Africa must produce its own vaccines
WASHINGTON, DC – During the pandemic, wealthy countries led the way in rapidly developing and producing COVID-19 vaccines. The same countries then bought up and administered those vaccines to their own populations, and have even ordered boosters for already-vaccinated people. Meanwhile, many developing countries have not been able to deliver even one dose to most of their populations.
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Africa, in particular, is struggling with limited access to COVID-19 vaccines. As of August 31, African countries had administered 94 million doses to the continent’s population of nearly 1.4 billion, with a total supply of 134.5 million. By contrast, the United States – with a total population of 332 million – has administered over 375 million vaccine doses.
This disparity partly reflects the fact that most African countries are not able to produce the vaccines needed to protect their populations against not only COVID-19, but also the myriad other diseases that plague the continent. Africa is home to only four local drug substance vaccine manufacturers – two more are in development – and two “fill-and-finish” facilities that rely on imported vaccine substances to produce distributable doses. Supply-chain disruptions during the COVID-19 pandemic showed just how risky this dependence on imports of critical medical supplies can be.
Africa is almost totally dependent on vaccine imports, producing just 1% of the vaccines it administers. So far during the pandemic, African countries have received most of their COVID-19 vaccine doses through either bilateral agreements or the COVID-19 Vaccine Global Access (COVAX) facility, an initiative launched last year by the World Health Organization and Gavi, the Vaccine Alliance. COVAX aims to provide vaccines for 20% of people in low- and middle-income countries.
But while initiatives like COVAX are clearly needed to fulfill Africa’s short-term needs, they will do little to improve the continent’s capacity to provide crucial vaccines for itself in the future. That is why the Mastercard Foundation has pledged $1.3 billion to support local manufacturing and distribution of COVID-19 vaccines, through a partnership with the Africa Centers for Disease Control and Prevention.
The program, which will include a focus on human-capital development, aligns with the African Union (AU) and the Africa CDC’s Partnerships for African Vaccine Manufacturing (PAVM) initiative. Launched this past April, PAVM aims to establish five vaccine research and manufacturing hubs on the continent over the next 10-15 years, and increase the share of vaccines produced locally for use on the continent to as much as 60% within the next 20 years. The European Union, in collaboration with the International Finance Corporation, France, Germany, and the United States, has announced plans to invest €1 billion ($1.2 billion) in the hub-development project.
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Developing Africa’s vaccine-manufacturing capabilities will not only help the continent to cope with future unexpected crises; it will also enable countries to improve the provision of existing vaccines. According to the Anadolu Agency, in 2019 an estimated 19.8 million children worldwide did not receive the measles vaccine through routine immunization coverage; the majority of those children live in Africa.
Moreover, these efforts will place Africa on a much stronger footing to meet demand for future public-health solutions. For example, vaccines for Lassa fever – an acute viral hemorrhagic illness that is endemic in eight countries in West Africa – are currently in the development phase. Researchers are also getting closer to developing an effective and affordable vaccine for malaria. In 2019, 94% of malaria cases and deaths occurred in Sub-Saharan Africa.
Yet vaccines are only one part of a long list of pharmaceutical products to which African countries often struggle to secure access. In 2015, 1.6 million Africans died from malaria, tuberculosis, or HIV/AIDS – all preventable or treatable diseases – because of chronic drug shortages.
Fortunately, there are also initiatives focused on dismantling barriers to pharmaceutical manufacturing in Africa. In 2012, the AU Development Agency (AUDA-NEPAD) published the Pharmaceutical Manufacturing Plan for Africa (PMPA), which proposes technical solutions to many of the challenges facing the pharmaceutical manufacturing industry. The implementation of the African Continental Free Trade Area (AfCFTA), by enabling the creation of economies of scale, should support progress on realizing the PMPA.
As the PMPA notes, the African Medicines Regulatory Harmonization (AMRH) program, established by AUDA-NEPAD in 2009 to address regulatory weaknesses affecting Africa’s pharmaceutical industry, is also critical to its success. The program’s achievements so far include the AU Model Law on Medical Products Regulation, the African Medical Devices Forum, and progress toward an African Medicines Agency.
The AMRH program is supported by a number of international organizations, including the AU, the WHO, Gavi, and the Bill and Melinda Gates Foundation. Multilateral institutions like the AU and the United Nations Industrial Development Organization are also working with the Federation of African Pharmaceutical Manufacturers Associations, which was launched in 2013 by a group of regional associations to advance the AMRH’s mission.
Multilateral institutions and initiatives must do even more to close the implementation gap and accelerate the development of Africa’s pharmaceutical industry. This means, for example, supporting capacity-building, knowledge transfer, and cross-sector coordination; backing rigorous implementation of the AfCFTA; mobilizing financial resources from international financial institutions and development banks; and cross-country collaboration to strengthen human capital.
Such efforts received a boost during the pandemic. African leaders and multilateral organizations alike must make the most of this momentum to ensure that when the next crisis arrives, Africa is ready.
