlantic Council’s Global Business and Economics Program and the Harvard University Belfer Center.

Financial inclusion and CBDCs

In the current fiat currency system, individuals generally gain access to credit and the financial system through checking and savings accounts housed within traditional financial institutions. Not everyone, however, is able to acquire a bank account. In emerging markets, financial institutions may not be easily accessible or robust, leaving people to rely on cash and barter systems. As a result, people who need to borrow money must turn to collateralized loans or nontraditional institutions like microfinance organizations and cooperatives. In countries with more developed financial institutions, opening a bank account may involve hurdles including formal identification, a minimum deposit and balance, and access to the Internet or a local bank branch. As the financial ecosystem becomes increasingly digital, those in both developed and emerging markets who unable to obtain bank accounts will be left further behind.

Of the people who do have bank accounts, many are underbanked and unable to access the full range of financial services, such as loans, mortgages, and brokerage accounts. In the United States, for example, about 14 million people are unbanked, and 50 million are underbanked. Some prominent causes of financial exclusion across the world are lack of wealth, limited financial education, prior defaults, incarceration, and immigration status. Much of this is attributable to a history of racism, gender-based discrimination, classism, colonialism, authoritarianism, religious persecution, and other forms of oppression. The resulting loss of wealth and “credit risk” stemming from historical violence, along with continued marginalization, further restricts many people’s access to the financial system, as is the case with Black communities in the United States, women in Myanmar, and refugees in Latin America. Financial institutions in less robust markets may also simply not be able to take on the credit risk of people who have no credit history.

Retail CBDCs can help remake the financial system into one that is more accessible to the unbanked and underbanked. Retail CBDCs are issued by a central bank directly to people without going through traditional bank accounts. In this system, individuals have CBDC accounts directly on the central bank core ledger. They then access their money and transact through a digital wallet application that is linked to the CBDC account through Application Program Interfaces (APIs). CBDCs would replace or provide an alternative to fiat cash, potentially addressing a number of current problems facing unbanked and underbanked communities. Retail CBDCs can do this in two ways: by establishing a more inclusive digital payments ecosystem and creating financial data identities.

Transforming the payments ecosystem

The management of fiat currency is expensive, particularly in developing countries, due to the costs of distribution, security, safety, and reliance on bank branches. A digital payments system would reduce costs while also removing the dangers of holding cash and increasing speed of access. This would make it easier and safer for women and people in isolated and rural areas to exchange money. Many fintech solutions, however, require the use of a bank account or physical agent. Retail CBDCs can bring people into a digital payments ecosystem without private intermediaries. Retail CBDC accounts would also incorporate mobile wallets, giving people the ability to make low-cost mobile payments.

Furthermore, CBDCs can foster interoperability across payment systems and promote collaboration between fintech companies and central banks. At the moment, the digital payments ecosystem is predicated on links across different platforms without a common origination. Access into this system generally requires a bank account. In a retail CBDC structure, however, the core ledger will be linked to consumer payment applications and digital wallets through APIs. The central node in the system is the central bank. In countries without robust financial institutions or where the obstacles to getting a bank account with a private institution are too high, people can enter the financial system at the source—the central bank.

A common central bank-backed system could lead to the integration of fintech and traditional financial products, improving domestic payment transfers and international remittances. Remittances are the largest source of external financing in emerging countries despite the high costs of money transfers offered by banks and post offices. In 2018, annual remittance flows to low- and middle-income countries reached $529 billion. Fully realized, CBDCs have the potential to create a domestic and cross-border payment transfer system that is fast, efficient, and affordable and that can be utilized by the full value chain for person-to-person, business-to-business and business-to-consumer transactions. Overall, a common national digital currency would contribute to the digitization of MSMEs, suppliers, producers, and consumers thereby making it easier for anyone to affordably carry out domestic and international transactions. In emerging countries still constructing a digital financial system, this can be especially transformative.

Financial history and digital identity

The privacy risks of CBDCs are well-documented, particularly regarding government data collection and surveillance of individuals’ transactions; the risks are even higher for marginalized communities. This is a serious concern that cannot be minimized and must be dealt with in the CBDC design.

CBDCs, however, also give unbanked communities (in developed and emerging markets) pathways into the financial system and an opportunity to create financial history critical for building credit. Financial data can be a tool for oppression, but it can also be a means for empowerment when it is inclusive and follows best practices for privacy and security. CBDCs can be integrated with fintech providers for payments, savings, remittances, etc., leveraging a central bank-housed digital account that creates a financial identity and credit history for people who have been historically excluded from private institutions. Credit history is critical for people to access services offered by private financial institutions—CBDCs can help create these datasets. Additionally, new financial data may lead to a better segmentation of customers and the development of new products attuned to people’s needs. Last, CBDCs will push governments to create shared data standards for a digital identity that can be integrated with other government services.

CBDCs in a post-COVID-19 world

In response to the COVID-19 pandemic, governments have had to conduct wide-ranging economic interventions and cash transfers. These responses, however, require a robust digital payments infrastructure that can quickly and effectively get money and resources to people. Unfortunately, for many countries the payments system is not set up in such a fashion. Even in the United States, with the most developed financial market in the world, millions of Americans have had to wait for months to receive their $1,200 stimulus payment, particularly the unbanked and underbanked who are most in need.

Direct engagement between government and people

In a retail CBDC payments infrastructure, central banks can make cash transfers and governments can offer subsidies and programmed spending incentives (e.g. direct cash rebates) directly to people and MSMEs. This serves three purposes:

improving the efficacy of stimulus programs without relying on the traditional trickle-down approach through intermediaries;
reducing costs and time for government support to reach people; and
facilitating the collection of economic and financial data to assess the impact of COVID-19.

While fintech companies and financial institutions are addressing some of these factors in developed markets, not every country has a robust payments ecosystem. CBDCs can bridge the gap. That being said, even in developed markets CBDCs can reduce the time and costs needed to conduct economic stimulus programs and ensure that financial support quickly reaches people through a uniform digital payments system.

In the current financial system, governments serve as a lender of last resort, bailing out banks and larger companies—this must change in the post-COVID-19 world. Ultimately, retail CBDCs can transform the relationship between the central bank and individual, giving central banks the power to serve as the lender of last resort for people and MSMEs.

Targeted long-term responses to disproportionately affected communities

COVID-19 is disproportionately affecting certain communities. In the United States, Black, Indigenous, homeless, incarcerated, and rural communities and communities of color are being hit hardest from both a health and economic standpoint. Similarly, COVID-19 will affect other marginalized communities across the world to a greater degree. Targeted interventions will be needed, backed by robust data, in the form of cash transfers, loans, and subsidies. Governments currently must go through other institutions to provide resources to affected communities—there is no direct mechanism to support people on the ground. CBDCs give governments the payments system to implement programs that respond directly to the long-term and particular effects of COVID-19.

Online and mobile payment systems

Unbanked and underbanked people have thus far relied on a cash economy tied to brick and mortar institutions. Many people are unable to fully partake in the digital economy despite the increasing availability of mobile phones and Internet technology. As a result, they remain dependent on in-person interactions. This physical system undermines public health and risks greater exposure and economic damage to already vulnerable communities in the event of a future pandemic.

Retail CBDCs provide state-sanctioned access into the digital economy through a mobile and remote payments system. While retail CBDCs at the outset involve simply the creation of a digital currency, network effects can build upon this technology and support further innovation. In a country like Thailand with a high unbanked population but also high smartphone and Internet penetration rates, new online financial tools can operate on a retail CBDC payments system. This can give millions of people access to a digital financial system that is resilient during public health crises.

A technocratic solution that cannot solve the underlying causes of financial exclusion

Like many fintech solutions, CBDCs cannot solve wealth inequality or the other root causes of financial exclusion. Retail CBDCs can simply help put in place a technical framework and mechanism to begin addressing these problems. Governments, however, will need to work across agencies, departments, and sectors to carry out more transformative economic changes. In the effort to promote financial inclusion, CBDCs will be limited by the following factors:

access to the Internet;
access to smartphones;
trust in technology and financial literacy; and
historical inequality and lack of wealth.

Access to the internet

CBDC-based transactions require the Internet. At the moment, however, only 59% of the world has access to the Internet. Many of those excluded are also likely to be unbanked or underbanked. For CBDCs to empower people and communities, governments and private Internet companies must work together to first build affordable Internet infrastructure. Additionally, mobile wallets used for CBDC transactions must be designed to operate in low-bandwidth areas. There is no way to work around the problem of Internet access.

Access to the smartphones

Comprehensive fintech solutions are possible in countries with high smartphone penetration, such as the Philippines, where the Central Bank has established a fintech and blockchain unit. Similarly, CBDC-based transactions require, at the least, a smartphone that lets users access their account—a smartphone is needed due to the cryptography involved in transactions. Unfortunately, only 3.5 billion (out of 7.8 billion) people currently own a smartphone. While this number is expected to grow in the upcoming years, smartphone penetration will not reach 100% any time soon. Before governments turn to CBDCs, they must work with mobile providers to increase the smartphone penetration rate.

Trust in technology and financial literacy

In a recent survey, only “54% of respondents said they would trust a digital currency issued by their government or central bank.” If CBDCs are to be adopted and used, people will need to know about the technology and trust it. Lack of trust can stem from concerns around data security, problems accessing the account, discomfort with transactions that lack physical currency, worries about glitches, and general distrust in the central bank. People with low income and limited education, in particular, are less likely to trust digital currencies. This skepticism and concern is understandable—any, even minor, problems pose tremendous risks to their livelihood.

Furthermore, governments will need to improve financial literacy, which is correlated with financial exclusion. In the Philippines, for example, 17% of people without bank accounts cited “lack of knowledge on how to open an account” and “lack of awareness” as reasons for not having a bank account. Financial knowledge also helps people to determine what products to use and how to use them, and to overcome financial institutions’ use of jargon and complex documentation.

In order to build trust and improve financial literacy, a central bank and its private partners will have to design a CBDC mobile wallet that is easy to use, free from technical problems, replete with strong consumer protections, and up to cybersecurity standards. Many digital currencies have been far from user-friendly. As a result, startups like Celo and MobileCoin have sought to design easy-to-use mobile wallets for people with limited financial knowledge. Governments and other payment providers will have to do the same for CBDCs through a design approach that involves heavy user testing, interviews, and feedback from users and partners. Furthermore, community development and social service organizations will need to offer training resources to financially illiterate people, to encourage them to use CBDCs, and to demonstrate the consumer protection measures that have been put in place. Overall, to improve trust and financial literacy, the launch of a retail CBDC will require the following:

a large on-the-ground education and awareness campaign led by economic development agencies, banks, education systems, and social service entities that partner with local community groups and leaders to provide training on how to use CBDCs and offer incentives for adoption;
mechanisms to collect complaints and feedback from groups involved with the education campaign and end-users of the CBDC payment system, and a process to address these problems; and
cybersecurity and consumer protection standards enforced by regulatory bodies, with clear policies in the scenario that money is stolen, lost, or made inaccessible.

Historical inequality and lack of wealth

CBDCs can tackle some of the hurdles that result in financial exclusion, like high costs, credit risk, and lack of documentation. They, however, do not address the major driver of financial exclusion: lack of wealth. Of the Philippine people who do not have a bank account, 60% say it is because they do not have enough money.

Poverty often stems from systematic exclusion and marginalization, sustained by a society and institutions that thrive on the poverty of certain groups. In a time when economic inequality is worsening in many countries, CBDCs will not transform how societies treat their members. Economic prosperity for the unbanked and underbanked requires the remaking of institutions and may involve profound transformations such as the overthrowing of authoritarian regimes, reassessing the economic system, addressing corruption, expanding gender/voting/religious rights, improving public education, etc. Financial exclusion is due to oppression—if not dealt with, CBDCs will only further entrench it within the digital world.

The national right to a retail CBDC account

If retail CBDCs are to contribute to financial inclusion, people must have a national right to a CBDC account with the central bank. Many countries, even the largest democracies, have historically limited certain communities’ rights, such as pathways to citizenship, access to basic government services, and the ability to vote. Analogously, if not made a national right, CBDCs risk being weaponized to serve as a new tool for excluding already persecuted groups. The result of weaponization: CBDCs will sustain and promote further wealth inequality. As the economy digitizes, millions of people will be left behind with even less access to cash.

A national right to a CBDC account incentivizes a central bank and regulatory bodies to commit to actions that alleviate the underlying causes of financial exclusion. Additionally, it will foster greater involvement by private payment providers to create applications that utilize CBDCs and form an interoperable system for a holistic digital economy. That being said, a rights-based approach may not necessarily solve the problem of financial exclusion. Rights are not always protected.

While acknowledging the fact that rights are not always protected, a national right to a CBDC account at least defines the aspiration, putting in place the opportunity for sustained efforts that can result in a more inclusive financial ecosystem. Moving forward, public and private sector leaders working on the design and implementation of CBDCs will need to assess how digital currencies might be weaponized against people (e.g. government surveillance) and institute principles and systems that prevent such an occurrence.

Conclusion

Financial inclusion is not access to cash or a digital currency. Inclusion is access to the resources and positive externalities that come about from the overall financial market. CBDCs by themselves cannot achieve financial inclusion, but they can help foster the conditions for a new digital system that includes the unbanked and underbanked.

While this analysis has focused on how retail CBDCs relate to financial inclusion, more research is needed to determine how CBDCs affect financial stability. A new CBDC-based payments system may undermine financial institutions, threatening the overall financial system. One possible scenario is a shift from retail and commercial banks to CBDCs. This outflow in deposits would reduce the ability for banks to lend and manage credit ris. Public and private sector leaders will need to further study the financial implications of CBDCs before launching them.

COVID-19 has demonstrated weaknesses in the current financial and economic system, from the difficulties of implementing stimulus programs to the inability of making transactions when most needed. CBDCs can be a powerful tool in the post-COVID-19 world if they are:

seen as a way to contribute to financial inclusion rather than as a primary solution;
recognized as a national right to all residents and backed by a government that supports this right;
paired with comprehensive training and financial education campaigns that meet the needs of people who are unbanked and underbanked;
leveraged for targeted stimulus and cash transfer programs;
used to put in place policies and solutions that address the different needs and historical causes of financial exclusion;
built upon to create a digital ecosystem with financial tools and applications that better target various customer segments and are accessible to anyone who has a retail CBDC account; and
implemented to reshape the relationship between central banks and people.

COVID-19’s disproportionate effect on certain communities necessitates the creation and establishment of technology that promotes community resiliency. CBDCs can be one such technology that helps usher in a financial system that is more prosperous for all.

The Atlantic Council GeoTech Center would like to thank Nikhil Raghuveera for serving as both Guest Author and the lead author of this report. Nikhil is a recent MBA/MPA graduate of The Wharton School and the Harvard Kennedy School with a background in economic consulting, nonprofit consulting, cryptocurrency, and venture capital. He will be joining the Atlantic Council GeoTech Center as a Nonresident Fellow.

Shared humanity amid times of turbulence

David Bray — Tue, 02 Jun 2020 03:30:00 +0000

On 16 April 1963, Martin Luther King Jr. penned his famous “Letter from a Birmingham Jail” noting “Injustice anywhere is a threat to justice everywhere… We are caught in an escapable network of mutuality, tied in a single garment of destiny. Whatever effects one directly, affects all indirectly.”

He wrote this eloquent letter in difficult circumstances, noting “I can assure you that it would have been much shorter if I had been writing from a comfortable desk, but what else can one do when he is alone in a narrow jail cell, other than write long letters…” and in his letter calls for “Now is the time to make real the promise of democracy and transform.”

We here at the Atlantic Council GeoTech Center strongly believe that Martin Luther King Jr. was and is right. There have been — and unfortunately remain — injustices present in societies that have not been made right. Internal to the United States and more broadly around the world, we all have an obligation to do all that we can to ensure societies address these injustices and work to ensure the promise of the future is available to all without inequities.

Though the mission of the GeoTech Center is limited to new technologies and data, we would be remiss if, during these times of turbulence, that we did not acknowledge and point out that such efforts in the United States and abroad have historically been less than diverse, less than inclusive, and less than representative of societies and communities. This needs to be fixed.

For all of the talk of the risk of either biased data or biased AI efforts, systemic human biases still persist in society and these are both unfair and unjust. Human biases, be they either intentional or unintentional, have not enabled new technologies and data to be developed by diverse communities and benefit people, prosperity, and peace globally. These issues must be remedied.

To such end, we at the GeoTech Center want to amplify and give a voice to those with solutions to address these issues, be they inside the United States or globally around the world. We are here to highlight positive #ChangeAgents who can help remedy the injustices present in societies that have not been made right, because united we stand, divided we fall.

An injustice anywhere is a threat to justice everywhere.

This post is a call for those who have positive solutions to address these issues to reach out to the Center; we are here to amplify your voice. Please reach out to us. This post is also to re-commit the Center to six concrete actions during this time of turbulence that were already implicit to our mission and we wanted to make publicly explicit:

1: We must provide voice to those who are asking and providing ideas regarding how we can fix issues of injustice systemically. Specifically, if enough positive #ChangeAgents start raising these questions, ideas, and possible solutions to “what comes next” for the decades ahead — and most importantly what social institutions will allow for the plurality of human co-existence and encourage peaceful resolution (and forgiveness) of disputes — than perhaps we have a lasting chance.

2: We must build up, focused on positive solutions to ensure diversity, inclusion, and justice are cornerstone values. Specifically, the importance of focusing on being positive #ChangeAgents is essential. Giving in to hate or feeding in to those detracting from finding ways to right what historically and still needs to be fixed removes our ability to empathize with others and strive to find the common humanity in us all.

3: We must build bridges across different groups, we cannot be a house divided; this includes bridges to those who hold different views or views that challenge our own. As Abraham Lincoln once noted: “I don’t like that man, I must get to know him better.” If we only take the time to get to know people we like, than we reinforce an age-old human paradigm of “us vs. them” and miss the opportunity to try and find a merit of compassion or insight even in people we might not agree with in principle.

4: We must find ways to benefit multiple groups, not just groups we self-identify with (lest we accelerate tribalism). We must build bridges, interact, and engage, with different groups and individuals. We must engage with each other as mutually interconnected humans and embrace the reality that each of us were we born, were infants and later toddlers, had a series of life experiences that shaped us, and will die. In these experiences we humans are all the same and part of “an escapable network of mutuality.”

5: We must work across communal groups and help build a world in which different ideas and people can co-exist. Over the centuries of history, both during the historical moments where people came together and during historical moments where people were treated unjustly, polarized, or divided — throughout these moments, human nature itself has not changed. We humans can do both wonderful, inclusive actions and the opposite. For the connectedness of us all, and our shared humanity, we must find ways to correct injustices at home and abroad as a small planet of 7.7 billion people (up from 5.3 billion people in 1990–2.5 billion in 1950 — and just 1.8 billion one hundred years ago in 1918).

6: We must identify what choices we are making that are disconnecting ourselves from others vs. connecting ourselves with others, and the act on better choices to produce healthier and more inclusive communities. So far 2020 has been a year of turbulence. We are facing both historically systemic and new challenges as societies that need positive solutions. If you have ideas for action-oriented, positive solutions to address these issues; we are here to amplify your voice.

Across communities and nations, we need to internally acknowledge the troubling events of history and of human nature, and then strive externally to be benevolent, bold, and brave in finding ways wherever we can at the local level across organizations or sectors or communities to build bridges.

The reason why is simple: we and future generations deserve such a world.

Transcript Jun 23, 2021

Brian Deese on Biden’s vision for ‘a twenty-first-century American industrial strategy’

By Atlantic Council

National Economic Council Director Brian Deese spoke about how the Biden administration can strengthen US economic recovery by working with the private sector and global allies.

Economy & Business Future of Work

GeoTech Cues Aug 10, 2021

Contextualizing COVID-19 and its implications for the future of work

By Matthew Gavieta

Digital Policy Future of Work

Blog Post Jul 27, 2021

The time for US immigration reform is now

By Jeff Goldstein

Future of Work Macroeconomics

The post Shared humanity amid times of turbulence appeared first on Atlantic Council.

Couch in RealClearDefense: The imperative of talent platforms, part I

Atlantic Council — Fri, 29 May 2020 15:40:34 +0000

Chief Executive Officer, Special Support Technologies

We must cultivate our current talent while ensuring investment in a comprehensive AI training package that ensures our future force is as agile, responsive, and as skilled as today.

Keith Couch

Former fellow

Everett Keith Couch

Scowcroft Center for Strategy and Security

Defense Policy National Security

The post Couch in RealClearDefense: The imperative of talent platforms, part I appeared first on Atlantic Council.

How tech, data and geopolitics impact food

Atlantic Council — Thu, 28 May 2020 13:00:00 +0000

On May 28, 2020, Ms. Daniella Taveau, Dr. Molly Jahn, and Dr. David Bray, Director of Atlantic Council’s GeoTech Center, discussed how tech, data, and geopolitics impact food. The conversation focused on how these vulnerabilities have existed for sometime and how the COVID-19 pandemic has exacerbated these issues, amplifying existing instabilities, inequities, and insecurities, and will continue to do so unless action is taken to address problems in the food system.

The panel focused on how, as the number of people on the planet grows and as weather and climate-related risks begin to present themselves – combined with the human activities ranging from geopolitics to internal conflicts within countries – the Global Food System faces increasing risks of major disruptions. Simultaneous to these increasing stresses on the Global Food System, several important economies appear to be headed toward isolationism and many more economies are applying restrictive trade barriers. These actions will likely introduce even more impediments and vulnerabilities to the fragile global food Ssstem.

The post How tech, data and geopolitics impact food appeared first on Atlantic Council.

Going deeper: Central Bank Digital Currencies and how best to design them to benefit everyone

Corina DuBois — Tue, 26 May 2020 10:00:00 +0000

Corina DuBois, Author regarding a video discussion with Lisa Pollina, Gabriel Abed, George Bachiashvili, Shane Glynn, Aditi Kumar, and Michael Greenwald on digital dollar as a potential tool in the economic growth and sustainability for a global society.

Our increasingly connected world requires new approaches to respond to emergent global concerns that challenge us all.

On May 19, 2020 – Lisa Pollina, Gabriel Abed, George Bachiashvili, Shane Glynn, Aditi Kuma shared perspectives on “The digital dollar: Do we need it and how do we build it?” as part of a live video discussion moderated by Michael Greenwald. The discussion focused what exactly is a digital dollar? How would it work, how could it best be designed, and who would manage it?

This 1-hour live discussion focused on Central Bank Digital Currencies and how they might be designed, implemented, and benefit societies. The panelists discussed what are the benefits and drawbacks? And how does it compare with other countries, including China, are doing on CBDCs? This was the first of what will be several collaborations between the Global Business & Economics Program and GeoTech Center at the Atlantic Council.

Additional details:

CBDCs are a new frontier for payments infrastructure and central banks. Their geopolitical ramifications cannot be underestimated. CBDCs pave the path for circumventing sanctions, forming new alliances, and establishing norms around identity, privacy, innovation, and cybersecurity. The nascent technology, however, is being explored by many countries without a guiding voice on how to ensure prosperity for its end user: the individual. The United States has historically served as the leading nation on global payments guiding both policy and innovation. The country must once again step into the limelight and take on a leading role.

Given the geopolitical implications and current US involvement, world leaders in the private and public sectors will need to:

Explicitly define international values for a digital payments ecosystem that protects users and ensures financial stability
Establish cross-border collaboration across central banks and government agencies on CBDC design, and bring in other countries currently not exploring CBDCs
Craft clear policies and regulations that delineate the role of private sector and public sector innovation in payments systems
Explore public-private partnerships to coordinate innovation and ensure that advancements support central bank efforts to manage the monetary system
Raise the voices of historically marginalized, underserved, and unbanked communities to ensure that new payment designs promote financial inclusion

The development of CBDCs tasks nations and companies to reimagine money in a more equitable and efficient model. Clear voices will be needed to offer common values for the world to coalesce around as the payments system is remade. Global prosperity depends on it.

Design choices of Central Bank Digital Currencies will transform digital payments and geopolitics

Can tech companies embody global values and ride to the rescue?

Tech companies have the resources to help us better manage this pandemic. If you are a leader of tech company today, what could be of greater benefit to your company than a healthy population, a revitalized global economy, and new international capabilities to fight this crisis, and the next one?

5G’s geopolitics solvable by improving routing protocols vs. modern threat

Having performed a deeper dive over the last few months into the issues surrounding 5G, the GeoTech Center proposes to world policymakers that the geopolitical tensions associated with 5G, as well as other geopolitical cybersecurity-related concerns, can be solved by improving routing protocols against modern threats.

Be Benevolent,
Be Bold, and
Be Brave in our challenging times.

The post Going deeper: Central Bank Digital Currencies and how best to design them to benefit everyone appeared first on Atlantic Council.

Event recap | Mobilizing industry to encourage multi-sector solutions to global concerns

Corina LJ DuBois — Thu, 21 May 2020 13:00:00 +0000

On May 21, 2020, Daryl Haegley, Yusuf Abdul-Qadir, Melissa Flagg, Lee McKnight, Mary Collins, Lin Wells, and Divya Chander shared their perspectives in a live video discussion titled “Mobilizing industry to encourage multi-sector solutions to address emergent global concerns” and moderated by David Bray, Director of the Atlantic Council’s GeoTech Center. The discussion focused on new ways of addressing the COVID-19 pandemic and application of multi-sector industry solutions to current and potential future pandemics.

The panelist focused on how nations and industries need better more timely approaches to future outbreaks and potential additional waves of COVID-19, as well as IoT-based risks and cyber-related concerns, disruptions to supply chains and autonomous systems in cities or factories, and better monitoring for manufactured biological or chemical threats. Continuous efforts are needed to increase the resilience of physical systems, cyber infrastructure, and people-centered communities in a way that respects and preserves privacy, sensitive information, and empowers people to have choice.

We need ways of advancing shared solutions with distributed action and data sharing of a shared context that does not involve centralized control nor centralized data repositories. Early examples already exist. Imagine you were trying to describe to someone in the 1920’s the importance of having smoke detectors linked to calling the fire department and automatic sprinkler systems to put out the fire. We can do the same thing for public health resilience. We can do the same for IoT and cyber-related infrastructure. And we can do the same thing for open societies in ways that do not required centralized data collection.

The post Event recap | Mobilizing industry to encourage multi-sector solutions to global concerns appeared first on Atlantic Council.

Lakhani as a moderator for the Sankalp Dialogues: How can Pakistani Entrepreneurs Navigate through Covid-19?

Atlantic Council — Tue, 19 May 2020 15:00:00 +0000

The post Lakhani as a moderator for the Sankalp Dialogues: How can Pakistani Entrepreneurs Navigate through Covid-19? appeared first on Atlantic Council.

“Our Humanity Brings Us Together”: A Syrian woman entrepreneur in Gaziantep launches an intercommunal campaign to support families economically touched by COVID-19

Pınar Dost — Mon, 18 May 2020 15:25:15 +0000

Lobna Helli (forty-one) is one of 3.7 million Syrian refugees (officially: Syrians Under Temporary Protection) and one of the 1.6 million Syrian women living in Turkey. She is among the many Syrians making a difference in their host communities.

Lobna, who had to temporarily close her chocolate house-restaurant called Lazord, had the idea to launch an initiative to help people in Gaziantep who have lost their jobs due to the COVID-19 pandemic. Using Facebook, she formed a ten-person team consisting mostly of women and started a movement called “Our humanity brings us together.” They facilitate connections between Syrian and Turkish families who either want to offer financial support or need financial help. With the funds they collect, they buy grocery cards worth one hundred Turkish lira and distribute them to those in need. They have reached more than one hundred families, so far.

Lobna is among a small number of Syrian women entrepreneurs in Turkey. 2.1 million of the 3.7 million Syrians under temporary protection in Turkey are of working age and, since January 2016, Syrian refugees are entitled to apply for a work permit. Syrian women have access to the labor market but the number of working Syrian women is very low. Therefore, they are actually not unemployed but inactive, meaning that they are not looking to work. According to a December 2018 official report, out of 929,062 Syrian women of working age (fifteen to sixty-four) only 99,967 are working. However, this number doesn’t include the eight hundred thousand Syrian men and women working informally. Around ten thousand to fifteen thousand Syrian businesses are operating in Turkey. According to the United Nations Development Programme Mapping of Syrians businesses, out of three hundred Syrian entrepreneurs, ten are women. Because of low participation of Syrian women in the labor market, only 911,106 of total Syrians are actively participating in the labor force.

