Category: Thought leaders

Solidifying the DFC-USAID relationship

Transforming the Overseas Private Investment Corporation (OPIC) by expanding its resources and authorities while merging it with other financing mechanisms—including the U.S. Agency for International Development’s (USAID) Development Credit Authority (DCA)—to create the U.S. International Development Finance Corporation (DFC) understandably required a major sales effort. While the foreign policy elites saw the DFC as a counter to China’s massive Belt and Road Initiative, advocates for international development viewed the DFC as an expansion of U.S. development leadership. And while fiscal conservatives were sold on prospective cost savings through the elimination of duplication, OPIC management told affected staff at USAID (the DCA team that was transferred to the DFC) that all of them would be offered jobs at the new DFC. Meeting all the expectations was always going to prove difficult—but one of the trickiest topics is how to best solidify the DFC-USAID relationship in order to maximize development results.

The DFC and USAID have a long history. In 1971, when OPIC was created, it assumed investment guarantee and promotion functions formerly conducted by USAID. The USAID administrator has always been a member of the OPIC board of directors since its creation, and served as the initial chairman of the board. Over the years, coordination between the two agencies has ebbed and flowed. In 2018, when Congress merged OPIC with several other federal programs and expanded its capital and authorities to create the DFC through the Better Utilization of Investments Leading to Development (BUILD) Act, a cornerstone philosophy of the legislation was that a vibrant collaboration between USAID and the DFC would be crucial to achieving major development impact.
Eight challenges for collaboration

Mismatch of development sectors. The sectors (or subsectors) on which USAID is focusing at any given time, either as a result of Congressional and executive branch priorities or country-level strategies, may not always be sectors in which the DFC has deep investment expertise and/or in which there is large private sector interest (as expressed via applications submitted to the DFC).
Different approaches and metrics for success. Historically, OPIC has been a demand-driven organization that promptly responded to deals presenting themselves to its Washington-based staff. OPIC measured its success largely on its earnings and the amount of investment it facilitated. USAID, on the other hand, undertakes long-term development projects usually designed by staff in the field, in collaboration with host governments and other local stakeholders and subject to detailed Congressional oversight—resulting in long planning and budgetary timelines. Success of USAID projects has been measured by development outcomes and advancement of U.S. foreign policy goals.
Tension between positive earnings and development effectiveness. The priority placed by the DFC on returning funds to the U.S. Treasury ensures that the DFC often ignores smaller or riskier deals that may only break even, but which can yield significant development results. USAID uses 100 percent of its program funding for grants and contracts that are never repaid, so there is a natural disincentive for DFC staff to work on USAID-sponsored transactions that may only break even or earn negative returns, even though such deals would still be more cost-effective for American taxpayers than a grant or contract.This also means that the DFC “risk analysis models” are much more risk averse than those previously used by the USAID DCA, despite the fact that DCA had a perfectly decent credit history. As a result, DFC deals are more expensive. A DCA $15 million guarantee for a deal in Colombia could be funded with $250,000 (the so-called “subsidy” paid to cover the risks), but now a similar $8 million guarantee for a DFC deal in Columbia requires $340,000.
Misplaced focus on large deals. Some DFC staff currently mistakenly believe that the BUILD Act’s provision stating that the “Maximum contingent liability of the [DFC] outstanding at any one time shall not exceed in the aggregate $60,000,000,000” means that the DFC must reach that ceiling within the seven-year life of the BUILD Act or risk this ceiling being reduced. This is then cited as a reason why the DFC needs to focus on big deals regardless of the scale of development impact.
Different definitions of development success. USAID and DFC view the definition of “major development outcomes” differently. DFC Impact Quotients (IQ) scores can be quite high for projects that USAID might not see as having major development impacts in a sector or country.
Limited political incentives. While heads of U.S. government agencies care deeply about their organizations’ mission, some are also very focused on their agency’s reputation, as well as their personal legacy and reputation. As such, it is a rare DFC CEO or USAID administrator who has the time to spend on helping their colleague get a big “win” if the credit is not shared equally or if the project ranks very low on their own list of priorities.
Limited staff incentives. Currently, DFC-USAID collaboration is not prioritized in the performance evaluations of the staff of either agency. While the performance review systems at USAID vary by hiring type, for those involved in designing and running programs, reviews primarily focus on management and development success of programs. At the DFC, annual performance reviews largely focus on the number and size of deals closed and the performance of deals already on the books. There is little at either agency that would reward staff for collaborating and jointly advancing results, especially factors prioritized by the other agency.
Lack of cross-agency understanding. Significant numbers of staff in both organizations have significant gaps in their understanding of the other organization’s processes, incentives, and strategic orientation, making it difficult for them to understand how the two organizations might best work together and the benefits that can arise from such a collaboration.

Overcoming these challenges requires a sophisticated set of responses. Some can be legislated; others will depend on the commitment of USAID and DFC leadership to facilitate strong collaboration that persists across electoral cycles and changes in administration.
Recommendations
Joint strategy for collaboration. Once every four years (in the year following the presidential election), USAID and DFC should be required to prepare or update a joint strategy for collaboration.1 As part of the strategy, the two organizations should agree on at least three to five sectors of joint interest based on each of their overall sectoral priorities (and funding).2 Similarly, the two organizations should agree on at least five countries of joint interest based on each of their overall country priorities (and funding). The National Security Advisor can facilitate final decisions.
Once the sectors and countries of joint interest are identified, the DFC CEO should ensure sufficient staff expertise within nine months to process any proposed deals in the agreed-upon sectors and coordinate with relevant USAID staff. The USAID administrator should issue an Agency Notice requiring any and all programs in the sectors and countries to identify ways in which working with the DFC could enable achievement of some or all of the programs’ goals prior to using other programming tools. When these modalities of collaboration are identified, USAID should prioritize budget and efforts to support these approaches, and DFC investment papers should reflect that there has been early consultation with USAID and the CDO on each transaction.
Primacy of development. Congress needs to make clear that its number one priority for the DFC is achieving substantial development results. Financial losses on the overall portfolio are to be avoided, but earning a return for American taxpayers has never been mandated in either the OPIC or DFC statutes and should be seen as a nice bonus rather than essential. Positive returns within the portfolio should be used to create a potential fund that DFC could use to take on more risk for greater development impact than OPIC was willing to take on in the past, particularly in low-income countries. Similarly, Congress should clarify that reaching the contingent liability cap within seven years should not be used as a reason to focus on large transactions.

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Joint credit. The two organizations shall be told that on any projects involving joint collaboration, announcements shall be joint and issued by both organizations at the same time. Any public signings of deal agreements, Hill meetings, or public events announcing the collaborative deals shall be designed, undertaken by, and convenient to representatives of both organizations (including, when appropriate, the relevant overseas offices).
Board roles. The BUILD Act’s provision concerning the chairperson of the DFC Board of Directors should be amended to state that in the event of the secretary of state’s absence, the vice chairperson (the USAID administrator), shall chair meetings of the DFC Board. In the event the chairperson and vice chairperson are both absent from a Board meeting, then it shall be chaired by the secretary of state’s designee.
Regular joint engagement. The DFC CEO and USAID administrator should convene a joint meeting of all their senior leaderships annually to brief one another on their organizations’ current priorities, challenges, and collaboration impediments. Furthermore, the current quarterly meetings among DFC and USAID regional leaders should be expanded so that USAID regional and pillar bureaus formally meet with their DFC counterparts and vice presidents once a quarter to review and provide information on current pipelines and programs.
DFC chief development officer (CDO) evaluation. Consistent with the BUILD Act’s requirement that the selection of the CDO shall be acceptable to both DFC CEO and USAID administrator, the CDO’s annual performance evaluation should include inputs received from the administrator, as well as “360° feedback” from personnel in both organizations.
Revised performance factors. For applicable job functions, both organizations should make any modifications to annual performance methods, factors, and metrics needed to recognize and incentivize employees for their efforts to ensure effective collaboration.
Joint training. Personnel within DFC and USAID have been working to create training programs relevant to USAID-DFC collaboration. Training for USAID foreign service officers, program officers, deputy mission directors, mission directors, and any other staff with relevant responsibilities, as well as all DFC investment, origination, credit, and legal personnel, shall include substantive training about the other organization, its tools, and methods of collaboration. Training materials shall be jointly prepared by the two organizations. Finally, the two agencies should broaden and formalize the current minimal two-way exchange of staff for multiyear assignments.
In-country staffing. Either the DFC is going to have to be allowed to have career staff located overseas to conduct proactive business development and work with USAID field staff to integrate DFC’s tools with USAID programs, or USAID is going to have to increase, dedicate, and train overseas staff for that purpose (similar to the “field investment officers” USAID created to maximize the DCA office’s effectiveness).
Beneficiary-level monitoring and evaluation (M&E). USAID and the DFC should jointly fund third parties to independently calculate the number of beneficiaries benefitting from a DFC-USAID collaboration so that those numbers can be aggregated with confidence and credibility.
Paperwork reduction. Congress can help reduce some of the time and staff investment required to enact “subsidy” transfers from USAID to DFC so that deals over $10 million don’t require two congressional notifications for the single transaction.
As the DFC evolves and scales its operations within the mandates set by Congress, policymakers are seeking to work out the kinks and make sure it operates efficiently and effectively. Solutions to fix the budget scoring of equity investments, for example, have been ably proposed by former OPIC CEO Rob Mosbacher and colleagues. Other policymakers are thinking through issues concerning how much to focus on low- versus middle-income countries. We offer these recommendations as another contribution to help the new institution leverage USAID’s development experience and in-country expertise to maximize the development effectiveness of its investments.

Is West Africa ready for a single currency?

Since the early 2000s, the 15-member Economic Community of West African States (ECOWAS) has been pursuing a common currency agenda, centered on the “eco,” with the intention of reducing barriers to doing business across the region and increasing trade overall. While the implementation of the new currency has been postponed due to hurdles in macroeconomic convergence across the countries and the disruptions caused by the COVID-19 pandemic, among other challenges, many policymakers remain keen to forge ahead, with implementation now tentatively set for 2027.