Responding to risks of COVID debt distress
Report by eminent experts offers recommendations to ensure governments emerging from debt distress can still invest in sustainable development.As many countries continue to face severe economic pressures from the COVID-19 pandemic, the Friedrich-Ebert-Stiftung (FES) and the Consensus Building Institute (CBI) jointly convened the Roundtable on Responding to the Risks of COVID Debt Distress.The Roundtable convened eminent experts with direct experience in dealing with debt distress at the policy and operational levels, including former senior government officials and private attorneys who have represented sovereign debtors, bilateral and multilateral creditors, and academics who have closely studied the recent history of sovereign debt restructuring. This new report represents the consensus of the group on a set of recommendations that could make private creditor participation in managing the risks of debt distress more complete, more equitable, and more effective. The group also developed recommendations for integrating new and additional multilateral finance into restructuring, to ensure that governments emerging from debt distress are able to continue making investments for sustainable development.In this context, the group sees many opportunities to build on existing commitments, policies, and tools for managing the risks of debt distress, including those established in response to the pandemic by the G20, Paris Club IMF, and MDBs, in order to minimize the risk of widespread debt distress. The most important challenges to meet are 1) ensuring that debt restructuring by vulnerable low- and middle-income countries on the basis of comparable treatment is sufficiently timely and inclusive to enable sovereign creditors to maintain public services and investments, and 2) providing additional public and private finance to meet the very substantial needs for investment in recovery and sustainable development.FES is planning a formal launch and discussion of the Roundtable Report in early fall. If you are interested in more information about this event, please email info(at)fesny.org. Download the full report below.
On space barons and global poverty
On July 21, 2021, billionaire Jeff Bezos rocketed about 65 miles above the Earth’s crust. Another billionaire, Sir Richard Branson, did the same nine days before, but his vehicle could only climb to 53 miles—some do not consider that a space flight, really.
Clearly, this was not the first time man ventured into space. However, in all earlier cases, explorers pursued a publicly defined mission and were paid from the public purse. Whereas Bezos and Branson were motived by private interest. Although Bezos thanked his company’s workers and customers for “paying for his trip,” it was, nonetheless, a privately financed venture. These two aspects, private interest and private financing, make these billionaires the world’s first space barons.
The public reception of the emerging elite space travelers club is mixed. Space enthusiasts celebrate the renewed interest in space travel, which could spark future technologies that, one day, help bring life to other planets. Critics suggest that the money used would be better spent for fighting global hunger and poverty.
There is more to both sides of this argument than meets the eye, and further inquiry is warranted. For starters, I shall rule out an otherwise interesting, but notoriously complex, dimension that gave economists a headache for decades. That is the problem of interpersonal comparison of utility. In this case, can we really compare the utility gained by Bezos from his $5.5 billion trip with that of 37 million people had the money been used to end their hunger? The question may seem rhetorical, but it is not.
The problem remains an interesting one even after Bezos, and thus the need to compare his well-being with that of others, is taken out of the picture. Let us look exclusively from the viewpoint of potential beneficiaries in the developing world. Would a transfer of cash to them be better than using the money on space tourism? Surprisingly, the answer is not necessarily affirmative.
Conspicuous consumption or an incubator for innovation?
Nobel laureate economist Angus Deaton suggests that technological innovations like antibiotics, pest control, and vaccines have been the primary drivers of humanity’s escape from destitution, including in developing countries, far surpassing development aid in impact. By this logic, space tourism could muster moral support, in addition to cash, if it also facilitates significant technological advances (in addition to conspicuous consumption).
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So far, blasting billionaires off to the edge of space has not exactly been earth-shattering, technically. Mankind had previously stepped onto the moon on six separate occasions; astronauts and cosmonauts have visited space routinely, often without such commotion; and Mars is already inhabited by robots. The NASA Voyager, built half a century ago, has become the first man-made object to exit our solar system—currently drifting at 14.2 billion miles away from us—that is about 21 hours of light-travel time from Earth (solar light reaches us in about eight minutes).
Previous research on space technology has undoubtedly improved life on earth. Modern water filtration systems, solar cells, firefighting equipment, insulin pumps, and artificial limbs are all reported to have been initiated by space research. It is too soon to see such impact from the new billionaire-driven space race. However, Bezos’ company Blue Origin is reported to hold at least 19 patents, whereas Elon Musk’s SpaceX has followed a different path: The company has not submitted any patent applications to avoid technological disclosure. Yet, there are some obvious advances including reusable rockets, which have reduced the cost of space flight dramatically.
Nonetheless, even in the presence of such innovations, there may remain significant doubts. Would for-profit innovations diffuse for public benefit as much as the publicly funded ones? The reluctance to lift intellectual property protections for COVID-19 vaccines has been a sobering test just recently.
The Samaritan’s Curse or trickle-down economics for the space age?
In some highly specialized settings, when a group tries to help those outside the group, their joint action can actually hurt the outsiders instead of helping them. This is called the “Samaritan’s Curse” and was In the case of foreign aid, a similar argument is considered when donors respond to deteriorating conditions in a country by providing more aid while the recipient country government acts strategically by leaving needs unfulfilled to qualify for further aid.