To some, Lobna is an insignificant statistic, but that denies her human experience and contributions to the Turkish community. Though she may be among a small minority, it is worth lending an ear to Lobna’s story to understand the value and entrepreneurial spirit that immigrants possess, especially, as women.

After the outbreak of the war in Syria, Lobna fled from Aleppo—one of the towns closest to the Turkish border—and took refuge in Turkey in 2015.

“We had a very nice life in Aleppo. My husband and I, we had nice jobs and a happy family. I was working for a company as a human resources expert. Our girls were going to school. We were going out on weekends to see our family, our friends, people we love. Like everyone else. A happy and ordinary life…. until the war broke out. With the war, our whole life suddenly changed so much [in a way] that we could not have predicted. Everything was turned upside down. We lost everything we had. We did not want to leave our country until the last moment. We always waited for this to end. But that day never came. Everything just got worse. My husband was imprisoned and tortured for being against the Assad regime. Finally, we had to flee to save our lives.”

Lobna took refuge in Gaziantep with her two daughters, and mother. As the city was close to Aleppo, they thought settling there would make it easier for them to return one day. They preferred to live in Turkey as they felt culturally closer to the country and because it was recommended by people who previously found refuge there. Her husband could join them only two years later as he was in prison.

Lobna left everything behind. Her grandmother’s lace tablecloth was one of the few things she could bring with her: “We left with the hope of returning back one day, but I wanted to have something of my past with me in case we could not return. To never forget our roots, where we came from.”

She started everything from scratch, entering a new country and a new city to learn a new language. She had to survive as a mother and a woman: “When we first came to Turkey from Syria, I worked as a volunteer in charities to help people like us. After a while, I started to think about what we can do to make money as my daughters started school. We had built a life here and life was going on”.

Gaziantep is one of the cities that is known for its gastronomy and dessert culture. Lobna Helli also decided to open a dessert shop but needed to be unique to be a successful entrepreneur: “The best way to forget our pain is to make others happy. The way to do this is through eating and dessert. I wanted to open a dessert shop, but I had to do something different because there are amazing restaurants and dessert shops in Gaziantep. I thought, what could I do differently? I researched and, finally, saw that there was no chocolate among so many desserts. And I opened a chocolate house. I added innovations such as chocolate döner [and] chocolate pizza. Everyone loved it—it attracted a lot of attention. After a while, I decided to expand the business and open a restaurant, not only for chocolate, but for Syrian food. But I had no capital. I convinced my mother, my sister, and women around me to invest. We sold all [the] gold we had and opened a restaurant. Now, we serve as a restaurant and a place where special events and gatherings are celebrated.”

Lazord Chocolate House is in one of the busiest places in Gaziantep. It is one of the most favored restaurants for Syrians and locals from Gaziantep.

The decoration of the restaurant is typically traditional, adorned with items such as the lace cover of Lobna’s grandmother, which she brought from Aleppo.

In addition to her mother and husband, Lobna employs three more people in Lazord Chocolate House and restaurant. They cook the finest dishes and appetizers of Syrian cuisine; from hummus to muhamma to kibeh. Her dream is to transform Lazord into a world cuisine restaurant.

Lobna’s story shows how refugees bring with them their knowledge, creativity, and goodwill, which they share with their host communities during both good and bad times.

*Lobna Helli is one of the fifteen Syrian women entrepreneurs interviewed in Gaziantep in the context of the Atlantic Council’s IN TURKEY’s upcoming documentary on Syrian Women Entrepreneurs in Turkey. It was realized with the support Limak Holding and produced by the 451 Derece production company.

An interview in Arabic with Lobna Helli at her store:

https://www.youtube.com/watch?v=pxCLTc97kpQ&feature=youtu.be

Our Humanity Brings Us Together COVID-19 raising awareness ad

Pinar Dost is deputy director of Atlantic Council in Turkey. Follow her on Twitter: @pdosting.

How Turkey benefits from global LNG glut

By Eser Özdil

While Turkey’s gas supply security is enhanced, the domestic market benefits from the increasing competition in the global gas market. With LNG, Turkey can further diversify its gas supply sources and the state-owned gas company, BOTAS, can decrease the weighted average cost of imported gas.

Oil and Gas Turkey

TURKEYSource May 4, 2020

Turkey’s renewables sector in light of COVID-19

By Değer Saygın

Globally, the electricity sector attracts more than $750 billion in investments annually. Much of the sector’s investment portfolio comprises renewable energy and grid infrastructure. The demand in the power sector due to COVID-19 and the impact on prices need to be analyzed carefully to ensure continuity in investment in these areas, which constitute the cornerstone of energy transition along with energy efficiency.

Coronavirus Renewables & Advanced Energy

New Atlanticist Apr 23, 2020

COVID-19 is transforming education for all: Fast tracking the shift to distant learning

By Robert Feller

The spread of the novel coronavirus (COVID-19) has presented the world with a series of challenges that can deepen inequalities across societies, but also (or maybe especially) in the world of education, which is now forced to move into the online realm. COVID-19, however, also gives us the opportunity to increase the quality and access to education for the world’s most vulnerable young people. The impact of new, digital innovations on the education of thousands of young refugees is huge and demands our urgent attention.

Coronavirus Syria

The post “Our Humanity Brings Us Together”: A Syrian woman entrepreneur in Gaziantep launches an intercommunal campaign to support families economically touched by COVID-19 appeared first on Atlantic Council.

We can more rapidly respond to future waves of COVID-19 and pandemics: Here is how

David Bray — Sun, 17 May 2020 03:55:00 +0000

The biggest threat of biological pathogens is the protracted amount of time needed to characterize the pathogen, develop effective treatments, and perform biological remediation. The 2001 anthrax events, SARS and H1N1 outbreaks, and the current COVID-19 pandemic, demonstrate that these long processes cause worldwide human, social, and economic harm.

The world needs a global Pandemic Prevention Board focused on building an “Immune System for the Planet”, as described in early April by GeoTech Center Director Dr. David Bray and then highlighted in a CNBC article by Atlantic Council CEO Fred Kempe on why tech companies can — and should — build a global quick response system to prevent future pandemics.

Despite the current COVID-19 turbulence, we can get through this together. Here is how:

First, we must recognize faster global governance for pandemic prevention is essential. We need solutions that combine new ways of rapidly collaborating on pandemic preparedness alongside new technologies and advances in data to safeguard against future low probability, high consequence bio-related events. Technologies and capabilities of interest include standoff detection sensors that work with unknown pathogens, autonomous pathogen identification, a vaccine development process that is not defeated by virus mutations, and new methods for affordable, fast, worldwide distribution of pandemic remediation.

Second, we must mobilize a coalition skilled in understanding how new technologies transform how nations and industry sectors can collaborate on important issues — to include more rapidly responding to future waves of COVID-19 and future pandemics. Recent developments make this objective reachable. Data must be collected and shared on a global scale using trusted means, and be accessible by experts and decision-makers without undue restrictions.

Third, we must recognize that new technologies comprise perhaps only 20% of the solution. The greater challenge is fielding novel solutions such as “Data Trusts for Good” and other mechanisms that span sectors and nations while still benefiting individual organizations and communities. Governance activities are essential to a complete approach, and these must prepare the public, industry, and nations alike to detect, characterize, and respond to subsequent waves of COVID-19 and future pandemics more rapidly. Working with governments and local experts, new technologies and data capabilities would be fielded and tested, both as local and global prototypes. The global net result will be a dramatic reduction in the time it takes to characterize, develop treatments for, and remediate new natural and human-produced pathogens.

Ultimately, the world needs an “Immune System for the Planet” that can provide indicators, warnings, and plans to respond faster, better, and in a more global manner that saves lives and increases resilience to a range of bio-related events including pandemics around the world.

This work also will prepare the world for the rise in secondary, adverse, effects from the rapidly expanding field of biotechnologies to include the risk of terrorist or other bad actors who might consider future pathogens as a weapon against societies. Exponential changes in the field create distinct challenges that make representative democracies, republics, and other forms of representative government vulnerable to these threats. Societies must utilize technology and data to enable governance at the speed needed to defeat threats associated with pandemics.

In the future, the only way for open societies to navigate through a pandemic is by mobilizing both private sector and public sector leaders to work together on the long-term recovery. Here at the Atlantic Council GeoTech Center, we seek to embody a similar “learn by doing, adapting, and leading” model with the hope that leaders from all sectors and all nations, regardless of politics, will do the same to benefit people, prosperity, and peace as the world recovers.

Onwards and upwards together.

Transcript Jun 23, 2021

Brian Deese on Biden’s vision for ‘a twenty-first-century American industrial strategy’

By Atlantic Council

National Economic Council Director Brian Deese spoke about how the Biden administration can strengthen US economic recovery by working with the private sector and global allies.

Economy & Business Future of Work

GeoTech Cues Aug 10, 2021

Contextualizing COVID-19 and its implications for the future of work

By Matthew Gavieta

Digital Policy Future of Work

Blog Post Jul 27, 2021

The time for US immigration reform is now

By Jeff Goldstein

Future of Work Macroeconomics

New technologies and data are tools. It is upon the choices we make, both as individuals and as communities, that ensure that they are used as a force for good in the world.

Dr. David Bray, Director, GeoTech Center

The post We can more rapidly respond to future waves of COVID-19 and pandemics: Here is how appeared first on Atlantic Council.

Bridging the digital divide

Atlantic Council — Fri, 15 May 2020 13:00:00 +0000

Thought leaders have long recognized a growing digital divide. In stark contrast with the democratic value of equality of opportunity, large portions of the world lack access to the Internet connectivity they need to survive and thrive in a digital landscape. As Dr. David Bray, Director of the Atlantic Council’s GeoTech Center, explained on a STEMTalks podcast episode, the pandemic has highlighted the fact that Internet access today is a necessity, not a luxury. As such, societies must be responsible for providing Internet access and training to their populations in its use.

With Dr. Linton Wells II of George Mason University, Dr. Bray laid out practical ways for individuals, governments, and companies to address the digital divide. Among them, Dr. Bray mentioned local level mobilization to reach community consensus on the reasons everyone deserves reliable internet access. Once enough local governments and populations have taken action, larger institutions will have incentive to seize the moment and get involved. In fact, moments of crisis like the COVID-19 pandemic present critical opportunities to make tangible arguments to policymakers that internet, like water or electricity, is an essential part of any national recovery.

The value added by universal internet access and the benefits to their own constituents are compelling arguments to policymakers, but, as Dr. Bray reiterated, the first step in addressing the digital divide is for a growing slice of the population to agree that everyone deserves access to the internet. Without this step, no true change can occur. Listen to the podcast for more practical steps towards creating a more just digital world.

The post Bridging the digital divide appeared first on Atlantic Council.

We can strengthen the global food system: Here is how

David Bray — Thu, 14 May 2020 03:00:00 +0000

The Global Food System is subject to a wide variety of influences, constraints, and potential shocks with resulting effects that are sudden and of global extent.

The world recently has experienced large-scale collapse of bread-basket food sources, multiple areas of humanitarian crises, price spikes causing rapid destabilization of national governments, and, with the COVID-19 pandemic, global food supply chain disruptions and food shortages throughout the world.

Despite the current COVID-19 turbulence, we can get through this together. Here is how:

First, to assuredly meet the needs of all people, we must limit the occurrence and severity of disruptions to the global food system. Important vulnerability drivers include public and private food policies, financial shocks, physical disruption of imports, disease dynamics, hydrometeorological events, corruption, conflict, actual/threatened contamination, and non-tariff barriers to trade.

Second, we must mobilize a coalition skilled in understanding how new technologies transform how nations and industry sectors can collaborate on important issues — to include strengthening the Global Food System against cascading shocks. Recent developments make this objective reachable. Different aspects of global food — including food for humans, animals, nutrients, agricultural production products, and associated supply chain systems — are all becoming digital, allowing sufficient real-time data collection to identify problems early and to guide appropriate responses.

Third, we must recognize that new technologies are probably only 20% of the solutions here. Fielding them in a manner that involves novel solutions such as “Data Trusts for Good” and other mechanisms that span sectors and nations while still benefiting individual organizations and communities represents the important other 80% of the necessary work that must be done. When fielding these solutions, governance activities that benefit the public, trade, and nations alike must also be included. Improved policies and practices that limit the effects of shocks to production, trade, and logistics are known. New agricultural technologies can enable new practices that both lessen the potential for cascading failures in the global food system and also produce savings to enable their adoption.

Ultimately, the world needs indicators, warnings, and plans that reflect global food system vulnerabilities.

These indicators, warnings, and plans should include food for humans, food for animals, and nutrients and other products associated with agricultural production globally. National governments (defense, economic, commerce, agricultural, and diplomatic departments), agricultural industries, and humanitarian organizations all have primary roles in ensuring that global food system vulnerabilities do not weaken societal welfare, prosperity, and peace around the world.

Looking toward the future ahead, the only way for open societies to navigate through the current pandemic is by mobilizing both private sector and public sector leaders to work together on the long-term recovery. Here at the Atlantic Council GeoTech Center, we seek to embody a similar “learn by doing, adapting, and leading” model with the hope that leaders from all sectors and all nations, regardless of politics, will do the same to benefit people, prosperity, and peace to ensure as a world we turn things around from this current mess that we collectively now confront.

Onwards and upwards together.

New technologies and data are tools. It is upon the choices we make, both as individuals and as communities, that ensure that they are used as a force for good in the world.

Dr. David Bray, Director, GeoTech Center

The post We can strengthen the global food system: Here is how appeared first on Atlantic Council.

We can get through this COVID-19 pandemic together: Here is how

David Bray — Mon, 11 May 2020 10:00:14 +0000

Here at the Atlantic Council, we recognize that working to benefit people, prosperity, and peace for all globally requires committed public servants. A year ago in 2019, Dr. Greg Treverton and Dr. Molly Jahn, as well as (the would be future GeoTech Center Director) Dr. David Bray, and other authors released the result of a year-long study that analyzed the impact of numerous long-term trends in the United States’ government workforce over a period of two decades.

This study concluded — again in early 2019 — that long-term trends had significantly diminished the capacity of government institutions to respond to rapid cycle stressful events. The study also concluded that overall institutional and workforce trends in the United States had reached a point where critical government operations might fail in stressful events that were likely to occur. Such a prediction of the risk of government institutions to respond to a crisis was made with the recognition that being a committed public servant can be especially hard in today’s world that includes increasing polarization in open societies, increasing misinformation, larger challenges of coordination, and larger challenges of legacy processes that may be misaligned for the needs of our changing world.

A year after that study, the COVID-19 pandemic happened.

With the pandemic it became clear that open societies, to include United States and parts of Europe, have let the necessary coordinating institutions needed for responding to such disruptions wane. Specifically: the COVID-19 pandemic unfortunately demonstrates what this prescient study warned officials in the United States about a year ago — namely that should have been a responsive collaboration, between both the public and private sectors, to a national and global emergency instead found that the governing institutions necessary for a rapid, adaptive response had been neglected for too long. Yet make no mistake, there are committed civil servants, members of the military, and non-partisan senior executives – at all levels of governments including local, state, federal, and tribal in the United States as well as other open societies. These dedicated individuals have been doing all that they can to help communities local and global navigate these turbulent times.

Despite the current COVID-19 turbulence, we can get through this together. Here is how:

First, leaders from both sides of the political aisle, as well as from the private sector, must recognize that the United States — and free and open societies in general around the world – need a rejuvenation that begins by recognizing that either renewed or *new* institutions are required to collaborate, coordinate, and adapt to new and emergent concerns that require both rapid public and private sector responses. The post-World War II institutions may not fit our interconnected world of 2020. They either need to be renewed or new, networked institutions that involve both public and private sector actors if we are to navigate both the current COVID-19 crisis and be prepared for potential future ones too.

Second, as the research that the 2019 study showed, the political environments for non-partisan senior executives in public service have gotten increasingly toxic over the last decade – due in a large part to an increase in hyper-partisan politics in the United States and in Europe. Combined with a world in which misinformation of all types and biases can spread must faster than the truth, which itself represents a significant challenge we are seeing with COVID-19, and the hard work of non-partisan senior executives will continue to face crises where the response mechanisms to address such emergency situations have atrophied. To fix this, open societies around the world must ask more of our political officials, to include pulling away from hyper-partisan politics and valuing non-partisan public service for a commitment to the good of communities local and global. There is no textbook for the future ahead, nor is there “zero risk”, yet we need leaders willing to build bridges across nations and sectors. We also need those same leaders to be willing to do, learn, and adapt as they help us all make sense of the way through the post-COVID-19 era ahead.

Third, open societies must re-awake shared community importance of a committed public and private sector ethos that supports a functioning set of governance activities for the health of towns, respective states, and nation, regardless of either individual or national politics, partisan media, or those who would prefer more autocratic regimes. It is only with a functioning public and a private sector that free, open societies will emerge from this current COVID-19 crisis stronger than they did before.

Looking toward the future ahead, the only way for open societies to navigate through the current pandemic is by mobilizing both private sector and public sector leaders to work together on the long-term recover. Here at the Atlantic Council GeoTech Center, we seek to embody a similar “learn by doing, adapting, and leading” model with the hope that leaders from all sectors and all nations, regardless of politics, will do the same to benefit people, prosperity, and peace to ensure as a world we turn things around from this current mess that we collectively now confront.

Onwards and upwards together.

Molly M. Jahn is the Founding Principal of the Jahn Research Group and former Deputy and Acting Under Secretary, USDA; Gregory F. Treverton was Chair of the U.S. National Intelligence Council until January 2017 and is now Professor of the Practice at the University of Southern California. Both are Senior Fellows with the Atlantic Council GeoTech Center.

New technologies and data are tools. It is upon the choices we make, both as individuals and as communities, that ensure that they are used as a force for good in the world.

Dr. David Bray, Director, GeoTech Center

The post We can get through this COVID-19 pandemic together: Here is how appeared first on Atlantic Council.

Steve Levine in Medium about pandemic’s impact on American cities

Atlantic Council — Wed, 06 May 2020 13:51:07 +0000

The post Steve Levine in Medium about pandemic’s impact on American cities appeared first on Atlantic Council.

Why COVID-19 requires both industry and nations to transform how they collaborate

Atlantic Council — Fri, 01 May 2020 13:00:31 +0000

On May 1, 2020, Vala Afshar, Ray Wang, and David Bray, shared perspectives in a live video discussion titled “Why COVID-19 requires industry and nations to transform how they collaborate“ about the transformative nature of the pandemic and post-COVID-19 era ahead.

This live discussion included what CEOs of companies could do to adapt their organizations and lead in the post-COVID-19 era. The discussion also highlighted the efforts of the Atlantic Council GeoTech Center in championing positive paths forward that nations, economies, and societies can pursue to ensure new technologies and data empower people, prosperity, and peace a mission focus that remains especially salient amid the current pandemic response and recovery.

The post Why COVID-19 requires both industry and nations to transform how they collaborate appeared first on Atlantic Council.

Event recap | The future of data and AI in space

Corina LJ DuBois — Wed, 29 Apr 2020 13:00:00 +0000

On April 29, 2020, Fredrik Bruhn, Amy Webb, Paul Jurasin, Anthony Scriffignano shared their perspectives in a panel discussion titled “Future of data and AI in space” as part of a live video discussion moderated by David Bray, the Director of the Atlantic Council’s GeoTech, on how commercial space efforts are being changed by advances in data and AI capabilities, to include satellites and other efforts in Earth’s orbit and beyond.

The live discussion highlighted how historical computational capabilities and limited electrical power available to satellites prevented edge computing in space. All data had to be transmitted back to Earth for processing. With advances in both processing as well as performance relative to onboard power capabilities, now it is possible to process petaflops of data in space. These advances, which will continue to advance in the near future, change what is possible by commercial space endeavors and what services can be provided to individuals and organizations around the world.

The next decade is yet unwritten. We must be willing to do first, second, and third iterative attempts at learning for the future ahead.

The post Event recap | The future of data and AI in space appeared first on Atlantic Council.

Design choices of Central Bank Digital Currencies will transform digital payments and geopolitics

Nikhil Raghuveera — Fri, 24 Apr 2020 01:30:23 +0000

CBDCs will be used by countries to create new monetary systems that will be leveraged in great power competition to form economic alliances, avoid sanctions, and depending on design potentially surveil the transactions associated with users of the currencies. World leaders from both the public and private sectors must understand CBDCs because, depending on the technology design choices, CBDCs will:

Revolutionize the way money is exchanged and payments are made
Redefine the relationship between the state, private sector financial institutions, and technology companies
Give countries the ability to design independent payments systems that operate separate from the US dollar-based order

Introduction

The Stone, Bronze, and Iron ages each reflect the tools used to craft civilization. In the current digital age, money is being transformed to reflect the most valued asset, data. No longer is money rooted in printed cash that has exchanged thousands of hands; instead, its digitization has changed the way people transact and institutions conduct business. What began as the first electronic payment offered by Western Union in the 1870s has become sprawling digital payments ecosystems. The latest innovation is entirely new non-state types of money predicated on cryptography. Just like fiat currency, these new forms of money are able to serve as a unit of account, store of value, and medium of exchange. The payment evolution’s only logical end is the digitization of the state-backed currency created by the central bank: the central bank digital currency (CBDC).

This analysis consists of two parts. Part I explores how CBDCs can improve payments, the underlying factors in a country that are necessary for a CBDC to be effective, and the payment values countries must decide upon. Part II assesses the geopolitical implications of CBDCs. CBDCs challenge the existing order of global payments. They allow countries to create monetary systems that operate independently of the existing US dollar-based order. Furthermore, CBDCs will be a primary tool used by major powers in economic diplomacy to form alliances, subvert sanctions, and collect payment data at a granularity not possible through fiat currency.

This report concludes with a call for the United States to reassert its role as a guiding voice, and set standards for CBDC and financial technology. CBDC development is driven by a host of nations, each determining their own set of values and some looking to export these values. Global economic stability and prosperity hinges upon shared working norms. In 1944, the United States ushered in an era of unprecedented monetary stability when it established the US dollar as the global reserve currency. American leadership is needed once again.

Part I. Central Bank Digital Currency and its Opportunities

An Overview

Central bank digital currency is a new form of digital currency offered by a central bank to replace fiat cash. Like cryptocurrencies and other private payment providers, central banks give users the ability to make digital payments without the use of physical cash. CBDCs would be a liability of the state (unlike private payment platforms which are managed by private companies and cryptocurrencies which are managed by protocols). Governments in advanced economies are exploring CBDCs as a means to curb the growth of private payment providers and cryptocurrencies, which they see as a competitive risk to central bank-issued cash. Governments in emerging markets are interested in CBDCs as a means to promote financial inclusion and more effective digital payments systems.

CBDC, while novel in its creation, utilizes existing technology that underpins private payment providers and cryptocurrency.

Digital Ledger: CBDCs are based on a digital ledger, or database, which keeps track of CBDC ownership and transactions by users who have accounts on the ledger. The ledger will likely be centralized in the form of a core ledger managed by the issuing central bank. On this core ledger, the central bank would issue CBDCs and process transactions. The core ledger could have some decentralized features based on distributed ledger technology, in which maintenance or processing of transactions could be performed by a group of entities rather than a single body. Distributed ledger technology is unlikely to be fully embraced due to technical limitations, but certain characteristics of it are being explored by central banks such as programmability, ledger management, and use of cryptography. The government faces a number of costs and benefits based on the design choices and so must choose what it believes best serves the purposes of the payments system (e.g. resilience, bandwidth, scalability, transaction speed).
Account-Based System or Digital Tokens: An account-based system or digital tokens determines how users are represented and make transactions in the payments system. In an account-based model, transactions are recorded in the database and referenced to individual identities. For this to be done en masse, a digital identity system is needed for every user. Alternatively, a digital token-based system utilizes public-private key pairs and digital signatures to sign a message and make a transaction. A token-based system offers universal access since a user identity is not required, also allowing for high levels of privacy. The challenge, however, is that users must remember their private key, or they lose access to their funds. Furthermore, it is difficult to create an effective anti-money laundering and know your customer framework on a tokenized system.
Digital Wallet: A digital wallet is a system that securely stores payment information for users to make transactions. Account-based and digital token systems both require some form of digital wallet that gives users the ability to securely store money. Digital wallets could either be offered by the government or a private entity.
Wholesale or Retail Interlinkages and Application Program Interfaces (APIs): CBDCs can be wholesale, retail, or both. A wholesale CBDC is designed specifically for financial institutions. A retail CBDC, on the other hand, is issued directly to the general public. Depending on the type of CBDC being implemented, linkages must be developed across platforms. Wholesale CBDCs will require linkages with financial institutions, securities and foreign exchange platforms, and other financial market systems. A retail CBDC will require linkages to consumer payment applications, foreign exchange systems, and digital wallets. APIs will be necessary for these linkages, connecting users to the core ledger and to one another to create the overall payment network.

The underlying technology of CBDCs (digital ledgers, account-based systems, digital tokens, digital wallets, and APIs) has existed for decades. Recent advances in financial technology and cryptography, however, have allowed for the creation of digital payment ecosystems that are resilient, protect privacy, avoid double-counting, and quickly process large volumes of transactions. Furthermore, broad adoption of financial technology by companies and individuals, as well as the accessibility of smartphones, makes CBDC a possible replacement to fiat currency.

Based on this technology, CBDC offers several key advantages to traditional fiat currency.

More consumer protection and security than that offered by private payment providers: Central banks are heavily incentivized to ensure a robust payments system and protect consumer data from private firms. Private payment providers, on the other hand, do not value social costs the same as central banks. Consequently, private payment providers are not incentivized to invest in security and resiliency measures to the same degree as central banks. Private companies also have strong incentives to collect and monopolize on the “data exhaust” produced by CBDC flows.
Promote financial inclusion through inclusive mobile money: Cash may be difficult to obtain for underpopulated and rural communities due to lack of bank branches and mechanisms to safely distribute cash. This is likely to worsen as more people adopt digital forms of money. Unbanked people also may be unable to access private digital payments systems. CBDCs would provide individuals access to a digital payments system without a private bank account.
Reduce costs associated with issuing and managing cash: Issuing and managing cash is expensive, with costs including printing, distribution, and replacement. For example, the costs of issuing and managing cash in the Euro area is 0.5% of GDP.
Enhance monetary policy and more effectively manage money supply: Interest-bearing CBDCs would increase the economy’s response to interest rate changes. CBDCs could also be used to charge negative interest rates in the case of an economic crisis.

Determining Whether a CBDC is Possible

Central banks have choices to make when determining whether to create a CBDC. The first step is deciding whether a CBDC is an effective tool given the economic circumstances of the country and the level of technology accessible to institutions and citizens. Countries need certain technical and infrastructure capabilities if CBDCs are to be a worthwhile project.

Comprehensive Digital Infrastructure: CBDC requires digital infrastructure; it is an ineffective solution in cash-based economies with poor internet connectivity, low smartphone penetration, and general inability to access technology. For CBDCs to be realized, a lion’s share of the populace across all demographics needs access to digital infrastructure. Additionally, CBDCs have technological requirements that must be met.
A Well-Functioning Central Bank: CBDCs give central banks new responsibilities that add considerable costs and risks. CBDCs require central banks to take on a number of new operations such as interfacing with customers, maintaining technology, being responsible for anti-money laundering, avoiding human errors, etc. Additionally, the central bank may need to intervene on behalf of the banking sector if CBDCs replace the use of retail bank accounts (banking-sector disintermediation). Lastly, retail CBDCs would cause a central bank’s balance sheet to grow significantly.
Effective Governance: CBDCs will involve new forms of digital payments and change the role of central banks and private financial institutions. New policies and regulations will be needed for: consumer protection, financial stability, anti-money laundering and know your customer frameworks, cybersecurity, etc. Government bodies, therefore, will need to be capable of taking on this new challenge to promote a financial and payments system that benefits the country.
Financial Technology Knowledge by the Central Bank and Government: CBDC development requires technical expertise. While the creation of digital notes, user interfaces, digital wallets, and payments infrastructure can be outsourced to government contractors, members of the central bank and government officials will need to understand the implications and risks of the technical design. By understanding the design, the central bank and government can put in place appropriate policies and regulations to manage the payments infrastructure and create a system that promotes economic prosperity.

