My Beauty Best Teacher

The Economist reports:

The developing countries also have a far greater influence on the performance of the rich economies than is generally realised. Emerging economies are driving global growth and having a big impact on developed countries' inflation, interest rates, wages and profits. As these newcomers become more integrated into the global economy and their incomes catch up with the rich countries, they will provide the biggest boost to the world economy since the industrial revolution...Rising exports give developing countries more money to spend on imports from richer ones. And although their average incomes are still low, their middle classes are expanding fast, creating a vast new market. Over the next decade, almost a billion new consumers will enter the global marketplace as household incomes rise above the threshold at which people generally begin to spend on non-essential goods. Emerging economies have already become important markets for rich-world firms: over half of the combined exports of America, the euro area and Japan go to these poorer economies. The rich economies' trade with developing countries is growing twice as fast as their trade with one another.

via Emergic

The Economist writes "...As developing countries and the former Soviet block have embraced market-friendly economic reforms and opened their borders to trade and investment, more countries are industrialising than ever before—and more quickly. During their industrial revolutions America and Britain took 50 years to double their real incomes per head; today China is achieving that in a single decade. In an open world, it is much easier to catch up by adopting advanced countries' technology than it is to be an economic leader that has to invent new technologies in order to keep growing. The shift in economic power towards emerging economies is therefore likely to continue. This is returning the world to the sort of state that endured throughout most of its history. People forget that, until the late 19th century, China and India were the world's two biggest economies and today's “emerging economies” accounted for the bulk of world production..."

A Goldman Sachs report highlights the quickening pace of industrialization worldwide.It states:

That the pace of development in today’s emerging economies is accelerating, intensifying the speed with which the associated changes in demand in those economies occur.The result is said to be a “compressing of the development process, with unprecedented levels of infrastructure investment squeezed into a shorter timeframe than occurred in already-developed economies, followed by a more rapid transition into consumer economies.”

via Ft Alphaville
What may the significance of this be for under-industrialized Africa?

Basil Enwegbara asks "...Can Africans learn something from today’s Chinese and Indians? Can we learn that a strong market for goods and services is a leading cause of economic growth, and that market is itself a major cause of capital, investment, and technological advancement? Are we now convinced that economic growth is an organic process, involving many interrelated factors? What about understanding that even the banking industry and other financial institutions do not create the conditions for economic growth, since they are only important when an economy is sufficiently sophisticated to make efficient and creative intermediation between savings and business?...Have we now finally realised that a continent that does not educate majority of its young men and women in job-enhancing education (science and engineering) to prepare them as useful citizens is not building its future high-value carrying workforce? Are we still in doubt that Africa having the world’s single largest number of highly educated professionals in the US and yet they could not be made to work closely with their African counterparts—like their Chinese and the Indians counterparts—to help jumpstart continental economy is our collective sin future generations will find difficult to forgive us? Have we now come to pose the question: How come our well-trained scientists and engineers, those that refused to migrate are allowed to roam our streets without being fully mobilised? What about the understanding that the future of our economic development lies in the mobilisation of Africa’s entrepreneurs, especially our highly gifted men and women who have the psyche of economic warriors? Put differently, are we now fully aware that it is this lack of entrepreneurial dynamism that today separates us from the developed economies of the West and recently Asian economies..."

Hinsley Njila founder of Real Focus writes about the deleterious effects of the CFA franc and echoes calls for Francophone countries to free themselves from its yoke:

For every growth in France’s GDP, the euro appreciates against the Dollar, thus the CFA franc assumes too high an exchange rate. This puts the brakes on growth in the African economies that are also heavily dependent on commodities produced by Asia and South American countries that have much more flexible currencies. Put simply, a strong euro just kills CFA member economies as they experience declining export prices...A high fixed rate also kills economic growth in member countries, as it’s incompatible with productivity. The level of regional integration among member countries and the two central banks is remarkably low, even further undermining economic growth. Because the economies of Central African countries are heavily dependent on oil, and those of West Africa heavily dependent on other commodities, it is hard to argue for the long-term viability of the CFA unless of course you’re De Gaulle.

via Cheetah Index

Sanou Mbaye writing in Project Syndicate:

He speaks on the need to liberalize the remittance channels:

The effects of banks’ hijacking of national payment systems to service only the modern economy are compounded by the exclusive agreements that banks and money-transfer companies such as Western Union have signed with most African countries. These agreements lock out non-banking entities from the highly lucrative market for migrant remittances from the African diaspora, which remain a key engine of growth

Furthermore on how key it is to nourish the informal economies:

African states must now recognize that modernizing their informal sectors by integrating them into the modern economy can be a major development tool. Yet only a few countries have started moving in that direction. Nigeria has refrained from signing any exclusive agreements with Western Union and others, and its newly consolidated banking industry is making significant inroads across the region...