In space tourism, a Samaritan’s Curse argument can hold even without such mischievous behavior by potential recipients. Suppose the poor could benefit significantly from future innovations driven by selfish (for-profit) motives of space travelers. Then, using the space tourism money for simple cash transfers instead could be the worse option for the poor themselves. For example, in Africa, cellphone technology may have improved life more than a hypothetical transfer of equivalent size.
For such prominent technology effects, it is not enough if private space ventures muster a whole lot of innovations. The effects on the global poor will also depend on how easily those innovations can be utilized for practical purposes in daily life and how quickly those applications can diffuse to developing countries. This is an area where public policy can go a long way: Capping intellectual property protections at a reasonable level, especially when public funds are used, could help broadly. Similarly, a technology-focused assistance scheme for developing countries can complement other international aid programs. Without such discretionary actions, the benefits of space tourism could take a long time to trickle down.
The bottom line is that space tourism can hold its moral ground if it achieves life-changing technological advances. However, a public nudge is most likely needed to distribute such benefits beyond the elite space travelers club. Otherwise, humanity may jump out of the Samaritan’s Curse into the trickle-down economics for the space age.
Cash and the city: Digital COVID-19 social response in Kinshasa
As COVID-19 spread across the world, governments responded with an unprecedented increase in social assistance measures. Policymakers had to shift their focus to urban areas, particularly slums, whose residents were hit the hardest by the pandemic and its economic impact. Social safety nets, traditionally targeting chronic poverty in rural areas, had to be reinvented overnight: The new objective was to prevent informal workers affected by lockdowns from falling back into poverty. Exciting innovations in the design and delivery of social transfers followed, with emerging lessons informing us, as the world continues battling the pandemic.
COVID-19 in Kinshasa: A mission impossible scenario
Kinshasa, the capital of the Democratic Republic of the Congo (DRC), is a case in point. The social and economic effects of the crisis have been devastating in this megacity of 15 million people, two-thirds of whom were poor pre-pandemic. Job losses, price increases, and a drop in remittances quickly increased the financial vulnerability of most households. The situation called for a large-scale emergency cash transfer program, even if none of the prerequisites were in place: no program administration to build on, no social registry or fiscal records to target beneficiaries, and a weak financial ecosystem to make payments. In short, the program had to be built from scratch, remotely, and fast.
The DRC Social Fund took up the challenge with the Solidarité par Transferts Economiques contre la Pauvreté à Kinshasa (STEP-KIN) program. What was the plan?
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10 steps to set up a cash transfer program from scratch
A. Identification of the eligible population
Select poor neighborhoods based on all available data, from satellite imagery to flood-prone cartography. Everybody living in selected areas was deemed eligible for the program. Inclusion error was small—few rich people live in poor neighborhoods.
Sign nondisclosure agreements with telecom operators to obtain an anonymized list of mobile phone subscribers living in the targeted areas (cell tower mapping). This whitelist of phone numbers—granting eligibility to the program, as opposed to a blacklist—substitutes for the social registry.
Screen this whitelist with simple filters to further limit inclusion errors, e.g., no smartphones. Research shows that mobile phone data (also known as call detail records) are a reliable proxy for poverty status. In fact, their analysis can be an alternative to standard welfare surveys.
B. Self-registration of beneficiaries
Set up a system for self-registration that allows eligible people to express their interest in participating and remotely provide their information. To work at scale, the system has to be automated, leveraging simple technologies for interactive mobile data collection.
Launch the self-registration process by sharing information with eligible people. Bulk written (SMS) or audio (IVR) messages are sent to all the whitelist numbers. A radio campaign—or another traditional communication channel—complements this outreach for trust-building.
Finalize the program’s beneficiary registry. All the subscribers from the whitelist who have consented to participate and shared their data are now the program’s beneficiaries. Information collected must be minimal to maximize the response rate and protect respondents’ privacy.
C. Digital payment of transfers
Request telecom operators to open a mobile money account for all the beneficiaries. This is straightforward as program beneficiaries are already phone subscribers. Depending on the country’s financial regulation, this step may require a simplified Know-Your-Customer framework.
Instruct the operators to initiate the social transfers to the beneficiaries through digital payments. Note: This step and the following two are standard in any digital cash transfer program.
Ensure all the beneficiaries can cash out the transfers, i.e., large network of cash-out points in targeted neighborhoods and dedicated customer services. This also requires putting in place a grievance redress mechanism system like a 24/7 hotline.
Implement post-distribution monitoring surveys to collect information on the use of the transfers, confirm targeting effectiveness ex post, identify compliance issues early, and strengthen accountability.
In an independent effort, Togo has used a similar methodology for its successful Novissi cash transfer program. Other examples of tech-savvy innovations for each of these 10 steps abound.
Source: DRC Social Fund.