As the region considers steps toward this goal, Brookings scholars Eswar Prasad and Vera Songwe have written an ambitious book on the regional integration agenda in West Africa and the role for a single currency in which they consider important questions concerning how ECOWAS could achieve greater trade and financial integration, with or without a currency union, as well as the ramifications of the agenda for the African continent. Three key contributions emerge from the book.
First, this book by Prasad and Songwe stands out for the methodical thoroughness of the analysis. The authors outline the factors that conventional theory sees as critical for an “optimal currency area” (OCA), originally conceived by Robert Mundell in his 1961 article, “A theory of optimum currency areas.” The authors compare these factors to the data and essentially conclude that “ECOWAS is not equal to an OCA.” As we have learned from Ashoka Mody’s 2018 book, “Euro Tragedy: A drama in nine acts,” Europe also did not meet the ideal conditions for OCA when the European Union (EU) embarked on its monetary union experiment. Drawing on a broad array of theoretical literature and applied policy analysis, Prasad and Songwe outline both the potential benefits and the significant costs of monetary integration. The book highlights how differences in economic structure and macroeconomic convergence can and might deter the ECOWAS common currency project and how a strong institutional framework is necessary, especially in terms of regional financial market development and unified legislation.

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Second, linked to the previous point, the book provides an academic framework in which all factors considered critical for the stability of a currency union (especially under macroeconomic stress) are identified and compared to econometric data as well as the institutional and policy realities in West Africa. These are the “hard factors” in the book. Notably, according to the authors, these hard factors do not yet support a transition to a single currency for West Africa. Policymakers might act regardless. They did so in the eurozone, which did not meet the criteria for an optimal currency area at the time of the implementation of the euro. “Soft factors” in the form of a regional vision extending far beyond the realms of monetary policy were used to cover over some of the concerns and hard gaps (correctly) identified during the run-up for monetary union. But these same soft factors subsequently proved to be the ultimate counterweight to the centrifugal forces unleashed by crisis and member state divergence (see Y. Varoufakis’ 2017 book, “Adults in the room”).
In that way, the book reiterates the importance of these soft factors when it highlights Nigeria’s monumental importance as an anchor, representing greater than 60 percent of the gross domestic product of ECOWAS, and compares that to Germany’s role as the eurozone’s main anchor. Germany—and specifically its export-oriented economy—derived benefits from the single currency but the country as a whole had to sacrifice its cherished conservative monetary policy and provide subsidies to weaker members of the euro area. This result appears to be not just the consequence of a cold cost-benefit analysis but also a commitment to Europe, which is broadly popular across the political center of gravity in the country, allowing for enough elasticity in what was perceived to be a rules-based project.
As we argued elsewhere (in “An evaluation of the single currency agenda in the ECOWAS region”):
“[T]he euro lessons show that even with robust institutions and strong political commitment, sustaining a single currency remains a challenge. These challenges are likely to be much more difficult to surmount in West Africa where the pre-conditions for success, including strong political will and robust institutions, are evidently absent. Let us also be clear that the euro was never just about monetary policy and trade. It was shaped by a vision of a united Europe. And this does not appear to be an entirely fruitless effort, especially in the eyes of Europeans coming of age in the new millennium.”
There are several areas where the book could provide a deeper analysis. First, the book is relatively silent on the geopolitics surrounding the currency reform. The book could discuss further the competing visions and perspectives of the anglophone bloc, led by Nigeria, and the francophone bloc, led by Côte d’Ivoire, as there appear to be two contrasting visions of the currency. For example, in January 2020, Nigeria criticized the December 2019 decision of French President Emmanuel Macron, Ivoirian President Alassane Ouattara, and the eight-member West African Economic and Monetary Union to replace the CFA franc (which is pegged to the euro) with the eco, saying that it conflicted with the ECOWAS broader vision of a single currency across all 15 West African countries. There also seem to be competing economic philosophies between the anglophone and francophone blocs, with Ghana, perhaps, as a potential bridge.
Second, the book leaves some questions unanswered. What is Nigeria’s perspective on the umbrella ECOWAS initiatives? What trade-offs and shared visions for the region can be identified? Fringe political movements in Europe may not threaten the single currency directly but their ascendance toward the center of political power could threaten the policy elasticity on which the euro’s survival, through all its recent upheavals, relied. How does the West African political landscape compare?
One issue in this context is the asymmetry between different interest groups: Owners of businesses with cross-border activities may derive benefits from a rule-based monetary union. Poor farmers may prefer a central bank with a domestic mandate to fund monetary stimulus. Nigeria’s multitier exchange rate mechanism highlights these policy dilemmas. Aside from the convergence of member states, which is analyzed by Prasad and Songwe, do we need to focus more on convergence criteria between different interest groups inside single countries, specifically inside Nigeria?
Third, the book highlights the various gaps without ranking them. Do the authors, nonetheless, have a view on policy priorities preceding a transition? How strong is the evidence that West Africa will derive benefits from a single currency? Most of the book focuses on impediments to a successful transition to and subsequent stability of a currency union. The benefits, such as growth of intra-regional trade and development of cross-border supply chains, are of a more general nature. Are there lessons from the West African Economic and Monetary Union or even from countries (e.g., the U.K.) that have chosen to stay out of currency unions among their main trading partners? Do we have to be conscious of the inherent dilemma that, although we have a good idea of what it takes to successfully transition (i.e., the outlined hard factors and maybe some of the soft factors), we cannot equate that to the quantifiable expectations of the benefits of a monetary union and their accrual over time? Are there specific risks to a transition in the context of West Africa? We know that potential benefits of economic integration are a consequence of transacting seamlessly in a single currency and eliminating exchange rate volatility. Are there potential risks such as portfolio flow volatility or trade deficits?
Fourth, when we talk about West Africa’s currency union, are we ultimately talking about promoting industrial growth and integration into the global supply chain? Asian economies grew into their dominant position along global supply chains without a currency union while their experiment with pegged currencies caused a temporary setback during the Asian Financial Crisis of 1997-1998. (See  “Common currency? Well, region must first build trust and grow investment” in The East African.)
Against this background, one may argue that it was not monetary policy stability and integration that drove development. Do policymakers need to think about a future both inside and outside the framework discussed here?

Finally, let us not underestimate the importance of visionary leadership. In the EU, German Chancellors Helmet Kohl and Gerhard Schroder and France’s Jean Monnet were visionaries motivated by the quest for an integrated Europe—a Europe with no more wars. In West Africa, Presidents Yakubu Gowon (Nigeria) and Gnassingbe Eyadema (Togo) built trust and ensured the successful launch of the Treaty of Lagos that established ECOWAS on May 28, 1975. The primary motivation of these two visionary leaders was a united West Africa—not a conglomeration of anglophone, francophone, or lusophone blocs.
In sum, Prasad and Songwe have written a thoughtful book that explores many aspects of the common currency project in West Africa. The book can serve as a call to action for policymakers to seriously consider the hard questions posed by the authors.

Unlocking constraints to industries without smokestacks to catalyze job creation for youth in Kenya

Unlike in much of the developed world, the promise of manufacturing to spur economic growth and jobs in Africa has remained elusive, with most of the continent’s economies facing deindustrialization. This trend is characterized by declining share of manufacturing in gross domestic product (GDP) and wage employment. All is, however, not lost considering emerging structural shifts, with services and other non-manufacturing industries promising economic transformations. These promising nonmanufacturing industries, termed “industries without smokestacks” (IWOSS), demonstrate key features of manufacturing such as high productivity, agglomeration, and job opportunities. The IWOSS sectors are diverse, cutting across financial services, horticulture, information and communication technology (ICT), tourism, transit trade, and wholesale trade. As part of a broader research project, the Brookings Institution’s Africa Growth Initiative partnered with the Kenya Institute for Public Policy Research and Analysis (KIPPRA) to assess which of these IWOSS might be best poised to unlock jobs in Kenya.

Right now, the country faces significant labor-market challenges in the form of unemployment, time-related underemployment, and inactivity—all of which are more severe for the youth and women. Between 2009 and 2019, the country’s population grew by an average of 2.2 percent annually, but the labor force expanded by an even higher rate of 3.1 percent per annum over the same period, rising from 15.8 million people to 20.7 million people. Unemployment is high: In 2016, the overall unemployment rate of the working-age group (15 to 64 years) was estimated at 7.4 percent, that of women was 9.6 percent, and that of the youth (15 to 24 years) was 17.7 percent. Time-related underemployment was estimated at 20.4 percent for the working-age population, and 26 percent and 35.9 percent for the women and youth, respectively. In addition, despite Kenya’s long prioritization of industrialization as an avenue for mass employment creation and economic growth, the manufacturing sector contribution to GDP has declined from 11.3 percent in 2010 to 7.5 percent in 2019. The formal sector wage employment contribution of manufacturing has also remained stagnant, averaging 13.0 percent over the last two decades.
Can support to horticulture, ICT, and tourism help address Kenya’s youth unemployment problem?
To examine the potential of IWOSS more closely, the KIPPRA team chose three IWOSS with strong sectoral growth performance, contribution to GDP, and strong export performance—horticulture, ICT, and tourism—and found that all three sectors demonstrate above-average output growth and projected that they can be significant sources of wage employment for youth up to the year 2030. At the aggregate level across all IWOSS, labor-output productivity is twice that of manufacturing and 1.7 times that of other non-IWOSS. Except for construction, the industrial sectors performed below average with respect to output growth over the two decades up to 2018.
Within IWOSS, we also found that ICT, tourism, and trade have the highest potential for wage-employment growth resulting from respective GDP growth of these sectors (Table 1). However, horticulture is characterized by nonwage employment in the form of family labor.
Table 1. Changes in formal employment and its share in IWOSS and non-IWOSS, 2001-2018