Political Will and the Values of the CBDC-based Payments System

Central banks have a number of design choices. These include the architecture of the system, type of ledger, account-based vs. token, and linkages with other institutions. Design choices will be predicated on the constraints listed above, and just as importantly, on political will.

Politics will be central to the success or failure of CBDC development. Political decisions will need to be made on the values of the payments system to be adopted by users—a CBDC will be the primary factor in the allocation of resources after all. Political decision-making will revolve on the following payments system values:

How/when CBDCs and digital currencies are used in daily transactions
Privacy
Consumer protection
Accessibility and convenience
Role of the central bank and other financial institutions

The CBDC will be designed accordingly based on the values agreed upon by political actors. Once implemented, the design will have far-reaching implications on domestic and international institutions.

Part II. Central Bank Digital Currency and its Geopolitical Implications

US Dollar as King

In July 1944, 730 delegates representing 44 states convened in Bretton Woods, New Hampshire to create a new international monetary system led by the United States. This system, in which the US dollar (pegged to gold) was made the international reserve currency, would promote global stability and economic growth.

The Bretton Woods system eventually ended in 1971 when the US dollar was de-pegged from gold, but its legacy remains. The US dollar today remains the global reserve currency, serving as a unit of account, store of value, and medium of exchange. Over 60% of all foreign central bank reserves are denominated in dollars, and over half of cross-border trade is denominated in US dollars. As a result, most international transactions are cleared by US-based banks.

The Federal Reserve is the epicenter of payment settlement—performed by correspondent banks which transfer money between accounts held by the Fed. Additionally, the US maintains significant control over the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the cross-border messaging system necessary for banks to make transactions. Global transactions rarely happen without interfacing with the US dollar.

Overall, the current global payments system is based on American values. Many payments are conducted through the United States banking system of the Fed and private financial institutions (commercial, investment, and correspondent banks). United States laws and policies that regulate the operations of financial institutions therefore have far-reaching implications on the transactions performed outside the country.

The Wall Street Journal showcases this by describing a transaction between a Canadian lumber company and a French purchaser: “A Canadian lumber company sells boards to a French buyer. The buyer’s bank in France and the seller’s bank in Canada settle the payment, in dollars, via “correspondent banks” that have accounts at the Fed. The money is transferred seamlessly between the banks’ Fed accounts because their status as correspondent banks means they are seen as safe counterparties. The use of these accounts, the U.S. says, means every transaction technically touches U.S. soil, giving it legal jurisdiction.”

The United States has leveraged this hegemony and weaponized the US dollar in recent decades, using it as a means to impose sanctions with greater frequency. Specifically, the United States has restricted the use of US dollars or forced SWIFT to prevent cross-country interbank transactions from sanctioned parties; other parties have limited power in working around US-imposed sanctions.

A New Payments Ecosystem Independent from the US Dollar

The US dollar is unlikely to be replaced as the global reserve currency in the immediate future. CBDCs, however, give countries the ability to operate outside the US dollar-led system by serving as a means to create independent payment mechanisms that link financial institutions together without the need for correspondent banks and SWIFT. This allows countries to:

Establish their own independent values for a monetary system
Export payment system values independent from the current global system and make financial transfers to sanctioned and rogue parties without international oversight
Collect transaction data, also know as “digital exhaust”, at the individual level

China and the Creation of an Alternate Payment Mechanism

China’s primary desire for a CBDC has been in response to projects like Bitcoin and Facebook’s Libra, which risk establishing payment values different from the Chinese Communist Party. While China does not look to upend the US dollar-based system or replace the US dollar as the global reserve currency, it is in the country’s best interests to have a payment process that does not rely on the US dollar. The geopolitical implications of a Chinese CBDC, therefore, are a critical issue.

China has made extensive efforts to develop a CBDC and has completed the “top-level” design. Recently, the Agriculture Bank of China issued a test app for mobile phones and the People’s Bank of China began a pilot program to introduce a digital currency in four cities. While the full design is yet to be revealed, the Chinese CBDC as of now is meant to only partially replace current cash in circulation. The CBDC would be issued to commercial banks that would then re-distribute the CBDC to the retail market; it is not meant to threaten the retail banking sector.

The immediate effects of a Chinese CBDC on global payments will be minimal, but the long-term ramifications cannot be understated. The Chinese CBDC fits within a greater context of the country’s efforts to create an independent payments system based on its Cross-Border Inter-Bank Payments System (CIPS). CIPS provides clearing and settlement services for cross-border RMB transactions, and is expected to eventually feature an independent messaging system that does not utilize SWIFT. Furthermore, Chinese payment applications like Alipay and WeChat Pay allow for direct payment transfers between Chinese citizens. Together, a Chinese CBDC, CIPS, and China’s robust digital payments ecosystem would result in a digital ecosystem that facilitates rapid and efficient payments across the country.

This payments ecosystem, when developed, can be exported to incorporate other countries. Alipay and WeChat Pay are already making significant inroads in Southeast Asia. Given transaction volume, Southeast Asian central banks will find it advantageous to join CIPS for more efficient financial transfers. Belt and Road Initiative countries will find similar benefits as they take Chinese loans and look to improve their financial infrastructure. Africa’s payments in RMB increased by 123% from 2016 to 2019—it is no surprise then that the Chinese government is exploring how to integrate a CBDC with Belt and Road Initiative countries. When fully realized, the Chinese system would allow for cross-border transactions between institutions and individuals without going through correspondent banks. While China may not seek to take on the responsibility of leading the global payments system, a CBDC is a critical piece for the country to solidify an independent economic ecosystem.

Western Europe and the Effort to Determine the Implications of CBDCs

The European Union, befitting its recent role as the global voice on technology regulation, is exploring how CBDCs affect the digital payments landscape and the design features needed to fit existing monetary values. European central banks have not determined whether to launch a CBDC yet. Instead, they are taking the time to understand its opportunities and challenges, particularly regarding CBDC design and the implications on privacy, financial inclusion, private payment providers, payment needs, and financial stability.

Many of the recent efforts were necessitated by the announcement of Libra, which prompted serious questions regarding the role of private companies in the digital payments space. The development of CBDCs by other countries is another sign that European banks must respond. Christine Lagarde as IMF Director made the case for digital currencies, “based on new and evolving requirements for money, as well as essential public policy objectives. My message is that while the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively.”

Initially, Sweden was the only country in the European Union considering a CBDC. More recently, France, Germany, and the European Central Bank have also stepped into the fray. France began tests this year to experiment how a CBDC could complete interbank settlement, identify additional advantages of a CBDC, and understand the impact on financial stability. The Bank of France is soliciting applications to experiment the use of a digital euro. The experiment’s objectives are:

“To show how conventional use cases for central bank money can be achieved through a CBDC based on different technologies”
“Identify the benefits of introducing a CBDC for the current ecosystem and understand how a CBDC might foster financial innovation”
“Conduct a detailed analysis of the potential effects of introducing a CBDC on financial stability, monetary policy and the regulatory environment”

While Germany has not made as significant of a step as France, the Bundesbank is also exploring the possibility of a CBDC. The Association of German Banks has advocated for the creation of a digital euro, calling on policymakers “to achieve a social consensus on how programmable digital money can be integrated into the existing financial system.”

The European Central Bank, as one would expect given the work of the German and French central banks, is assessing the potential for a CBDC. They have formed a working group consisting of the Bank of England, the Bank of Japan, the Sveriges Riksbank (Sweden), the Swiss National Bank, and the Bank of International Settlement. The European Central Bank makes the case for CBDCs as a means to address a “fragmented point-of-sale and online payments infrastructure.” The Bank looks to fulfill five objectives:

Full pan-European reach and a seamless customer experience
Convenience and cost efficiency
Safety and security
European identity and governance
Global acceptance in the long run

The ECB hopes that the private industry can offer a solution to these objectives, but is open to creating a CBDC if the need arises.

Further west of the European Union, the United Kingdom released a report examining the opportunities, challenges, and design for a British CBDC. The Bank of England showcased a possible CBDC model to “illustrate the key issues as a basis for further discussion and exploration of the opportunities and challenges that CBDC could pose for payments, the Bank’s objectives for monetary and financial stability, and the wider economy.” While the Bank has not yet determined whether to launch a CBDC, they look to define the key principles that a CBDC should address for monetary and financial stability.

The European CBDC effort is a means to improve the region’s financial system, particularly in the wake of Facebook’s Libra and other private company offerings. The European project was created to economically tie together a number of countries with a history of military conflict. Today, these countries transact with one another heavily and many are interconnected through the euro. The economic alliances already in play necessitate the exploration of CBDCs as a payment innovation that “would be good for the [European] financial center and its integration into the world financial system.” As François Villeroy de Galhau, Governor of the Bank of France, notes, “we as central banks must and want to take up this call for innovation at a time when private initiatives—especially payments between financial players—and technologies are accelerating, and public and political demand is increasing. Other countries have paved the way; it is now up to us to play our part, both ambitiously and methodically.”

The CBDC Horse Race

A Bank of International Settlements survey of 63 central banks found that 70% are engaged in CBDC work. Some are simply researching its opportunities, while others have or will create a digital currency. Emerging markets are leading the charge, seeing it as a means to improve payments infrastructure and promote financial inclusion as they digitize their economies. The implications are clear: CBDCs will play a critical role in shaping the future of digital payments.

Enter the digital currency horse race. The effects of CBDCs are magnified when linked to other countries. These connections create a fuller digital ecosystem that facilitates more efficient cross-border payments between individuals and institutions. The financial centers of the world see emerging markets up for grabs in the competitive expansion of cross-border digital payments networks. CBDCs serve as a weapon in economic competition. The major powers of the world have no wish to see a CBDC and digital payments design imposed upon them by another country.

Mu Changchun, deputy director at the People’s Bank of China says, “in the future, the process of digital currency issuance will be the way of horse racing, the leader will win the entire market; who is more efficient, who can better serve the public, who it will survive in the future; if a front-runner takes the lead in taking action, the technology they use will be adopted by other parties.”

Similarly, François Villeroy de Galhau, Governor of the Bank of France notes that “I see a certain interest to move quickly on the issue of at least a wholesale [CBDC] to be the first issuer at the international level and thus derive the benefits reserved for a reference [CBDC].”

German Finance Minister Olaf Scholz is most explicit: “such a payment system would be good for the [European] financial center and its integration into the world financial system…We should not leave the field to China, Russia, the U.S. or any private providers.”

CBDCs serve as an opportunity for governments to establish and export norms on the role of currency in society. These norms could set global standards for payments systems. As discussed in Part I, norms include: how/when CBDCs and digital currencies are used in daily transactions, privacy, consumer protection, accessibility/convenience, and the role of the central bank and other financial institutions. In their effort to export payments system values, advanced economies offer emerging markets and other players several opportunities:

Financial Ecosystem: Advanced economies can provide a large financial ecosystem for efficient domestic and cross-country transactions between individuals and institutions. This is particularly useful for countries engaging in significant amounts of trade and remittances, or for countries with lack of trust in domestic institutions. An example would be Belt and Road Initiative countries participating in a payments network led by China.
Technical Support: The IMF finds in their study that “various central banks surveyed plan to outsource CBDC development.” Whether central banks turn to private sector contractors for support or not, launching a CBDC requires technical expertise, digital infrastructure, and financial technology knowledge. Advanced economies can help emerging markets achieve technological leaps in their payments system. Specifically, they can offer support to emerging markets either in the form of letting other countries adopt an interoperable payments system managed by the advanced economy’s central bank and/or providing technical assistance to countries in the development process of a digital payments system.
Circumvent Sanctions: Advanced economies can establish cross-border payment processes with countries under international sanctions or terrorist groups to bypass the US dollar and SWIFT. The European Union, for example, could establish a CBDC payment link to Iran and circumvent United States sanctions. Advanced economies could also purchase digital currencies from sanctioned countries. Venezuela, for example, issued the petro so investors could “do an end run around sanctions imposed against their country by the Trump administration.”

CBDC and the New Currency: Data

In addition to serving as a means for establishing payment alliances and values, the exportation of CBDCs gives governments an even more powerful currency: data. While CBDCs would limit international oversight, central banks will have the ability to track CBDC payments. Transaction data would be centrally housed within the core ledger, giving governments the ability to monitor the economy and determine interventions. Privacy, however, is at risk. The central bank would be able to identify individual users and payment flows, making the anonymity currently offered by cash obsolete. Governments would be able to track payment flows domestically and internationally. As a result, governments could more effectively repress opposition groups or tacitly support the funding of terrorist organizations.

Furthermore, individuals and financial institutions of countries who have adopted another country’s CBDC-based payments system could see their financial transactions being tracked and collected. CBDCs would allow for an unprecedented level of intrusion by a foreign central bank, which would have visibility into transactions well beyond what is possible with the US dollar-based system. Similar to privacy concerns around private payment providers, CBDCs pose the heightened risk that a government is privy to payments information. As a result, the technical design of the ledger and CBDC system will need to be heavily examined to ensure a level of privacy that guarantees national sovereignty.

Missing in Action: The United States and the Need for a Global Voice

Unlike Bretton Woods, no clear voice has emerged to define the standards for CBDCs. The United States thus far has no plans to develop a CBDC. In a letter to Congress, United States Federal Reserve Chairman Jerome Powell writes that “the characteristics that make the development of central bank digital currency more immediately compelling for some countries differ from those of the US.” Given the robust payments landscape in the United States, Powell’s reasoning makes sense. The claim that United States does not need a CBDC at the moment is justifiable.

Missing in this assessment, however, is the need for a global voice on CBDC standards. In 1944, the United States helped usher in financial and economic stability by establishing a system of norms and values that the world could coalesce around. United States reticence this time around has created a vacuum in which countries are exploring CBDC design without a shared set of principles. Countries are establishing their own settlement systems and implementing laws and regulations for private sector payments to operate and innovate around. Furthermore, the vacuum in financial technology leadership is evident by the fact that the private sector is playing an increasingly important role in promoting payments system values for which governments are then forced to respond to after the fact. A key example is recent government responses against Libra.

Whether the United States decides to launch a CBDC or not, it must provide global leadership and support the development of a common set of values for other countries and private sector companies to operate around. The United States made some forays through its response to Libra, culminating in a request for Facebook to halt development. A stronger and more explicit stance is needed. Given the country’s role in global payments, as well as the fact that it houses a substantial portion of private sector innovation, the United States government (specifically Congress, the Federal Reserve, the Securities and Exchange Commission, and the Department of Treasury) should look to establish principles for others to embrace. Specifically, the United States must take on a leadership role to determine common norms around the following values:

The Role of Central Banks: wholesale vs. retail CBDCs and the role of central banks when it comes to allowing and restricting certain types of payments (e.g. terrorism)
CBDC Technology: the technical design for CBDCs, the core ledger, APIs, payment functionality, programmable money, cryptography, an account-based vs. token-based system, and interoperability across central banks
Consumer Protection: privacy and cybersecurity standards for CBDC-based payments systems (both public and private sector) to maintain resiliency, the extent to which central banks and digital payment providers can track payments and identify users, and public disclosure requirements for transparency and reporting
Financial Stability and Integrity: CBDC effects on the banking system, commercial bank deposits, and the implementation of monetary policy
Private Sector Innovation: the role of private sector in the overall payments ecosystem, their protocols, and integration with other providers
Financial inclusion: methods to ensure that CBDCs serve the most marginalized of communities without further entrenching social and economic inequality

Conclusion

Given the geopolitical implications and current US involvement, world leaders in the private and public sectors will need to:

Explicitly define international values for a digital payments ecosystem that protects users and ensures financial stability
Establish cross-border collaboration across central banks and government agencies on CBDC design, and bring in other countries currently not exploring CBDCs
Craft clear policies and regulations that delineate the role of private sector and public sector innovation in payments systems
Explore public-private partnerships to coordinate innovation and ensure that advancements support central bank efforts to manage the monetary system
Raise the voices of historically marginalized, underserved, and unbanked communities to ensure that new payment designs promote financial inclusion

The Atlantic Council GeoTech Center would like to thank Nikhil Raghuveera for serving as both Guest Author and lead author for this report. Nikhil is a dual degree MBA/MPA student at The Wharton School and the Harvard Kennedy School with a background in economic consulting, nonprofit consulting, cryptocurrency, and venture capital who will be graduating this May 2020.

Lakhani in i2i’s brief: COVID-19 & its impact on Pakistani startups

Atlantic Council — Wed, 22 Apr 2020 02:58:38 +0000

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Hruby in the Africa Report: Africa’s innovators vs the virus

Atlantic Council — Tue, 21 Apr 2020 20:26:55 +0000

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Lakhani in the Karavan Podcast: Kalsoom Lakhani of i2i Ventures

Atlantic Council — Sat, 18 Apr 2020 18:16:49 +0000

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Lakhani’s company i2i mentioned in Pioneer’s Post on supporting start-ups to scale up in Pakistan

Atlantic Council — Thu, 16 Apr 2020 17:03:00 +0000

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Event recap | How can tech help with crisis responses?

Corina LJ DuBois — Thu, 26 Mar 2020 13:00:16 +0000

On March 26, 2020, Mr. Matthew Putman, CEO Nanotronics and David Bray, Atlantic Council GeoTech Center Director participated in a live video discussion hosted by Michael Krigsman, Founder of CxOTalk title “How Can Tech Help With Crisis Responses?”

In this video, Matthew and David discuss the importance of innovation as a way of getting through crises, such as the current COVID-19 pandemic. They both highlight what private sector entrepreneurs can do in collaboration with public sector leaders. The discussion highlights the broad role of advances in additive manufacturing and 3D printing, data and AI, as well as distributed production and computing. The video concludes with the recognition that COVID-19 is catalyzing a global shift that was already happening away from centralized production to distribution production with connected digital and cognitive means to mirror the same output of a centralized production with the added advantage of being more resilient as a result.

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Pandemic Survival Strategies: A leadership guide for organizations wanting to weather the COVID-19 storm

Jason Wang (Guest Author) and David Bray, PhD — Tue, 24 Mar 2020 13:00:00 +0000

COVID-19 is impacting the global economy

Both of us witnessed the impacts of the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003, though from different perspectives. Jason was in East Asia and witnessed the fear and market collapse that happened then. He drafted this initial version of the guide. David meanwhile was in the U.S. with the Centers for Disease Control’s Bioterrorism Preparedness and Response Program and saw the outbreak from a public health emergency response perspective.

Fast forward to 2020 and now we have a global pandemic with effects that will change the way we work, live, and interact for some time to come. At the time of writing, some 20% of the world’s population find themselves under lockdown and the economic powerhouses of Europe and North America grapple with the realization that they are now the epicenter of the unfolding COVID-19 pandemic. The prospect of global economic depression looms.

While the pandemic is serious, however, we can and will get through this. This article is about more than business continuity planning for organizations, be they in tech or NGOs, that seeks to provide value to people. This guide is about good leadership in turbulent environments. If we act smart and if we are willing to invest in each other, we may all come out of this situation faster — and potentially stronger.

1. Your Team, Customers & Community

Let’s start by looking at the factors that have to do with your team, your customers and your community. Remember that these three groups do not exist in isolation (even when we are practicing social distancing) but are interconnected. This is why it’s important to remember that for every problem there exists a finite set of positive outcomes but an infinite number of negative ones. This is why we advocate “failing fast.” Agility and flexibility are key.

In times of crisis, this is when you invest in your team AND in your customers. It isn’t an either/or zero-sum game. After all, without your team, you can’t support your customers well. And without your customers — well, sooner or later you won’t have your team anymore. Give them all the support and leeway you can. Perhaps your employees will also be looking after their children during this time, which may also include being responsible for their schooling. Keep in mind your contractors, who will have it even worse. They will all require your help, your understanding, and your patience at this time. Activating the creativity of your employees to find solutions that work for them and you is your ace in the hole now. To do that you need effective and open communication.

Effective and open communication between all parties is of the utmost importance when transitioning to the work-from-home reality of social distancing. With everyone spread out, take nothing for granted in terms of making sure that everyone knows what is going on, and why. It is better to over-communicate and be transparent with your actions.

In terms of your responsibility to your team and community, stay up to date with and abide by the best practices with regard to the pandemic as defined by local and global health officials. Adopt conservative measures rather than taking unnecessary risks. If you look at the countries affected earlier by the pandemic, we are looking at a minimum of six months before the outbreak is brought under control. Presumptions of “two weeks and we’ll be back” are unlikely given that some nations have as yet been unwilling to recommend a lockdown. Provide whatever material (such as personal protective equipment) or logistical assistance you can to your employees, your customers, and your community.

2. Assess Your 360-Degree Exposure

To navigate the storm, you’re going to need to be as open-eyed as you can regarding your company’s exposure and where the greatest risks or liabilities are likely to come from. Examine the macro scenarios to your revenue, your supply chain, and your operations. This exposure analysis needs to expand beyond your company. You want to consider the impact of the crisis on your customers’ capital and operational expenditure as well. These are your market opportunities. How can your company help your customers be more efficient and profitable?

Plan for the worse by modeling the edge cases — the severity and duration of ongoing lockdowns, for instance, or the effectiveness (or not) of government attempts to keep the markets afloat. Use such extreme scenarios as a way to help you understand the range of operational options open to you. At the very least, as we’ve already mentioned, you can expect scenarios where a significant portion of your workforce will be working remotely. In preparation, you need to consider how you will ensure the confidentiality, integrity, and availability of key data and communications between employees. You will quickly need to invest in VPN connections, hardware and software keys necessary to secure your communications in such a way that you don’t lose your trade secrets.

3. Consider Your Liquidity

Liquidity is critical. Liquidity gives you the flexibility to respond in the rapidly changing situations as we endure the recovery and resurgence of COVID-19 cases in the months ahead. As with your exposure modeling, look at edge cases to determine when to define “red lines.” Undertake a thorough examination of your human resources, supply chain and inventory in order to conserve cash.

This is, again, also an area where having a customer-centric perspective is of vital importance. In your 360-degree exposure assessment, such a perspective should guide all your activities necessary to build trust and loyalty as both sides seek to meet the challenges posed by COVID-19. We reiterate: a zero-sum, I-win-you-lose mentality is a failing strategy. Look for “win-win” with your partners. You, your customers and your supply chain partners will rely on each other to keep things moving and maintain liquidity.

Make decisions to determine which of your resources need to be allocated on current AND future revenue. It’s important to bear in mind that as the pandemic runs its course there will be successive waves of infection and recovery. Make your plans accordingly and be strategic as you do so. Unexpected opportunities may arise and there is nothing wrong with pursuing a chance that comes your way. But make a judgment call on what impact it could have on team focus — or the chance of a negative cash flow scenario.

4. Fight the Good Fight (aka, Reject Paralyzing Fear)

Even the worst storm blows itself out eventually. The COVID-19 pandemic will not last forever, so plan for the recovery!

As Jason notes, did you know the word for crisis (危機, weiji) in Mandarin shares a common character with the word for “opportunity” (機會, jihui)? That character (機, ji) can be translated as a “turning point” or “crucial moment.”

As David also notes: It is the choices that we make as humans, choices in how we respond to the turbulence presented to us, how we learn + do + adapt to changing circumstances, and how we partner with others that can help move our world forward in a positive direction that ultimately shapes the future.

Choices in the turning points before us matter. Remember: “Fear is the mind-killer.” Stress-induced panic will lead you to second-guess your intuition and your judgment, bringing mistakes or what can be even worse, the paralysis of inaction. It’s often better to make a wrong decision than no decision at all. One adage to consider: FAIL isn’t failing, it’s the “First Attempt at Iterative Learning.”

The world is changing before us. As leaders, we don’t want you to be entirely risk-averse during this period. As leaders, you are hired to be risk-accepting and drive opportunity, right? The adage “nothing ventured, nothing gained” still applies. Leverage your exposure assessment and your customer relationship management to identify possible opportunities.

In the same vein, consider what kind of marketing and messaging you will need to catch the wave to recovery. Many businesses have started to do this already, so much so in fact that companies contacting their customers to tell them how they are handling the coronavirus crisis has become something of a source of online humor. If you can find something original or unique to say, this is an opportunity for you!

During every downturn, there is always an opportunity to leapfrog competitors. Ask yourself: Where can you invest in your people, your plant or your operations?

Jason Wang is a Guest Author and David Bray, PhD is the inaugural Director of Atlantic Council GeoTech Center

Be Benevolent,
Be Bold, and
Be Brave in our challenging times.

The COVID-19 pandemic will take some months to resolve and potentially longer. The world will certainly be changed by it. So treat it as an opportunity. We believe these suggestions offer the best chance to ensure that your startup will rise to meet the challenges of this crucial moment.

We all can lead. Positive “change agents” — individuals willing to work across sectors and nations to help illuminate better ways through the shared turbulence we are experiencing — are needed now more than ever. We hope you’ll join the good fight against the COVID-19 disruptions alongside us.

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People-centered design principles for AI implementation

Atlantic Council — Thu, 12 Mar 2020 03:45:36 +0000

At an event hosted by MIT’s Sloan Management Review, Dr. David Bray, Director of the Atlantic Council’s GeoTech Center, and Mr. R “Ray” Wang of Constellation Research discussed how organizations can adopt AI in a people-centered manner. Dr. Bray and Mr. Wang discussed how even those organizations that seem unrelated to AI in most cases will soon make use of the technologies.

AI allows organizations to make better, smarter use of their data, enabling more educated and efficient decisions. With this fact in mind, both speakers emphasized that all organizations must seriously consider their approach to using AI. Companies must ensure that the development of their AI tools does not come at the expense of people, both within and outside of their organization. Crucially, AI must be seen as a tool to augment human employees rather than an asset to replace them.

Watch the event to learn more about the people-centered design principles. This discussion was in Dr. Bray’s role as past roles as Visiting Executive in Residence at Harvard University and Executive Director for the People-Centered Internet coalition. This was prior to his start as the inaugural director for the Atlantic Council’s new GeoTech Center. The video was made publicly available by MIT’s Sloan Management Review.

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Dr. David Bray discusses with Brookings why Leaders must take risks and experiment

Atlantic Council — Wed, 11 Mar 2020 16:00:00 +0000

In discussion with the Brookings Institution, Dr. David Bray, inaugural director of the Atlantic Council’s GeoTech Center, discussed for public service the legacy idea that “leader’s can’t take risks or experiment” in government is an idea that needs to be retired for open societies to thrive in the future.

Specifically, Dr. Bray highlights three of what he calls 21st century realities:

Public service must include workspaces for those who want to experiment and explore new ways of delivering results.
Public service agencies need, within reason, to be allowed to have things fail, and be allowed to take risks.
Public service cannot be done solely by government professionals in a top-down fashion.

He note that in addition to inverting public service from top-down approaches to championing bottom-up change agents, public service needs to explore new ways of collaborating with the public and private sector.

This discussion was in Dr. Bray’s role as past roles and the post was made publicly available by the Brookings Institution.

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The pursuit of a people-centered Internet through artificial intelligence

Atlantic Council — Wed, 11 Mar 2020 13:30:00 +0000

The visionaries who created the Internet imagined the system as a new opportunity for the spread of democratization, participation, and global cooperation. However, the Internet has been involved in much of today’s discord, whether that be the spread of misinformation or the growing backlash against globalization. Dr. David Bray, the inaugural director of the Atlantic Council’s GeoTech Center, spoke on the Alldus’s AI In Action podcast series on the current state of the Internet and how it can be reshaped using AI to create a people-centered ecosystem that benefits everyone.

This discussion was in Dr. Bray’s role as past roles as Visiting Executive in Residence at Harvard University and Executive Director for the People-Centered Internet coalition. This was prior to his start as the inaugural director for the Atlantic Council’s new GeoTech Center. Watch the episode to hear Dr. Bray’s full discussion of his background and his vision for how AI development could reshape how we use the Internet.