Does it work? 100,000 beneficiaries and counting
In three months, STEP-KIN identified, registered, and paid more than 100,000 individuals in 50 poor neighborhoods, becoming the largest cash-based operation in Kinshasa. The program is now expanding to 250,000 recipients for a total of $37.5 million to be transferred in monthly payments of $25. The first 6,500 randomized post-distribution surveys show that the targeting worked, i.e. beneficiaries are poor and vulnerable, with 40 percent unemployed and the remaining 60 percent earning less than $100 per month on average. They also document that the program’s objective is achieved: Recipients cash out for (i) meeting food needs, (ii) spending on health and education, (iii) reinvesting in their livelihoods, and (iv) paying rent.
Lessons and the challenges ahead
STEP-KIN was designed out of necessity and deployed with a learning-by-doing approach. This “quick and dirty” digital targeting approach works when the goal is to quickly reach a large population. Speed (and cost-efficiency) trump accuracy here. Other targeting methods would perform better where inclusion errors matter more, e.g. assistance for the ultra poor. Leveraging telecom data requires a very high mobile penetration rate (92 percent in Kinshasa). In many countries, it would work in urban settings only. Further, we should be careful of unintended consequences: the use of technologies may increase de facto exclusion of the most vulnerable, such as a lower registration and cash-out rate of women (38 percent of beneficiaries). Alternatives to technologies, such as on-site registration, must always be offered. Lastly, protecting beneficiaries’ privacy is a priority in processing personal data. The program must adhere to recognized industry standards by using data for legitimate purposes only and fairly and transparently.
Using telecom data and mobile technologies is not the panacea for social safety nets. However, given the new focus on crisis response in urban areas, why not continue to explore this promising solution?
Our last, best chance on climate
The COVID-19 pandemic showed us that human existence is fragile and perilous. However, if we do not take action now against climate change, the damage could be even greater and more lasting than the effects of the pandemic. Decisions made now are crucial in shaping the future of people and the planet. We must not go back to the old normal; it’s imperative to build back better through sustainable, inclusive, and resilient growth.
The 2018 Intergovernmental Panel on Climate Change (IPCC) special report Global Warming of 1.5°C highlighted the grave risks of global warming beyond 1.5 degrees Celsius, the already evident impact of climate change, and the limited time to arrest it. Projections show that more rapid and severe climate change will inflict greater harm on the environment, lives, and livelihoods. For example, warming of 2 degrees Celsius instead of 1.5 degrees Celsius would essentially wipe out all coral reefs on the planet, instead of 70 to 90 percent, and expose 37 percent of the population, instead of 14 percent, to extreme heat at least once every five years. Warming that exceeds 2 degrees Celsius significantly increases the risk of larger, likely irreversible environmental changes. The IPCC’s 2021 report documents the rapid acceleration of climate change, dramatically narrowing the window for limiting global warming from 2 degrees Celsius to 1.5 degrees Celsius and underscoring the imperative to reach net zero emissions by 2050.
If we do not take action now against climate change, the damage could be even greater and more lasting than the effects of the pandemic.
There is a growing realization that the risks and economic costs of climate change have been underestimated. If unchecked, climate change could displace hundreds of millions of people, mostly in the developing world, increasing the potential for conflict. Likewise, carbon-intensive economies depend on jobs that may be eliminated in the future to reduce pollution and avert catastrophic climate change. Jobs and incomes will be lost, driving many into poverty, and the longer decarbonization is delayed, the more disorderly future shocks will be.
Thanks to technological advances, the cost of renewable energy is declining, making it increasingly competitive with fossil fuels. Moreover, there is mounting evidence that decarbonization does not hamper growth, development, and jobs but instead offers a path to more inclusive, resilient, and sustainable growth; indeed it can “unlock the inclusive growth story of the 21st century.”
Investment and innovation
Increased spending on sustainable infrastructure has strong multiplier effects. In the short term, it can help the world economy recover from the effects of the COVID-19 pandemic by creating jobs and investment opportunities. In the medium term, it can spur innovation, create new sources of growth, and reduce poverty and inequality while delivering cleaner air and water. Over the long term, stabilizing climate change is the only path to a viable future.
To enable the shift away from carbon, governments must work with stakeholders to encourage clean energy and transportation systems, smart development, sustainable land use, wise water management, and a circular industrial economy. Major investment is needed to replace aging and polluting infrastructure, address infrastructure deficits and structural change in emerging market and developing economies, and protect and restore natural capital. In a report prepared for the Group of Seven (G-7), we asserted that the world must increase annual investment by 2 percent of pre-pandemic gross domestic product for this decade and beyond.
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An even greater boost is needed for emerging market and developing economies (other than China) given their recent sharp declines in investment and need for financing to support growth, development goals, and structural change, including rapid urbanization. The coming two decades will be a crucial period of transition for emerging market and developing economies, requiring greater investment in all forms of capital—physical, human, natural, and social.
In developed and developing economies, investment offers significant potential to accelerate the transition to net zero through lower- and zero-carbon solutions, from sustainable aviation fuels to electric vehicles. The 2020 “Paris Effect” report finds that by 2030, low-carbon solutions could be competitive in sectors accounting for 70 percent of emissions, up from 25 percent today and none five years ago.