Note: Manufacturing excludes agro-processing.Source: Authors’ calculations based on data from KNBS (Various), Statistical Abstract.
The projections to the year 2030 reveal that there will be wider sex disparities in wage employment if the prevailing growth trends persist and no policy interventions are put in place. Male youth (15 to 24 years) will dominate manufacturing, construction, and trade, with their respective numbers projected to be 1.5, 13.8, and 1.2 times higher than females. In ICT, there will be 3 times more males than females if present growth trends persist. The projections also reveal that there will be more females in horticulture (1.3 times more) and tourism (1.1 times more) relative to males.
Constraints to growth for horticulture, ICT, and tourism
Importantly, for these sectors to meet—or even surpass—their job-creation potential, a number of constraints must be addressed. The study identified both crosscutting and sector-specific constraints affecting the output and employment growth of the three IWOSS sectors. The crosscutting constraints relate to investment climate, which encompasses infrastructure, the business and regulatory environment, and skills gaps.
Infrastructure
The high cost of electricity and the lack of a reliable power supply to firms pose challenges not only across firms in the IWOSS sectors but also across the entire economy as these obstacles hurt firm-level competitiveness and deter investment. The cost of road and railway transport in Kenya is generally higher than in its comparator set of countries. Not only that, but many firms are grappling with poor infrastructure of feeder roads, which leads to large post-harvest losses in the horticultural sector estimated at 42 percent. While Kenya’s ICT infrastructure is among the best in Africa, the relatively high cost of mobile broadband services and the large digital divide between urban and rural areas still hinder the sector’s expansion. These constraints are related to weak competition in Kenya’s ICT sector. Importantly, there is limited (but increasing) interoperability between mobile-payment operators, which affects the ability of smaller players to grow, thus potentially creating an inefficient market with one or a few large players.
Business and regulatory environment
While Kenya was ranked third in Africa in the 2020 World Bank Doing Business Report on account of ease of getting credit and to some extent getting connected to electricity, the regulatory business environment remains complex, especially with regard to starting a business, cross-border trade, and getting construction permits. These constraints hamper the country’s ability to improve its competitiveness, attract investments, and create more jobs and improvements, and will require deeper and broader reforms.
Persistent skills gaps
Skills gaps and mismatches resulting from low educational attainment levels relative to a typical middle-income country also persist in Kenya. About 43 percent of the working-age population have only a primary education (of eight years) as their highest education level, yet the IWOSS sectors heavily depend on post-primary level skills. Further, education quality is characterized by inadequate skills and gaps in required skills even among tertiary graduates.

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Skills gap analyses across the three IWOSS sectors reveal that horticulture has skills deficits for occupations requiring post-primary education and skills surpluses for occupations that require at least some secondary education. Tourism has skills deficits for all skill levels, particularly those related to external communications, product quality, value packaging, and quality management.
While over the last decade IWOSS sectors such as horticulture had relatively strong export performance relative to aggregate exports, there are still significant cross-border constraints related to inadequate skills among customs officials, lack of an integrated quality system, limited coordination among exporters, insufficient systems to handle food-safety compliance, and inadequate capacity to trace horticultural commodities. Further, ICT faces additional challenges related to a weak framework to identify and nurture innovations.
Policy recommendations
The relatively high productivity across IWOSS sectors presents a case for policy support to enhance growth and employment opportunities. However, IWOSS are not currently meeting their potential, and a number of policy changes are necessary to help them grow and absorb labor. Thus, the government and other stakeholders should:

Enhance investments in infrastructure including trunk roads as well as feeder roads and a host of supportive facilities such as cold rooms for horticulture produce.
Address regulatory bottlenecks through a continuous process of monitoring and evaluation as well as by conducting regulatory impact assessments. For example, an improved policy and regulatory framework on net-metering and wheeling systems would enhance entrants into alternative sources of energy and off-grid systems. Better regulations would also open up markets for more players and hence enhance the role of ICT as an enabler.
Expand the creation of wage jobs rather than informal jobs in the growing sectors. Reducing barriers to formalization linked to complex regulations, high taxes, and other aspects of cumbersome investment climate is essential.
Focus education and training systems to produce skills demanded by the market compared to academic credentials. This can be achieved by strengthening partnerships for skills development and enhancing programs that combine on-the-job and in-class training.
Monitor and forecast skills needs to ensure the youth are equipped for available jobs, and then develop skills of the youth to meet the increasing demand for more educational qualifications. Skills development should take into account basic skills and social skills needed in specific sectors.

For horticulture, the following are the priority interventions:

Ameliorate the possible effects of the dynamic nontariff trade barriers (NTTBs) by supporting continuous skills transfer and extension services support to local producers, including small-scale farmers.
Enhance further investments in supportive infrastructure—the feeder roads and cold chain infrastructure such as “cold” collection centers and pack houses.
Open up more options for transport—especially maritime transport of exports—by investing in a dedicated maritime line to key export destinations.
Mold the preference of youth toward agricultural training to attract more youth to higher productivity jobs within the sector.

For ICT, a key intervention would be to put in place a policy framework that enhances competitive markets to improve affordability/access to services by the last-mile users. Fast-tracking an all-encompassing policy for e-commerce will open up further investments in the sector. On skills and capacity development, there is a need to promote private-sector-led, skills-development initiatives in high-level ICT skills such as programming. In ICT, best-practice models can be adopted by Kenya to enhance the benefits of ICT services. These include:

Encourage sharing of communication infrastructure (e.g., masts) by encouraging cross-sector consultations for infrastructure developments.
Create planning databases containing detailed information of infrastructure available for sharing.
Enhance interoperability through moral suasion.

For tourism, policies for supporting growth in the sector include:

Enhance access to reliable electricity and transport infrastructure to reduce operational costs and enhance competitiveness.
Reform the regulatory and tax regime, with a focus on eliminating multiple taxation and clarifying the unclear tax regime.
Promote the development of specialized training institutions for crucial high-level and diverse skills. Examples of these skills are film production, decisionmaking and problem-solving, food technology, information technology, and leadership.

How teacher expectations empower student learning

In primary school, we were both lucky to have teachers who thought we were brilliant: Ms. Darrow believed Sameer was an excellent student despite average grades, and Ms. Lewis made Niharika feel like she could survive anything. Looking back, neither of us knows why they thought this way, but we’re certain that they both truly felt this way, and their feelings made us believe it as well. Our time with these teachers made us believe in our ability to take on academic challenges, building a base of confidence that we would draw on throughout our lives.

We experienced firsthand that what a teacher expects from a student can have a powerful effect. But we also know that there are many students who never have a teacher who believes in them. There is a strong perception among teachers and other stakeholders that students from disadvantaged economic and social backgrounds cannot learn as well. These beliefs adversely impact what teachers do in the classroom and in turn how much students learn and grow. It’s precisely these students from disadvantaged backgrounds who have been hit hardest by COVID-19 and who need the most help. To bridge this growing inequality in learning, we must design support for teachers to nurture the belief that all students can learn.
The problem: The belief that all students can learn is not universal
We recently surveyed school leaders and teachers from India, Kenya, Malaysia, and Indonesia and found that only 48 percent of teachers in our sample believed that all students can learn, regardless of familial background or educational experience. This confirms a comprehensive World Bank survey of 16,000 teachers from eight low- and middle-income Latin American, African, and Asian countries, which found that a substantial portion of teachers believe they can’t help students who start out below grade level or come from troubled homes (Figure 1).
Figure 1. Teacher beliefs on their students’ learning abilities
Source: World Bank, 2018.
Teachers underestimate the abilities of their students because of social attitudes and community prejudices. In low-income countries, the high social gap between teachers and students may reduce teacher empathy and motivation to work with their students.
Further, because school leaders and government officials rarely track teaching practices and student progress, teachers don’t internalize their responsibility toward ensuring all students are learning.
All of the above coupled with persistently low levels of prior student performance may reinforce teacher beliefs that not all students can learn.
Why the problem matters: There is a vicious cycle of low expectations
What teachers expect students to learn influences outcomes for their students. In a famous psychology experiment from 65 years ago, Rosenthal and Jacobsen (1968) falsely told teachers that selected students were identified by a test to be “late bloomers” and would learn great amounts over the course of the years when in fact the researchers had selected students at random. A year later, the students identified as “late bloomers” had learned more than their peers because the teachers increased their support to these students.
Since this experiment, many other psychology studies have been done to replicate and understand the impact of teacher expectations on student achievement. In a landmark review of more than 30 years of research, Jussim and Harber (2005) find that while the original study may be overstating its results, teacher expectations do impact students, and this can be particularly strong for students from stigmatized groups. Rubie-Davies and colleagues (2006) found that teacher expectations of Maori students in New Zealand were lower than their peers, and can lead to lower outcomes. Recent research in economics to understand school effectiveness (here and here) in the United States find that schools that develop a culture that assumes all students can learn at high levels are best at raising the achievement of students from marginalized backgrounds.
Teacher expectations create a reinforcing cycle. Teacher beliefs about students’ growth potential shape those teachers’ actions, which then, in turn, impacts students’ growth, feeding back into teachers’ beliefs about students. In low- and middle-income countries, decades of underperformance of school systems have created a deeply ingrained belief that not all students can learn, which continues to limit the potential of these school systems to improve what they deliver to students (Figure 2).
Figure 2. The reinforcing cycle of teachers’ beliefs on student outcomes
Source: Katie Wright, 2017.
How we can address the problem: Shift teacher expectations and behavior
Behavioral science has taught us that we must understand the mental models of key actors in a system to shift its outcomes. Sectors like health have extensively relied on learnings from behavioral science to improve health outcomes. In education, we must similarly research, develop, and test behavioral approaches to improving teacher performance. We suggest three broad categories of interventions for school systems to explore.
1. Develop leaders that build a culture of high expectations in the system
In a Global School Leader survey, we find that in schools where leaders do believe that students can learn, 54 percent of teachers also share this belief, compared with 37 percent of teachers that hold high expectations when the school leader does not. This reinforces studies that suggest that school leaders can increase teacher responsibility for student learning through organizational structures and discourse that help challenge existing beliefs. School systems should invest in understanding how they can grow and empower leaders to create an environment where the primary focus is on improving learning outcomes.
2. Explicitly discuss the power of teacher expectations
Pre-service and in-service teacher training must address the power of teacher expectations directly. Teachers can be supported to develop a growth mindset so that they view the problem of low student-learning levels as something they can change. Highlighting positive case studies that illustrate challenges that teachers and students face on a regular basis and ways they can overcome them can encourage teachers to reflect on the link between their classroom practices and the impact on students. Experiential training models can help teachers experience firsthand how their empathy for and expectations of students can drive learning.
3. Improving practices can shift beliefs
Beliefs can be deep rooted and hard to shift, but when teachers succeed in the classroom, that can also shift their beliefs on what students can achieve. Encouraging teachers to adopt classroom tools and effective pedagogical practices could help improve students’ learning levels, which could, in turn, shift teachers’ beliefs on student abilities.
Ensuring that all students have teachers like Ms. Darrow and Ms. Lewis with high expectations for their students’ success will require a totally fresh perception of students’ intelligence and ability. Until current practices address teacher expectations head-on and shift the “soft bigotry of low expectations” into the tangible empowerment of high expectations, students won’t reach their full growth potential.