Arguing for the broader inclusion of more financial actors in national payment systems

Giving micro-finance institutions access to national and regional payments systems and electronic retail facilities will go a long way toward meeting the requirements of the retail and business sector in terms of banking facilities. It will also help facilitate access by the poorest to financial services, thus helping to reduce the high proportion of the un-banked population.

All of this will invariably spur development and integration of national financial systems and intra-regional trade. This will be a welcome development, because a large proportion of intra-regional trade is carried out by informal operators and small and medium enterprises that do not have access to the banking system. Moreover, economic integration and increased intra-regional trade are the best entry point into global markets for all countries.

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From Foreign Policy Magazine comes this article "The Top 10 Stories You Missed in 2009". It has pictures and in depth analysis, but here is a handy summary of the top five stories for you:

1. The Northeast Passage Opens for Business. Good (lower cost of transporting goods around the world) or bad (an omen of the mystical cult of Global Warming), this does raise the importance of the Arctic Ocean, which is now accessible to exploration and development. This may be the cause of rising tensions between Russia and the US.
2. Iraq's New Flashpoint. Iraq's Arab and Kurdish populations are at odds with one another in the Nineveh region, not because of oil, but because of a large Kurdish population in this area, which is outside of the autonomous Kurdish region. Neither side has turned to violence- yet.
3. A Hotline for China and India. You only put in a hotline between world leaders when you are afraid that miscommunication may result and someone may make an unwise decision to nuke the other. The key to this conflict is the Himalayan region of Tawang, which is in India but China claims was part of Tibet (which is now part of China). The area has been increasingly militarized, and the Indian military documented 270 border violations and almost 2,300 cases of "aggressive border patrolling" by the Chinese in 2008.
4. A New Housing Bubble? More than any other factor, ill-advised speculation on U.S. real estate set off the global financial crisis. But even after millions of foreclosures and secondary effects ripped through economies around the world, a new housing bubble is forming again, for the same reasons the first did- Democratic pressure on banks to give everyone a home loan, Democratic pressure on banks to be nice about credit scores, Democratic 'stimulus' money for home sales, and Democratic pressure on banks to keep interest rates low and print money. Be prepared for Democratic policies such as these destroying the world's economies again sometime soon.
5. The ‘Civilian Surge' Fizzles. A major part of the strategy in dealing with terrorism and failed states was a surge in civilian personal from the State Department and USAID, but it turns out, those agencies have failed to deliver, and now the military is trying to meet that commitment too.

John H. Christy reports in Forbes:

The economies of sub-Saharan Africa are in the best shape in several decades. Africa is on track to deliver economic growth of nearly 7% in 2008. Inflation, which measures below 7%, is high by the standards of the developed world, but nowhere near crisis levels. Record oil prices have certainly helped stabilize African economies, but the International Monetary Fund notes that improvements have also been broad-based, attributable to better macroeconomic policies in recent years...[continue reading]

via Cheetah Index

More on the finance for the 'missing middle' in This is Africa:

While small enterprises are the lifeblood of African economies, they often struggle for financing. but are things changing?...reforms to the business environment in several countries, particularly Rwanda, and a degree of coalescence by international development financiers and investors around an understanding of the social and economic importance of SME development mean that increasing amounts of time and money are being spent on understanding and addressing the needs of this complex market segment. Together these businesses are more often than not the principal employer in any given country. They compose anywhere from 60 to 80 percent of most African economies, with the variance generally more a matter of definition than of structure. Furthermore, owner-entrepreneurs drive the creation of a middle class, a crucial factor in countries’ movement out of poverty and in their development as markets for international investment...