Greater support by governments and stronger international cooperation can help accelerate the pace of innovation, further drive down costs, and ensure the widespread availability of low-carbon technologies, including in developing economies. Developed and developing economies need greater investment and fiscal stimulus now to counter the effects of the pandemic while responsibly managing debt and deficits over the medium term. Fiscal policy, on both the revenue and expenditure sides, can promote the transition to low-carbon, inclusive growth, including through green budgeting.
Policies to accelerate change
Policymakers must set expectations and provide a clear sense of direction on how to achieve the net zero emissions target. To that end, the International Monetary Fund (IMF), the World Bank, and a growing number of academic, public, and private sector voices have called for elimination of fossil fuel subsidies and putting a price on carbon. A credible carbon price would send a critical signal to direct investment and innovation toward clean technologies and encourage energy efficiency. The IMF managing director said that “without it we simply cannot reach the goals of the Paris Agreement” and that “this price signal needs to get predictably stronger—by 2030, we need an average global price of $75 per ton of CO2, way up from today’s $3 per ton,” to be effective.
A credible carbon price would send a critical signal to direct investment and innovation toward clean technologies and encourage energy efficiency.
Along with carbon pricing, the transition to climate-resilient growth will require many different and mutually supportive policies given major market failures, the availability of other powerful and effective policy instruments, and political economy impediments. As outlined in a recent paper, governments and the private sector must:
Reinforce carbon pricing with sector-specific policies—regulations, energy efficiency standards, feebates—and phase out coal.
Boost public investment in sustainable and resilient infrastructure, including nature-based solutions—restoration of degraded lands and conservation of existing ecosystems—while mitigating the impact on the poor.
Promote sustainable use of natural resources with policy measures such as payments for ecosystem services, regulations, reform of agricultural and water subsidies, and incentives for a circular economy to decouple economic growth from use of material resources.
Deploy industrial and other policies to spur climate-friendly innovation, including in digitalization, new materials, life sciences, and production processes, with a focus on the coordination of policy areas and on long-term policies and policy planning.
Provide information and promote public discussion on social norms and behavior to reduce energy demand and carbon intensity of consumption and business activity; educate the public about climate change risks and on early warning systems and evacuation plans in case of natural disasters.
Align finance with climate objectives—manage financial stability risks posed by climate change; align social and private returns with green investment; mobilize resources for investment, including a major boost to international climate finance; and make monetary and supervisory policies consistent with net-zero-emissions objectives.
Develop insurance instruments and social safety nets to mitigate the immediate impact of climate shocks.
Foster a just transition with investment in and support for the shift to a low-carbon economy for affected workers, businesses, and regions—rapid change will involve dislocation in both production and consumption.
Integrate sustainability considerations into public financial management and corporate governance; use better models and look beyond gross domestic product when deciding policy priorities and measuring well-being and sustainability.
By acting together on climate change, countries will benefit from stronger demand expansion and investment recovery, economies of scale, and lower costs for new technologies. The returns to collaboration and innovation are uniquely powerful at present given the high unemployment following the pandemic; the need for global access to COVID-19 vaccines; and the mounting threat of climate change, biodiversity loss, and environmental degradation. Failure to act on any of these threatens human health, economic prosperity, and the very future of the planet.
Mobilizing climate finance
Progress on global climate action will require commensurate ambition on climate finance. There are abundant pools of long-term savings, and interest rates are exceptionally low worldwide, but many emerging markets and most developing economies find it difficult to access long-term financing on the necessary scale, and the cost of capital is a major impediment to sustainable investment.
Developed economies’ commitment to provide $100 billion in climate finance by 2020 is not just symbolic but foundational to climate action. Credible progress on the $100 billion commitment is a make-or-break issue for the success of the coming conference and for climate action in the developing world.
Rich countries need to build on the G-7’s commitment by boosting climate finance in 2021-22 and doubling it to $60 billion by 2025. There is an urgent need to improve the quality of climate finance, by boosting grants from their present low level, immediately doubling finance for adaptation, and ensuring that at least half of concessional climate finance supports adaptation and resilience objectives.
Because of their mandates, instruments, and financial structure, multilateral development banks are the most effective source of support for climate action in developing economies and for the mobilization and leveraging of climate finance. These institutions must use all their powers and instruments at this moment of crisis, agreeing to triple financing by 2025 from 2018 levels. This will require an accelerated replenishment this year of IDA (the World Bank’s fund for assistance to the poorest countries), more effective use of development banks’ balance sheets, enhanced private sector finance mobilization, accelerated alignment with the Paris Agreement, and proactive capital increases.
Establishing the Resilience and Sustainability Trust within the IMF could also help bolster efforts, and proposals from the United Nations Economic Commission for Africa and the Bezos Earth Fund offer other ways to leverage concessional climate finance. The use of country platforms, which the Group of Twenty (G-20) has promoted but has yet to effectively apply, is another option to increase coordination.
Efforts to align the financial system with climate risk and opportunities are underway through the COP26 private finance agenda and in conjunction with initiatives such as the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures, the Network for Greening the Financial System, the Coalition of Finance Ministers for Climate Action, the European Union sustainable finance expert group, and, most recently, the Group of Twenty working group on sustainable finance.