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Reaching consensus on the future of data

Atlantic Council — Wed, 11 Mar 2020 13:00:00 +0000

At the October 2019 AIWorld Government conference, Dr. David Bray, inaugural director of the Atlantic Council’s GeoTech Center, presented a vision for a more equitable and democratic internet environment in the future. He and his partners at AIWorld are working to promote a people-centered Internet in which individuals retain ownership of their data and are able to make informed decisions regarding its use. This discussion was in Dr. Bray’s role as past roles as Visiting Executive in Residence at Harvard University and Executive Director for the People-Centered Internet coalition. This was prior to his start as the inaugural director for the Atlantic Council’s new GeoTech Center.

In this video, Dr. Bray highlights that without such intentional measures for encouraging data ownership, open societies threaten to devolve into surveillance states or systems of surveillance capitalism. Only through conversations in public fora like the AIWorld Government Conference can real consensus be achieved on the best way forward.

Watch the summary video and check out the conference’s website for more information on how AIWorld Government is working to create a data environment suitable for open societies.

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Atlantic Council launches GeoTech Center and Commission

Graham Lampa — Wed, 11 Mar 2020 13:00:00 +0000

President and CEO Frederick Kempe also announced high-level Atlantic Council GeoTech Commission; taps top technologist David Bray as founding director

WASHINGTON, DC—The Atlantic Council today launched the GeoTech Center, whose role will be to provide greater understanding of emerging technologies and to develop strategies and policies to ensure the use of “technology for good” among individuals, societies and the international community. The Center will focus on the impact of data and machine learning, personalized medicine, additive manufacturing, nanotechnology, green energy, commercialization of space, robotics, synthetic biology, and other new technologies on the horizon. The center is being launched with support from founding partners Accenture, SICPA, The Rockefeller Foundation, and Carnegie Mellon University, as well as corporate supporter Amazon Web Services (AWS).

“We are living in a time of rapid change, where new technologies like AI, blockchain, cloud computing, quantum computing and extended reality are changing how people work and live.”

John Goodman, chief executive officer of Accenture Federal Services

Atlantic Council President and CEO Frederick Kempe also announced the launch of the GeoTech Commission, a high-level group of experts that will study the trajectories of new technologies and report on policy actions to ensure the most beneficial outcomes for people, prosperity, and peace. The commission’s honorary co-chairs will be a bipartisan group of four leading members of the United States Congress: Senator Mark Warner (D-VA), Senator Rob Portman (R-OH), Rep. Suzan DelBene (D-WA), and Rep. Michael McCaul (R-TX). The commission’s report, which will be released later this year, will be timed to inform policy makers, legislators, and the general public in conjunction with US elections in November.

The GeoTech Center will be directed by David Bray, a leading technology strategist and public servant. Bray’s rich background ranges from private sector experience as a strategist for startups to US government positions that have included work at the Centers for Disease Control leading tech responses to the September 11 and anthrax attacks, as well as SARS. He also served as a senior advisor to the Department of Defense in Afghanistan and as executive director for the National Commission for the Review of Research and Development Programs of the US intelligence community. He most recently served as executive director of the People-Centered Internet coalition.

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“The next generation of technological change will have a more dramatic impact on how individuals live and work, how economies operate and how nations interact than any that has come before it,” said Kempe. “We hope that our new GeoTech Center, benefitting from the rich business and government experience of David Bray, will help us more successfully navigate a disruptive period ahead. Our aim will be to work with the Atlantic Council’s global community so that we can better tap the breathtaking potential of these new technologies to do good while at the same time recognizing the need to manage the inevitable downsides of such revolutionary change.”

Said Bray, “New technologies and data are tools. It is upon the choices we make, both as individuals and as communities, that ensure that they are used as a force for good in the world—and through the efforts of the new center and commission, we plan to help define what measurable good outcomes include. In a time of global turbulence and polarization, our mission is more important than ever. The GeoTech Team will champion positive paths for new tech and data that benefit people, prosperity, and peace globally.”

The GeoTech Commission will be comprised of a select group of prominent leaders from the private sector, academia, and government. Working together, the commissioners will explore how societies and markets characterize new technologies and data choices and their benefits to people, prosperity, and peace. The commission will also study how overall adoption of beneficial new technologies and data initiatives can be accelerated regionally, nationally, and globally. Aside from its congressional honorary chairs, its co-chairs will be John Goodman, Chief Executive Officer of Accenture Federal Services, and Teresa Carlson, Vice President of Worldwide Public Sector at AWS.

“We are living in a time of rapid change, where new technologies like AI, blockchain, cloud computing, quantum computing, and extended reality are changing how people work and live. We see public and private sector leaders focused on harnessing the impact of these technologies for their customers, their organizations, and their workforce,” said John Goodman, Chief Executive Officer of Accenture Federal Services. “Together, these innovations have broader implications on national security, economic competitiveness, and the vitality of society. Bringing together leaders across the public and private sectors to go beyond understanding these changes and working together to chart a path forward to make a positive impact in the world is why Accenture is proud to be a founding partner of the GeoTech Center.”

“We are excited to work with the GeoTech Commission on these important topics,” said Shannon Kellogg, Vice President of AWS Public Policy for the Americas. “Cloud technology plays a key role in driving digital transformation, and allows people, organizations, and governments to be more efficient and agile in accomplishing their missions and reinventing citizen services and experiences.”

Atlantic Council — Mon, 02 Mar 2020 21:03:09 +0000

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African Youth Survey launched

Africa Center — Wed, 26 Feb 2020 14:47:00 +0000

On Wednesday, February 26, the Africa Center hosted the Washington launch of the Ichikowitz Family Foundation’s inaugural African Youth Survey: the most comprehensive overview of youth perspectives in Africa to date. The report paints a picture of Afro-optimism, but also highlights the challenges of corruption and unemployment, while bringing to light interesting contradictions regarding opinions on climate change, democracy, and foreign influence.

Africa Center — Mon, 15 Jul 2019 19:45:34 +0000

On July 15, the Atlantic Council’s Africa Center hosted a discussion on China’s diversifying economic engagement in Africa, occasioned by the launch of Senior Fellow Aubrey Hruby’s latest issue brief, Deconstructing the Dragon: China’s Commercial Expansion in Africa.

Africa Center Director of Programs and Studies and Deputy Director Bronwyn Bruton introduced Hruby’s paper and welcomed participants.

Hruby summarized the changing nature of Chinese financing in Africa, contrasting the well-documented government-to-government lending model with China’s growing incursions into private equity, venture capital, and other investment mechanisms. She also highlighted many of the gains Chinese companies have made in telecommunications, security technology, and media sectors, advising US investors and policy makers to look beyond China’s traditional dominance in infrastructure to new priority areas. Hruby asserted that the United States must build out its commercial strategy toward Africa, using new tools such as the US International Development Finance Corporation to maintain the upper hand in areas of comparative advantage.

An interactive debate followed during which participants discussed the most effective ways to break down persistent barriers to trade in sub-Saharan Africa through new programs such as the Prosper Africa initiative, and the potential of the new African Continental Free Trade Agreement to facilitate American investment on the continent, particularly by small- and medium-sized enterprises.

Among those in attendance were H.E. Seydou Kaboré, ambassador to the United States of Burkina Faso; H.E. Mahamadou Nimaga, ambassador to the United States of the Republic of Mali; representatives from key US government agencies including the US Department of Commerce, US Department of State, US Department of the Treasury, Millennium Challenge Corporation, Office of the US Trade Representative, Overseas Private Investment Corporation, and US Agency for International Development; and members of the intelligence community as well as private equity and advisory firms working in African markets.

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Hard talk

Melinda Haring — Tue, 25 Jun 2019 18:11:33 +0000

“Some of the greatest Ukrainian patriots aren’t even Ukrainian,” the eminently quotable public intellectual Yevhen Hlibovotsky is fond of saying.

While he didn’t have John Sung Kim in mind, he might have. Kim, forty-five, is a wealthy Korean-American entrepreneur who built and sold two companies (one IPO, one all cash sale) in Silicon Valley before moving to Kyiv in 2016. He’s also an evangelist for Ukraine’s tech scene.

Kim is dead set on changing Ukraine by teaching engineers and entrepreneurs how to attract venture capital and build world-class startups. But that’s not all. He also wants to change the country’s mentality, from the short-term time horizons he sees everywhere to longer, big-picture thinking. When he can convince top talent to take a lower salary combined with equity in a company instead of just more cash, that will be a game changer for the country, he says.

There’s no shortage of raw talent in Ukraine. “The top 3 percent of talent in Ukraine is world-class,” Kim says over coffee in Kyiv. He says the country’s top engineers are good enough to work at Google and Facebook, and the second layer is outstanding, but with one caveat: “They lack soft skills.”

He has three things in mind when he talks about soft skills: business-level English, mannerisms and mentality, and work ethic. Plenty of engineers speak English well but most lack the right mannerisms and mentality, and their work ethic often stinks.

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Kim has been living in Kyiv for nearly three years and he knows what he’s talking about. He spends 90 percent of his time recruiting engineers for his company, JetBridge, a managed outsourcing and outstaffing company based in the capital.

One way Kim measures the health of the country and the time horizons of his recruits is through the “bread today, steak tomorrow” exercise. He asks interviewees if they can have bread today or steak tomorrow, which would they choose? In other words, “Would you like stock options in this company or $500 a month more with no equity?” He says that people in the East want the bread now because they don’t trust that the company will be there tomorrow; in the West, people say steak.

“In Silicon Valley, the mentality is ‘Keep the bread, keep the steak. In a month, I want the steak restaurant,’” he said. It’s a radical shift, but Kim is sure that once engineers start asking for equity in a company, Ukraine will massively change. Once they become owners, engineers will have a stake in the product—and that will affect their work ethic.

That thinking isn’t the only challenge he faces. The talent he talks to doesn’t prepare for meetings and tries to take notes on their phone if they take notes at all. Kim, who doesn’t glance at his phone for two hours while we talk, urges his students to use a paper notebook to maintain eye contact and to search someone online before an interview to see if he or she has written anything that might be the basis of a conversation. Ask intelligent questions and show an interest in the person, he said.

The quality that perhaps drives Kim the craziest, though, is the “Fine, forget it” approach. Entrepreneurs and engineers might pitch him for startup capital, but they never follow up or try again. He’s trying to retrain them to ask, “What metrics would you need to see for us to get another meeting?”

Very few startups in Ukraine have pitched him a second time, which he finds shocking. Persistence is the key to getting backed in Silicon Valley. And no one knows how to pitch. In Ukraine, pitches almost always open with a history lesson, rather than data or dates, which he said is a more effective way of getting to yes.

Kim says the hardest part of recruiting is finding people who will go above and beyond the expected forty-hour workweek. He always asks recruits how many hours they worked in their previous job, and no one has ever told him more than forty hours.

“Sometimes you’re going to have to show up on Saturday,” Kim says with a shrug. In Silicon Valley, they have a phrase for this: “Let’s bust it out over the weekend.” It means that a project requires everyone to pitch in and work all weekend to meet a goal. So far, Kim hasn’t seen many Ukrainians with this mindset. And most engineers have a side hustle; without a strict manager, engineers in Ukraine tend to stray from their day jobs.

In spite of his criticism, Kim doesn’t blame Ukrainian engineers for their lack of soft skills. “They don’t have role models,” he said.

Kim wants to be one of those role models. He isn’t making any money from his current company in Ukraine; anything he makes goes back into the business. He also teaches a class called “executive communication” at Taras Shevchenko University and is eager to connect venture capitalists in California with entrepreneurs in Ukraine.

He sees a huge reservoir of good, low-cost talent in Ukraine. The country hasn’t yet had a unicorn—a privately held startup company valued at over $1 billion—but he believes it’s only a matter of time and mentorship. He points to GitLab, whose competitor was acquired by Microsoft in 2018 for $7.5 billion, and the Ukrainian artificial intelligence startup People.ai valued at $500,000. No one has exited the market yet, though.

When he sold his second startup, DoctorBase, in 2015, he decided to take a break from fifteen years of pure grind and travel the world. “People make $10 million or more and they either buy a yacht or build a legacy,” he said. He opted to build a legacy, but wasn’t sure exactly where.

The jovial entrepreneur is from a Korean-American family, and Ukraine wasn’t on his radar at the time. But his co-founder is of Ukrainian heritage, so he agreed to visit. He was blown away by what he found—and it didn’t hurt that he fell in love with a Ukrainian woman.

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He now spends 50 percent of his time in Kyiv and 50 percent in San Francisco. JetBridge is registered in Delaware, because “it’s impossible for foreigners to work here,” as others have lamented. Kim says foreigners have three options: invest in a Ukrainian company and potentially lose one’s investment; marry a Ukrainian and wait for two years to get residency; or work for a Ukrainian company, pay taxes, and buy a fake address. Until the government reforms its courts and place of residence registration (propiska), the best option for foreign entrepreneurs who want to do business in Ukraine is to register their businesses abroad, Kim believes.

The endlessly energetic entrepreneur has more than just his Silicon Valley experience to draw on. He says that South Korea may offer some development lessons for Ukraine. The small country was not always an “Asian Tiger” economy or exporter of high-tech. Education played an enormous role in the country’s development. Years ago, the South Korean government set up programs that brought foreigners there to teach English, technology, and the arts. Since then, there’s been an explosion in dance, pop music, tech, and innovation. Ukraine has everything it needs to do the same thing, he said.

He wants his future Korean-Ukrainian-American children to look back at what he did in Ukraine and say, “Wow.”

Kim told his San Francisco-based business partners, “We have an opportunity to be Lewis and Clark in Ukraine; we can make a huge difference here,” he said.

Melinda Haring is the editor of the UkraineAlert blog at the Atlantic Council and a senior fellow at the Foreign Policy Research Institute. She tweets @melindaharing.

The IT sector has grown without any government intervention, and there is little room for corrupt practices, as IT companies have no need for quotas, subsidies, or licenses. The sector functions according to Western standards, and its employees, who work on common projects with their colleagues from the West, have adopted Western corporate attitudes in which there is zero-tolerance for corruption. Salaries are paid officially, including all taxes.

The IT sector, together with other sectors of the knowledge economy, has a chance of becoming a “Western oasis” in the Ukrainian economy: corruption-free but still ensuring significant economic growth throughout the country and creating jobs in related sectors. The new economy will not defeat corruption in the “old economy,” but it will gradually oust the old economy from the Ukrainian market, along with its corruption schemes.

The West can and should provide comprehensive support to the new leadership of Ukraine in building and nurturing this new economy. In any economic contacts with Ukraine’s new leaders, the West should draw Ukrainians’ attention to the longstanding problem of protecting intellectual property, provide technological support in introducing e-government in all government sectors, and demand the creation of a more favorable regime for Western investments in high-tech sectors of the Ukrainian economy. Along with the new economy, we will get a new Ukraine—a dynamically developing and less corrupt country that will be a more capable and realistic candidate for the European Union.

Anatoly Motkin is founder and president of StrategEast, a strategic center that reinforces the values of rule of law and private property protection in Eurasian and Baltic countries and assists them in the process of economic and social transformation.

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Investors and private equity experts on access to capital for women in African markets

Africa Center — Thu, 16 May 2019 19:49:58 +0000

On Thursday, May 16, the Africa Center hosted a discussion on women’s entrepreneurship and gendered barriers to raising capital in African markets.

Ms. Bronwyn Bruton, Africa Center director of programs and studies and deputy director, welcomed attendees, and Ms. Aubrey Hruby, Africa Center senior fellow, set the stage for a panel discussion that included Mr. Jake Cusack, managing partner at CrossBoundary, Ms. Berhane Demissie, managing partner at Cepheus Growth Capital, and Ms. Kathryn C. Kaufman, managing director for global women’s issues at the Overseas Private Investment Corporation (OPIC).

During the discussion, Kaufman gave an overview of OPIC’s new 2X Women’s Initiative, which has mobilized over $1 billion for businesses that are women-owned, led, and supported across the developing world. She underscored the extent to which Development Finance Institutions (DFIs) like OPIC are pushing each other to create gender-equitable change. She expressed hope that a coordinated effort will have outsized impacts in African markets, where private equity funds rely heavily on the DFI community to raise capital.

Cusack touched on his experience leading CrossBoundary, an investment firm specializing in fragile and frontier markets across much of the developing world, and elaborated on its success in achieving gender parity. He stressed that instead of implementing an artificial quota policy, the firm worked to improve its access to gender-diverse talent. Data shows that there is a positive correlation between gender balance and performance in emerging market private equity and venture capital investing, with gender-equitable funds receiving an internal rate of return about 20 percent higher than those that are male-centered. However, while talent is evenly distributed, Cusack noted, opportunity still is not.

Berhane discussed her experience building Cepheus Growth Capital, a private equity firm focused on small and medium-sized enterprises in Ethiopia. She stressed the value of ensuring that firms maintain gender diversity in their own leadership teams and in the companies in which they invest. She cited a recent International Finance Corporation report that sets a minimum of 30 percent men and women in leadership teams as a benchmark, but acknowledged that it is challenging in a market like Ethiopia where private equity is still a nascent asset class. She concluded that more forums are needed to facilitate women’s access to capital, especially those working in first-time funds.

An interactive question and answer period followed, during which the audience engaged panelists on the role of other US government agencies in advancing women’s entrepreneurship and ways to improve women’s access to capital in sectors that are particularly male-dominated, including energy and financial services.

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President Iván Duque Márquez: Colombia’s domestic and regional opportunities and challenges

Chloe Zoeller, Katherine Pereira & Camila Hernandez — Thu, 14 Feb 2019 22:53:23 +0000

On Thursday, February 14, His Excellency Iván Duque Márquez, president of the Republic of Colombia, discussed Colombia’s ambitious agenda for transitional justice, economic reform, and regional leadership. Duque, who was sworn in as president of Colombia in August 2018, was interviewed by CNBC Contributor Michelle Caruso-Cabrera. The Adrienne Arsht Latin America Center at the Atlantic Council hosted the event in conjunction with CSIS, AS/COA, the Inter-American Dialogue, and the Wilson Center. President Duque covered a wide array of topics, including:

Venezuela: The dialogue opened with the region’s most pressing issue: the Venezuela crisis. Duque made no reservations about criticizing Nicolas Maduro, stating that “this is the most brutal dictatorship in recent Latin American history.” He was firm that “amnesty is not an option” for Maduro, as he is a dictator who must be tried by the international criminal court. “Blocking humanitarian aid for me is a crime against humanity,” said Duque, adding that Colombia will continue to receive foreign aid intended for Venezuelans. Furthermore, he made a bold, clear request to members of the Venezuelan military to shift allegiance to the Venezuelan people and let aid in.

Most significantly, he expressed unwavering support for the Interim Government of President Juan Guaidó, commending the opposition’s efforts in the last six months to reclaim democracy for the Venezuelan people. Duque conveyed hope for progress in Venezuela, saying that “this is the first time in many years that the Venezuelan people are seeing light at the end of the tunnel.” He celebrated the international community for supporting Guaidó and asked China to reconsider its posturing on the issue. “I would respectfully invite [the Chinese] to support Juan Guaidó because it is important for Latin America…”.

US-Colombian Relations: Duque, fresh off his meetings with President Trump, expressed his commitment to work with Trump on issues of mutual interest, including counter-narcotics and support for Venezuela. He expressed reservations about military intervention, which the Trump administration has touted as a viable option for Venezuela. Otherwise, he articulated a shared vision between the two countries moving forward. He said he enjoyed the discussion with the US President and members of Congress and looked forward to deepening ties between the countries.

Counter-narcotics policy: Duque also discussed his administration’s plans for countering the narcotics trade in Colombia. He said that combatting the drug trade and organized crime requires a proactive, uncompromising stance against violence.

“In the last five years, we have jumped from 60,000 hectares to 200,000 hectares” of coca, said Duque, acknowledging a problematic increase in coca production in Colombia. “By 2023, we should reduce the number of crops by more than 60%, and we are working together [with the US] on achieving that”. He mentioned that his administration has already eliminated 60,000 hectares of Coca in just six months.

Duque’s plans to use a “360 type of approach” to eradicate drugs, drawing from a diverse array of tools and policies. When probed about whether the toolbox would include aerial fumigation, Duque referred to the Constitutional ruling in Colombia, which requires definitive proof that spraying does not negatively impact the health of individuals on the ground. He told the audience that he planned to engage in dialogue on the topic on March 6 at a hearing in Bogotá.

Duque also stressed the need to frame the conversation around issues of sustainable business outlets beyond coca production. “When Plan Colombia began in 1999, we had more or less 160,000 hectares of coca. We were able to reduce that size to less than 60,000 by 2012. That means that yes, we can be effective, but it also means that to be effective is not just a matter of eradication. We have to shift from illegal economies to legal economies,” said Duque. Ultimately, he said he “preferred to take the moral stand” on issues of drug production in Colombia, arguing for a “comprehensive way” of addressing the root causes of the issue.

ELN and political violence: When asked about the recent ELN bombing that killed 21 cadets in Bogotá and a general return to urban violence in Colombia, Duque was clear: “For me, it is the consequence of trying to be morally relaxed with violence.” His response was met with uproarious applause from the audience.

The President said that he fundamentally rejects violence as an approach to relations with the state, and that he will ensure that those responsible for acts of violence face justice. “Nothing justifies what they did,” said Duque. “No ideology justifies a kidnapping, a killing. No longer can terrorism be used as a way of expressing political ideas.”

Peace implementation: During his campaign for the presidency, Duque rejected the 2016 Peace Accords with the FARC signed by ex-president Juan Manuel Santos. Now, as President, Duque is committed to ensuring success in the reintegration of former FARC members, as well as to rebuilding conflict torn areas of Colombia. He said his administration has completed 19 projects to allow former combatants to sustainably reintegrate and has continued to push for stabilization and economic opportunities in the 117 municipalities most impacted by the conflict.

Duque said also pointed to a promising statistic: homicides have been reducing under his administration. “…I have given the Ministry of Defense and the military one big goal,” said Duque. “By the end of my administration, we will end up with the lowest homicide rate in the history of Colombia. Day by day, week by week, we are following those trends. We are working together, with all of the units—the judicial system primarily—to achieve those results.” He ended by stating that he aims to increase the number of victims with full reparation benefits by at least 35% by the end of his term in office.

Business, trade, and foreign investment: Duque, considered a friend of the private sector, made the following statement on economics and trade: “When you have too much market excess and the market does not have the right regulations, it ends up in a voracious capitalism.” He continued by saying that “the most important social program to sustain income is a formal job,” and indicated that he will open the market to more private investment in an effort to create more official jobs in Colombia. He explained that his tax reductions aim to incentivize private sector growth and thus job stimulation. “I truly believe that we need the private sector to generate employment,” said Duque.

He also commented on investment from foreign actors, most notably from China. “We need to have sound investment from the rest of the world,” said Duque. “If Chinese corporations want to invest in Colombia, they must follow the rules and if they do, they are welcome.”

Duque also addressed the status of exports in Colombia, which sit at 17% of total GDP. “The first thing I want is for exports as share of GDP to grow. I also want to diversify the trade basket,” he said. “76% of our exports are highly concentrated on 12-13 products, and we definitely need to diversify that.” He also said there is a need for creating accessibility to markets, and that Latin America needs to focus more on intraregional integration so that it is not profoundly dependent on external shocks. Along this vein, he proposed a continuance of the relationship between the Pacific Alliance and MERCOSUR.

Duque ended his time on stage with a commitment to more inclusive policies, especially toward those who have been disenfranchised and unheard in the peace process. “We want Afro-Colombians to actively participate in governance issues. For me,” said Duque, “it is important that we get a better representation in the government and in regional entities” by those groups who have otherwise been left behind.

The post President Iván Duque Márquez: Colombia’s domestic and regional opportunities and challenges appeared first on Atlantic Council.

Remes in McKinsey Global Institute: Smarter cities are resilient cities

Atlantic Council — Tue, 01 Jan 2019 17:25:00 +0000

The post Remes in McKinsey Global Institute: Smarter cities are resilient cities appeared first on Atlantic Council.

From Silicon Valley to Shenzhen: dollar exposures in Chinese fintech

Michael B. Greenwald — Fri, 21 Dec 2018 03:41:38 +0000

In the post-9/11 era, Washington has waged innovative campaigns against terrorism finance, sanctions evasion, and money laundering. Leveraging the United States’ heavyweight status in the international financial system, the US Treasury has isolated and bankrupted rogue regimes, global terrorists, and their enablers. As financial technology transforms global business, the traditional financial system faces new competition across a suite of offerings, ranging from brokerage services to peer-to-peer lending. In no area is this clearer than in mobile payments, where a global hegemony lies ready to exercise its weight, and it is not the United States.
Explosive Growth in Chinese Fintech

That hegemon is China, which has seen its tech giants, Alibaba and Tencent, transform the mobile payments landscape in China. With a lack of a sophisticated credit card market and an undeveloped consumer banking system, both firms’ platforms have experienced explosive growth, far outpacing their peers in Organization for Economic Cooperation and Development (OECD) countries. Today, Alibaba’s financial subsidiary, Ant Financial, commands a higher valuation than Goldman Sachs, while managing the world’s largest money market fund, Yu’e Bao.

Mirroring this trend, Tencent’s money market fund, Licaitong, has seen its assets triple in the past three years. This growth has been powered by its messaging app, WeChat, which enables consumers to perform activities, ranging from ordering groceries to scheduling dental appointments, in addition to normal social media functions. Earlier this year, its mobile payments subsidiary, TenPay, exceeded Alipay’s in terms of monthly active users, powered by the growing market for electronic wallets.

Chinese Equity Listings in the United States

With the emergence of these new players on the global arena, the United States’ economic statecraft must grapple with the inevitable prospect of competition. How can the United States effectively ensure that a Tencent or Alibaba is preventing terrorists listed under US sanctions from accessing their payments? In essence, how can the United States pressure platforms that exist outside of its jurisdiction?

Despite being publicly traded firms, neither Alibaba nor Tencent have mainland listings on either the Shanghai or Shenzhen stock exchanges. Alibaba’s stock is listed in New York, with its 2014 initial public offering (IPO) ranked as the largest in the New York Stock Exchange’s history, while Tencent is listed in Hong Kong, with a December listing of its subsidiary, Tencent Music. Other Chinese tech giants, like Baidu and JD.Com, as well as dynamic startups, like Qutoutiao and Nio, have listings in New York as well.

The underdeveloped characteristics of China’s mainland equity markets have been frequently highlighted. The dominance of these markets by retail investors, rather than by institutions, has contributed to significant bouts of volatility. IPO backlogs on these markets are massive, attributable to the government’s strict regulation, ostensibly to protect the interests of investors. Trading halts are frequently overused and abused by firms, reducing market efficiency and concerning global investors. As a result, major providers of benchmark indices, like MSCI and FTSE Russell, are reluctant to allow Chinese stocks into their indices.

Even New York’s closest rival, Hong Kong, lags behind in a number of key characteristics, despite its status as a hub for doing business in Asia. Reeling from its defeat for the Alibaba IPO, the exchange recently adjusted its rules to permit dual-class shares, which are popular in public tech firms. Though Hong Kong attracted large names in 2018, like Xiaomi and Meituan, its strict vetting procedures have placed it at a disadvantage to its peers. Hong Kong’s investors also have a noted preference for firms operating with stable cash flows, in contrast to the many loss-generating startups operating in the new economy.

Despite their lower name recognition, the New York market offers outstanding liquidity and high valuations for Chinese firms seeking to list abroad. In addition, many Chinese exchanges feature strict rules regarding profitability, mandating a firm be profitable prior to its listing, while New York has been much more accommodative, with Amazon being a prime example of this. With so many comparable tech giants already listed in New York, many Chinese firms have come to view it as a better listing location for this reason alone. Though worthy of attention, Hong Kong’s regulatory changes are simply too little, too late, to alter the calculus of many Chinese firms.

Simply put, American markets, in contrast to their peers in mainland China or Hong Kong, enjoy the marriage of mature financial infrastructure with sufficient liquidity. Moving forward, the observed affinity for American listings among Chinese tech firms creates a powerful asymmetric opportunity for policymakers seeking to address matters of sanctions enforcement.