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Washington Consensus reforms and lessons for economic performance in sub-Saharan Africa

Abstract
Over three decades after market-oriented structural reforms termed “Washington Consensus” policies were first implemented, we revisit the evidence on policy adoption
and the effects of these policies on socio-economic performance in sub-Saharan African countries. We focus on three key ubiquitous reform policies around privatization,
fiscal discipline, and trade openness and document significant improvements in economic performance for reformers over the past two decades. Following initial declines in
per capita economic growth over the 1980s and 1990s, reform adopters experienced notable increases in per capita real GDP growth in the post–2000 period. We
complement aggregate analysis with four country case studies that highlight important lessons for effective reform. Notably, the ability to implement pro-poor policies
alongside market-oriented reforms played a central role in successful policy performance.

Citation

Archibong, Belinda, Brahima Coulibaly, and Ngozi Okonjo-Iweala.
2021.

“Washington Consensus Reforms and Lessons for Economic Performance in Sub-Saharan Africa.”

Journal of Economic Perspectives,

35 (3):
133-56.

DOI: 10.1257/jep.35.3.133

Additional Materials

JEL Classification

E23
Macroeconomics: Production

E62
Fiscal Policy

F34
International Lending and Debt Problems

H63
National Debt; Debt Management; Sovereign Debt

L33
Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out

O11
Macroeconomic Analyses of Economic Development

O23
Fiscal and Monetary Policy in Development

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How government donors engage with the Sustainable Development Goals

In 2015, 193 nations signed on to Agenda 2030 setting forth the Sustainable Development Goals (SDGs). The predecessor Millennium Development Goals (MDGs) were a narrower set of eight objectives targeted specifically at enhancing economic and social progress in lower- and middle-income countries—with first-order implications for focusing donor development assistance. In contrast, the 17 SDGs are universal—they cover a broader scope of economic, social, environmental, and political elements of development. They are designed for all countries of the world—in recognition that “sustainable development” is an ongoing process in all countries, no matter their level of economic development.

In a new report, I review how 20 of the largest donor countries encompass the SDGs in their international development cooperation policies and programs. They have all committed to the SDGs. All, except for the United States, have in various ways built them into policies guiding their own development and their international development programs. Referencing publications and web pages, the report captures how each country proposes or reports incorporating the SDGs at three levels—strategy/policy, programs, and reporting on outputs and results for their investments in international development. All countries surveyed, except the U.S., have produced at least one Voluntary National Review (VNR), the formal mechanism for countries to share their progress. Although principally aimed at reporting on national progress on the SDGs, some VNRs also cover international development cooperation.
‘Sustainable development’ is an ongoing process in all countries, no matter their level of economic development.
This stocktaking is based on how each country presents its engagement with the SDGs and does not assess the extent to which those policies and plans are translated into practice. There is no single common way donors incorporate the SDGs in their international development policies and programs. Efforts range from expression of support at a very general level to embedding the global goals in policies and strategies or building strategies around the goals. Some countries address commitments to the SDGs in a comprehensive manner with a single strategy covering both domestic activities and development cooperation, although distinguishing separate priorities for each. At the program level, a few donors tie each program, and even budget levels, to the relevant goals but many use the SDGs only as a general reference point. A few donors report against the SDGs. In actuality, country action can range from grand policy pronouncements that are little more than “SDG-washing” to pragmatically designing programs around specific SDGs, reporting results against SDGs, and independently auditing implementation.

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Some incorporate reporting on their international work in their VNRs, others restrict the VNR just to their national SDG program. Some use Agenda 2030 as the principal frame for their international development work, others embed the SDGs, or particular goals, in their international policies and programs.
Some approaches are unique to one or a few countries. Canada incorporates the SDGs in its Feminist International Assistance Policy. Denmark sorts countries into one of three categories and links each category to specific SDGs. Several donors have websites that report programs and results for each SDG, and several connect their development finance to the SDGs. Finland connects theories of change to specific SDGs. Some countries engage in public consultations in setting their SDG commitments. Several countries have outreach programs to educate their populace on development cooperation and the SDGs. Japan has posted videos that explain its international engagement on the SDGs. Spain has a policy of undertaking an SDG analysis of the global impact of proposed legislative initiatives.
Some countries, including Germany, Finland, New Zealand, Sweden, and Australia, evidence high-level political ownership of the SDGs in establishing a central government mechanism for policy coherence on Agenda 2030. Several countries follow the SDG principle of “leave no one behind” and employ some or all of the “five Ps”—People, Planet, Prosperity, Peace, and Partnership.
As Agenda 2030 is the international development currency of this decade, incorporating the SDGs in U.S. development cooperation policy would be an important step in the Biden-Harris administration commitment to reengage the U.S. with the world community.
For the most part, the MDGs lived in the realm of internationalists, specifically with practitioners of international development, international organizations, and international NGOs. The SDGs, in contrast, are truly universal, not just in scope but also in application. Their use extends from the international, to the national, to the local. By 2020, 168 countries had written VNRs, with another 43 VNRs expected in 2021.While the U.S. government has not issued a national VNR, New York pioneered the Voluntary Local Review (VLR), an innovation based on the VNR where local governments assess their progress on the SDGs. Several other American cities have also completed VLRs, including Los Angeles and Pittsburgh; and Hawaii completed the first-ever statewide VLR. New York has since signed up more than 300 cities worldwide to do the same, and universities have adopted a unique SDG framework  to assess their contribution to economic, social, and environmental progress. As of 2018, 78 percent of S&P 500 companies had issued recent sustainability reports, many of which make reference to specific SDGs.
The SDGs have become so ubiquitous that they serve as a common language.  Reference SDG 5, and many people know you are talking about gender equality. For an individual looking to make a responsible investment or a government looking to attract responsible corporate actors, if a corporation has a commitment—better yet a specific target—on SDG 8 on decent work and growth or SDG 7 on affordable and clean energy, it might well be worth a look.

The catalyst for this report is the opportunity for the Biden administration to incorporate the SDGs in its development strategies and programs. While the U.S. was an active partner in the development and initial commitment to the SDGs, over the past four years U.S. development policies have referenced the SDGs but not embraced them. Candidate Biden committed to the SDGs, and the administration reportedly is deliberating on how it might incorporate the SDGs in its development cooperation.
As Agenda 2030 is the international development currency of this decade, incorporating the SDGs in U.S. development cooperation policy would be an important step in the Biden-Harris administration commitment to reengage the U.S. with the world community. More specifically, it would align U.S. development policies and agencies—in particular, the United States Agency for International Development (USAID), Millennium Challenge Corporation (MCC), Development Finance Corporation (DFC), U.S. Trade and Development Agency (USTDA), and U.S. Department of Agriculture (USDA)—with their donor counterparts and partner-country national strategies. It would facilitate U.S. development agencies in setting common goals and targets with other development actors, and it would provide benchmarks for tracking and measuring the results of U.S. development cooperation.
Knowing how other donors have done so should be a useful guide for how the U.S. might best do likewise.

Donor engagement with Agenda 2030: How government agencies encompass the Sustainable Development Goals

Overview
In 2015, all members of the United Nations adopted an ambitious agenda known as the Sustainable Development Goals (SDGs), also known as the Global Goals. The agenda consists of 17 development goals to be achieved by 2030. This report examines how government donor agencies encompass SDGs in international development cooperation, covering 20 of the 30 members of the Development Assistance Committee (DAC). It reviews how they propose to incorporate the SDGs at the level of strategy and policy, programs, and reporting of outputs and results. Eighteen of the 20 members (excepting the United States and the European Union) have produced at least one Voluntary National Review (VNR). Although principally aimed at reporting on national progress on the SDGs, some VNRs cover international development cooperation and so are specifically noted. This review is based on how each country presents its engagement with the SDGs and does not assess the extent to which those policies and plans are translated into practice.

All the government donors surveyed here have to varying degrees endorsed the SDGs at the level of policy and strategy, ranging from expression of support at a very general level to embedding the Global Goals in policies and strategies or building strategies around the goals. Some countries address commitments to the SDGs in a comprehensive manner with a single strategy covering both domestic activities and development cooperation, even as a unitary commitment, although distinguishing separate priorities for each. A number of countries follow the SDG pledge to “leave no one behind” and employ some or all of the “5 Ps”—People, Planet, Prosperity, Peace, and Partnership—that show the integrated nature of the goals.
At the program level, a few donors tie each program, and even budget levels, to the relevant goals but most use the SDGs only as a general reference point. Only a few donors actually report against the SDGs.

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At least five countries have established a central government mechanism for policy coherence on Agenda 2030. In Germany, the Federal Chancellery has the lead on SDG implementation, with responsibility extending across the government and coherence provided through ministry secretaries serving on the State Secretaries’ Committee for Sustainable Development. In Finland, the prime minister’s office coordinates SDG implementation, and the Ministry of Foreign Affairs is represented on the coordination secretariat. In New Zealand, the Treasury develops a Wellbeing Budget. The Swedish Government has a National Coordinator for the 2030 Agenda,1 and multiple Swedish governmental agencies, including the Swedish International Development Cooperation Agency (SIDA), form the DG Forum to work jointly on the global goals. In Australia, a senior officials group co-chaired by the Department of the Prime Minister and Cabinet (PM&C) and the Department of Foreign Affairs and Trade provides coordination on the 2030 agenda, both domestically and internationally.
Briefly, the SDG engagement of the 20 DAC members include:
Australia embraces an SDG strategy in its domestic and development cooperation policies that is integrated across government departments. It aligns its foreign assistance budget directly with each of the SDGs. In 2018 it issued a Voluntary National Review (VNR) covering both domestic and development cooperation activities.
Belgium uses Agenda 2030 as an overall framework for its development cooperation. It incorporates the SDGs into certain programmatic areas and maintains a website that allows the user to sort projects by various categories, including the SDGs. Its 2017 VNR includes reporting on its development cooperation activities and provides links not just to SDGs but also to SDG targets.
Canada is noted for having incorporated the SDGs in its Feminist International Assistance Policy. In early 2021 it commenced an exercise in Global Affairs Canada to integrate the SDGs across all of its business functions. Canada used the 2018 VNR to report on both domestic and international activities.
Denmark builds its development cooperation program on the SDGs and links each activity to the relevant SDGs. It sorts partner countries into one of three categories by level of development, each linked to specific SDGs. Denmark requires that the appropriation note for each activity identify the relevant SDGs. Denmark has established an SDG investment fund.
The European Union embraces the SDGs in its development cooperation at the levels of strategy/policy, program, and reporting. It maintains an interactive website that tracks EU work toward achieving each SDG and a website that provides data on EU assistance, including by SDG.
Finland presents its domestic and development cooperation approach to Agenda 2030 in a common strategy. It creates a comprehensive approach in its international development cooperation programs through linking objectives, theory of change, and results reporting to the relevant SDGs.
France has integrated the SDGs in its development strategy and links them to its two principal objectives, 100 percent compliance with the Paris agreement on climate change and to its social link2 interventions. It has issued SDG bonds to finance development activities.