COP26 goals
For nearly three decades the United Nations has been assembling almost every country on earth for global climate summits. Under the U.K. presidency, this year’s summit will take place in Glasgow. The 26th Conference of the Parties on Climate Change (COP26), postponed for a year because of the COVID-19 pandemic, will bring together world leaders, scientists, businesses, public and private finance officials, climate activists, journalists, and other observers.
These are the key objectives for the Glasgow conference:
– Broad-based targets and a roadmap to secure net zero by mid-century and keep 1.5 degrees Celsius within reach, with ambitious action on carbon pricing, sector policies, phaseout of coal, and support for innovation.
– Support for adaptation and resilience, especially in poor and vulnerable countries, and for protection and rebuilding of natural capital.
– Mobilization of private businesses and climate finance to support these objectives and channeling of finance to emerging market and developing economies.
– Collective action to deliver these goals by finalizing the Paris Rulebook and accelerating collaboration.
From pledges to action
U.S. Special Presidential Envoy for Climate John Kerry has described the coming conference, scheduled to begin in Glasgow on October 31, as the “last, best opportunity to get real” on the threat of climate change. The U.K. COP26 presidency, under the leadership of Alok Sharma, has set out priorities for the Glasgow conference: commitment to the net-zero-emissions target, stepping up action on adaptation and resilience, delivering on the $100 billion climate finance commitment, bolstering and transforming private finance, and increasing collaboration on all these objectives.
There has been encouraging progress already. At its June Carbis Bay meeting, the G-7 committed to net zero emissions by 2050, halving collective emissions over 2010–30, increasing and improving climate finance by 2025, and conservation or protection of at least 30 percent of the land and oceans by 2030. And, for the first time, the G-20 has signaled the need for action on carbon pricing. In the private sector, a growing number of businesses across all sectors have committed to net zero targets, and major financial institutions have set deadlines to take portfolios to net zero.
This decade will be decisive. What happens at national and international levels will determine whether the post-COVID recovery is strong and inclusive and whether we will embark on a new path of sustainable growth. If we get it right, we can usher in a new era of sustainable development with expanded opportunities for people across the world. Get it wrong and we will not only have a lost decade for development, but the people of the planet will be in great danger in the coming decades. We need to choose now, and we must choose wisely.
Debt service risks, Special Drawing Rights allocations, and development prospects
On August 23, 2021, the International Monetary Fund (IMF) issued $650 billion equivalent in new Special Drawing Rights (SDRs) to its members. The SDRs do not change any country’s net wealth—each country has a liability that exactly equals the new assets it has been issued—but they do represent a sizable injection of liquidity because the SDRs can be voluntarily exchanged on demand for hard cash—U.S. dollars, euros, yen, renminbi, or other tradable currency. If SDRs are converted and the cash is used to pay down debt, then SDRs can be a mechanism to replace more expensive debt with cheaper debt, improving country creditworthiness. Alternatively, cashed-out SDRs can be used to supplement public revenues to increase spending for countries whose development prospects have been particularly hard hit by the pandemic.
This brief looks at SDR allocations from two perspectives:
To what extent can SDRs ease the debt service burden falling due in the next five years in developing countries?
To what extent can SDRs ease a recovery in development prospects?
The focus of the brief is on developing countries only. We exclude those economies classified as high income by the World Bank. We start by discussing the impact of the current, statutory allocation of the new issuance of SDRs, and then speculate on the impact of any voluntary reallocation that may occur if countries with surplus SDRs choose to on-lend a portion of this surplus to other countries. A range of “what-if” scenarios are presented to identify the impact of a hypothetical $100 billion reallocation of SDRs.
Download the full policy brief here.
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Why is blue-collar work still male-dominated?
In the 20th century, women smashed glass ceilings across the world. But continued progress is not inevitable. Recent developments in the U.S. pose a stark warning: Abortion rights may be rolled back, and working-class women’s employment may be in jeopardy.
In the U.S., female school leavers are stuck in poorly paid “pink collar” jobs: as social workers, secretaries, beauticians, retail assistants, and waitresses. Mechanics, manufacturing, and other skilled manual jobs remain overwhelmingly male (Figure 1).
Figure 1. Sex segregation of middle-class and working-class occupations in the United States
Source: Cotter et al 2004.
Why is this? There are at least four possible explanations.
Brawn?
Physical strength is required in some manual roles—like construction in India and China. But in Western warehouses and factories, bulging biceps have been displaced by robots.
Culture?
Gender ideologies are pervasive. Stereotyped as caring and agreeable, working-class women may gravitate toward social care, retail, and hospitality. Conformity is also motivated by the desire for peer approval. With limited opportunity to collectively break out of this straitjacket, secondary school (or high school) graduates follow established norms.
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So, given the social costs of transgressing gender boundaries, women move upwards, but not sideways—or so it was famously argued by Paula England, whose article has over 1,600 citations. But does ideology trump economics? Do poor, working-class women willingly forgo lucrative job opportunities?
Low demand?
Low demand may be part of the problem. “Good jobs” for high school graduates have dwindled. Manufacturing and other manual-intensive occupations that on average paid substantially higher salaries than services have disappeared (Figures 2 and 3).