Leveraging Listings to Support US Sanctions Policy

To ensure Chinese companies’ compliance in future sanctions regimes, these listings in US equity markets offer prime leverage for American policymakers. The threat of a delisting, typically only used in law enforcement against criminally-charged companies, could be an effective psychological tool to encourage Chinese CEOs to comply with US sanctions policy. At the same time, should these hard conversations not be effective, Washington should be ready to up the ante by targeting the personal assets of Chinese entrepreneurs, including their stock portfolios and US assets, in a bid to force the hand of senior management. Should this move be either ineffective or ignored, the United States could then explore the possibility of a debt/equity restriction, or even a full delisting, if the threat is great enough to warrant such extreme action. These measures would have a significant impact on Chinese firms, which would likely comply long before negotiations reached that stage.

It should be noted that Beijing has not ignored this asymmetric advantage in the hands of Washington. Earlier this year, the country’s regulators established the landmark China Denominated Receipt (CDR) program, which would enable Chinese firms listed abroad to establish listings on the mainland. However, this initiative has had a lackluster performance after initial enthusiasm in the spring.

These relate to an issue within the initiative, the first being convertibility. A denominated receipt would be redeemable for shares of the stock, but not trade the underlying shares themselves. Should a Chinese investor seek to redeem dollar-denominated shares of Alibaba or Baidu, it is a much more contentious debate of whether they will receive those shares than if they were receiving them in New York or in London. Should China’s securities regulatory agency, the CSRC, not allow for convertibility, large and volatile valuation gaps between CDRs and their foreign-listed shares could emerge, damaging market efficiency. More broadly, holding a CDR would also be more challenging in the long run, as secondary share offerings are much harder to execute in mainland markets than in New York. Beijing requires regulatory approval for all new share offerings, whereas a secondary share offering in other markets is typically laxer, requiring solely a mandate from investors at an annual meeting.

Xiaomi presents an effective case study in analyzing the potential downsides of the CDR market. Originally having targeted a $10 billion fundraise between its Hong Kong IPO and a mainland CDR listing, Xiaomi suddenly placed its CDR plans on hold. This was likely due to a combination of bearish market sentiment, strict vetting criteria in mainland markets, and the lack of finalized rules on convertibility. As it stands right now, HSBC may, in fact, be the first firm to tap the CDR market, allowing it to access mainland investors through the Shanghai-London Stock Connect.

With this episode aside, it is likely that the Chinese will try to challenge US financial supremacy by leveraging the combination of their sizable capital markets and advanced financial technology. However, by effectively utilizing the dollar’s role as a global reserve currency, the attractive liquidity of US markets, and the broader economic links between New York and Shanghai, Washington can build effective sanctions regimes in the future that account for these new trends.

Michael B. Greenwald is a fellow at Harvard Kennedy School Belfer Center. He is deputy executive director of the Trilateral Commission, senior adviser to Atlantic Council President and CEO Frederick Kempe, and adjunct professor at Boston University. From 2015-2017, Greenwald served as the US Treasury attaché to Qatar and Kuwait. He previously held counterterrorism and intelligence roles in the US government.

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Coming to life: Artificial intelligence in Africa

Aleksandra Gadzala Tirziu — Wed, 14 Nov 2018 14:00:42 +0000

Nonresident Senior Fellow

The rapid uptake of disruptive technologies in Africa, such as mobile and financial technologies, is prompting speculation among tech investors about whether artificial intelligence (AI) applications will also take root on the continent.

A new issue brief by Africa Center Senior Fellow Aleksandra Gadzala, “Coming to Life: Artificial Intelligence in Africa,” mostly throws cold water on the idea. She acknowledges that many African nations still lack the statistical capacity, infrastructure, and good governance necessary to see AI take off. However, in a select handful of countries, AI solutions are already being successfully deployed at scale. Gadzala surveys the state of AI in Africa and discovers what these successful investments have in common, and what African governments need to do to strengthen the ecosystem necessary to see these technologies flourish, focusing on ways to foster a culture of research and innovation, improve investment environments, and strengthen policy frameworks so African nations can reap the full benefits of AI.

This issue brief is part of a partnership between the Atlantic Council’s Africa Center and the OCP Policy Center and is made possible by generous support through the OCP Foundation.

Artificial intelligence (AI), which enables machines to exhibit human-like cognition, is unleashing the next wave of digital disruption. Global investment in AI skyrocketed to somewhere between $20 billion and $30 billion in 2016, with 90 percent of this spent on research and development and deployment, and 10 percent on AI acquisitions.¹ Investment has so far been dominated by digital giants like Google and Baidu, but private investors are also jumping in, fronting an estimated $4-$5 billion in venture capital in 2016, and another $1-$3 billion in private equity.² While many uses of AI are still in the experimental phase, commercial applications are already surfacing in a variety of sectors: AI systems filter emails, recommend items for purchase, provide legal advice, and drive cars.

The success of mobile technologies (tech) across Africa is prompting speculation among tech investors about whether AI applications will also take root in African nations. Mobile technologies, after all, have permitted African nations to dramatically increase their communication capabilities while leapfrogging the need for old-fashioned infrastructure. Will AI offer similar benefits?

Unfortunately, except in a handful of countries—namely Kenya, South Africa, Nigeria, Ghana, and Ethiopia—the application of AI is a chimera, not a reality. The critical factors necessary for the technology to take hold are woefully absent across most of the continent, and many African countries remain incapable of requisite reforms in the areas of data collection and data privacy, infrastructure, education, and governance. Without those reforms, there is little chance that most African nations will be able to exploit AI technologies to advance sustainable development and inclusive growth. The specter of automation threatens to leave these countries behind.

But there are a few African countries where the factors needed for the successful adoption of AI technologies are rapidly converging. In these nations, AI initiatives are still mostly small-scale, pilot, or ad hoc—but appear promising and have thus attracted significant backing from global corporations. This issue brief examines the obstacles to AI’s broader adoption across the African region and explores the enabling factors underpinning its promise in the handful of African countries where, despite significant challenges, AI ventures are enjoying early success.

Without those reforms, there is little chance that most African nations will be able to exploit AI.

An uneasy environment for AI

At its most basic, artificial intelligence uses algorithmic techniques loosely modeled on the human brain to enable machines to discover patterns, generate insights from the data to which they are exposed, and then apply those lessons learned to future decision making and predictions. AI, in the form of virtual assistants like Apple’s Siri or Amazon’s Alexa, uses algorithms to match single voiceprints against subsequent repetitions of the same phrase to learn and predict natural-language requests. Learning thermostats like Nest, which was acquired by Google in 2014 for $3.2 billion,³ also use behavioral algorithms to learn individual heating and cooling needs and adjust the temperature in the user’s home based on her personal preferences. AI is also now being used in more complex applications including the analysis of large genome sets in an effort to prevent diseases, and the mapping of human mobility patterns to predict and control humanitarian crises.

To perform such functions AI depends on robust digital foundations, which include the availability of large volumes of data—usually referred to as “big data.” Machines can analyze this data to learn, make connections, and arrive at decisions. But AI also relies on significant know-how among its human adopters: industry leaders must know how to successfully implement AI into their operations, and consumers must be comfortable with its use (and that includes a reasonable assurance of data privacy). With the exceptions of Kenya, South Africa, Nigeria, Ghana, and Ethiopia—where these factors are rapidly coming together on the back of other enabling factors—most African countries currently struggle to meet any or all of these requirements.

Source: The World Bank Databank, Statistical Capacity Indicator, http://datatopics.worldbank.org/statisticalcapacity/SCIdashboard.aspx.

Africa’s data challenge

The near-ubiquity of mobile phones—nearly one per person⁴—and the growing popularity of social media and messaging applications (apps) across Africa has made data more readily available. Governments, development programs like the World Bank’s “Listening to Africa” initiative, and market research companies increasingly rely on mobile phone surveys and user data to collect insights into local populations. Still, even in countries where AI holds promise, the quality, timeliness, and availability of data on critical indicators—data on births and deaths; growth and poverty; taxes and trade; health, schooling, and safety; and land and the environment—and the surrounding necessary data protections are often poor in quality or missing.⁵

Globally, Africa has the lowest average level of statistical capacity. Only half of African countries have carried out more than two comparable household surveys in the past ten years; just 29 percent have published household surveys with education data since 2005;⁶ and statistical capacity has, over the last fifteen years, declined more in Africa than in any other region of the world.⁷ The weaknesses of the data are expressed in the instability of even headline statistics like economic growth and population size. Nigeria’s recent switch to a new base year after a twenty-year delay led to a rebased estimate of gross domestic product (GDP) in 2013 that is approximately 89 percent higher than the earlier estimate for the same year, a figure the Economist described as “dodgy.”⁸ Projections of the country’s population—estimated to be the largest in Africa—are also based on census data that the former head of the National Population Commission has called inaccurate.⁹

Lacking or faulty data severely limits the efficacy of AI systems. Discrepancies between on-the-ground realities and data input into AI systems may cause systems to learn incorrectly, yielding erroneous outputs. Skewed input data additionally opens the door for the reproduction and even amplification of human biases and discrimination—an issue that is especially sensitive in countries like Ethiopia and Kenya where long-standing ethnic tensions continue to inform politics and business. Such drawbacks jeopardize the likely benefits to be derived from data sharing, or open access data, which is central to research and development and innovation. When in 2011 Kenya became the first sub-Saharan country to launch a national open data initiative and made public sector information digitally available, it was met with much excitement.¹⁰ The initiative faltered, however, as government ministries were reluctant to release data or the data that were released were poorly structured, outdated, or inconsequential. The initiative was redesigned and relaunched in 2015 with improvements in quality and an increase in the number of datasets available.

The push for more and better data across Africa is hamstrung by insufficient regulations to protect against data misuse and to ensure personal privacy. The African Union’s (AU) Convention on Cybersecurity and Data Protection encourages African governments to recognize the importance of data security and provides a framework for leaders to integrate into their respective legislations. Adopted by the AU in 2014, the Convention has yet to take effect as only ten out of the fifty-four AU member states have ratified it.¹¹ In Kenya, a data protection law has been making its way through parliament for the last six years; a recent draft was published in June 2018.¹² In Nigeria, personal privacy is de jure guaranteed by Section 37 of the constitution. De facto, the constitutional promise remains unsupported by comprehensive legislation—a data protection bill introduced in 2010 is still making its way through parliament—leaving citizens exposed to likely data abuses and rights violations. Data privacy groups worry that some governments may have a vested interest in obstructing such regulations in order to access citizen data—or that, if introduced, regulations may curb free speech.

A missing (knowledge) base for adoption

Concerns over data privacy are met with additional anxieties over automation and potential job losses resulting from the adoption of artificial intelligence solutions. According to the Oxford Martin School at the University of Oxford, 85 percent of Ethiopian jobs are at risk of being replaced by automation. In South Africa, the number is 67 percent and in Nigeria, it is 65 percent.¹³ Without a clear understanding of the potential advantages of AI solutions—the potential to improve monitoring and forecasting, optimize operations, develop targeted pricing and marketing solutions, and enhance user experiences, for example—and a workforce able to onboard and take advantage of AI solutions, demand for AI in most African countries is likely to remain low.

Education and skills training remain a critical challenge. The skills base of the continent’s workforce is lower than that of any other global region as indicated by the World Economic Forum’s (WEF) Human Capital Capacity Index, which reflects the percentage of a region’s workforce that has attained tertiary, secondary, and primary education as well as the percentage that has literacy and numeracy skills.¹⁴ Ethiopia is one of the lowest performers on the Index, fourth from the bottom (above only Senegal, Mauritania, and Yemen).¹⁵ Despite the fact that Ethiopian government spending on education nearly doubled between 2000 and 2013,¹⁶ improvements in youth literacy and student enrollment rates have been disappointing. Only one-fifth out of every 1,000 children who starts school advances beyond the eighth grade,¹⁷ and those who do progress learn on average only 40 percent of the material they are expected to master.¹⁸ Nigeria also ranks in the bottom twenty countries of the WEF index, at 114th out of 130 countries. With an estimated 10.5 million children out of school, Nigeria’s unenrolled rate is the highest in the world,¹⁹ and its primary and secondary school systems are largely failing.²⁰ Without significant improvements, neither Ethiopia nor Nigeria can hope to produce an AI-ready workforce, which must be well-versed in advanced digital skills and data science, and also in complementary disciplines like economics and psychology that become more important as more jobs become automated.

iCog Labs organized Africa’s first robot soccer match at Ethiopia’s Ministry of Science and Technology in March 2017. Photo Credit: iCog Labs

Companies also need employees with the technical skills necessary to understand the business case for AI and to successfully engage suppliers and consumers. This requires the ability to separate the excitement surrounding AI from its actual capabilities in specific, real-world contexts. It includes a pragmatic view of AI’s capabilities and limitations, which requires at least a high-level grasp of how AI works and how it differs from other conventional technologies. Even in “developed” markets, few firms have so far deployed AI at scale, as they remain uncertain of either the business case or the likely return on investment.²¹ In African countries where data ecosystem and infrastructure are wanting, and the workforce is not yet equipped with the skills necessary to adopt and advance AI solutions, the case for the widespread adoption of the technology is often even less clear.

Where AI succeeds

Significant hurdles notwithstanding, AI solutions are being successfully deployed at scale in some African countries and especially in Kenya, Nigeria, Ghana, Ethiopia, and South Africa. Most solutions currently target the financial services, agriculture, and healthcare sectors.

South Africa leads the continent in AI adoption with a robust ecosystem that includes numerous technology hubs, research groups, and forums like the AI Summit—which is sponsored by multinational companies including Intel, Salesforce, Amazon, and IBM—and Singularity University’s South Africa Summit. There are an estimated one-hundred-plus companies in South Africa that are either integrating AI solutions into their existing operations or that are developing new solutions using AI.²² Elsewhere, technology giants including IBM, Microsoft, Google, and Facebook are also making inroads. Google’s next AI research lab—its first in Africa—will open in Accra, Ghana, later in 2018. IBM operates AI-oriented research labs in Kenya and South Africa. In Kenya, IBM’s $100 million initiative, “Project Lucy,” an extension of the company’s supercomputer “Watson,” is working to address development challenges including healthcare, financial inclusion, water and sanitation, human mobility, and agriculture. Facebook opened its first African technology hub in Lagos earlier in 2018. Among the available training programs is a year-long AI Research Residency Program with the company’s AI Research Group.

Smaller, somewhat less coordinated efforts are also surfacing. iCog Labs is a privately operated AI research lab in Addis Ababa, Ethiopia. iCog Labs launched in 2013 with $50,000 and four programmers,²³ including the founder and chief executive officer of SinguarityNET, a global AI marketplace, and chief scientist of Hanson Robotics, the Hong Kong-based engineering and robotics company famed for its development of the interactive humanoid robot, “Sophia.” The venture provides a variety of AI research and development services for Ethiopian and international customers and educates young Ethiopians in computer coding, hardware, and entrepreneurship. Many of iCog Labs’ domestic pursuits align with the government’s development priorities, especially in the areas of education and agriculture. Like many emergent AI and technology ventures across the African region, iCog Labs reflects a forward-looking vision for the continent with an ever-more blurred line between public and private sector-led development solutions.

In Nigeria, a chatbot called Kudi AI is integrated into Facebook’s Messenger app, and facilitates mobile banking and payment services to users who may not have access to, or may be unfamiliar with, browser-based online banking but are comfortable with text-based messaging.²⁴ With over 5,000 users since its launch in 2017,²⁵ Kudi, which receives seed funding from the Silicon Valley incubator Y-Combinator, is among a growing number of AI-powered apps designed to extend financial services to underserved populations. In like manner, MomConnect, a chatbot initiated by South Africa’s National Department of Health, connects an estimated 1.8 million expectant mothers with pre-and post-natal services. Registered women are able to “chat” with the app and receive healthcare advice relevant to their pregnancy.²⁶ Delivering services is a big opportunity for AI in African markets—this includes social as well as commercial services. IBM launched its Watson Workspace, a messaging app designed to streamline corporate workflow, in Nigeria in August 2018. The app has been adopted by Descasio, Nigeria’s leading cloud services provider, to enhance its email services and improve employee collaboration.²⁷

AI ventures can succeed in select African markets when key enabling factors are in place.

The apparent success of these and other AI ventures in select African markets occurs in spite of numerous data, regulatory, and workforce challenges. Various factors conspire to facilitate this success, but several are especially key for fostering favorable AI environments in African countries.

Existing digital foundation

Early adopters of AI in developed economies tend to be companies that are advanced in their digital transformations and have the right assets in place in order to be able to effectively deploy the technology.²⁸ In African markets where AI is taking root, digital foundations in the form of widespread mobile phone penetration and established mobile technology solutions are also in place. Such foundations ensure a baseline of technological infrastructure—sufficient mobile and Internet connectivity—and consumer awareness and acceptance of technology-driven solutions on which AI providers can build trust and discover new avenues for consumer engagement.

Mobile phone penetration in Kenya, for example, is 94 percent;²⁹ almost a quarter of the country’s households have an Internet connection—among the highest in the developing world. In a population of about 48 million, there are at least seven million Kenyan Facebook accounts and another ten million on WhatsApp.³⁰ MPesa, the country’s mobile money transfer platform, today has the highest number of mobile money transactions in the world—equal to almost one-third of Kenya’s GDP.³¹ Such an environment makes it easier for AI providers to merge their solutions with existing ones. AI apps like UjuziKilimo, for instance, a precision farming app that uses machine learning and data analytics to help Kenyan farmers optimize their irrigation practices, relies on established SMS technology for its interface.³² In Nigeria, where mobile phone penetration is 84 percent,³³and technology start-ups attract on average $73,000 in investment³⁴ ventures pursuing the AI market also leverage existing mobile solutions. Ubenwa, a Nigerian startup working to detect birth asphyxia, uses inbuilt smartphone microphones and speech recognition algorithms to identify the condition based on the amplitude and frequency of an infant’s cry³⁵

AI companies in African markets with robust digital foundations are able to capitalize on earlier waves of technological innovation and to leverage existing technology providers as early adopters—chatbots for financial technology (fintech) platforms, for instance. They also have at their disposal consumers who are generally familiar with and open to innovative tech-driven solutions.

Government support

AI holds promise in countries where governments have made technology a national priority and are taking concerted measures to stimulate innovation and to improve data protection, research, and development. Kenya, Ghana, South Africa, Ethiopia, and Nigeria are the nations in which the efforts are most aggressive and advanced—and not surprisingly, they are the nations in which AI technologies are beginning to pay off.

The Kenyan Ministry of Information, Communication, and Technology (ICT), for example, has established an eleven-person “Blockchain and Artificial Intelligence Taskforce,” to explore how the technologies can best be used to advance the country’s development. With a three-month tenure, the team is to propose a fifteen-year roadmap with key milestones in 2027 and 2037.³⁶ In Nigeria, the government has similarly approved the establishment of an agency on robotics and AI for the southeast region. Generally regarded for its energy industry, the Nigerian southeast has long been one of the country’s most entrepreneurial areas. Over the last eight years, and with little fanfare, tech hubs and start-up communities have been burgeoning in areas outside of Lagos—Enugu, Abuja, Ibadan, Port Harcourt—diversifying Nigeria’s innovation landscape.³⁷ The new AI agency is a nod to this reality. It is also a likely effort to attract financing, as well as an encouraging sign that other building blocks necessary for AI to develop and scale are likely to follow.

A growing number of African governments are beginning to realize that they cannot on their own fulfill their development goals: commercial technology solutions will play a bigger role in fixing issues previously entrusted to government bureaucrats and aid agencies. Governments are also beginning to realize that for such solutions to prevail, critical regulatory and infrastructure bottlenecks must be eliminated or improved. Leaders in Ghana and South Africa have enacted comprehensive data protection legislation—two of only eleven sub-Saharan countries to have done so thus far.³⁸ Ghana’s 2012 Data Protection Act regulates how personal information is acquired, stored, and disclosed. The Protection of Personal Information Act, signed into law in South Africa in 2013, similarly introduces an overarching framework for processing personal information and sets up a supervisory function to ensure legislative compliance. Like Kenya, Ghana is one of the few African countries with an open data initiative. In order for technological innovations to be successful in the long term, progress and innovation in government policies is also necessary.

A culture of research and innovation

Among the reasons behind Google’s decision to locate its AI research lab in Ghana is the country’s “strong ecosystem of local universities”³⁹ and expanding network of technology hubs. Ghana has twenty-four tech hubs⁴⁰—the most in sub-Saharan Africa after South Africa (59), Nigeria (55), and Kenya (30)—ten public universities, and several private institutions, many of which maintain partnerships with universities around the world. For example, the Ghana Technology University College, which was founded in 2005 by Ghana Telecom, the national telecommunications company, has scholarly links to schools in the United States, Kenya, Germany, Denmark, South Korea, and the United Kingdom. It offers various degree programs, including a Master of Science in “Entrepreneurship and Technology.”⁴¹

Universities and tech hubs are key channels through which African countries can acquire, domesticate, and diffuse new technologies in the economy. Even more importantly, they are critical for identifying emerging technologies that can serve as a platform for producing new products and services to address local challenges. At the “Artificial Intelligence and Robotics Center of Excellence” at Addis Ababa Science and Technology University, researchers are developing AI-powered solutions for Ethiopia’s agriculture sector—flying insect robots, for instance, to assist with crop surveillance.⁴² Despite the country’s overall poor education, efforts are being made to develop science and technology skills. Ethiopia has over thirty official universities and around 130 polytechnics, most of which emphasize technology,⁴³ and many of which have collaborations with the country’s emergent tech hubs—Bluemoon, IceAddis, and Sheba Valley. Similar collaborations between South African universities and technology hubs haven proven to be strong drivers of AI innovation. The LaunchLab at Stellenbosch University, for example, successfully incubates student-led start-ups in areas including blockchain, fintech, 3D printing, and AI. Other notable South African AI initiatives include the Centre for Artificial Intelligence Research (CAIR), a joint initiative of the School of Mathematics, Statistics, and Computer Science at the University of KwaZulu-Natal and the Council for Industrial Research; the Computational Intelligence Research Group at the University of Pretoria; Robotics and Agents Lab at the University of Cape Town; and the Mobile Intelligence Autonomous Systems, which develops autonomous navigation systems.⁴⁴

Connecting universities with tech hubs promotes innovation in AI and other disruptive technologies by bringing together teaching, research, product development, and commercialization—functions that are often kept separate. The value in this approach is that it creates full value chains for specific AI solutions and connects key stakeholders through continuous interaction.

Global support

Most successful AI ventures in Africa are supported by global partnerships that facilitate either financing or know-how—or both. iCog Labs is backed by SingularityNET, two American AI firms, and Humanity+, an international organization focused on the ethical use of emerging technologies to advance human development. The technology behind Kudi AI is developed in Silicon Valley and deployed in Nigeria; UjuziKilimo is supported by a range of global organizations including the American venture capital firm, VillageCapital; MomConnect, an initiative of the South African government, has over twenty global and South African partners including US multinational Johnson & Johnson, which provides funding. A significant portion of the $560 million in venture capital financing to tech hubs across Africa comes from US and European investors⁴⁵ who rightly recognize the transformative potential of AI and other technologies across the region.

MomConnect is a chatbot offering maternal health information to around 1.8 million pregnant women in South Africa. Photo Credit: United Nations Foundation.

Conclusion

For now, opportunities for AI in Africa remain confined to a handful of countries where critical factors for success are quickly coming together to bypass outstanding challenges and bottlenecks. These factors are converging more gradually—or not at all—in other African countries. Despite enthusiasm about AI being able to help African countries “leapfrog” their economic development, progress in certain areas—in data availability and privacy; in skills and training; in digital infrastructure—first has to happen before AI can be meaningfully mastered and deployed. In the absence of such efforts, only a select group of African countries will likely advance toward sustainable development and inclusive growth while the rest will, as feared, be left behind.

Fellow

Aleksandra Gadzala Tirziu

Africa Center Scowcroft Center for Strategy and Security

Economy & Business Technology & Innovation

1 Jacques Bughin et al., “Artificial Intelligence: The Next Digital Frontier?,” (paper presented at the 2017 Viva Technology Forum, Paris, France, June 14, 2017), https://www.mckinsey.com/~/media/McKinsey/Industries/Advanced%20Electronics/Our%20Insights/How%20artificial%20intelligence%20can%20deliver%20real%20value%20to%20companies/MGI-Artificial-Intelligence-Discussion-paper.ashx.

2 Jacques Bughin et al., “Artificial Intelligence.”

3 Aaron Tilley, “Google Acquires Smart Thermostat Maker Nest for $3.2 Billion,” Forbes, January 13, 2014, https://www.forbes.com/sites/aarontilley/2014/01/13/google-acquires-nest-for-3-2-billion/#544ad9696ee2.

4 Sub-Saharan Africa: Ericsson Mobility Report, Ericsson, November 2016, https://www.ericsson.com/assets/local/mobility-report/documents/2016/ericsson-mobility-report-november-2016-rssa.pdf.

5 “Nigeria’s GDP: Step Change,” Economist, April 12, 2014, https://www.economist.com/finance-and-economics/2014/04/12/step-change.

6 Jean-Paul van Belle et al., The Africa Data Revolution Report 2016: Highlighting Developments in African Data Ecosystems, United Nations Economic Commission for Africa; United Nations Development Programme; Open Data for Development Foundation; World Wide Web Foundation, 2017, https://www.uneca.org/sites/default/files/uploaded-documents/ACS/africa-data-revolution-report-2016.pdf.

7 Florian Krätke and Bruce Byiers, The Political Economy of Official Statistics: Implications for the Data Revolution in Sub-Saharan Africa, PARIS21, December 2014, http://www.paris21.org/sites/default/files/PARIS21-DiscussionPaper5_0.pdf.

8 “Nigeria’s GDP.”

9 “Why Nobody Knows How Many Nigerians There Are,” Economist, June 20, 2017, https://www.economist.com/the-economist-explains/2017/06/20/why-nobody-knows-how-many-nigerians-there-are.

10 Claire Provost, “Kenya Opens Its Books in Revolutionary Transparency Drive,” Guardian, July 13, 2011, https://www.theguardian.com/global-development/poverty-matters/2011/jul/13/kenya-open-data-initiative.

11 Abdi Latif Dahir, “Africa Isn’t Ready to Protect Its Citizens Personal Data Even as EU Champions Digital Privacy,” Quartz Africa, May 8, 2018, https://qz.com/africa/1271756/africa-isnt-ready-to-protect-its-citizens-personal-data-even-as-eu-champions-digital-privacy.

12 Duncan Miriri, “Kenya to Publish Draft Data Protection Bill this Month: Minister,” Reuters, June 11, 2018, https://www.reuters.com/article/us-kenya-dataprotection/kenya-to-publish-draft-data-protection-bill-this-month-minister-idUSKBN1J71S5.

13 Carl Benedikt Frey et al., Technology at Work v2.0: The Future Is Not What It Used to Be, Citi GPS, January 2016, https://www.oxfordmartin.ox.ac.uk/downloads/reports/Citi_GPS_Technology_Work_2.pdf.

14 Ricard Samans et al., “The Global Human Capital Report 2017: Preparing People for the Future of Work” (paper presented at the World Economic Forum, Davos, Switzerland, September 13, 2017)., http://www3.weforum.org/docs/WEF_Global_Human_Capital_Report_2017.pdf.

15 Ricard Samans et al., “The Global Human Capital Report 2017.”

16 Dr. Jeffrey Sachs et al., Global Education Monitoring Report 2016. Education for People and Planet: Creating Sustainable Futures for All, United Nations Educational, Scientific, and Cultural Organization, September 6, 2016, http://unesdoc.unesco.org/images/0024/002457/245752e.pdf.

17 Education Sector Development Programme V, Federal Ministry of Education of the Federal Democratic Republic of Ethiopia, August 2015, http://planipolis.iiep.unesco.org/sites/planipolis/files/ressources/ethiopia_esdp_v.pdf.

18 Tom Gardner and Commentary, “Ethiopia’s Remarkable Education Statistics Mask a System in Crisis,” Quartz Africa, December 28, 2017, https://qz.com/africa/1163797/ethiopias-remarkable-education-statistics-mask-a-system-in-crisis.