Germany issued a strategy, with several subsequent updates, that explains its approach to each SDG in both domestic and development cooperation policies. For development cooperation, it links priorities and program areas to the relevant SDGs.
Ireland incorporates the SDGs in its domestic and international development cooperation policies and reporting. It has an extensive program for educating the Irish people about development cooperation.
Italy embraces the SDGs in both its domestic and development cooperation policies and reports on both together. It structures its priorities on specific SDGs under the fifth P of Partnership.
Japan comprehensively incorporates the SDGs in its development cooperation strategies/policies, programs, and reporting. The Japan International Cooperation Agency (JICA) has a video on its website that explains its approach to the SDGs. It has issued social bonds linked to the SDGs.
South Korea places achievement of the SDGs as one of four strategic goals for the Korea International Cooperation Agency (KOICA). The mission of KOICA is “Leave no one behind with People-centered Peace and Prosperity.”
The Netherlands integrates the SDGs in its development cooperation strategies/policies, programs, and reporting. Its country development strategies use the SDGs as the narrative. Several websites present the goals, programs, and reporting on its development activities structured on the SDGs.
New Zealand utilizes Agenda 2030 as the overall frame for its development program. It uses the SDGs as the measure of progress for its partner countries in the Pacific, which is the principal focus of its development cooperation program. It explains that it tracks its contribution to the SDGs but that aligning official development assistance (ODA) with SDG outcomes is conceptually and empirically challenging.
Norway sets Agenda 2030 as the overarching frame of its development cooperation program and integrates the SDGs in strategies/policies, programs, and reporting. Its strategy includes communicating with the Norwegian people about the global goals.
Spain uses Agenda 2030 for the frame for its development cooperation. Its 2018 VNR calls for an SDG impact analysis on legislative initiatives to assess their external and global impact on the SDGs.
Sweden sets Agenda 2030 as the overarching frame for its development cooperation program. It publishes strategies on specific development programs and how they incorporate the SDGs, both for geographic regions (e.g., the Middle East and North Africa) and specific program areas (e.g., capacity building). SIDA works with investors and the private sector to advance the SDGs.
Switzerland incorporates the SDGs in its development cooperation strategy. A draft 10-year strategy has completed the phase of public consultation. Switzerland publishes factsheets for priority countries that connect its development activities to the SDGs. Results linked to the SDGs are reported on a website.
The U.K. uses the SDGs as the overall frame for its development cooperation program and incorporates them into partner country profiles. The 2019 VNR reports on progress on each global goal.
The United States has supported Agenda 2030 but has not brought the SDGs into its domestic or international development policies and programs.

Download the full report

US trade and investment in Africa

Thank you very much, Chairman Van Hollen, Ranking Member Rounds, and distinguished members of the Subcommittee, for your extraordinary leadership on U.S. Trade and Investment with Africa. Your exemplary bipartisan work on Africa inspires many in the U.S. and abroad on how politics can be used to serve the greater good. I am incredibly honored and grateful for the opportunity offered to me by the members of the Senate Foreign Relations Committee’s (SFRC) Subcommittee on Africa and Global Health Policy to testify on U.S. Trade and Investment in Africa.

I am Landry Signé, Executive Director and Professor at the Thunderbird School of Global Management, Senior Fellow at the Brookings Institution’s Africa Growth Initiative in the Global Economy and Development Program, and a member of the World Economic Forum’s Regional Action Group on Africa, and the World Economic Forum’s Global Future Council on Agile Governance.
Advancing trade, investment, and technology in Africa offers enormous economic growth and increased prosperity for both regions and is best realized through value-based foreign policy and a market-based model of development, education, and accountability. There is no better time to accelerate U.S. trade and investment in Africa than now. Despite Africa’s tremendous economic potential, the U.S. has lost substantial ground to traditional and emerging partners, especially China. Indeed, while recent trends indicate that the U.S. engagement with the region has fallen, it has not and should not cede its relationship with the region to other powers.

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Importantly, the U.S. can build on new regional momentum to revive and strengthen its partnership with Africa for mutual prosperity, including building on the recent launch of the African Continental Free Trade Area (AfCFTA), and given the promise of the initiatives of the DFC, Prosper Africa, and the post-AGOA 2025 options. To do so means a shift in emphasis in the relationship to one more focused on value-based foreign policy,1 and also building upon the areas of strength and convergence with African citizens’ preferences;2 such as trade, investment, technology, education, accountability, and a market-based model of development.

“Borders frequented by trade seldom need soldiers.”

-William Schurz, second President of the American Institute for Foreign Trade (now the Thunderbird School of Global Management)
Trade and investment are not just about money and prosperity. They also bring and support peace, stability, and security. In my book Unlocking Africa’s Business Potential,3 I explore key trade and investment trends, opportunities, challenges and strategies, that illustrate the tremendous potential of Africa, and explain the complex competition between emerging and established powers on the continent. The following key trends are critical for policymaking given their implications for trade investment, economic transformation, inclusive prosperity, geopolitical dynamics, and mutual U.S.-Africa interests.
1. Africa’s economic transformation and business potential are more substantial than most people think: the world’s next growth market. Considered a hopeless continent in 2000 by The Economist, Africa has seen the two best cumulative successive decades of its existence in the 21st century. Trade in and with Africa has grown 300 percent in the last decade, outperforming global averages (196 percent).4 It has become home to many of the world’s fastest-growing economies, offering unique opportunities for U.S. trade and investment. Moreover, Africa has tremendous economic potential and offers rewarding opportunities for local and global partners looking for new markets and long-term investments with some of the highest returns, but also the potential to foster economic growth, diversification, job creation, including for women and youth, and improved general welfare.
2. The fast population growth on the continent could be turned into demographic dividends, or threats to global prosperity and stability. Africa was home to 17 percent of the world population in 2020, and is expected to have 26 percent of the global population in 2050 (2.53 billion people).5 If Africa is not successfully integrated into the global economy, there could be a major threat to global prosperity and stability. Citizens could be further subject to extreme poverty, fragility, violent extremism, illegal immigration, health challenges, among others—challenges that many already face on the continent. If our goal is a prosperous and safe world, Africa must not be left behind.
3. The growth of household consumption and business spending: a unique opportunity for U.S. trade and investment. By 2050, Africa will be home to an estimated USD 16.12 trillion of combined consumer and business spending.67 And Africa’s prosperity can be good for the U.S.: Such growth will offer tremendous opportunities for U.S. businesses in household consumption (USD 8 trillion) in areas such as food and beverages, housing, hospitality and recreation, health care, financial services, education and transport, and consumer goods, but also business to business spending (construction, utility, and transportation, agriculture and agri-processing, wholesale and retail, etc.).
4. The rise of global partnerships and the competition between traditional and new players: an opportunity for the U.S. to build on its sustainable competitive advantage. In 2009, China became the region’s prime trading partner. In fact, between 2006 and 2016, China’s trade with Africa surged, with imports increasing by 233 percent and exports increasing 53 percent, as they did for several other global players as well.8 During the same period, the U.S. lost ground in exports to Africa (-66 percent).9
China’s influence goes beyond the trade relationship: It is also the top investor in infrastructure, and now is the first destination of English-speaking African students, outperforming the U.S. and the U.K.10

Change (increase) in imports from Africa,
2006 – 2016

Change (increase) in exports to Africa,
2006 – 2016

Russia
142%
168%

Turkey
192%
61%

India
181%
186%

Indonesia
107%
147%

World
56%
18%

Source: IMF, Direction of Trade Statistics, 2017.11
But the U.S. remains a critical player on the continent, as I mentioned in a recent article: “Successes in the past decades—initiatives such as the African Growth and Opportunity Act (AGOA), the President’s Malaria Initiative, the President’s Emergency Plan for AIDS Relief, the Millennium Challenge Corporation, and U.S. trade and investment hubs—have generated tremendous opportunities for millions of Africans and Americans. But the current era—and competition from other global powers—will require new ideas and a new approach to several key issues.”12 In fact, African countries would often prefer to work with the U.S. given local content regulation rules, more investment in on-the-ground resources, and standards about hiring/training locals. In other words, the U.S. is less extractive and more transparent than numerous other partners.
5. Fast urbanization but also fast rural population growth: By 2030, Africa will be home to 5 cities of more than 10 million inhabitants and 12 other cities of more than 5 million inhabitants.13 Cities in Africa are becoming powerful economic centers, and a city-based approach to foreign policy, but also trade and investment, will be critical to outperform competitors and build mutual prosperity. Contributing to the prosperity of African cities will also make a difference in addressing security challenges.
6. Africa has made tremendous progress in mobilizing resources for infrastructure development, working hard to bridge gaps in ICT, energy, water and sanitation, and transportation. Despite the remaining deficits, the Infrastructure Consortium for Africa (ICA) reported that between 2013 and 2017 the annual funding for infrastructure development in the region was USD 77 billion, about twice as much as the annual funding average of the first six years of the 2000s.14 However, many of these gaps persist. In 2018 the African Development Bank (AfDB) found that Africa’s infrastructure requirements are between USD 130 and 170 billion a year, leaving a financing gap of USD 68 to108 billion.15 China has played a key role in financing, and has become the largest bilateral infrastructure financer in Africa (Chinese FDI grew 40 percent annually from 2010 to 2020).16 However, the U.S. has the chance to make a monumental difference when it comes to investing in infrastructure development in Africa.
In fact, Africa has one of the fastest-growing, and is the second-largest, mobile phone market in the world.1718 In sub-Saharan Africa alone, there were 477 million mobile subscribers in 2019; by 2025, the region will host 614 million cell phone subscribers, and 475 million mobile internet users.19 The internet is also expected to contribute to at least 5 to 6 percent of Africa’s total GDP by 2025.20 While the Information and Communication Technology sector is making incredible advancements, water and sanitation, transportation, and energy infrastructure development still needs significant investment. However, this is indicative of positive and extensive investment opportunities that can be undertaken on the African continent.
7. Fast digitalization, increased technological innovation, and an accelerated Fourth Industrial Revolution (4IR): The Fourth Industrial Revolution is characterized by the fusion of the digital, biological, and technological world, and technologies such as artificial intelligence, big data, 5G, drones and automated vehicles, and cloud computing.21 As a world leader in technological innovation, digital transformation, and the Fourth Industrial Revolution, the United States is well-positioned to play a leading role in the African digital space and contribute to Africa’s pursuit of now-vital technologies.