Figure 2. Job polarization between the mid-1990s and mid-2010s
Source: Will there be enough good jobs? MIT Technology Review.
Figure 3. Evolution of total employment by type of occupation based on skills, normalized to 1980 value
Source: Duran-Franch 2020.
Having lost jobs in manufacturing, American men increasingly pursue service and clerical occupations, as shown by Joana Duran-Franch. They have leaped ahead in these job queues. Unlike working-class women, they are not stymied by unaffordable child care. More importantly, employers anticipate that men will work longer hours, so may statistically discriminate in their favor. The overall downturn in demand means that even as “pink collar” jobs are growing, women lose out.
Men have capitalized on the growth in interpersonal work, even though it was historically feminine. Economics can trump culture! Gender stereotypes may well be pervasive, but individuals shift tack when they eye sufficient rewards.
Figure 4. Evolution of the share of low-educated employment, gender ratio, and wage by occupation type
Source: Duran-Franch 2020.
Automation?
Mining, manufacturing, and transportation have become increasingly automated. Workers have been displaced from routine tasks—as shown in Figure 5 by economists Daron Acemoglu and Pascual Restrepo.
Figure 5. Task displacement and component due to observed technologies (in %), 1987-2016
Source: Tasks, Automation, and the Rise in US Wage Inequality.
In the U.S., this may have positive consequences for productivity and workers might move into better jobs, as argued by David Autor. Indeed, some are! But as Duran-Franch’s analysis suggests, this transition is predominantly male.
There are strong parallels in emerging economies. Even if they industrialize, this is unlikely to generate mass employment. India’s industrial sector remains small and capital intensive. Job queues are long, and men are at the front. Since manufacturing demand can be met by men, employers seldom diversify.
Even as economies become more technologically innovative, working-class women from Michigan and Mumbai may be left far behind.
American leadership in advancing the sustainable development goals
The sustainable development goals (SDGs) reflect a commitment to equity, justice, and environmental resilience. Across the country, Americans share this commitment as they build a transformative economic recovery out of COVID-19 that addresses the historic legacy of racial inequities and takes ambitious action on climate change.
On Monday, September 20, the Center for Sustainable Development and the United Nations Foundation will co-host the third annual “American leadership in advancing the sustainable development goals” event on the sidelines of the U.N. General Assembly. This high-level virtual event will showcase how American leaders and institutions are using the SDGs to build resilient and inclusive communities across the United States.
This event will showcase American leadership, ingenuity, and commitment to a domestic agenda that leaves no one behind and embraces the deep transformations required for long-term sustainability and equity. It features the experiences and innovations of people across America, including work in Orlando, Phoenix, and San Diego, leadership by young people, and a special focus on advancing equity.
Viewers can join the conversation on Twitter using the hashtag #USAforSDGs.
Can national statistical offices shape the data revolution?
In recent years, breakthrough technologies in artificial intelligence (AI) and the use of satellite imagery made it possible to disrupt the way we collect, process, and analyze data. Facilitated by the intersection of new statistical techniques and the availability of (big) data, it is now possible to create hypergranular estimates.
National statistical offices (NSOs) could be at the forefront of this change. Conventional tasks of statistical offices, such as the coordination of household surveys and censuses, will remain at the core of their work. However, just like AI can enhance the capabilities of doctors, it also has the potential to make statistical offices better, faster, and eventually cheaper.
Still, many countries struggle to make this happen. In a COVID-19 world marked by constrained financial and statistical capacities, making innovation work for statistical offices is of prime importance to create better lives for all. PARIS21 and World Data Lab have joined forces to support innovation in statistical offices and make them fit for this purpose, including Colombia’s national statistical office. If we enrich existing surveys and censuses with geospatial data, it will be possible to generate very granular and more up-to-date demographic and poverty estimates.
In the case of Colombia, this novel method facilitated a scale-up from existing poverty estimates that contained 1,123 data points to 78,000 data points, which represents a 70-fold increase. This results in much more granular estimates highlighting Colombia’s heterogeneity between and within municipalities (see Figure 1).
Figure 1. Poverty shares (%) Colombia, in 2018
The averages for each municipality still contain big variances as poverty depends on many more factors than geography.
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Traditional methods don´t allow for cost-efficient hypergranular estimations but serve as a reference point, due to their ground-truthing capacity. Hence, we have combined existing data with novel AI techniques, to go down to granular estimates of up to 4×4 kilometers. In particular, we have trained an algorithm to connect daytime and nighttime satellite images. In a next step, we have used this algorithm to predict poverty rates based on daytime satellite imagery. Since these remotely sensed data are available on a very granular level, this has allowed us to significantly increase the granularity of the data on poverty. Finally, we have combined these predictions with information from the latest census to ensure their reliability. This combination of traditional and novel techniques has allowed us to capture the variance in poverty rates across and within communities all over the country. Applying these techniques to poverty shares sheds light on the differences in poverty rates in Colombia, even within municipalities. Take the department of Antioquia with its capital Medellín, the second largest city in Colombia. In Figure 2, the detected variance, which is as high as 48 percent, becomes visible by comparing the existing data with the hypergranular estimates.