19 “Overview: The Situation,” United Nations Educational, Scientific, and Cultural Organization, accessed September 5, 2018, https://www.unicef.org/nigeria/overview.html.

20 Feyi Fawehinmi and Commentary, “President Buhari’s Slips, Nigeria’s ‘Lazy’ Youth and a Looming Education Crisis,” Quartz Africa, April 22, 2018, https://qz.com/africa/1258991/nigerias-buhari-unemployed-youth-and-an-education-crisis.

21 Jacques Bughin et al., “Artificial Intelligence.”

22 Alexander Ferrein and Thomas Meyer, “A Brief Overview of Artificial Intelligence in South Africa,” AI Magazine, 2012, 99-101.

23 Thomas Lewton, “Futurists in Ethiopia are Betting on Artificial Intelligence to Drive Development,” Quartz Africa, June 13, 2018, https://qz.com/africa/1301231/ethiopias-futurists-want-artificial-intelligence-to-drive-the-countrys-development.

24 “Frequently Asked Questions,” Kudi, accessed September 5, 2018, https://kudi.ai/faq.html.

25 “Nigeria’s Kudimoney.com Applies for Banking License to Launch Country’s Online-Only Bank of the Future,” TechMoran, May 5, 2017, https://techmoran.com/nigerias-kudimoney-com-applies-banking-license-launch-countrys-online-bank-future.

26 Toby Shapshak, “South African Messaging Wonder MomConnect Launches on WhatsApp,” Forbes, December 4, 2017, https://www.forbes.com/sites/tobyshapshak/2017/12/04/african-messaging-wonder-momconnect-launches-on-whatsapp/#109c4ac27c3b.

27 Jumoke Akiyode-Lawanson, “IBM Introduces AI-Powered Solution in Nigeria,” Business Day, August 21, 2018, https://www.businessdayonline.com/companies/technology/article/ibm-introduces-ai-powered-solution-nigeria.

28 Bughin et al., “Artificial Intelligence.”

29 Third Quarter Sector Statistics Report for the Financial Year 2017/2018 (1st January – 31st March 2018), Communications Authority of Kenya, July 2018, http://www.ca.go.ke/images/downloads/STATISTICS/Sector%20Statistics%20Report%20Q3%202017-18.pdf.

30 Nanjala Nyabola, “Kenya’s Technology Evolved. Its Political Problems Stayed the Same,” MIT Technology Review, August 22, 2018, https://www.technologyreview.com/s/611833/kenyas-technology-evolved-its-political-problems-stayed-the-same.

31 Nyanjala, “Kenya’s.”

32 “UjuziKilimo: Farm Specific and Actionable Advice by SMS,” UjuziKilimo, accessed September 5, 2018, http://www.ujuzikilimo.com/sms.html.

33 Adeyemi Adepetun, “Nigeria’s Mobile Phone Penetration Hits 84 Per Cent,” Guardian Nigeria, March 16, 2018, https://guardian.ng/business-services/nigerias-mobile-phone-penetration-hits-84-per-cent.

34 Matthew Green, “Nigeria’s Booming Start-up Scene Draws Foreign Investment,” Financial Times, November 6, 2017, https://www.ft.com/content/ffb3b3f8-a511-11e7-8d56-98a09be71849.

35 .“Overview,” Ubenwa, accessed September 5, 2018, http://ubenwa.com/index.html#overview.

36 Rachael Odhiambo, “Kenya Launches Blockchain and Artificial Intelligence Taskforce,” BitcoinAfrica, March 1, 2018, https://bitcoinafrica.io/2018/03/01/kenyablockchain-and-artificial-intelligence-taskforce.

37 Paul Adepoju, “Why Nigeria’s Newest Start-ups are Sprouting Outside the Megacity of Lagos,” Quartz Africa, September 21, 2015, https://qz.com/africa/506450/why-nigerias-newest-start-ups-are-sprouting-outside-the-megacity-of-lagos.

38 The eleven countries are Angola, Benin, Burkina Faso, Gabon, Ghana, Côte d’Ivoire, Lesotho, Madagascar, Mali, Senegal, and South Africa.

39 “Google AI in Ghana,” Google Africa Blog, June 13, 2018, https://africa.googleblog.com/2018/06/google-ai-in-ghana.html.

40 Abdi Latif Dahir, “Africa’s Newest Startup Hubs are Expanding Beyond Its Legacy Tech Markets,” Quartz Africa, March 21, 2018, https://qz.com/africa/1234168/africas-newest-tech-hubs-are-in-senegal-ghana-cote-divoire-zimbabwe-uganda.

41 “MSc Business Entrepreneurship and Technology,” Ghana Technology University College, accessed September 5, 2018, http://site.gtuc.edu.gh/msc-business-entrepreneurship-and-technology.

42 “The Artificial Intelligence & Robotics Center of Excellence,” Addis Ababa Science & Technology University, accessed September 5, 2018, http://www.aastu.edu.et/research-and-technology-transfer-vpresident/the-artificial-intelligence-robotics-center-of-excellence.

43 Christina Galbraith, “Artificial Intelligence Catches Fire in Ethiopia,” Huffington Post, August 26, 2015, https://www.huffingtonpost.com/techonomy/artificial-intelligence-c_b_8043974.html.

44 Alexander Ferrein and Thomas Meyer, “A Brief Overview.”

45 Yomi Kazeem, “Startup Venture Funding Jumped More Than 50% in Africa Last Year to a Record High,” Quartz Africa, February 21, 2018, https://qz.com/1211233/how-much-did-african-startups-raise-in- 2017-partech-disrupt-africa.

The post Coming to life: Artificial intelligence in Africa appeared first on Atlantic Council.

Coming to life: Artificial intelligence in Africa

rcasberg — Wed, 14 Nov 2018 14:00:42 +0000

Nonresident Senior Fellow

This issue brief is part of a partnership between the Atlantic Council’s Africa Center and the OCP Policy Center and is made possible by generous support through the OCP Foundation.

Without those reforms, there is little chance that most African nations will be able to exploit AI.

An uneasy environment for AI

Source: The World Bank Databank, Statistical Capacity Indicator, http://datatopics.worldbank.org/statisticalcapacity/SCIdashboard.aspx.

Africa’s data challenge

A missing (knowledge) base for adoption

iCog Labs organized Africa’s first robot soccer match at Ethiopia’s Ministry of Science and Technology in March 2017. Photo Credit: iCog Labs

Where AI succeeds

AI ventures can succeed in select African markets when key enabling factors are in place.

Existing digital foundation

Government support

A culture of research and innovation

Global support

MomConnect is a chatbot offering maternal health information to around 1.8 million pregnant women in South Africa. Photo Credit: United Nations Foundation.

Conclusion

Fellow

Aleksandra Gadzala Tirziu

Africa Center Scowcroft Center for Strategy and Security

Economy & Business Technology & Innovation

2 Jacques Bughin et al., “Artificial Intelligence.”

4 Sub-Saharan Africa: Ericsson Mobility Report, Ericsson, November 2016, https://www.ericsson.com/assets/local/mobility-report/documents/2016/ericsson-mobility-report-november-2016-rssa.pdf.

5 “Nigeria’s GDP: Step Change,” Economist, April 12, 2014, https://www.economist.com/finance-and-economics/2014/04/12/step-change.

8 “Nigeria’s GDP.”

9 “Why Nobody Knows How Many Nigerians There Are,” Economist, June 20, 2017, https://www.economist.com/the-economist-explains/2017/06/20/why-nobody-knows-how-many-nigerians-there-are.

15 Ricard Samans et al., “The Global Human Capital Report 2017.”

19 “Overview: The Situation,” United Nations Educational, Scientific, and Cultural Organization, accessed September 5, 2018, https://www.unicef.org/nigeria/overview.html.

21 Jacques Bughin et al., “Artificial Intelligence.”

22 Alexander Ferrein and Thomas Meyer, “A Brief Overview of Artificial Intelligence in South Africa,” AI Magazine, 2012, 99-101.

24 “Frequently Asked Questions,” Kudi, accessed September 5, 2018, https://kudi.ai/faq.html.

28 Bughin et al., “Artificial Intelligence.”

31 Nyanjala, “Kenya’s.”

32 “UjuziKilimo: Farm Specific and Actionable Advice by SMS,” UjuziKilimo, accessed September 5, 2018, http://www.ujuzikilimo.com/sms.html.

34 Matthew Green, “Nigeria’s Booming Start-up Scene Draws Foreign Investment,” Financial Times, November 6, 2017, https://www.ft.com/content/ffb3b3f8-a511-11e7-8d56-98a09be71849.

35 .“Overview,” Ubenwa, accessed September 5, 2018, http://ubenwa.com/index.html#overview.

38 The eleven countries are Angola, Benin, Burkina Faso, Gabon, Ghana, Côte d’Ivoire, Lesotho, Madagascar, Mali, Senegal, and South Africa.

39 “Google AI in Ghana,” Google Africa Blog, June 13, 2018, https://africa.googleblog.com/2018/06/google-ai-in-ghana.html.

41 “MSc Business Entrepreneurship and Technology,” Ghana Technology University College, accessed September 5, 2018, http://site.gtuc.edu.gh/msc-business-entrepreneurship-and-technology.

43 Christina Galbraith, “Artificial Intelligence Catches Fire in Ethiopia,” Huffington Post, August 26, 2015, https://www.huffingtonpost.com/techonomy/artificial-intelligence-c_b_8043974.html.

44 Alexander Ferrein and Thomas Meyer, “A Brief Overview.”

The post Coming to life: Artificial intelligence in Africa appeared first on Atlantic Council.

The future of development finance

Aubrey Hruby — Mon, 05 Nov 2018 19:44:42 +0000

pdf download

Growing anxiety about China’s dominance of emerging markets spurred a rare bipartisan effort to pass the Better Utilization of Investments Leading to Development (BUILD) Act of 2018. The BUILD Act delivers a needed overhaul of US development finance capabilities and commercial diplomacy by subsuming the Overseas Private Investment Corporation (OPIC) and other development finance agencies into a single, streamlined entity: The United States International Development Finance Corporation (USDFC). The USDFC will provide policymakers with new tools for supporting US commercial diplomacy and promoting US corporate success in fast-growing foreign markets, including equity and grant making capabilities.

The BUILD Act has big implications for African markets, in which demographic growth has fueled an employment crisis and funding for entrepreneurial ventures remains painfully limited. A new issue brief by Africa Center Senior Fellow Aubrey Hruby, “The Future of Development Finance,” suggests that the new USDFC can catalyze job creation and conflict-prevention efforts while countering China’s rise – but only if policymakers create an agency prepared for future market realities. The USDFC, she writes, has to be able to tap into opportunities in the informal marketplace, despite the inherent risks and transaction costs; fast-track the development of business ecosystems and trust; and make the fundraising process more efficient for private equity firms. Hruby also recommends that the new USDFC should prioritize investments in areas of US competitiveness, such as finance, management services, and entertainment, rather than in Chinese-dominated sectors such as infrastructure.

With over 80 percent of future growth emanating out of emerging markets, the BUILD Act is poised to offer US companies a competitive boost that they desperately need. Hruby’s brief offers the policy makers tasked with creating the USDFC with a practical outline for creating a development finance institution capable of capturing the accelerating returns of the African marketplace.

Introduction

Rising competition from China in emerging markets has finally shaken the United States out of its complacency towards development finance and commercial diplomacy, creating a welcome new willingness on the part of US policy makers to innovate in enhancing the tools available to support US corporate success in fast-growing foreign markets.

The Better Utilization of Investments Leading to Development (BUILD) Act of 2018, which passed into law in October, is an important first step towards rebalancing US commercial diplomacy. It establishes a new government agency, the United States International Development Finance Corporation (USDFC),¹ that will subsume the Overseas Private Investment Corporation (OPIC) and authorizes the transfer of some facilities from the US Agency for International Development (USAID), namely the Development Credit Authority (DCA), the Office of Private Capital and Microenterprise (OPCM), and enterprise funds.²While both OPIC and enterprise funds have generated healthy returns for the Treasury, an updated approach that streamlines efforts and combines more flexible financing options will help boost commercial returns and support US national security interests.³Smart power⁴programs that generate economic activity can support conflict-prevention efforts while providing economic opportunities in emerging markets.

The USDFC will allow US policy makers to formulate a twenty-first-century free market approach to development finance. It will continue to focus on helping US businesses invest in low-income and lower-middle-income economies, but will do so more effectively than OPIC has done by expanding current capabilities in five ways:⁵

Raising the contingent liability cap to $60 billion over the next five years, which represents a doubling of OPIC’s current $29 billion lending cap.⁶
Permitting minority equity investments of up to 30 percent of total equity in any given project (the USDFC has a total limit of 35 percent equity of the agency’s total investments).
Providing technical assistance and grants for advisory services, project studies, and project promotion.
Allowing products to be denominated and repayable in a foreign currency, not just US dollars.
Replacing the “US nexus” with a “US preference” allowing for more flexibility for the USDFC to invest in innovative structures and market-interested players.

These new capabilities will provide greater support to US companies and investors seeking opportunities in historically risky markets. Nowhere is this more critical than in Africa.

Sub-Saharan Africa is the second-fastest-growing economic region globally (after South Asia), and many countries have made steady progress in addressing some of the key socioeconomic challenges. But growth is continually undermined by a huge unmet demand for infrastructure— particularly for energy and transport, consumer goods, and services in education and healthcare. Fortunately, most development finance institutions (DFIs) and foreign investment agencies, especially those in Europe and Asia, have already woken up to these trends and are helping the private sector to take advantage of the opportunities they present. African markets currently constitute 27 percent of OPIC’s portfolio and that share is slated to rise given the growth trends on the continent and the expanded USDFC budget cap.⁷ The ability to provide loans in local currencies will also enable the USDFC to be more in tune with local economic conditions, provide lower cost capital, and take a more long-term position in the markets.

This issue brief provides a snapshot of the DFI competitive landscape within African markets, discusses the key components of development finance, outlines the future challenges for DFIs, and offers recommendations to US policy makers charged with making the new USDFC a reality.

A snapshot of development finance institutions in Africa

Emergence of DFIs

Modern DFIs evolved from one of the central pillars of the Marshall Plan: addressing a clear market failure with government-provided insurance to private US investors to protect against the risks faced in post-war European markets. This political risk insurance was expanded in the 1950s to cover a larger spectrum of risks, from currency convertibility to expropriation.⁸ By the late 1960s, US policy makers had recognized the need to form an agency specialized in political risk insurance in an ever-expanding set of countries; they created OPIC in 1971.

For almost fifty years, OPIC and its sister institution, the US Export-Import Bank, have been central vehicles for US commercial diplomacy. OPIC was established with an initial portfolio of $8.4 billion in political risk insurance and $169 million in loan guarantees under the Richard Nixon administration, with a mandate to help US firms invest in sound business ideas in emerging markets with weak institutions.⁹ By participating alongside the private sector in accessing high risk–high return opportunities, OPIC, at its core, has been self-sustaining. It has returned almost $4 billion back to the US Treasury in deficit reduction over the last ten years, supported over $80 billion in US exports, and created 280,000 American jobs.¹⁰

OPIC does this by providing firms with risk-mitigating tools, such as political risk insurance and debt investment in private equity (PE) funds. But, while relatively large in capitalization, OPIC was built with limitations that have hamstrung its capacity to innovate and made it unable to effectively compete with its developed country counterparts. These limitations include its dependence on debt investments and dollar-based lending. Still, despite these constraints, OPIC has delivered benefits to the US economy and paid development dividends abroad.

With the exception of Britain, which formed its Colonial Development Corporation (CDC Group) in 1948

¹¹ to help advance agricultural development in the wake of World War II, many European countries also created their DFIs in the late 1960s and early 1970s. A combination of Cold War thinking, post-independence colonial patronage, and a desire to be part of the East Asian growth story of the 1970s motivated the formation of over a dozen DFIs and microfinance organizations in this period. Across the board, these institutions typically provide credit, equity, and a wide range of capacity-building programs to companies, small businesses, and early-stage funds whose financial needs are not sufficiently served by private banks or local capital markets.¹²

DFI finances

Most DFIs are funded through annual contributions from national governments, which ensures their creditworthiness. At their core, most DFIs are lenders with debt dominating their portfolios. The great exception is the United Kingdom’s CDC Group: 70 percent of its commitments have been in equity.¹³ To date, DFIs have generally focused on finance and infrastructure projects. OPIC provides the most financing for utilities (largely the result of the Barack Obama administration’s Power Africa initiative).¹⁴ A breakdown of the portfolios of the best-known DFIs is shown in Table 1.¹⁵

DFIs’ role in Africa’s growth story

African projects and deals claim the largest regional share of DFI portfolios. Between 2012 and 2016, sub-Saharan Africa received the most commitments ($14.2 billion), followed by East and South Asia ($10.5 billion) and Latin America ($10.2 billion).¹⁶ The $14 billion allocated in 2016 was nearly six times the amount allocated in 2005, and the proportion of funds allocated to Africa in overall DFI portfolios has also been growing. In the last fifteen years, it has risen from less than a quarter to roughly a third of the European DFIs’ consolidated portfolio. OPIC is also very active in the region: In 2017, sub-Saharan Africa accounted for 27 percent of its portfolio. The current portfolio is $6.1 billion across 128 projects.¹⁷

Comparing the development finance activities of non-European countries with those of the traditional DFIs is difficult given the vastly different approaches taken by the newer cadre of investors in sub-Saharan African markets (including China, India, Turkey, Morocco, and Israel). What these new players have in common is their aggressive use of financial activities as central to their commercial diplomacy and foreign policy.

No country has invested more in commercial diplomacy over the past decade than China. Fueled in large part by its desire to find natural resources and to sustain corporate profits, China has over the past two decades transformed its formerly negligible economic ties to Africa. It is now the continent’s biggest financier, accounting for 14 percent of Africa’s total debt stock.¹⁸ (This figure understates China’s hold on Africa’s fastest-growing economies: Beijing, for example, holds over 72 percent, or $5.32 billion, of Kenya’s bilateral debt).

¹⁹ Through the China-Africa Development Fund and export-import banks, China has supported the development of over three thousand critical infrastructure projects.²⁰ At the most recent Forum on China-Africa Cooperation, held in September, Beijing announced an additional commitment of $60 billion over three years to African countries.²¹

By offering debt that often does not meet the Organisation for Economic Co-operation and Development’s concessionality terms, China has been able to fill gaps left by multilateral financial institutions and Western DFIs, which often have stringent economic, social, and governance criteria. China’s aggressive approach has produced dramatic increases in the number of Chinese firms doing business in Africa; annual two-way trade is now over $200 billion.²² McKinsey & Company, a global consulting firm, estimates that there are now over ten thousand mainly private Chinese companies of all sizes operating in all sectors of African markets.²³ While China makes a show of announcing new programs and additional funds to support Chinese companies in Africa at a pageant-like triennial summit, US commercial diplomacy has stagnated. It still relies on the African Growth and Opportunity Act (a nonreciprocal trade agreement granting duty-free access to the US market for certain products), a hamstrung Export-Import Bank, and OPIC (which is limited to using only debt tools) as the foundation of its commercial relationship with Africa. The creation of the USDFC throws open a new door to innovation in development finance for the United States and will finally begin to level the playing field.

Key functionalities and best practices

DFIs are pivotal catalysts of growth in underserved economies, but they also promote the interests of their own governments and domestic businesses.

The BUILD Act articulates three main principles that will guide USDFC activities: additionality, meaning that DFI interventions must not crowd out private capital; the need to be catalytic by leveraging the capacities of the private sector and partnering with like-minded institutions; and alignment with US foreign policy strategic objectives.

Tool of commercial diplomacy

The United States has had a history of purporting to align its commercial interests with developmental and national security goals, but mostly falling short of creating robust commercial diplomacy capacities. A few bright spots—the Marshall Plan and US support provided to the fledgling private sectors of the former Soviet Union—demonstrate how measured capitalism can help foster democracy and political stability.

A core pillar of the Donald Trump administration’s National Security Strategy (NSS), and its America-first focus, is focused on regaining economic competitiveness as a basis for US power going forward.²⁴ The NSS makes explicitly clear what has long been intrinsically understood— that economic strength is the foundation of geopolitical strength—and calls for upgrading “diplomatic capabilities to compete in the current environment and embrace a competitive mindset.”²⁵Through its ability to generate economic activity in underserved markets, the newly created USDFC has an important role to play in smart power programs that help prevent conflict, create jobs, and deliver returns for the domestic economy.

Risk mitigation in underserved markets

The USDFC will prioritize activities in less developed countries, as defined by the World Bank.²⁶

There is no doubt that DFIs—by acting as first-movers and providing tools to reduce risk and unlock private capital flows—play a catalytic role in underserved markets.

DFIs are evolving away from the monoline provision of political risk insurance and increasingly seek to provide a comprehensive tool kit that is still aimed at mitigating political and regulatory risk, but also addresses counterparty credit risk and currency risks.

Currencies in emerging markets are often volatile and suffer from double-digit inflation. Resolving foreign exchange risks is vital for unlocking private equity flows into emerging markets by ensuring returns are not erased at exit when profits are translated back into dollars. According to the African Private Equity and Venture Capital Association’s review of private equity in Africa, 63 percent of fund managers found currency fluctuations to be the most important macroeconomic risk when investing in African markets.²⁷ DFIs have an important role to play by developing cost-effective ways to support investors in managing currency risks.

The four main risk mitigation tools relevant to African markets are summarized in Table 2.²⁸

Seeding private equity funds

DFIs have played a central and catalytic role in the creation of the African private equity industry. In the late 1990s, European DFIs, along with the IFC, began helping to seed private equity funds focused on African markets with equity. As one of the first to move in 1995, FMO started actively working with local partners and commercial banks to create small and medium-sized enterprise (SME) funds via the Dutch government’s Seed Capital Fund.²⁹ Technical assistance was also provided to train local investment managers. In that way, the DFI capital started to unlock other pools of money, including from institutional investors and private individuals looking to invest in African funds.

It is hard to overstate the importance of DFIs to the private equity industry. In 1997, there were twelve funds with a total of $1 billion³⁰ and today there are well over two hundred managing upwards of $35 billion in assets.³¹ Over 50 percent of private equity funds in Africa have DFIs as early investors, and DFIs helped to create a pool of professional fund managers deeply steeped in sustainable investing practices.³² The United Kingdom’s CDC Group has invested $4.1 billion in eighty-two private equity funds operating across the African continent, which in turn have invested more than $50 billion in more than 570 privately owned and managed companies in sixty-five countries.33 By comparison, OPIC has made just thirty-six investments in emerging market private equity firms.³³ This is, in part, due to OPIC’s inability to invest equity, and the reluctance of European DFIs to invest equity alongside OPIC debt.

In 2017, $453 billion was raised for private equity globally, adding to a stock of current uninvested capital of over $1 trillion.³⁴ The amount of money raised for African private equity was less than 1 percent of the global raise. The United States is home to seventy-seven of the one hundred top global limited partners and of these, 42 percent are public or private-sector pension funds. There is a huge amount of capital that could be unlocked for emerging and frontier markets by the USDFC through seeding more funds and other Africa-focused intermediaries. Nowhere is this more needed than in African countries.

Though ten million people are coming of age and joining the African labor market every year, the continent is only creating 3.7 million jobs per annum. American counter-extremism and security interests will be advanced if the USDFC can figure out ways to unlock more latent capital in the United States to help advance job creation in African countries.³⁵

Direct investments

In addition to seeding private equity funds, DFIs started making direct investments in African companies in the early 2000s. Direct investments give DFIs the opportunity to support company growth in situations in which PE firms cannot invest, or in which the investment has strategic significance in terms of either return, impact, or both.

Because DFIs have different thresholds for economic returns, they can often absorb more risk and be more patient over time. Also, the thorough due diligence conducted by DFIs sends valuable market signals to other investors. When DFIs invest in an African corporation, family offices, private equity funds, and international and local institutional investors take note and often piggyback on the DFIs’ diligence work. DFI equity investments therefore have the potential to be valuable far beyond their face value through their de-risking catalytic effect and ability to unlock private capital.

But it is important that such investments remain catalytic and do not instead crowd out private interests. Many DFIs have stipulations in their mandates that prevent them from competing on bids where the private sector has also bid.³⁶

DFIs of the future

The creation of the USDFC presents US policy makers with a strategic opportunity to innovate and shape a development finance institution wired to support US companies in rapidly growing, ever-changing low- and lower-middle-income countries. As the 120-day period articulated in the BUILD Act for creating the new agency unfolds, policy makers should focus their efforts on ensuring that the USDFC is equipped to do the following:³⁷

Operate in informal markets. Informal markets are the loci of economic growth in most low-income countries. The informal sector produces an estimated 40 percent of Latin American and 35 percent of South Asian gross domestic product, and employs 65 percent of the workforce in some sub-Saharan African countries. In Kenya, the informal sector accounted for 90 percent of the jobs created in 2016. Scarce data, immature governance structures, fragmentation, and fluidity make investing in informal businesses extremely difficult for DFIs. The traditional due diligence requirements of major DFIs either make it impossible for informal sector companies to survive—due to a lack of proper documentation and corporate compliance, and the limited bandwidth of the entrepreneurs—or are cost-prohibitive on a return-adjusted basis for DFIs to embark on given the small size of the deals.

DFIs of the future cannot ignore the opportunities in the informal sector and must find a way to reduce the associated transaction cost. Companies operating in African markets that straddle the formal and informal markets such as cars45 in Nigeria and Brookside Dairie in Kenya should be studied to understand how they make informal businesses more efficient and the constraints to growth. These “straddling” businesses could be targets of direct investment as they carry outsized development returns by creating entire ecoystems of SMEs.

Additionally, DFIs could begin investing in companies that provide crosscutting business support services aimed at getting early-stage businesses investment ready. This space has traditionally been left to nonprofit players that lack the return incentive of DFIs, such as USAID’s joint program with leading consultancy firm Open Capital Advisors,³⁸ which makes $600,000 available through an investment readiness program to catalyze $3.5 million in investment into East African businesses; or Mastercard Foundation’s $1 million investment to support the African Entrepreneur Collective, an East African–focused SME incubator working to develop small businesses in Rwanda.³⁹ Such support, while valuable, often comes with a limited timeframe and therefore lacks the ongoing benefit a private investment would deliver. The flexibility to give technical assistance and make direct debt and equity investments into these service companies helps to formalize informal markets, and allows DFIS to be developmentally catalytic.⁴⁰

Fast-track the development of business ecosystems and trust. DFIs of the future will also be able to use investments to get outsized development returns by reducing the cost of doing business, fostering trust within the market, and serving as a bridge for institutional capital. While DFIs have been helping to shape business ecosystems since the creation of the first enterprise funds in Central and Eastern Europe after the collapse of the Soviet Union, the needs of fast-growing companies in undercapitalized markets will require a blurring of the lines between traditional DFI products. A movement towards more flexible and customized funding structures (blended finance) will ensure that businesses get the capital necessary through various stages of growth. Part of additionality is ensuring that firms are responsive to customers rather than DFI processes. The increase in local debt facilities backed by DFIs is a positive development reducing the risk of debt financing for growing SMEs in emerging markets.

Make the fundraising process more efficient for private equity firms and intermediaries. Given their unmatched importance to private equity funds operating in African markets, DFIs should dedicate some of their resources to improving the efficiency of the fundraising process. The average African private equity firm takes over three years to raise money, independent of its size. A great deal of this time is spent meeting with the two dozen main DFIs, tweaking presentations, and going through each DFI’s highly individualized application process. DFIs of the future can draw inspiration from the best practices in incubators and accelerators and apply them to the fundraising process, experiment with panel-type interviews and processes, and employ shared tech-based screening and due diligence procedures. By establishing even more standard rules and consistency in how they themselves operate, DFIs have an additive role to play in helping the entire development finance sector ecosystem evolve.

DFIs are more relevant than ever in the face of global growth patterns. With over 80 percent of future growth emanating out of emerging markets, US companies will require a competitive boost. Under the right leadership, mandate, and structure, DFIs can create new channels to crowd-in the private sector. Moreover, they can play a catalytic role by generating new knowledge, convening stakeholders, and providing technical assistance to build capacity in both the private and public sectors.⁴¹

The new USDFC

In addition to expanding the budgetary cap, the BUILD Act has endowed the new USDFC with equity power and a consolidated set of tools.