Indeed, advanced technology can have beneficial spillover effects: For example, in health, countries such as Rwanda and Ghana are using an American drone company Zipline to deliver, in record time, medication, blood, and medical supplies to remote rural areas with limited road accessibility.22 In agriculture, African farmers now have access to affordable precision farming tools that use sensors, satellites, smart devices, and big data technologies to inform every decision. The lending, insurance, and e-commerce opportunities provided by the fintech industry are transforming the lives of all Africans, and not just those in urban centers. These advancements are just the beginning too, as African entrepreneurs are increasingly seeking partners to bring transformative businesses to life. African tech startup funding increased over 40 percent in 2020 to over USD 700 million, a fraction of tech startup funding outside of Africa.  Despite such progress, the digital divide remains important and must be bridged to allow inclusive development. During the pandemic, for example, access to school and business on the continent was more complex given the level of internet connectivity, among other limitations. Bridging the digital divide represents an opportunity to both advance U.S. trade and investment in Africa while addressing some of Africa’s key priorities.
8. Fast regional integration and the African Continental Free Trade Areas: opportunities for a continental engagement. With the signing of the African Continental Free Trade Area (AfCFTA) in 2018, ratification in 2019, and an official launch in January 2021, African growth prospects and business opportunities have been magnified. The continent is giving the world just one more reason to invest in it with the creation of the largest new free-trade zone per number of countries in world, since the creation of the WTO. The AfCFTA will accelerate Africa’s industrialization as well as incomes, which will lead to the increase of both household consumption and business spending, generating unique opportunities for U.S. trade and investment. Per a World Bank study, the AfCFTA has the potential to lift 30 million people out of extreme poverty, increase the income of 68 million Africans, increase Africa’s exports by USD 560 billion, and generate USD 450 billion of potential gains for African economies by 2035.23
9. The sustained demand for accountability, democracy, and stability of African citizens, and policy priorities aligned with U.S. core values. Per Afrobarometer surveys, 7 out of 10 Africans support democracy and accountable governance, and approximately two-thirds are opposed to a single party or military government.24 Importantly, areas in which the U.S. has a sustained competitive advantage, given its global leadership in democracy and human rights, and its support for such issues as health and education, are priorities for Africans too.25 Given China’s leadership in infrastructure, the U.S. could grow its footprint in this area but by partnering with other players such as the G7 and the European Union countries. This approach will be welcomed by African citizens, who prefer the U.S. model of development (32 percent) over the Chinse one (23 percent).26
II. U.S. policy recommendations for bolstering trade with Africa by increasing investment, bridging the digital divide, and addressing the continent’s energy and infrastructure needs.
The pandemic has created unique momentum for engagement with Africa. The U.S. should seize this momentum and build on Congress’ historical bi-partisan support for the region to develop and successfully implement a long-term comprehensive Africa strategy that effectively coordinates action around trade, investment, commerce, and economic growth. This strategy should draw from consultations with African partners and multilaterals, building on areas of sustainable competitive advantages. The strategy should:
a) be rooted in the American values and principles that are aligned with the priorities of African citizens and U.S.-Africa mutual trade and investment interests
b) protect American, African, and global interests by advancing security, stability, and peace through strategic partnerships with African organizations
c) utilize U.S. strengths (digital transformation, Fourth Industrial Revolution, education, creative industries, health, democratic values, etc.) in the context of the new continental trade dynamics brought about by the African Continental Free Trade Areas (AfCFTA).
Importantly, these are areas where the U.S. can still outperform its main competitors such as China or Russia. More specifically, my recommendations to the Subcommittee are as follows:
1. Build on multilateralism and strategic alliances in concert with African partners to advance U.S. and African interests.
Given Africa’s own emphasis on regionalism, the U.S. would do well to support those efforts and align its own strategy with this perspective in mind. Core African partners include: the African Union, the African Continental Free Trade Area, the Africa Centres for Disease Control and Prevention, the African Union Development Agency, the African Development Bank, among others.
African leaders are looking for partners, especially in terms of trade and investment, more than they need aid. Initiatives from the Millennium Challenge Corporation and the DFC should further support African regional and continental projects, when possible, through regional compacts (MCC, through the 2018 AGOA and MCA Modernization Act, allows investments to be made across borders in Africa, creating opportunities for trade and investment by fostering regional integration and integrated markets).27 For the U.S. to outperform its competitors, it must be on the ground engaging with Africa both at the base but also at the highest levels, building on the Trade and Investment hubs, but going much further.
2. Enhance the effectiveness and better coordinate the action of U.S. agencies acting around trade and investment in Africa by adopting the principle of agile governance.
 The U.S. already has phenomenal tools, which in principle, could make a monumental difference if successfully implemented. Prosper Africa holds a lot of potential in terms of trade, investment, shared prosperity, and effective coordination of U.S. agencies, which is not yet realized. The goal of Prosper Africa is to coordinate the tools from across government agencies28 and to foster trade and investment between the U.S. and Africa. Although it is a great idea, many players, especially on the African side, are still hoping for it to achieve its full potential. It will be extremely important to have major wins to reinstate trust with African partners.
I recommend making Prosper Africa more agile in its ability to manage complexity and competition, and appoint a dedicated full-time Chief Executive Officer to assist the current Executive Chairman and Chief Operating Officer, who are doing tremendous work. This new position should have the authority needed to fix the pacing (appropriate speed of action), coordination (legitimate and appropriate coordination), and representation challenges (uniqueness of the voice, communication, and acceptance of the credibility), to deliver exceptional outcomes for U.S. and African businesses, and investors, to achieve mutual prosperity.
3. Redefine the base for new engagement with Africa by appointing a U.S. Special Presidential Envoy for Africa to represent the U.S. at high-level meetings and multiply presidential and high-level visits in Africa.
To stop ceding ground to other powers in Africa, it is crucial that the U.S. reiterate the respect it has for Africa, Africans, and their leaders. Appointing a Special Envoy and reinstating high-level meetings, including presidential visits to the region, between the United States and Africa will send a strong signal. Regular visits by senior U.S. officials, including the President and his cabinet, will help to shift perceptions around Africa, highlighting the continent as a safe, reliable destination for investment. Creating a forum for dialogue between government officials and the SME community will create the opportunity to engage in a systematic and coordinated way.29
Advancing such levels of engagement, with specific actions, will substantially advance mutual interests. The U.S. should build on this to further institutionalize relations with Africa and engagements at the highest level. The success of the U.S.-Africa Business Forum, which did contribute to deals around USD 14 billion between 2014 (first edition) and 2016, with additional deals and commitments of USD 9 billion at the 2016 edition, illustrate the importance of high-level meetings, which should be reinitiated (The first edition of the U.S.-Africa Business Forum was attended by about 50 heads of state and governments, and 150 global CEOs).
This is not just important for African leaders, but also for African citizens who prefer the U.S. model of development compared to any other country.30 Strategically seizing such as opportunity to build a long-term sustainable advantage will be critical.
4. For the successful implementation of the AfCFTA and other critical initiatives (post-2025 AGOA, among others) the U.S. should be involved in regular high-level consultations between the United States Trade Representative, the AfCFTA, and the African Union, creating a working group which could define the critical steps forward.
It is important to engage with Africa on the way forward about U.S.-Africa relations, through regular consultations. The AfCFTA offers new opportunities for U.S. businesses to use Africa as a global platform, not just to capitalize on the large African market, but to benefit from the unique advantage provided to sell around the world. The U.S. will also gain market shares, etc. Africa can become the base for U.S. companies to trade not just with Africa, but with the world as well. Africa is not just a market, but also a platform to manufacture and export in other regions of the world. The AGOA Forum provides a platform to discuss these questions in partnership with Africans, but it remains underutilized.
5. The U.S. should capitalize on the AfCFTA that provides the opportunity for the U.S. and the world to finally address the global macroeconomic imbalances which have been reflected in structurally large U.S. current account deficits with a handful of countries largely on account of excessive concentration of supply chains.31
The growth opportunities associated with increasing economies of scale and productivity growth under the AfCFTA provides the path to reorder and diversify the supply chains for greater resilience and while also sustainably addressing the macroeconomic imbalances which have dominated the world economy over the past decades.
Already several countries and corporations are taking advantage of growth opportunities offered by the AfCFTA in the automotive industry. Volkswagen has opened its first car plant in Rwanda.3233 Groupe Peugeot Société Anonyme has established its first plant to assemble up to 5000 cars a year in Namibia, taking advantage of the free market area to target customers in other countries across the region.34 With its population growth and rising middle class, Africa could well become the largest market for the automotive industry in the coming decades.
These are tremendous opportunities that U.S. carmakers, including those manufacturing less polluting new energy vehicles should be targeting, especially with Africa’s excess reserves of lithium and coltan which are some of the most important raw materials for a rapidly changing industry.
6. Focus policy action on impact, and on the effective implementation and delivery of initiatives, not just on big policy announcements.
The U.S. should distinguish itself by focusing on successful implementation of existing or new initiatives. For example, the G7 countries and partners have announced an USD 80 billion dollars commitment for Africa’s private sector for the next five years. How will it be implemented? It is critical to have a clear mechanism for successful implementation that includes sufficient details about the projects. For example, the U.S. and partners should engage with African multilaterals (AfCFTA, AU, etc.) and governments during the policymaking and implementation processes to strategically identify and align objectives. An implementation unit may be created, and a multistakeholder working group to assess and decide on mutual priorities. Similarly, how could the Build Back Better World initiative be successfully implemented, and to what extent will Africa benefit from it? The administration needs to appoint a leader to strategically engage and to have consultations with allies. Bringing the allies together, and giving teeth to the plans that have been put together, will be critical to build sustainable competitive advantage for the U.S.
7. The U.S. should promote commercial diplomacy through an economic strategy that goes beyond the traditional vision of trade and investment. Domestically, the U.S. should increase efforts to document and disseminate the tremendous potential Africa can have for U.S. businesses.
Given that a central goal of Prosper Africa is to double two-way trade, the United States should play a better role in identifying and sharing business and investment opportunities with its domestic businesses and corporations. As large corporations are already better resourced when dealing in Africa, American SMEs are the most likely beneficiaries of Prosper Africa—whether through market access or on the supply side—and the DFC should provide them with resources to help trade and invest in a timely manner. For Prosper Africa to benefit both the U.S. and Africa, each side needs to feel confident in the trading process and consider each other a friend.
Prosper Africa should focus on specific mechanisms aimed at ensuring that American SMEs better understand the dynamics in Africa, to develop a specific interest and attraction on the continent and make others more eager to invest and do business there. This goal can be achieved through business promotion and facilitation activities encouraging business development as well as corporate diplomacy.
8. The U.S. should capitalize on the African Diaspora, which is heavily represented and active in the U.S., by specifically adopting diaspora commercial diplomacy to foster trade and investment between the U.S. and Africa.
President Biden has made steps in strengthening this relationship through early engagement with the community, but this strategy can be pursued further in regard to trade and investment with Africa in order to distinguish the U.S. from other competitors and accelerate its competitive advantage. The collaborations between African innovators on the continent and African and African-American innovators based in the U.S. have the potential to advance U.S.-Africa relations on several levels.35 Members of the African diaspora have an incredibly valuable understanding of Africa-U.S. cross-cultural engagement, not to mention existing relationships and networks on the continent, making them perhaps the best suited to Prosper Africa’s efforts to support and facilitate business I mentioned above. Prosper Africa should formalize a relationship with the African diaspora’s SME community and the continent’s SME community, and routinely engage as a group, to support the formulation of strategies and mechanisms to increase two-way trade. It has started such an effort, but can do more: For example, in 2019, Brookings hosted a conversation between USAID and members of the diaspora’s SMEs. It brought to light specific, actionable ways to enhance the program’s mechanisms, including the need to expand staff support at trade hubs, expedite DFC loans, and improve data collection and analysis.36 SMEs in Africa are crucial to include in these conversations so that all stakeholders are involved to ensure Prosper Africa designs effective, efficient policies.
9. Accelerate the COVID-19 vaccine strategy and partnerships, and aggressively pursue vaccine diplomacy beyond COVID-19 by supporting the development of a vaccine manufacturing industry in Africa, including investments in human capital and technology development.37
 According to the Africa Centers for Disease Control and Prevention (Africa CDC), only 3.19 percent of Africans have received at least one dose of the COVID-19 vaccine as of July 21, 2021.38 A Duke University study estimated that most Africans will not have had an opportunity to receive the COVID-19 vaccine until 2024.39 The devastation of the COVID-19 pandemic, as well as other epidemics in recent years like, has revealed the urgent need for investment in Africa’s national and continental healthcare systems. Vaccine diplomacy is a crucial first step towards helping Africa recover from the pandemic and prevent the emergence of new variants that might damage the recoveries in other nations.
While it is the right thing to do, it will also support U.S. businesses. Poor healthcare systems threaten Africa’s industrialization and workforce development, and now is the opportunity for the U.S. to help build equitable health systems and ensure preparedness for future health emergencies. This support should not be limited to loans or donations. Partnerships with academic institutions or public-private partnerships between U.S. and African agencies and firms that create avenues for collaboration, knowledge exchange, and skill and technology development will all be instrumental in strengthening the soft power of the U.S.
Specifically, the U.S. should provide broad technical and financial support for the new African Union-Africa CDC initiative, Partnerships for African Vaccine Manufacturing (PAVM), which aims to build five vaccine-manufacturing research centers over the next 10-15 years. The success of this PAVM initiative would open doors for a transformation of Africa’s pharmaceutical industry in Africa, a sector that has enormous growth potential. The development must go beyond “fill and finish” manufacturing, which does little to truly decrease Africa’s overreliance on foreign suppliers.40
10. Contribute to closing the gap in the physical and digital infrastructure by leveraging existing programs supporting African countries’ digital transformation strategies.41
The U.S. already has established infrastructure and technology development programs, but is underutilizing them. Such initiatives, especially those that focus on electricity and internet penetration, should be prioritized and fast-tracked.42
Most importantly and prior to even leveraging these existing initiatives, the U.S. should consult and act in partnership with African countries for the investments in major infrastructures, including 5G. For example, an opportunity is within OPIC [now DFC]’s “Connect Africa” initiative, which was launched with a fund of USD 1 billion for transportation, ICT, and value chain development projects.43 The Power Africa initiative has been successful, and augmenting the program now would contribute to repairing and strengthening the U.S.-Africa relationship.44
Furthermore, several African countries are developing and implementing a multi-stakeholder Fourth Industrial Revolution (4IR) national task force or commission to assess country readiness and adopt a comprehensive national strategy. Initiatives such as the Centers for the Fourth Industrial Revolution (South Africa and Rwanda), or the Presidential Commission on the 4IR (South Africa) should be supported and replicated across the continent.
11. The U.S. must continue and increase its support to bridging the infrastructure gap in Africa while advancing trade and investment for mutual prosperity.
This, simultaneously, represents both a way forward to enhance trade and investment while achieving the global public good. In fact, in Sub-Saharan Africa, over 50 percent of people live without access to electricity, more than 70 percent of people live without access to safe drinking water, 69 percent of people live without basic sanitation,45 and 53 percent of the roads are unpaved.46 China has been playing a central role by investing in these areas.
Importantly, the U.S. should differentiate its approach from competitors by emphasizing engagement with African continental organizations (PIDA, the AFDB, the African Development Fund, among others), bilaterally—and more importantly, transparently, with specific countries, and by partnering with allies. The U.S. also could better support capacity building and regional projects through investments, new projects, and partnerships. The U.S. could better partner with Africa to bring its own expertise and knowledge to serve at various phases of project development, such as studies and implementation.47 A long-term partnership will also be key to outperforming other players. The U.S. will see a high return for its investments, as well as geostrategic balance. The U.S. will fill an empty seat, that would otherwise be occupied by other players on the continent.
12. The U.S. can build on higher education, another area of comparative advantage, to provide technical training and reskilling programs through initiatives and agencies to close the digital skills gap and human capital gap (especially for youth and women).48
It is crucial the U.S. expand educational and training opportunities in Africa. The soft skills and development of academic institutions provide the opportunity for the U.S. to lay the foundation for a lasting win-win partnership with Africa, sustained by knowledge exchange and deepening business ties. U.S. policy needs to provide support that incentivizes American universities to open more campuses and degree programs, especially in STEM and technology, throughout Africa. Such programs provide skills in areas critical for the rise of manufacturing industry and effective decentralisation of global supply chains and will be equally beneficial learning opportunities for African students and American students who may study abroad. For example, Carnegie Mellon University has a campus in Rwanda that offers master’s programs in information technology and electrical and computer engineering.49 Morgan State University has recently launched a partnership with a university in Ghana, offering two graduate degree programs to students.50 Fast-growing SMEs will be far more likely to evolve and invest in areas where there is a skilled workforce or, at least, resources to support training workers, and added U.S. support could go a long way towards creating an attractive business environment for SME investment. It is indeed an opportunity to establish a long-term partnership of a new nature between U.S. and Africa.
Conclusion
In closing, it is time for U.S. to reverse the trend in the ground lost in Africa as many traditional and emerging global powers are racing to capture Africa’s tremendous economic potential. The U.S. has a sustained competitive advantage to partner with Africa, advance U.S. trade and investment with the continent, while meeting the majority of Africans’ priorities. It is up to the U.S. to pursue the recommendations above and seize this unique momentum to advance mutual U.S.-Africa trade and investment interests. By acting promptly, and forging transformative partnerships aligned with African values, the U.S. has the opportunity to not only advance its own interests and contribute to the transformation of a continent that will make up nearly 40 percent of the world’s population by 2100, but also the opportunity to lead the way in building a more prosperous, democratic, secure, and stable world. As mentioned by William Schurz, “borders frequented by trade seldom need soldiers.”
Thank you very much for your attention and looking forward to your questions.