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In Foreign Affairs Nicolas van de Walle reviews Kate Meagher's new book "Identity Economics: Social Networks and the Informal Economy in Nigeria":

Within development circles, conventional wisdom has it that successful manufacturing sectors often develop in low-income countries thanks to identity-based social networks made up of producers working together. These networks are said to generate the social capital that can be used to overcome many of the shortcomings of underdevelopment. Meagher's careful study of two such networks in southwestern Nigeria -- of small, undercapitalized garment and shoe manufacturers -- suggests that the advantages for producers within the networks are being undermined by an increasingly dysfunctional state. Meagher shows that these networks, whose roots go back to the colonial era, bring in hundreds of millions of dollars in revenue and export their goods to states throughout West Africa. But in recent years, they have proved vulnerable to Asian imports and have largely failed to develop economies of scale, invest in new machinery, or generate new lines of production; these networks, it turns out, stifle innovation and consolidation, even as they protect their members. Informed by theory as well as sustained fieldwork, Meagher's study is a useful antidote to the purveyors of magic-bullet solutions for African development. It should be read by anyone interested in Africa's industrialization.

via Loomnie

Richard Gnodde writes in the FT:

For the past five years we have seen a strong period of global growth and wealth creation driven by the opening of new markets, financial innovation, favourable credit conditions and disciplined corporate management. Perhaps more striking has been the breadth of this growth – across geographies, asset classes and industries. We have one global economy, but it is increasingly powered by multiple engines, with multiple sources of demand and liquidity.
The new flows go beyond the increased investment in emerging markets to include investments from those markets into mature economies, and cross-border investments between emerging economies. Since 1990, cross-border capital flows have grown more than 10 per cent annually. Over that period, capital inflows to emerging markets have grown twice as fast as inflows to developed countries. Investment flowing to developing countries now accounts for nearly half of world total FDI inflows, compared with only 20 per cent in 1990. Even excluding China, the share doubled to 32 per cent.

From Reuters:

Struggling countries must manufacture more and be given better access to global markets to expand their economies, the U.N. Industrial Development Organization said in a report...The discovery of oil or gold can suck labour out of manufacturing, raise the price of goods and push the economy away from exports and into domestic sectors, the report warns.
African countries should learn from Asian states such as Malaysia that developed their economies through wealth creation, rather than focusing solely on cutting poverty, the report says.
Africa has been dogged for decades by the "happy peasant syndrome", where donors give money to alleviate poverty instead of targeting the aid for economic growth,says Kandeh Yumkella(UNIDO DG)

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Della Bradshaw reports in the FT on Ian MacMillan who asserts that:

If philanthropists endow the seed funding for societal wealth enterprises, in many economies, particularly developing ones, it should be possible to attract local entrepreneurs who are quite happy to live with the smaller profit streams eschewed by their counterparts in wealthier economies..."A powerful appeal to philanthropists is that their contributions have a chance to remove problems ... and the associated recurrent 'annual tin cup' dependencies. Perhaps the idea behind the proverb -- give a man a fish and he soon goes hungry, teach him to fish and he eats forever -- represents a viable option in today's world.

She writes:

MacMillan's methodology is simple. "You don't just go in with your cowboy boots and spurs," he says. Instead, he and his students from across the university develop ideas they think will combine the dual function of creating businesses while addressing social problems(pdf), then put the initial idea into practice with seed funding and appoint a local entrepreneur to run the business.

Joshua Wanyama writes in the Cheetah Index:

When a continent as rich as Africa sells its natural resources to the rest of the world. I call that a basic economic market. When African economies and companies start keeping these resources at home and produce world quality products, then they have added value and ensured better prices for their commodities...Until Africa increases the value for its natural resources consistently, the continent keeps fueling outside economies while playing second fiddle to world markets.

The WSJ reports on how the appetite for returns is leading investors to markets in Africa and beyond :

Frontier markets offer opportunities to participate in some of the world's fastest-growing economies. Parts of Africa, Central and Eastern Europe and the Middle East have been clocking growth of about 6% or more in recent years.
That trend is largely projected to continue through at least 2009, far outpacing developed-economy growth of about 1.3%.
Yet, frontier economies are some of the most volatile financial markets around. Kenya's stock market, rocked by political strife, lost more than 11% in just 10 days earlier this year...[continue reading]

Keith Hart writing in Memory Bank:

When I graduated to the field of development studies, the picture of West Africa’s cities was just as distorted as one you might get from boorowing a Manchester school perspective. Here the emphasis of the economists was on the new states’ ability to pursue a neo-Keynesian development program. How could ‘we’ (the politicians, bureaucrats and their academic advisers) provide the jobs and other needs of the hordes flocking into the cities at the time? It was assumed that such provision had to come through the bureaucracy and conform to state-made laws. My paper on ‘informal income opportunities and urban employment’ pointed to the wide range of economic activities that were invisible to bureacracy. But even I saw them through a statist lens (“seeing like a state”), hence the term ‘informal’, not regulated by the bureaucracy. At that time I assumed that the bulk of economic progress must come though public and private sector enterprise of a corporate type.
The informal economy was never adequately described or defined, but these days it is commonplace to read assertions that African economies are 70-90% ‘informal’. Certainly the deregulation undertaken over the last three decades of neoliberal economic policies have led to a radical informalization of the world economy, not least in Africa. But to label these activities ‘informal’ is to avoid identifying what they are positively for or how they are organized, by which social principles.
I would say that the last half-century has seen a massive transfer of population to the cities, where most people have been left to generate their own forms of commerce. The informal economy in this sense has been a holding operation allowing many people to survive in the city and some to flourish. Whatever is coming up next will draw to some extent on this sprawling self-organized economic activity. Our task is to find out more about the promising sectors spawned by such a development.

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Binneh S. Minteh writing in the The Sword of Truth states:

The emboldening of an African – Brazilian /African-Indian private sector, through positive and constructive bilateral mechanisms and institutions, may be a contributing policy decision in both fostering ties, and diversifying economies across the continent.In addition the opening of African economies to more entrepreneurs and private businesses from both India and Brazil may become the necessary driving force behind the vehicle strengthening economic diversification across the continent.....[continue reading]

via Cheetah Index

Newsweek reports on the emergence of Vietnam as a formidable competitor to China."...In many ways, Vietnam is a throwback to Asia's export-driven tiger economies, which thrived until China emerged as a world-beating manufacturer in the 1990s. Yet its emergence illustrates how China itself has become vulnerable to cut-rate competitors. Unlike other Asian economies, which sought to align themselves with the juggernaut in their midst, Vietnam has instead become a giant-killer. Much of its growth now comes in industries China still dominates, like textiles, footwear and toys. It competes against China in key Western markets but exports comparatively little to its northern neighbor..."African countries particularly with regard to textiles have thrown their hands up in horror and desperation at the onset of what they view as unstoppable Chinese competition. Vietnam's pugnacity illustrates the importance of a logically executed policy and the caliber of their nascent private sector. The victimist handwringing stance of African goverments when it comes to trade is a derivative of opaque and often clueless reactive thinking. The adoption of a constructive dynamic approach as evidenced by the success of the Vietnamese is something that needs to be embarked upon by the African private-public sector.

The British PM Gordon Brown, seems to have changed his position on Aid.In a speech on international development he stated that:

Some argue that it is the presence of big international corporations that is the cause of the problems in developing countries, but I disagree. Indeed, I believe it is the absence of business - and not the presence of business - that blights the lives of poor people, leaving them dependent on aid and denying them the opportunity to work, denying them the chance to support their families and denying them the means to ensure their children get the chance to succeed.
Economic growth alone has lifted more than 500 million people out of poverty over the last 25 years, accounting for over 80 per cent of poverty reduction.
And the countries whose economies are growing fastest, like Rwanda and Ghana represented here today, are those that are making progress on the Millennium Development Goals - with countries whose economies are growing more slowly falling behind.
So we need to fully acknowledge the critical importance of the private sector in driving development - focusing our attention not on an old one-dimensional welfarist approach but on enterprise, on free and fair trade and open markets, and on harnessing the power of innovation -- the building blocks of growth.
Developing countries - including Ghana and Rwanda - are already working hard to put in place the macroeconomic stability, supportive regulatory environment and measures to tackle corruption that are necessary for business and trade to thrive.

He expands on this and urges the strengthening of successful methodologies:

Today we need a new approach --- moving beyond minimum standards, beyond philanthropy and beyond traditional corporate social responsibility - important though they are - to develop long-term business initiatives that mobilise the resources and talents that are the central strengths of global business...From delivering financial services via mobile phones so that millions of people have access to basic bank accounts for the first time; to providing rural farmers with electronic price and weather information so they can decide when best to harvest and sell their crops; to sourcing ingredients from local supply chains to develop the base of the local economy --- each one of these initiatives is providing innovative solutions to the problems we face and spreading enterprise and opportunity across the developing world.