First, the USDFC will help put US development finance on a par with other countries at a crucial time. A recent estimate is that between 2002 and 2014, annual commitments made by DFIs grew from $10 billion to $70 billion. In addition, the DFIs of the other G-8 nations have been growing and doing development finance in more flexible ways, improving tools, and investing much more aggressively than the United States. For example, in 2017, the United Kingdom committed to quadrupling the limit on support it gives to its development finance portfolio.⁴² The USDFC will also improve US competitiveness against China, which is making ever-larger investments through its development finance institutions.⁴³

Second, the USDFC’s ability to invest equity in addition to debt makes the agency even more catalytic. With equity, it will be able to more effectively seed private equity funds and intermediaries focused on African markets. Under the old system, a private equity firm that was fundraising and had received an OPIC commitment would have to go to the European DFIs to get investments in order to unlock the OPIC debt money. European DFIs were reluctant to make these types of investments, however, because OPIC’s debt would be senior to their equity in the event of a bust scenario. Funds were thus often forced to choose between OPIC and European DFIs, and most chose the Europeans, whose long-standing equity products could truly anchor funds. Now the USDFC will be able to do the same and that power will create more US funds that invest abroad.

Finally, the USDFC will streamline the fundraising process by bringing a consolidated tool kit to aid efforts in US commercial diplomacy. It will consolidate some agency activities and federal development programs into one full-service, self-sustaining institution.⁴⁴ By creating a flexible menu of lending, first-loss capabilities, equity, local currency debt, and grants for technical assistance, the USDFC will be able to better deliver blended capital to a company or fund that is appropriately calibrated to its stage of growth. It will be the first time that policy makers will be able to speak about grants and returns, capacity-building and private equity in a single conversation unmarred by interagency divisions and communication slowdowns. It could become a role model for other DFIs.

Recommendations

The bipartisan nature of the support for the USDFC is inspiring in a time of deep divisions in Washington. The Trump administration has transformed the potential for the United States to buttress African economic development, while helping American companies succeed in new markets. Expanding a government agency, recruiting additional staff, and developing a viable pipeline of opportunities will all take time and create new bureaucratic, technical, and political challenges. During this formative 120-day reorganization period, US policy makers should consider the following recommendations:

Double down on areas of US competitiveness. The United States is a service-based economy and excels in sectors such as finance, technology, entertainment, and professional services.⁴⁵ Home to the world’s most well-established hub of venture capital and tech entrepreneurship, the United States has an opportunity to shape the new USDFC in areas of competitive differentiation and to offset recent Chinese advances. Chinese tech companies such as Huawei, Tecno, ZTE, and others have taken a deep interest in African markets over the past ten years and, recently, Tencent and Alibaba have started making investments in countries from Nigeria to Kenya. The USDFC should create special initiatives around financial technologies, venture capital, and crosscutting business services that can reduce transaction costs in lower-income economies. The preference given to American companies under the USDFC should be strongly enforced in areas of US competitive advantage.
Focus on key performance indicators. To do smaller, more impactful, and catalytic deals, especially in the informal sector, the USDFC should identify and prioritize key performance indicators such as the cost of transactions, standardization of due diligence standards, and time to commitment. Partnering with the European DFIs to standardize and harmonize due diligence and contracting processes can help the USDFC do more deals, more quickly. Additionally, the USDFC should incorporate technology in deal origination, data collection/analysis, and due diligence.
Cultivate a risk-taking mentality. While having a development mandate to work in low-income economies, many DFIs shy away from riskier deals because of concern about credit rating, the inability to drive down transaction costs, and the difficulty of creating meaningful incentives for employees on deal origination, vetting, closing, and exiting. The USDFC can explore structural innovations like seeding special purpose vehicles to create pools of patient off-balance sheet money from DFIs for higher risk deals.
Invest in ecosystem players for efficiency. To create a robust pipeline of deals and reduce transaction costs, the USDFC should prioritize investing in companies that function as the critical infrastructure of market assessment, deal origination, and vetting. These include tech companies in the data space and deal platforms such as Fraym and Asoko Insights.
Mobilize deep private sector expertise. Inspired by the Marshall Plan and early enterprise funds’ successes, the USDFC should create a program for private sector secondees, volunteers, and retirees to serve in advisory council roles on specific funds, deals, and sector deal teams. The Dutch provide a viable model. PUM Netherlands Senior Experts is a nonprofit organization that receives most of its funding from the Dutch government to develop small and medium-sized enterprises in over thirty emerging markets.
Prioritize equity investment in funds and other financial intermediaries. The vast majority of the USDFC’s equity power should go to funds—general partners of the funds are specialists closer to the ground with greater incentive to close and successfully exit deals. Outside of seeding and growing equity funds and permanent capital vehicles the USDFC should consider making equity investments in platform companies that have outsized and scalable development impact (such as renewable energy companies, financial inclusion technology, and mobile-first education). It is important to have a clearly defined policy around the use of equity to ensure additionality and to prevent the USDFC from competing with the very funds it seeds.
Create the positions of senior innovation officer and institutional liaison to educate and mobilize the US private sector. Since the mobile revolution has transformed the landscape of frontier markets, and technology will be critical for driving down transaction costs, the USDFC should establish a position of senior innovation officer to engage with tech-first parts of the US economy and forge partnerships with tech innovators in emerging markets. The innovation officer will be important in outreaching to tech companies and Silicon Valley venture funds and incorporating new technology internallly in the USDFC. Additionally, the USDFC should hire an executive tasked with engaging with US family offices and institutional investors, educating US companies and mobilizing domestic interest in priority deals.
Create a deal corps for MBA graduates. Forging a partnership with the Peace Corps, the Africa Business Fellowship, Bizcorps, US banks, and leading US business schools, the USDFC should create a two-year program for master of business administration (MBA) graduates to work in deal teams based on the continent. These teams, reporting into USDFC, could be involved in deal origination, initial due diligence, and post-deal monitoring. Top MBAs could be incentivized through loan forgiveness, the prestige of working with a US government agency, and a living wage stipend. Through this program, the United States can enhance its competitiveness by creating a whole cadre of future business leaders with first-hand experience in emerging markets.
Allow for regional enterprise funds. Given that the African continent is divided into fifty-four countries, many small and economically challenged, regional efforts become critical for sustainability. Encouraging regional integration has been a pillar of US foreign policy in African markets and the enterprise funds outlined in the BUILD Act should also operate with a regional mandate to reinforce African economic integration progress. The Millennium Challenge Corporation was given a mandate to make regional compacts earlier this year and the new USDFC should also have this capacity.

Conclusion

The USDFC presents a once-in-a-generation opportunity for the United States to create robust and strategic commercial diplomacy and remain competitive in the global market. The next four months will be critical in laying the groundwork for a DFI suited to the challenges of twenty-first-century emerging markets. By incorporating lessons learned and innovative thinking, the USDFC can create a new standard in development finance, and in doing so, strengthen US global competitiveness.

Aubrey Hruby is a senior fellow at the Atlantic Council and advisor to investors in African markets. She speaks regularly on African business issues and writes regularly for publications including the Financial Times and Axios. Aubrey is a term member of the Council on Foreign Relations, a board member of Invest Africa USA, young leader at the Milken Institute and the co-author of award-winning The Next Africa (Macmillan, 2015). She earned an MBA from the Wharton School at the University of Pennsylvania and an MA from Georgetown University.

1 The name of the agency was established by the BUILD Act, but the agency’s acronym
has yet to be determined

2 Christopher M. Vaughn, “Better Utilization of Investments Leading to Development Act
of 2018: A Bill to Establish the US International Development Finance Corporation,”
Lexology, April 30, 2018, https://www.lexology.com/library/detail.aspx?g=ce217d35-
c913-466d-a47f-8895cd7b0c94; The DCA helps businesses in underserved markets
gain access to local private capital through risk-sharing agreements. Established in
the early 1990s to support the development of fledgling private sectors across Central
and Eastern Europe, enterprise funds are essentially the use of state funds to make
private equity investments in emerging markets

3 US Agency for International Development, The Enterprise Funds in Europe and Eurasia: Successes and Lessons Learned, September 12, 2013, https://www.usaid.gov/sites/
default/files/documents/1863/EE_Enterprise_Funds-LessonsLearned.pdf

4 Joseph S. Nye Jr., “Get Smart: Combining Hard and Soft Power,” Foreign Affairs, July/
August 2009, https://www.foreignaffairs.com/articles/2009-07-01/get-smart

5 Vaughn, “Better Utilization of Investments Leading to Development Act of 2018.”

6 James M. Roberts and Brett D. Schaefer, “House and Senate Revisions Have Not Improved the BUILD Act Enough to Warrant Conservative Support,” The Heritage Foundation, July 24, 2018, https://www.heritage.org/sites/default/files/2018-07/IB4890_0.pdf

7 “Connect Africa,” OPIC, accessed October 10, 2018, https://www.opic.gov/opic-in-action/connect-africa

8 “The Political Risk Insurance Industry: A View from the Supply Side,” in World Investment and Political Risk, ed. Multilateral Investment Guarantee Agency, 2010, https://www.miga.org/documents/flagship09ebook_chap3.pdf

9 “OPIC History,” OPIC, accessed October 10, 2018, https://www.opic.gov/who-we-are/opic-history

10 “Better Utilization of Investments Leading to Development (BUILD) Act of 2018 (H.R.5105/S.2463),” The Borgen Project, accessed October
10, 2018, https://borgenproject.org/wp-content/uploads/BUILD-Summary.pdf

11 In 1963, the Colonial Development Corporation was renamed the Commonwealth Development Corporation, which remains its formal name
today

12 José de Luna Martínez, “The Role of Development Financial Institutions in the New Millennium,” World Bank Blogs, September 27, 2017,
http://blogs.worldbank.org/eastasiapacific/the-role-of-development-financial-institutions-in-the-new-millennium

13 Charles Kenny et al., “Comparing Five Bilateral Development Finance Institutions and the IFC,” Center for Global Development, January 17,
2018, https://www.cgdev.org/publication/comparing-five-bilateral-development-finance-institutions-and-ifc.

14 Ibid

15 Ibid

16 Charles Kenny et al., “Comparing Five Bilateral Development Finance Institutions and the IFC.”

17 “Connect Africa,” OPIC

18 Wenjie Chen and Roger Nord, “Reassessing Africa’s Global Partnerships: Approaches for Engaging the New World Order,” in Foresight Africa
2018, ed. The Brookings Institution, January 11, 2018, https://www.brookings.edu/wp-content/uploads/2018/01/foresight-2018_chapter-6_
web_final.pdf

19 “Sh534bn China Debt Now 72pc of Bilateral Loans Pile,” Business Daily, July 2, 2018, https://www.businessdailyafrica.com/economy/
Sh534bn-China-debt-now-72pc-of-bilateral-loans-pile/3946234-4642122-743gtxz/index.html

20 Witney Schneidman and Joel Wiegert, “Competing in Africa: China, the European Union, and the United States,” The Brookings Institution,
April 16, 2018, https://www.brookings.edu/blog/africa-in-focus/2018/04/16/competing-in-africa-china-the-european-union-and-the-unitedstates/

21 Yun Sun, “China’s 2018 Financial Commitments to Africa: Adjustment and Recalibration,” The Brookings Institution, September 5, 2018,
https://www.brookings.edu/blog/africa-in-focus/2018/09/05/chinas-2018-financial-commitments-to-africa-adjustment-and-recalibration/

22 Schneidman and Wiegert, “Competing in Africa: China, the European Union, and the United States.”

23 Kartik Jayaram, Omid Kassiri, and Irene Yuan Sun, “The Closest Look Yet at Chinese Economic Engagement in Africa,” McKinsey & Company,
June 2017, https://www.mckinsey.com/featured-insights/middle-east-and-africa/the-closest-look-yet-at-chinese-economic-engagement-inafrica

24 Colin Dueck, “Trump’s National Security Strategy: 10 Big Priorities,” The National Interest, January 9, 2018, https://nationalinterest.org/feature/trumps-national-security-strategy-10-big-priorities-23994

25 Peter Feaver, “Five Takeaways from Trump’s National Security Strategy,” Foreign Policy, December 18, 2017, https://foreignpolicy.
com/2017/12/18/five-takeaways-from-trumps-national-security-strategy/

26 US Congress, Senate, Better Utilization of Investments Leading to Development Act of 2018, S 2463, 115th Cong., 2nd sess., introduced in
Senate February 27, 2018, https://www.congress.gov/bill/115th-congress/senate-bill/2463

27 “African Fund Managers Continue to Capture Opportunities Amidst Rising Currency and Geopolitical Risk,” African Private Equity and Venture Capital Association, December 7, 2017, https://www.avca-africa.org/newsroom/avca-news/2017/african-fund-managers-continue-to-capture-opportunities-amidst-rising-currency-and-geopolitical-risk/

28 Belgian Investment Company for Developing Countries, Annual Report 2016, 2016, http://www.bio-invest.be/library/annual-report.html

29 African Private Equity and Venture Capital Association, An Untold Story: The Evolution of Responsible Investing in Africa, April 2018, http://
financedocbox.com/Mutual_Funds/77901840-An-untold-story-the-evolution-of-responsible-investing-in-africa.html

30 Amar Bhattacharya, Peter J. Montiel, and Sunil Sharma, “How Can sub-Saharan Africa Attract More Private Capital Inflows?” in Finance and
Development, ed. International Monetary Fund, June 1997, https://www.imf.org/external/pubs/ft/fandd/1997/06/pdf/bhattach.pdf

31 Aubrey Hruby, “The Missing Middle in African Private Equity,” Financial Times, October 24, 2016, https://www.ft.com/content/6e2e0a7a504a-3ac1-bd83-e68f21090d5b

32 “Reviving DFI Funding in Africa,” CNBC Africa, May 15, 2014, https://www.cnbcafrica.com/news/2014/05/15/reviving-dfi-funding-in-africa/

33 “Current List of Investment Funds,” Overseas Private Investment Corporation, September 30, 2016, https://www.opic.gov/sites/default/files/
files/IFD_FundList_fy2016.pdf

34 Christine Idzelis, “Everything about Private Equity Reeks of Bubble. Party On!” Institutional Investor, July 22, 2018, https://www.institutionalinvestor.com/article/b195s0y2vfll69/everything-about-private-equity-reeks-of-bubble-party-on

35 Siddarth Chatterjee and John Dramani Mahama, “Promise or Peril? Africa’s 830 Million Young People by 2050,” United Nations Development Programme, August 12, 2017, http://www.africa.undp.org/content/rba/en/home/blog/2017/8/12/Promise-Or-Peril-Africa-s-830-MillionYoung-People-By-2050.html

36 Thomas Dickinson, Development Finance Institutions: Profitability Promoting Development, Organisation for Economic Co-operation and
Development, accessed October 10, 2018, http://www.oecd.org/dev/41302068.pdf

37 Per the BUILD Act, a “reorganization plan” must be submitted within 120 days of the A ct’s enactment by the president of the United States
to the relevant congressional committees

38 “Open Capital Advisors, USAID, and Four Investor Partners Launch Investment Readiness Program,” Open Capital Advisors, accessed October 10, 2018, https://opencapitaladvisors.com/open-capital-advisors-usaid-and-four-investor-partners-launch-investment-readiness-program-2/

39 “Mastercard $1 Million Grant Set to Ignite Business Growth in Rwanda,” Mastercard, April 26, 2017, https://newsroom.mastercard.com/mea/
press-releases/mastercard-1-million-grant-set-to-ignite-business-growth-in-rwanda/

40 Tom Groenfeldt, “IFC and VCs Want to Take Emerging Market Microfinance to Mobile,” Forbes, April 4, 2018, https://www.forbes.com/sites/
tomgroenfeldt/2018/04/04/ifc-and-vcs-want-to-take-emerging-market-microfinance-to-mobile/#23fd6ac47a39

41 De Luna Martínez, “The Role of Development Financial Institutions in the New Millennium.”

42 Henry Mance and Jim Pickard, “UK eyes move to divert billions in aid to private equity arm,” Financial Times, November 22, 2016, https://
www.ft.com/content/bbc9717e-b0a6-11e6-a37c-f4a01f1b0fa1

43 Adva Saldinger, “Support for New US Development Finance Bill, Even as Some Details Are Questioned,” Devex, March 1, 2018, https://www.
devex.com/news/support-for-new-us-development-finance-bill-even-as-some-details-are-questioned-92220

44 “Better Utilization of Investments Leading to Development (BUILD) Act of 2018 (H.R.5105/S.2463),” The Borgen Project

45 Aubrey Hruby, “Escaping China’s Shadow: Finding America’s Competitive Edge in Africa,” Atlantic Council, September 7, 2018, http://www.atlanticcouncil.org/publications/issue-briefs/escaping-china-shadow

The post The future of development finance appeared first on Atlantic Council.

The future of development finance

Aubrey Hruby — Mon, 05 Nov 2018 19:44:42 +0000

The post The future of development finance appeared first on Atlantic Council.

Getting creative about development

Aubrey Hruby — Mon, 24 Sep 2018 13:11:21 +0000

7 Based on EY’s definition of the underground economy, which involves the exchange of cultural goods hidden from official view. See: Marc
Lhermitte et al., Cultural Times: The First Global Map of Cultural and Creative Industries, EY, December 2015, http://www.ey.com/Publication/
vwLUAssets/ey-cultural-times-2015/$FILE/ey-cultural-times-2015.pdf

African film, music, and fashion are exploding in popularity on the global stage. From Nigeria’s Nollywood film industry to the visual arts in South Africa, creative and cultural industries (CCI) represent a new realm of economic opportunity. From artists to distributors, Africa’s creative economy is currently estimated to employ about half a million people, generates $4.2 billion in revenue, and is growing rapidly. In order to expand Africa’s share of the $2.25 trillion global entertainment market, African governments, businesses, and investors should find innovative ways of supporting, promoting, and investing in CCI.

A new issue brief by Africa Center Senior Fellow Aubrey Hruby, Getting Creative About Development, provides a snapshot of the creative and cultural industries in key African markets, discusses the trends undergirding the growth of CCI, outlines the challenges facing the industry, and offers policy recommendations. Africa has long been rich in talent and creativity, and in today’s maturing markets, African CCI has a significant role to play in economic development and the potential to stake its claim as part of the global mainstream.

Introduction

By 2035, sub-Saharan Africa will have more working-age people than the rest of the world combined. African governments collectively need to create eighteen million new jobs each year to absorb the large, young, and ambitious population coming to working age.¹ But technological advances, combined with the underdeveloped infrastructure of most African nations, mean that the tried and true model of export-oriented industrialization, which allowed the East and Southeast Asian economies to develop very rapidly, is unlikely to produce adequate job creation in the vast majority of African markets. In fact, manufacturing as a share of total economic activity in Africa has stagnated at about 10 percent,² and—though there are notable exceptions, such as Ethiopia—the continent as a whole is deindustrializing.³ Agriculture still continues to serve as the backbone of most African economies, with over 70 percent of Africans earning a living in that sector.⁴

But as Africa urbanizes, the composition of economic activity is rapidly changing, shifting away from agriculture and towards the services sector. In 2015, services accounted for 58 percent of sub-Saharan GDP (up from 47 percent in 2005).⁵ More significantly, 33 percent of African youth are now employed in services.⁶ The services sector is broad and dynamic, including everything from accounting firms to roadside barbers. And an often-overlooked source of growth in the sector, especially in Africa’s larger and more developed markets such as Nigeria, South Africa, Kenya, and Morocco, are the creative and cultural industries (CCI). African film, music, and fashion are exploding in popularity on the global stage and should be seen as a force for economic good.

From Nigeria’s Nollywood film industry to the visual arts in South Africa, CCI are creating a new realm of opportunity. Africa’s cultural goods sector⁷ is estimated to employ about half a million people and generate $4.2 billion in revenue on the continent, albeit mostly through the informal economy.⁸ However, if CCI could become more formalized and thus capitalized, CCI could become a driving force in economic development. African governments, foreign aid agencies and multilateral institutions should consider elevating CCI within their development strategies. This brief takes a market-oriented view of African music, fashion, film, and visual arts and addresses the commercialization of the arts for employment and profit. In this way, indigenously-created African products will be discussed in the same context as foreign cultural products that touch African markets through the production process. The brief treats cultural goods as products that can be consumed locally and exported internationally and the central argument of this brief is that African countries should strive for a larger share of the global entertainment market.

With these undergirding assumptions, this brief will provide a snapshot of the creative and cultural industries in key African markets; discuss the trends undergirding the growth of CCI; outline the challenges facing the industry; and offer policy recommendations. While the creative and cultural sector will not supplant agriculture, manufacturing, or services in job creation efforts, CCI has a significant role to play in African economic development and has far too long been ignored due to its untraditional nature.

Snapshot of the creative and cultural industries in Africa

Africa’s rich cultural assets have influenced global culture since the horrors of slavery carried African traditions to the Americas and Europe. Though slaves and their descendants enriched their new countries and communities, creating entirely new categories of music and art, they were rarely permitted to receive commercial returns on their cultural contributions. And cultural exports from Africa continued to be undervalued, and appropriated by non-African artists, well into the post-colonial era. The same type of racial discrimination that prevented black American artists from sharing in the profits of their creative pursuits historically disadvantaged Africans in their efforts to monetize their talents. Superstar Nigerian musician Fela Kuti has never gained proper recognition from Western record companies despite selling millions of copies of his sixty records. Fela commented, “American record companies seem to feel I am antiwestern, anticapitalism, anti the kind of society they like.”⁹ As a result of this type of exclusion, the creative and cultural industries in African markets today lack the formality and professionalism of their global counterparts. However, globalization is rapidly changing this reality, and presenting African countries the opportunity to harvest greater returns from the international entertainment market.

Today, CCI plays an integral role in the global economy, generating $2.25 trillion in revenue and employing 29.5 million people. Africa accounts for less than 3 percent of the total revenue, and 8 percent of the total CCI jobs, leaving room for tremendous growth.¹⁰

Demand for African cultural goods has increased both within the continent and internationally. There is a global appetite for representations of African cultures—even fictitious ones. The Hollywood blockbuster Black Panther, which showcased African actors, music, and design influence, is now the highest grossing superhero film of all time, bringing in over $1.2 billion at the box office globally. American celebrities and first ladies wear African fashion and Nigerian music pulses on the airwaves. Nollywood, Nigeria’s film industry, accounts for 2 percent of Nigerian GDP and directly employs 300,000 people.¹¹ Indirectly, Nollywood is estimated to employ over one million people from actors to directors, hair stylists to sound technicians, marketers to advertisers.¹² In South Africa, creative industries contribute about 2.9 percent to GDP and account for 3.6 percent of employment.¹³

While most CCI is consumed locally in African markets, transatlantic musical collaborations are growing and there is deepening integration between US record labels and African (mainly Nigerian) artists. Nigerian singer-songwriter Tiwa Savage’s collaboration with the American R & B singer, Fantasia Barrino, led to a Grammy nomination in 2010, and WizKid’s feature on Drake’s song, “One Dance,” led to a multi-album worldwide deal with RCA Records/Sony Music International. African music is now accessible on international services such as iTunes, Shazam, and YouTube, and Spotify opened offices in South Africa in early 2018. Africa’s creative and cultural industries are unmistakably on the rise —especially in the US and European markets, which will make them more and more attractive to investors. This matters, because additional capital is needed to commercialize and distribute these products to the global market, and to maximize the sector’s profit and employment potential for African economies.

CCI by sub-sector

The United Nations Educational, Scientific, and Cultural Organization (UNESCO) defines CCI as activities “whose principal purpose is production or reproduction, promotion, distribution or commercialization of goods, services and activities of a cultural, artistic or heritage-related nature.” CCI has eleven sub-sectors: television, visual arts, newspapers and magazines, advertising, architecture, books, performing arts, gaming, movies, music, and radio. This brief covers only the film, music, and, fashion industries given their size, relative maturity, measurability, and potential for future growth.

Film industry

Nollywood is the central hub of Africa’s film industry and is the second-largest film industry in the world by volume. Due to working capital constraints and the largely informal nature of Nollywood, film production is rapid, averaging about forty movies per week—a volume that falls short of only India’s Bollywood industry. Over the last three decades, Nollywood has been largely ignored by the rest of the world, but has built a large and dependable audience of Nigerians.¹⁴ Today, that domestic market is expanding outside Nigeria and the Nigerian diaspora, and filling the continent-wide demand for programming that is made by Africans about Africans. Most titles are recorded in English and usually sell over 200,000 copies, allowing them to turn a profit within two to three weeks of release.¹⁵These profits are then recycled into the new round of production.

As the industry matures and production value improves, Nollywood films have garnered greater international recognition and commercial success, with some available to stream on platforms like Netflix. The Wedding Party premiered at the 2016 Toronto International Film Festival and quickly became the first Nigerian film to pass the $1.3 million mark, only to be surpassed by its sequel The Wedding Party 2 in 2017. ¹⁶

With the success of Nollywood and its growing role in the Nigerian economy (it contributes $7.2 billion to GDP), the government has increasingly acknowledged the importance of the industry for economic development.¹⁷ Abuja has committed a budget of about $8 million through Project ACT, which aims to improve and promote three key components of the movie-making value chain: capacity building, film production, and distribution.¹⁸The government has also pledged tax relief aimed at fostering growth in the film industry.

Before the rise of Nollywood, Egypt was an internationally-recognized global powerhouse in film production. Prior to 2011, Egypt produced about forty films a year and has accounted for 75 percent of the films made in Arabic-speaking countries since 1980.¹⁹Political and economic challenges have since adversely affected Egypt’s industry—production numbers plummeted after the events of the Arab Spring. However, the industry is beginning to recover as younger filmmakers and older stars return to remake the industry in a new era.

The film industry is also growing rapidly in South Africa and Morocco, though not through original content production, as in Nollywood. Instead, these countries have become destinations for many of the world’s top filmmakers. Cheaper production costs, tax credits, and safe environments lead many to film in these alluring landscapes: from Safe House and Eye in the Sky in South Africa to American Sniper and Sex and the City 2 in Morocco. Ahead of many of their peers, the infrastructure in Morocco and South Africa provides filmmakers with the necessary tools for high-end movie production. State of the art complexes such as Cape Town Film Studios’ $35 million facility enhance South Africa’s competitiveness to attract production. Employing just four thousand people in 1995,²⁰ the South African industry created more than 21,000 jobs by 2017 and contributed about $430 million to GDP.²¹

American, British, and French companies account for about 90 percent of foreign investment in the Moroccan film industry, which amounted to over $130 million in 2014. Filming is largely clustered in Ouarzazate, and has created about three thousand Moroccan jobs.²²Companies in Morocco are providing cheaper alternatives for many of the roles required in movie production, including editing, which can offer attractively lower costs for international filmmakers. Morocco’s government has also supported the expansion of the film industry through a successful incentive structure, which includes a simplified import and export process for film shooting equipment, rebates from nationally owned transportation services (i.e. Royal Air Maroc), and VAT exemption on all good and services acquired in Morocco.

Music industry

African music has long influenced music genres in the West. However, African-produced music gained little recognition outside of the continent until the era of independence. In the 1960s and seventies, Afrobeat, a combination of West African jazz, and funk styles pioneered by Fela Kuti, influenced a generation of American and British artists. But the appeal remained niche and diaspora-focused from the 1980s until around 2010. As streaming services spread throughout Africa with broadband penetration and mobile telephony, music made on the continent has gained global recognition from everyday listeners to music superstars like Drake and Nas.²³ Nigerian pop sensation Davido credits the internet and social media with sparking the transition of African music from the periphery to the mainstream in western markets.²⁴

Today Nigeria is the hub of music creation in Africa, producing over 550 albums annually. Over the last decade, “Naija” music has skyrocketed in popularity and today Nigerian live performance exceeds $100 million in annual revenue.²⁵ Nigeria has a strong domestic digital music business and international players are taking a bigger interest. US and European record labels continue to sign Nigerian artists as they gain visibility through collaborations with Western artists. Los Angeles-based Universal Music Group recently acquired one of East Africa’s largest labels, AI records, and has opened a new office in Lagos to focus on the region.²⁶Universal has additionally signed established artists from Ghana, South Africa, Côte d’Ivoire, Togo, and Cameroon, as they build a pan-African music operation.