This reveals the capabilities of combining conventional poverty analysis methods with novel AI techniques and the potential to get more granular in the future.
Figure 2. Poverty shares (%) in Antioquia, in 2018
We further used satellite imagery to predict population density on the city-block level, by using a machine-learning technique called Random Forest. This approach builds on a large number of individual classifications or regression trees, each of them aimed at providing the best possible prediction. Averaging over the predictions of all individual trees eventually leads to the final prediction of the Random Forest. This technique has allowed us to distribute input data on the municipality level to a granularity of a 100×100 meter area. Breaking down each municipality into even smaller fractions reveals immense deviations from the average. Let us take the district of Bogotá D.C. as an example. The census data suggest an average population density of 46 persons living in a range of 100×100 meters. However, our methods reveal a more heterogeneous distribution, notably between rural and urban regions, ranging from one to 999 people per 100×100 meters. This instance shows how we can drastically improve the granularity of existing data by integrating state-of-the-art methods and novel data types into our analysis.
Figure 3. Population density in Cundinamarca in 2018
Previous examples show how valuable this kind of engagement is in a country like Colombia, where 42.5 percent of the population lives in monetary poverty, with great disparities between and even within municipalities (as shown in Figure 2). The granularity obtained from the use of novel machine-learning methods, as developed in this exercise, allows public entities to formulate and implement policies that focus on the most vulnerable and strive to leave no one behind—even more as these policies can be addressed to the most suitable areas, with the highest impact. The outcomes of this collaboration have proven to be essential for the decisionmaking processes associated with the recovery agendas to overcome the difficulties caused by the COVID-19 pandemic.
In conclusion, innovation in statistical methods and AI technology could be a facilitator for NSOs to become the main provider for data-based decisionmaking. The opportunity to create hypergranular and quality data depends on the investment of resources in AI techniques and novel scientific approaches. The future demand for, and the technical improvement of, real-time data and forecasts can resolve the prevalent perfectionism fallacy in NSOs. Consequently, contributing to technical innovation and partnering up with providers of cutting-edge enterprises will accelerate the transformation process. If this opportunity window is used properly, we can pave the way for statistical offices to enter the 21st century.
COVID-19 impacts on foreign direct investments in sub-Saharan Africa
In June of this year, the United Nations Conference on Trade and Development (UNCTAD) released its 2021 World Investment Report, in which it focuses on investing in a sustainable recovery from the pandemic. The report itself looks at how the COVID-19 pandemic impacted foreign direct investment globally and investment priorities for the recovery phase. The complex health and economic challenges created by the pandemic throughout the African continent have significant impacts on the foreign direct investment (FDI) both to and from the region. In fact, Africa’s share of total global FDI inflows for developing economies fell from 6.3 percent to 5.9 percent between 2019 and 2020 (Figure 1). Although FDI inflows were already on a decline, COVID-19 continued to have a negative impact on investment globally and regionally.
Figure 1. Foreign direct investment inflows, 2007-2009 and 2018-2020
Source: United Nations Conference on Trade and Development, World Investment Report. 2021.
Overall, FDI inflows to sub-Saharan Africa decreased by 12 percent between 2019 and 2020, but a few countries did see investments grow. In fact, Central Africa registered a consistent increase in FDI with inflows increasing to $9.2 billion from $8.9 billion. East Africa and southern Africa, on the other hand, saw 16 percent drops in inflows each since 2019. Notably, even within regions the impacts of the pandemic varied. For example, in West Africa, Ghana saw a 52 percent decline in FDI inflows in the year 2020—a drop from $3.9 billion to $1.9 billion; meanwhile, inflows to Nigeria slightly increased from $2.3 billion in 2019 to $2.4 billion in 2020.
FDI outflows were also impacted by the COVID-19 pandemic, but, again, varied across and within regions (Figure 2): According to the report, FDI outflows from Africa fell by two-thirds from $4.9 billion in 2019 to $1.6 billion in 2020. Notably, the highest outflows came from Togo, which, according to the report, were mostly to other African countries. For example, Togolese company Afrik Assurances opened financial services operations in Benin and Côte d’Ivoire during the pandemic. While Ghana saw a decrease in outflows, it still made up a significant percentage of total outflows from the continent. Another notable trend was the significant drop in outflow investment for southern Africa, which, according to the authors, is due to South African multinational enterprises repatriating capital from foreign countries.
Figure 2. Foreign direct investment outflows, 2007-2009 and 2018-2020
Source: United Nations Conference on Trade and Development, World Investment Report. 2021.
The report authors, overall, remain optimistic despite these drops. In fact, UNCTAD suggests that Africa will see a rise in both FDI inflows and outflows in the year 2021 with potential to reach pre-COVID levels in 2022. Notably, the report also suggests that the African Continental Free Trade Area and the Sustainable Investment Protocol (phase II of the AfCFTA) could boost FDI flows in the long term as well. In the long run, for a successful recovery, the authors stress increasing vaccine availability and call for international financial support, among other country-focused policies.