Slums, sprawl, and skyscrapers

These three words are probably the most used in popular and policy discussions of city development. The squalor of slums, unsustainability of sprawl and sterility of skyscrapers are the proverbial Achilles heel of community leaders and urban planners. They call for livable neighborhoods with a vibrant mix of homes, shops, offices, and local amenities.

In a recent report, “Pancakes to Pyramids: City Form to Promote Sustainable Growth,” we examine how cities across the world have grown over the past quarter century and explain why some are stuck with slums, while others have expanded and some have built impressive skylines. Our priors have been shaped by our experiences living in cities, and we set out to examine if empirical regularities were consistent with these priors.
3 priors, 1 question
One of us recalls riding Mumbai’s crowded suburban rails during the early 1990s, passing the large slums of Dharavi where people lived cheek by jowl with little access to taps and toilets at home. While India’s economy was opening up to new investment, authorities responsible for Mumbai were slow to lay in the infrastructure and streamline the regulations that made it easier for newcomers to live and set up businesses. To be sure, Mumbai’s skyline has peaked over the past three decades, with redevelopment comprising a quarter of all real estate development over the last 10 years. Redevelopment of the city responded to economic demand. However, there is a long path ahead, to ensure that the slums of Dharavi transform into livable neighborhoods.
Around the same time, another one of us was growing up in Anyang, 15 kilometers from Seoul, and recalls catching frogs in rice fields with his friends. He recalls that “going to Seoul was a big deal—an annual event.” However, very soon, Seoul expanded into Anyang to accommodate its growing economy and population, building outward and upward. Rice fields gave way to skyscrapers, keeping in step in Korea’s rapid economic growth (See Figure 1).
Figure 1. Building outward and upward in Anyang, South Korea

The third among us grew up in a single-family home in a dormitory village of about 1,000 people around the city of Caen, one of the rainiest parts of France. She moved to Paris as a young adult, a city that she had always dreamt of living in. Her dreams were shattered as she realized that, as a student, she could not afford the cozy apartment under the roofs of the left bank district. She ended up living in the “Red Belt” suburbs of Paris with its Lenin stadiums and high towers and concentrated poverty that share some of the most expensive land in Europe with expensive single family homes. However, the metro system allowed her to enjoy the human density and amenities of Paris.
Our experiences living in cities highlighted that the way a city grew reflected broader processes of economic development. If a country was poor and its economy stagnant, cities were crowded and squalid. As a country’s economy expanded, cities became home to more people and businesses who demanded better homes, offices, infrastructure, and open spaces. Cities accommodated changes in demand by redeveloping their existing structures, by expanding into the periphery, and by building taller. However, regulations could stymie the supply of structures and push poorer people into farther locations. But decent transport systems could keep them connected to opportunities. A growing economy interacting with urban regulations and transport systems shaped how a city grew. The question is: Was our experience shared across cities?
Floor space—the final product of urbanization
To answer this question, we carried out an empirical exercise to examine how floor space has evolved across cities and what factors contribute to floor area growth. We focused on floor space available in the city rather than its land area as floor space makes the difference between a city being livable or being crowded. As noted urbanist Alain Bertaud puts it, the final product of urbanization is floor space.