In just a decade, music has become a key Nigerian export. The dominance of Nigerian music on African radio and TV stations led to protests in Kenya, where local artists felt they could not build a Kenyan following. In response, Kenya’s Ministry of Culture passed legislation directing that 60 percent of content on radio and TV stations must be produced domestically.²⁷

The music industry is contributing to the growth of the creative sector not only in Nigeria, but also in South Africa and Kenya. South Africa’s total music revenue is set to reach $178 million by 2020, supported by revenue from digital music streaming.²⁸ A strong mobile music sector will support rapid growth in Kenya as well. Kenya’s total music industry revenue is expected to rise to from just $22 million in 2017 to $32 million in 2021.²⁹ Internet penetration and the spread of mobile technology will continue to support increased consumption of digital music.

Fashion industry

Demand for apparel by African designers is no longer limited to local markets. Western fashion houses have long tapped the African market for inspiration, from Yves Saint Laurent’s 1967 “African” collection to Stella McCartney’s incorporation of Ankara prints in her spring 2018 collection. Given the long-standing demand for the often bold, bright, and lively nature of African designs, African designers themselves are finally gaining prominence abroad. Amaka Osakwe, designer of the fashion line Maki Oh, gained commercial success thanks to pop sensations Beyoncé and Rihanna, and to former first lady Michelle Obama wearing her styles.

The majority of African megacities now hold fashion weeks to showcase African designers, including Johannesburg, Cape Town, Lagos, Accra, Dakar, Cairo, and Nairobi. In addition to growing the local fashion market, African designers increasingly participate in New York, London, and Paris fashion weeks. Today’s African designers are global, often operating in European, American, and African markets simultaneously. The Nigerian designer Deola Sagoe recognized the appeal of African styles when studying in the United States in the 1980s. The core element of Sagoe’s designs rely on Aso Oke fabric, a traditional handwoven cloth from Nigeria, which has attracted the attention of Vogue and A-list celebrities.³⁰

The global fashion industry is projected to generate $5 trillion in the next decade, and African designers are looking to capture a larger piece of that market. African designers operating at the heights of global fashion are positioned to take a greater share of the $420 billion luxury fashion industry³¹ and inspire local designers focused on sub-Saharan Africa’s $31 billion apparel and footwear market.³²

The African Development Bank’s recent launch of the Fashionomics initiative highlights the role fashion can play in economic development. To grow Africa’s fashion industry, the initiative looks to promote investment in the sector, increase access to capital for entrepreneurs, and incubate and accelerate start-ups.³³Fashionomics is actively providing training and knowledge sharing opportunities for today’s burgeoning designers.

Trends undergirding the growth of CCI

Africa’s changing demographics, the growth of the African diaspora and the rise of mobile and internet technology all support CCI growth.

Demographics

Not only is the size of the market for CCI growing in sheer numbers, but the underlying demographic shifts are more favorable to the film, music, and fashion industries. Globally, millennials are responsible for over two-thirds of all streams on Spotify³⁴ and the median Hulu subscriber is just thirty-one years old, showing a strong youth bias in terms of digital media consumption.³⁵ Africa is a young continent. About two-thirds of its population is currently under the age of thirty, compared to just one-third in Europe and North America.³⁶ Over 43 percent of Africa’s population currently lives in urban areas, and 90 percent of urban population growth will take place in Asia and Africa in the coming decades.³⁷ These young urbanites are more likely to have mobile and broadband access and are increasingly middle class. ³⁸

A larger middle class will result in more disposable income to spend on live concerts, movie tickets, and the latest fashions. Between 2011 and 2015, spending in South African households on recreation and culture, and on clothing and footwear, saw a real increase of 57.9 percent and 23.3 percent respectively.³⁹ The shift to a younger, more prosperous middle class will continue to support the growth of CCI.

Communications infrastructure

The growing penetration of internet and mobile devices throughout the continent supports a more robust CCI market. In sub-Saharan Africa, unique mobile subscriber penetration reached 44 percent by the end of 2017, up from just 25 percent at the start of the decade. In the coming years, the mobile subscriber base is expected to grow 4.8 percent per year. In Nigeria alone, there were 91.6 million internet users or about 45 percent of the population in 2017, most located in urban centers. ⁴⁰

On a continent with only one cinema per million people, streaming services will play a pivotal role in the growth of the film and music industries. Mobile payments, well-established in markets such as Kenya, strengthen business models in the music and film industry. Spotify entered the African market with a launch in South Africa in May 2018. Next to the big global players like Spotify, YouTube, and Apple Music, there is a growing number of African streaming services, many focused on delivering African content. The music-streaming service Simfy Africa has grown from the South African market to include Nigeria and Angola. NotJustOkay, a Nigerian music blog, has visitors from 183 countries.⁴¹Similarly, iRoko Partners, a media distribution company, has been extremely successful in both the Nigerian market and globally.

Globalized entertainment market

While the market for CCI grows within Africa, globalization opens access to international entertainment markets. The days when Hollywood just focused on the US market are over. The rise of a worldwide middle class has resulted in faster, broader consumption of the industry’s content. Filmmakers must consider the box office potential of their films in other regions like China, which would have been a distant concept just two decades ago. Streaming services for music and movies allow content to be marketed and accessed around the world instantaneously.

African CCI is positioned to take advantage of the entertainment industry’s global view. A growing number of Africans are native or secondary English speakers, making their products more consumable given the global popularity of the language.

The diaspora

Global celebrity culture and Africa’s growing diaspora work in tandem to accelerate the spread of African music, film, and fashion to international markets. Centuries-long relationships between African, European countries and the United States mean that millions of Africans and people of African descent live in a country outside of their birth. The African Union estimates the size of the African diaspora at 170 million.⁴²Because of the diaspora and the market power of African Americans in regard to entertainment,⁴³ African celebrities are gaining greater recognition in Western countries. South African Trevor Noah, host of the popular American comedy news program, The Daily Show, and Academy Award winner and Kenyanraised Lupita Nyong’o are just two such examples. After her Oscar win, Lupita Nyong’o went on to star, alongside multiple African actresses, in the Broadway musical Eclipse about the 2003 Liberian civil war. The play’s success highlights a growing appetite for African stories and African voices, often brought to the US market through the African diaspora.

African nations’ relationships with countries such as China are spreading African cultural influence eastward. Deputy Director of the Chinese State Administration of Radio and Television, Yan Chengsheng, has expressed interest in bringing Nollywood films to China’s highly regulated film market. Chengsheng has argued the quality of Nollywood films needs to improve, but also acknowledged the opportunity, stating “while telling Chinese stories to the world, we are also willing to tell African stories.”⁴⁴ As international markets are exposed to the people and culture of Africa, their desire to consume the exports of CCI will rise.

Challenges facing CCI in African markets

A number of obstacles inhibit the creative and cultural industries from making a greater contribution to economic growth in African markets. The scarcity of capital remains a top problem for artists and businesses in the industry. Without traditional forms of collateral in a perceived “risky industry,” banks and individuals are reluctant to fund creators. Moreover, a lack of sufficient industry data inhibits entrepreneurs from effectively accessing credit when they cannot readily point to comparables to justify projected returns on an investment.

Lack of funding

Today’s funding for the creative industry often comes in the form of grants for non-commercial activities. A United Nations Conference on Trade and Development (UNCTAD) study in Zambia confirmed that the historic tradition of viewing the creative industries from a cultural rather than commercial lens leaves the industry dependent on public funds.⁴⁵A dearth of African millionaires eager to invest in the creatives leaves many entrepreneurs with few options to turn to for capital. But in more established markets, like Lagos and Cape Town, businesses investing in creative talent are beginning to emerge. Temple Management, a full-service management agency for those in entertainment, art, and media, is working to modernize and professionalize the industry playing the same role that the Creative Artists Agency (CAA) does in the US market“Creative Artists Agency,”. ⁴⁶

As CCI matures, banks are beginning to provide new forms of financing. In Nigeria, the Bank of Industry’s “Nollywood Fund” and Access Bank’s “Access NollyFund” show that the banking industry is beginning to acknowledge the commercial potential of African film industries. However, the amount of capital provided by these funds is small compared to the demand for capital. The Nollywood Fund’s maximum borrowing limit is around $140,000.⁴⁷ While this is well above the average Nollywood film budget of $40,000, it comes nowhere close to Bollywood’s average film budget of $1.5 million or Hollywood’s $47.7 million.⁴⁸ The lack of financing leads to low budget production resulting in poor quality films with little potential for commercial success beyond the Nigerian market. Creative approaches are sorely needed.

Lack of intellectual property rights protection

The prevalence of movie and music piracy in Africa frustrates monetization efforts. Lack of intellectual property (IP) rights and enforcement limits an artist’s ability to earn a return on investment. The World Bank estimates that for every legitimate Nollywood film sold, nine are pirated.⁴⁹Furthermore, the Nigerian Copyright Commission (NCC) estimates the country loses over $1 billion annually to piracy.⁵⁰ South Africa estimates it loses 44 percent of its DVD revenues, 15 percent of which is online. ⁵¹ High piracy also deters international co-production and distribution opportunities in foreign markets. Music is regularly obtained in the Nigerian markets through illegal downloads, rather than legitimate music stores or streaming services that ensure artists receive their portion of a sale.⁵² Without a functioning IP rights system, many African artists leave the continent to pursue their talents elsewhere.

Recommendations

To fully support and commercialize CCI, governments and international organizations need to take deliberate steps to invest in all aspects of the value chain from creation to consumption. Accurate measurement of CCI’s impact on GDP and employment are critical to legitimize the commercial potential of the industry. Two-thirds of African countries have already signed the Convention on the Protection and Promotion of the Diversity of Cultural Expressions,⁵³ but their commitment needs to be realized in development strategies by incorporating innovative new policies and enforcement mechanisms to advance and protect Africa’s CCI.

To African Governments:

Collect and Track Data

African governments need to expand and consistently track CCI statistics to support policy development and promote private sector investment. UNESCO’s 2009 guidelines for measuring the economic effects of the cultural industry prompted many African countries to begin country measurement. Kenya has taken a lead by publishing the Nairobi Plan of Action on Cultural Industries and facilitating the buildout of institutions such as the Music Copyright Society of Kenya and the Kenya Film Commission. However, the availability and quality of statistics varies widely across the continent based on the capacity of a country’s national statistics institute.

Countries already exhibiting strong national statistics need to track specific statistics related to CCI’s impact on GDP and employment. As more data is collected, countries can develop more impactful policy and partnerships to meet the needs of CCI.

Enforce Intellectual Property Rights

The successful distribution of music and film relies on stricter IP rights and stronger enforcement mechanisms. Laws need to be less ambiguous and updated to reflect current technologies. Regulating ownership and ensuring creative control over an artist’s work will expand potential export opportunities. It will also encourage additional investment as banks can be more certain of a return on investment.

In May 2018, South Africa’s highest decision-making body approved the first phase of a new IP policy to improve access to medicine. South Africa’s Department of Trade and Industry worked with the United Nations Conference on Trade and Development (UNCTAD) to identify needed stakeholders and industry experts to draft the new policy. While the first phase is focused on public health, a similar method could be followed to develop new IP policies for music and film in future phases and outside South Africa.⁵⁴

Introduce Targeted Funding Schemes and Incentives The capital made available to CCI by the traditional risk-averse banking model will continue to be insufficient. Without proper financing, artists will struggle to gain access to global supply chains. However, the risk can be mitigated by targeted programs and credit-guarantee schemes established by regional and development banks, and implemented by commercial banks. For example, the ECOWAS Investment and Development Bank (EBID) had started a Cultural and Industries Guarantee Fund (FGIC) to provide financing to West African cultural projects, but the program seems to have not been prioritized after 2015.⁵⁵ These types of programs should be properly funded, staffed and prioritized. Additionally, regional programs targeted as supporting CCI industries, such as the African Development Bank’s Fashionomics, should continue to prioritize connecting artists and designers with traditional and alternative financing channels.

African governments should also facilitate strategic alliances between the public and private sectors to encourage capital investment. This includes setting aside public funds for partnerships supporting CCI and providing incentives to international companies to invest in Africa’s economies. Morocco and South Africa’s growing film production industries should serve as models. Government incentives attract international producers, who partner with African companies and hire Africans to assist in production. Similar programs can be used elsewhere in Africa or leveraged for industries beyond film.

Reduce the Cost of Data

Increased digital media consumption will demand increased broadband access and universal Wi-Fi. Only one in every hundred Africans has access to cable internet, and those that do pay exorbitantly more for data then those outside Africa. Telegeography, a research firm, estimated the cost of internet connectivity in Johannesburg at $9 per month for each megabit per second of capacity, about twenty times the cost in London and ten times the cost in Los Angeles.⁵⁶ In the past few years, there has been a sizable increase in the capacity of undersea cables connecting Africa to the rest of the world. As new cables come ashore, competition has driven prices down. African governments need to support competition by ensuring private sector participation in the broadband economy.

Beyond broadband, Africa’s expensive mobile-internet packages force consumers to limit their access to data, reducing consumption opportunities. While increased cable connections continue to drive mobile data prices down, universal Wi-Fi access has the capacity to disrupt traditional mobile phone and cable internet companies. Wi-Fi signals not only carry more data per second than those used by a 4G phone, but the equipment to produce a Wi-Fi network is cheap. African governments should continue to explore innovative approaches to encouraging additional Wi-Fi services through the use of TV white space to expand the consumer base for CCI. Malawi and South Africa’s partnership with Microsoft in this area can serve as test cases for potential scale up elsewhere on the continent.⁵⁷

To the United States

Given the competitive edge the United States has in the entertainment industry,

⁵⁸American policy-makers should consider establishing a US-African CCI financing roundtable. This public-private platform should be led by the Overseas Private Investment Corporation (OPIC) and would draw upon sector experts to facilitate financing and investments that contribute to CCI growth. Knowledge exchange and collaboration among key actors will deepen understanding of Africa’s CCI market opportunities and risks. The roundtable should work to establish pathways of investment that can be packaged for investors with different appetites for risk.

To International Organizations

The World Bank and IFC can better support CCI by creating job positions with responsibility for financing Africa’s creative and cultural industries. While the IFC works with clients in media, technology, and retail, it has not established an area of expertise in CCI. Taking a holistic view of the industry will better position the IFC to meet the needs of the industry’s interconnected players. Given the potential development impacts of CCI, these institutions need to dedicate the necessary talent to support the growing financial needs of the industry.

International organizations also need to take a role in tracking the impact of CCI. While the last decade has led to a rise in the capture of CCI-related statistics, the lack of annual, continent-wide measurements of CCI remains. The World Bank should work with UNESCO to expand statistics related to the economy, trade, and the private sector to include statistics dedicated to CCI. While UNESCO tracks a variety of statistics related to cultural employment and feature films,

⁵⁹ African countries are not routinely represented in all statistics.

Conclusion

The digitized, global economy provides an opportunity for African CCI to play a more meaningful role in the continent’s development. From artists to distributors, Africa’s creative economy can provide modern jobs across multiple sectors and contribute to economic growth. Additionally, sharing African creativity with global audiences helps to change perceptions, encourage tourism and lays the groundwork for myriad cultural exchanges. African governments, businesses and investors must recognize the value of CCI, as without their support and promotion, the industry will find it increasingly difficult to remain competitive in global markets. Africa has long been rich in talent and creativity, and in today’s maturing markets, these artists and producers have the potential to stake their claim as part of the global mainstream.

1 Céline Allard et al., Regional Economic Outlook: sub-Saharan Africa 2015, International Monetary Fund, April 2015, https://www.imf.org/~/media/Websites/IMF/imported-flagship-issues/external/pubs/ft/reo/2015/afr/eng/pdf/_sreo0415pdf.ashx

2 Brahima Sangafowa Coulibaly, “Africa’s Alternative Path to Development,” The Brookings Institution, May 3, 2018, https://www.brookings.edu/opinions/africas-alternative-path-to-development/

3 “More a Marathon than a Sprint,” The Economist, November 7, 2015, https://www.economist.com/middle-east-and-africa/2015/11/07/more-a-marathon-than-a-sprint

4 Africa has not experienced a green revolution similar to that of East Asia, where
cereal yields nearly quadrupled between 1960 and 1990. Low productivity in African
agriculture and labor continues to inhibit economic growth; Daudi Sumba et al., Africa
Agriculture Status Report 2017: The Business of Smallholder Agriculture in sub-Saharan Africa, Alliance for a Green Revolution in Africa, August 28, 2017, https://agra.
org/wp-content/uploads/2017/09/Final-AASR-2017-Aug-28.pdf; El-hadj M. Bah et al.,
The Africa Competitiveness Report 2017, World Bank Group, May 4, 2017, http://documents.worldbank.org/curated/en/733321493793700840/pdf/114750-2-5-2017-15-48-
23-ACRfinal.pdf

5 Art Chambers et al., The sub-Saharan African Services Economy: Insights and Trends,
US International Trade Commission, July 12, 2017, https://www.usitc.gov/publications/332/sub-saharan_african_id-17-046_final_071217sae.pdf

6 El-hadj M. Bah et al., The Africa Competitiveness Report 2017, World Bank Group, May 4, 2017, http://documents.worldbank.org/curated/
en/733321493793700840/pdf/114750-2-5-2017-15-48-23-ACRfinal.pdf

8 Marc Lhermitte et al., Cultural Times: The First Global Map of Cultural and Creative Industries, EY, December 2015, http://www.ey.com/Publication/vwLUAssets/ey-cultural-times-2015/$FILE/ey-cultural-times-2015.pdf

9 Richard Harrington, “Fela Kuti &,” Washington Post, November 7, 1986, https://www.washingtonpost.com/archive/lifestyle/1986/11/07/fela-kuti-38/69e5f304-aa23-44ce-a3c2-c9d3e3c119ee/?utm_term=.4d142b945bf1

10 Lhermitte et al., “Cultural Times.”

11 Ibid

12 Eric Oh, Nigeria’s Film Industry: Nollywood Looks to Expand Globally, US International Trade Commission, October 2014, https://www.usitc.
gov/publications/332/erick_oh_nigerias_film_industry.pdf

13 Revised White Paper on Arts, Culture, and Heritage, Department of Arts and Culture of the Republic of South Africa, February 2017, http://
www.dac.gov.za/sites/default/files/Legislations%20Files/Revised%203rd%20Draft%20RWP%20on%20ACH%20FEBRUARY%202017_0.pdf

14 Jake Bright, “Meet ‘Nollywood’: The Second Largest Movie Industry in the World,” Fortune, June 24, 2015, http://fortune.com/2015/06/24/
nollywood-movie-industry/

15 Production costs range on average from $25,000 to $70,000; “Making a Fortune by Distributing Nigerian Films Online,” BBC News, May 7,
2012, https://www.bbc.co.uk/news/world-africa-17896461

16 The Wedding Planner made N453 million at the box-office, far surpassing the previous Nollywood box office record of N178.5 million;
Christopher Vourlias, “Wedding Party Fuels Record Nigerian Box Office Despite Ailing Economy,” Variety, February 3, 2017, https://variety.
com/2017/film/global/wedding-party-fuels-record-nigerian-box-office-despite-ailing-economy-1201977878/

17 Steve Omanufeme, “Runaway Success,” IMF, Finance and Development 53 (2016), accessed August 15, 2018, http://www.imf.org/external/
pubs/ft/fandd/2016/06/omanufeme.htm

18 “About Us,” Project ACT – Nollywood, accessed August 15, 2018, http://www.projectactnollywood.com.ng/about/

19 Lhermitte et al., “Cultural Times.”

20 Andrew England, “Booming Film Industry Boosts South Africa’s Economy,” Financial Times, September 5, 2014, https://www.ft.com/content/6cce315e-3420-11e4-b81c-00144feabdc0

21 Economic Impact of the South African Film Industry, Urban-Econ Development Economists, June 21, 2017, http://nfvf.co.za/home/22/
files/2017%20files/Final%20NFVF%20Economic%20Impact%20Study%20Report_21_06_2017.pdf

22 “Economie créative : panorama et potentiel,” Ministère de l’Economie et des Finances du Royaume du Maroc, April 2016, https://www.finances.gov.ma/Docs/depf/2016/economie_creative.pdf

23 Phoebe Park, “From Afrobeat to Akon: Why African Music Finally Has the World’s Ear,” CNN, November 18, 2016, https://www.cnn.
com/2016/05/05/africa/future-african-music/index.html

24 Arwa Haider, “Davido, Mr Eazi and How Afrofusion Went Mainstream in the West,” Financial Times, December 22, 2017, https://www.ft.com/
content/b3af2160-e033-11e7-a0d4-0944c5f49e46

25 Lhermitte et al., “Cultural Times.”

26 Yinka Adegoke, “The World’s Biggest Music Company is Setting Its Sights on Africa,” Quartz Africa, July 17, 2018, https://qz.com/1328454/
universal-music-group-the-worlds-biggest-music-company-sets-its-sights-on-africa/

27 Bill Odidi, “Our Singers Busy Crying Foul, But Just How Local is Our ‘Local’ Music?” Daily Nation, August 29, 2015, https://www.nation.co.ke/
lifestyle/weekend/Our-singers-busy-crying-foul/1220-2849900-423kf0z/index.html.

28 Vicki Myburgh et al., “Entertainment and Media Outlook: 2016-2020,” PwC, September 2016, https://www.pwc.co.za/en/assets/pdf/enm/entertainment-and-media-outlook-2016-2020.pdf

29 Ibid

30 “Fashionable Business: Deola Sagoe, Others Driving the Continent’s Multi-Billion Dollar Industry,” Ventures Africa, September 10, 2014, http://
venturesafrica.com/fashionable-business-deola-sagoe-leading-africa-towards-15bn/

31 Luxury and Cosmetics Financial Factbook 2017, EY, 2017, https://www.ey.com/gl/en/industries/consumer-products/ey-luxury-and-cosmetics-financial-factbook-2017#item2

32 Euromonitor International, “Apparel and Footwear in 2015: Trends, Developments, and Perspectives,” May 2015, http://www.euromonitor.
com/apparel-and-footwear-in-2015-trends-developments-and-prospects/report

33 “African Creative Industries,” Fashionomics Africa, accessed August 15, 2018, http://www.fashionomicsafrica.org/creative/

34 Hugh McIntyre, “Millennials are Leading the Spotify Revolution,” Forbes, April 20, 2016, https://www.forbes.com/sites/hughmcintyre/2016/04/20/millennials-are-leading-the-spotify-revolution/

35 “Hulu Grows to Over 17 Million Subscribers in 2017, Emerges as Powerful Pay TV Alternative Combining Live Television with the Largest
SVOD TV Library in the US,” Hulu, January 9, 2018, https://www.hulu.com/press/hulu-grows-to-over-17-million-subscribers-in-2017-emergesas-powerful-pay-tv-alternative-combining-live-television-with-the-largest-svod-tv-library-in-the-u-s/

36 Based on data from the United Nations World Population Prospects 2017, https://esa.un.org/unpd/wpp/

37 World Urbanization Prospects: “The 2018 Revision, United Nations Department of Economic and Social Affairs,” May 16, 2018, https://esa.
un.org/unpd/wup/Publications/Files/WUP2018-KeyFacts.pdf

38 The African Development Bank estimates Africa’s middle class to be 350 million people or 34 percent of Africa’s population (2014). Africa’s
middle class continues to grow at a faster rate than total population growth. Additionally, Africa’s middle class has led to increased domestic
consumption, with consumer spending expected to reach US $2.6 trillion by 2030; Mthuli Ncube et al., “Tracking Africa’s Progress in Figures,” African Development Bank Group, May 9, 2014, https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Tracking_Africa%E2%80%99s_Progress_in_Figures.pdf

39 “Media Release: Living Conditions Survey (LCS) 2014/2015,” Statistics South Africa, last updated January 27, 2017, http://www.statssa.gov.
za/?p=9473

40 “Nigeria’s Internet Users Rise to 91.6m,” Communicator, 22 (2017): accessed August 15, 2018, https://www.ncc.gov.ng/thecommunicator/index.php?option=com_content&view=article&id=1572:nigeria-s-internet-users-rise-to-91-6m&catid=32&Itemid=179 The Mobile Economy: sub-Saharan Africa 2018, GSMA, 2018, https://www.gsmaintelligence.com/research/?file=809c442550e5487f3b1d025fdc70e23b&download

41 Funsho Arogundade, “Nigeria’s Super Bloggers,” PM News Nigeria, January 28, 2013, http://www.pmnewsnigeria.com/2013/01/28/nigerias-super-bloggers/

42 The African Union (AU) Commission defines the African diaspora as “peoples of African origin living outside the continent, irrespective
of their citizenship and nationality and who are willing to contribute to the development of the continent and the building of the African
Union.”

43 Janie Boschma, “Black Consumers Have ‘Unprecedented Impact’ in 2015,” Atlantic, February 2, 2016, https://www.theatlantic.com/politics/
archive/2016/02/black-consumers-have-unprecedented-impact-in-2015/433725/

44 Solomon Elusoji, “China Looks Forward to Opening Its Giant Market to Nollywood,” This Day Live, May 22, 2018. https://www.thisdaylive.
com/index.php/2018/05/22/china-looks-forward-to-opening-its-giant-market-to-nollywood/

45 Keith Nurse, “Study on Alternative and Innovative Funding Mechanisms for ACP Cultural Industries, European Commission,” http://acpculturesplus.eu/sites/default/files/2017/02/02/etude_financements_-_executive_summary_en.pdf

46 Creative Artists Industry, accessed August 15, 2018, https://www.caa.com/

47 “Nollyfund,” Bank of Industry, accessed August 15, 2018, https://www.boi.ng/boinollyfund/

48 Eric Oh, Nigeria’s Film Industry: Nollywood Looks to Expand Globally, US International Trade Commission, October 2014, https://www.usitc.
gov/publications/332/erick_oh_nigerias_film_industry.pdf

49 Ibid

50 Ibid

51 South African Film Industry Economic Baseline Study Report, National Film and Video Foundation of South Africa, April 2013, http://nfvf.
co.za/home/22/files/Baseline%20study.pdf

52 Dionne Searcey, “Nigeria’s Afrobeats Music Scene is Booming, but Profits go to Pirates,” New York Times, June 3, 2017, https://www.nytimes.
com/2017/06/03/world/africa/nigeria-lagos-afrobeats-music-piracy-seyi-shay.html

53 Convention on the Protection and Promotion of the Diversity of Cultural Expressions, Paris, 20 October 2005, available from http://www.
unesco.org/eri/la/convention.asp?KO=31038&language=E&order=alpha

54 United Nations Conference on Trade and Development, “South Africa Adopts New IP Policy Improving Access to Medicine,” May 31, 2018,
http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1762

55 ECOWAS Bank for Investment and Development, “Annual Report 2014,” 2014, http://www.bidc-ebid.com/wpen/blog/wp-content/uploads/
EBID_annual_report_2014_en.pdf

56 “Beefing Up Mobile-phone and Internet Penetration in Africa,” The Economist, November 9, 2017, https://www.economist.com/special-report/2017/11/09/beefing-up-mobile-phone-and-internet-penetration-in-africa

57 David L. Johnson and Chomora Mikeka, “Malawi and South Africa Pioneer Unused TV Frequencies for Rural Broadband,” IEEE Spectrum,
August 29, 2016, https://spectrum.ieee.org/telecom/internet/malawi-and-south-africa-pioneer-unused-tv-frequencies-for-rural-broadband

58 Aubrey Hruby, Escaping China’s Shadow: Finding America’s Competitive Edge in Africa, Atlantic Council, September 7, 2017, http://www.atlanticcouncil.org/images/Escaping_Chinas_Shadow_web_0907.pdf

59 United Nations Educational, Scientific, and Cultural Organization, “Welcome to UIS.STAT,” accessed August 15, 2018. http://data.uis.unesco.
org/

The post Getting creative about development appeared first on Atlantic Council.

Getting creative about development

Aubrey Hruby — Mon, 24 Sep 2018 13:11:21 +0000