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We answered this question in two parts. First, we estimated how the built-up area of a city has changed over the past 25 years, from 1990-2015. Second, we identified how city building heights look across the world. To get a handle on built-up area growth, we examine data from 9,500 cities from the Global Human Settlement Urban Center Database. Details on measurement are provided in the report and our working paper.
We find that livable floor space hinges on city growth along three margins:

Horizontal spread—extending beyond the city’s previously built-up area.
Infill development—closing gaps between existing structures.
Vertical layering—raising the skyline of the existing built-up area.

As cities grow in productivity and in population, they add floor space by expanding outward, inward, upward, or—more usually—along all three margins to varying degrees. We use the terms pancakes and pyramids as shorthand for two broadly different tendencies in the physical manifestation of city growth:

Cities with low productivity and income levels and dysfunctional policy environments generally grow as pancakes—flat and spreading slowly. Low economic demand for land and floor space keeps land prices low and structures close to the ground, especially at the urban edge. Given slow expansion, growth in population density is often accommodated by crowding, starkly visible in the slums of developing country cities.
Cities with higher productivity and responsive policies may evolve from pancakes into pyramids—their horizontal expansion persists, yet it is accompanied by infill development and vertical layering. A rising demand for floor space in economically productive cities and a rise in housing investment and consumption, leads developers to fill vacant or underused land at and within the city edge with new structures. The same demand for floor space drives expansion not just horizontally in two dimensions, but also in the third—the vertical. Structures are built taller, on average, and at the urban core, they are built much taller, forming sharply peaked skylines.

The inevitability of sprawl, but with a silver lining
We find that horizontal growth is inevitable for most developing country cities. In low-income and lower-middle-income countries, 90 percent of urban built-up area expansion occurs as horizontal growth (Figure 2). But there is a silver lining: in high-income and upper-middle-income country cities, a larger share of new built-up area is provided through infill development. A city in a high-income country that increases its built-up area by 100 m2 will add about 35 m2 through infill development and 65 m2 through horizontal spread. But a similar city in a low-income country will add 90 m2 through horizontal spread and only 10 m2 from infill.
Figure 2. Horizontal growth is inevitable for most developing country cities

Source: Pancakes to Pyramids: City Form to Promote Sustainable Growth
We also find that economic productivity and rising incomes are indispensable for vertical layering because building high is capital-intensive. A city that grows in population, but not productivity and incomes, will not generate enough economic demand for new floor space for its spatial expansion to keep pace with population growth. For example, if the population increased by 10 percent but incomes stay constant, the city’s total floor space increases by 6 percent. This 6 percent increase is too small to allow a newly added population the same amount of floor space per person as before: Each inhabitant’s residential and work space will shrink, eventually making the city less livable. Our estimations indicate:

The elasticity of total floor space to population is 0.60. If a city’s population increases by 10 percent (holding income constant), its total floor space increases by 6 percent because of built-up area increase (3.5 percent) and vertical layering (2.5 percent) (Figure 3).
Elasticity of total floor space to income: 0.29. If the city’s income increases by 10 percent (holding population constant), its total floor space increases by 2.9 percent through a combination of built-up area expansion (1 percent) and vertical layering (1.9 percent).

Figure 3. Horizontal growth is inevitable for most developing country cities

Source: Pancakes to Pyramids: City Form to Promote Sustainable Growth
Increasing incomes and economic productivity are together necessary for a rise in floor space per person through vertical layering and pyramidal growth. Our research shows that the growth of cities and the availability of floor space reflect market forces that support productivity and economic growth. The finding echoes the World Bank’s 2009 World Development Report on Economic Geography: “Many policymakers perceive cities as constructs of the state—to be managed and manipulated to serve some social objective. In reality, cities and towns, just like firms and farms, are creatures of the market”.
Slums, sprawl, and skyscrapers reflect market conditions but are generally distorted by poor regulation and inadequate infrastructure. The movement out of slums toward livable cities is critical for developing countries, but this is unlikely to happen without structural transformations and economic growth.

A structured learning approach to support scaling: Guidelines for how to do this in practice

You don’t have to look far to find mentions of “adaptive learning” or “multistakeholder collaboration” in the global education sector. Donors typically ask for the programs they fund to be adaptive and collaborative, implementers try to embrace flexible and inclusive approaches, and researchers tinker to learn about the most effective ways to do these things. But what do they look like in practice?

A new way of working
To address this question, the Center for Universal Education (CUE) at the Brookings Institution, in collaboration with local institutions around the world, set out to develop an innovative participatory research approach: the Real-time Scaling Labs (RTSLs). An RTSL is a process to document, learn from, and support scaling efforts by bringing together “non-usual suspects” over a multiyear period to plan for the scaling process, discuss and reflect on key challenges or opportunities as they arise, and implement course corrections based on data and insights.
The scaling labs are structured spaces for key stakeholders to roll up their sleeves and dive into the complex, messy business of scaling—adding texture to the idea of an adaptive, multistakeholder learning process. It involves linking people and sectors within countries that might not be used to working together to explore collective solutions to shared challenges. Labs can be established and led by a variety of institutions—NGOs, government ministries, or private-sector enterprises could all take this on—and the beauty of the labs is that they can be tailored to different contexts in ways that make sense for the people working there. Though there are common features across the labs and a general set of steps to take, many of the important details are best left to the good instincts of those on the ground.
Applying an RTSL to support marginalized girls in Tanzania
Since 2018, CUE has partnered with CAMFED Tanzania to implement an RTSL to expand and deepen the impact of CAMFED’s Learner Guide Program, an initiative that promotes life-skills development and creates pathways to employment and further education for marginalized girls transitioning from secondary school. Lab members include representatives from the Ministry of Education, Science, and Technology (MoEST) and the President’s Office-Regional Administration and Local Government (PO-RALG)—the two main bodies responsible for education service delivery in Tanzania. Beyond government, the RTSL has also brought together civil-society representatives, teachers and school leaders, and members of CAMFED’s National Advisory Council to explore how core elements of the Learner Guide Program could be integrated within the existing government system.
Over a three-year period, the lab has been shaped into a structure well-suited for the Tanzanian context. Subcommittees were formed among smaller groups of lab members so that they could draw on their individual expertise to investigate thematic issues related to the Learner Guide scaling process. These groups of experts have analyzed how key components of the program, such as the “My Better World” life skills materials, or microloans provided to Learner Guides, could be adapted or integrated within the existing government system. Lab members have contributed to the development of costed scaling strategies that help the Tanzanian government and CAMFED understand how and why program costs could shift if leadership of the program is transferred to the government. CAMFED Tanzania is currently working with their colleagues in Zambia and Zimbabwe to adapt and implement RTSLs in those countries too.
In addition to the Tanzania RTSL, CUE and local partner institutions have implemented RTSLs to support the scaling of education initiatives in other countries: Botswana, Cote d’Ivoire, Jordan (two labs), and the Philippines. These experiences have surfaced valuable insights about key scaling principles and how they manifest in different contexts. Through this work, CUE has analyzed how the RTSL has added value to the scaling process—and where it could be strengthened—and has used these insights and experiences to develop “Real-time Scaling Lab Guidelines” that others can use to implement their own RTSL.
Using the guidelines
While education actors should adapt the RTSL to meet their needs, CUE recommends following these key steps from the guidelines to implement an RTSL:

Clarify the problem to be addressed. The institution(s) initiating the RTSL should begin by identifying an evidence-based education initiative in the process of scaling as the focus of lab activities and research. While the lab supports and documents the process of scaling a particular initiative, the goal of the lab is to sustainably address a problem in the local context. This early stage of the lab process also involves conducting background research to gain a nuanced understanding of the country context, government priorities, and key stakeholders to involve.
Determine lab structure and identify key personnel. Labs can be established as a standalone structure or integrated within an existing one (such as a ministry working group or standing committee). Regardless of where the lab is “housed,” a manager should be identified to provide overall leadership of the process, and a researcher tasked with documenting the scaling journey. This documentation will serve as the basis for the group’s adaptive learning process. Finally, lab members are identified – the number can vary based on the initiative and context, but the lab group should include diverse actors representing different sectors who are involved with the initiative.
Develop and refine scaling strategy. Under the leadership of the manager and researcher, lab members articulate a shared scaling goal, develop a scaling strategy, and then put the strategy into practice, collecting and analyzing data and information as the process moves along. In the spirit of continuous improvement, lab members should test adaptations to the scaling model or approach, and make strategic decisions based on emerging insights.
Reflect and learn through periodic gatherings. A central feature of the lab process is regularly coming together to openly discuss and reflect on the scaling process—what is going well and what could be improved—and proposing adjustments in the scaling strategy that address challenges and take advantage of windows of opportunity. The COVID-19 pandemic has reinforced the need for flexible adaptation that responds to changing environments. It has also ushered in new ways of collaborating and working together. While the exact structure and rhythm of these gatherings can differ, the ongoing examination of the scaling process based on new data and changes in the broader environment is essential.

CUE hopes this guidance can support other education actors working to bring about large-scale, sustainable impact in education systems. While concepts such as adaptive learning seem straightforward, they can be tricky to apply. The experiences of the RTSLs have offered an effective way to bring folks together for iterative, collective learning. We welcome readers’ questions, feedback, and reflections.

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