Poorest Countries Being Harmed by Euro Currency Crisis

The ongoing economic crisis in Europe is forecast to harm the economies of the world’s poorest countries if it continues, according to a study by the United Kingdom’s Overseas Development Institute (ODI) (odi.org.uk).

As an example, Kenya’s shilling currency has weakened and increased the cost of imports, leading to a surge in inflation, while the number of European tourists has declined, according to Business Daily.

Raging since 2009 (http://www.bbc.co.uk/news/business-13856580), the eurozone crisis has seen several European countries struggling to pay debts built up during the boom years, and this has threatened the currency compact among countries that use the euro single currency (http://www.ecb.europa.eu/euro/html/index.en.html). Several countries have introduced harsh austerity measures to try and rein in the debts and stabilize economies while keeping countries within the eurozone.

This has had the consequence of dramatically raising unemployment levels, reducing consumption of goods and services and increasing poverty rates in many European countries. Some governments have responded by reducing the amount of legal labour migration allowed into their countries.

The study estimates that the euro crisis could amount to a loss of US $238 billion for poorer countries from 2012 to 2013 as aid, trade, investment and remittance payments sent home to relatives and friends are damaged by the crisis.

This would particularly harm export-dependent, emerging-market countries. The study found demand was weakening for products from low and low-to-middle income countries. This would in turn harm growth in these countries. Growth in the past decade has helped many countries lift millions of people out of poverty and enabled the growth of new middle classes, who in turn use their rising incomes to purchase consumer goods and invest.

The crisis will cause developing countries’ currencies to drop in value if they are pegged to the euro, and for countries to be economically harmed because of austerity policies in European countries, said the study’s author, Dr. Isabella Massa.

“The EU remains the largest single export market for poorer countries, although it is the emerging BRIC economies which are their main source of imports.”

The European Union (EU) (http://europa.eu/index_en.htm) is the biggest market in the world and the largest importer of goods from developing countries. The ODI report found a 1 per cent drop in global export demand has the knock-on affect of reducing growth in poor countries by 0.5 per cent. The countries most at risk from the crisis are Mozambique, Kenya, Niger, Cameroon, Cape Verde and Paraguay.

For example, 17 per cent of Ivory Coast’s exports go to the EU. Mozambique sends 14 per cent of its exports to the EU and Nigeria sends 10 per cent.

Tajikistan in Central Asia was the most highly dependent economy on remittance payments from its workers living outside the country to prop up its GDP (gross domestic product). Remittance payments from Tajik citizens outside the country made up 40 per cent of GDP.

Liberia and the Democratic Republic of Congo were both heavily dependent on foreign direct investment (FDI) from Europe in 2010.

Many countries have also grown used to strong demand for their resources in recent years as China has rapidly developed and urbanized, sucking in more and more resources from around the world, including sub-Saharan Africa.

“Poor countries are vulnerable to the euro crisis not only because of their exposure (due to dependence on trade flows, remittances, private capital flows and aid) but also because of their weaker resilience compared to 2007, before the onset of the global financial crisis,” said Massa.

“The ability of developing countries to respond to the shock waves emanating from the euro area crisis is likely to be constrained if international finance dries up and global conditions deteriorate sharply.

“The escalation of the euro crisis and the fact that growth rates in emerging BRIC economies, which have been the engine of the global recovery after the 2008-9 financial crisis, are now slowing down make the current situation really worrying for developing countries.”

Despite the gloom, there are many positive and powerful antidotes to this economic crisis, including rising South-South trade and innovation, which shows it is possible to reduce dependency on wealthy-developed countries alone for economic prosperity.

By David South, Development Challenges, South-South Solutions

Published: September 2013

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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African Supercomputers to Power Next Phase of Development

Information technology developments in Africa have long lagged behind those in other parts of the world. But the transformation being brought about by the widespread adoption and use of mobile phones – each one a mini-computer – and the expansion of undersea fibre optic cable connections to Africa are creating the conditions for an exciting new phase of computing growth on the continent.

Despite the global economic crisis, Africa is on course to see annual consumer spending reach US $1.4 trillion by 2020, nearly double the US $860 billion in 2008 (McKinsey). On top of this, by 2050, a projected 63 per cent of Africa’s population will be urban dwellers. With Africa’s middle class the fastest-growing in the world – doubling in less than 20 years – matching computing power with this consuming urban population could unleash a treasure trove of opportunity for information technology entrepreneurs.

These developments are creating the conditions for game-changing computing in the next years. And this is encouraging the creation of a new supercomputer (http://en.wikipedia.org/wiki/Supercomputer) for Africa in Kenya that will double the total number of supercomputers in Africa. Hugely powerful compared to personal or commercial computers, supercomputers use cutting-edge technology to carry out high-speed calculations involving vast quantities of data.

Expanded supercomputing power brings numerous advantages to both economic and human development. It will radically alter what can be accomplished in Africa – allowing mass data processing to be done, highly complex and data dense applications to be run, and very large research projects to be conducted on the continent rather than overseas.

Increasing computing power in Africa will bring in its wake, it is hoped, a surge in economic and research opportunities.

It will help African researchers and scientists to undertake globally competitive projects, rather than seeing this work done overseas. It will also open up a vast range of possibilities for African entrepreneurs and businesses to do complex data processing, modelling and research and will enable them to become more sophisticated operations.

The new supercomputer, the iHub Cluster, is being built in the Kenyan capital by one of Africa’s pioneering information technology hubs – iHub Nairobi (http://ihub.co.ke/pages/home.php) – in partnership with Internet products and services company Google and microchip maker Intel Corporation.

Africa’s first supercomputer is located in South Africa and is ranked 497 in terms of computing power on the list of 500 supercomputers in the world (http://www.top500.org/).

It is located in the “Tsessebe cluster” in Cape Town’s Centre for High Performance Computing (http://www.chpc.ac.za/).

“With mobile devices coming in multiple cores, it is important for developers to be exposed to higher performance computing; we are hoping to debut at a higher level than ‘Tsessebe cluster’,” Jimmy Gitonga, the project team leader for the iHub cluster, told Computer World.

Africa suffers from poor supercomputer capacity and this has had a knock-on affect on everything to do with economic development. The iHub supercomputer hopes to help universities and colleges to gain competitive edge and be able to undertake more complex research in the fields of media, pharmaceuticals and biomedical engineering.

“In Africa, we need to be on top of the mobile scene, its our widest used device,” Gitonga told Computer World.

Some of the practical applications for the iHub supercomputer in East Africa and the Horn of Africa include improving weather forecasting and drought prediction, increasing the ability to give advance warning of droughts and famines in the region.

“Most of the United Nations agencies and international agencies operating in the region have extensive field research on how to tackle natural disasters in the region. Imagine if they had affordable space where they can meet with developers and test resource-hungry applications,” Gitonga said.

The iHub also wants to offer the services of the supercomputer to researchers and organizations who have had to go abroad to have their data processed. The iHub supercomputer hopes to be used by mobile phone developers, gamers, universities and research institutions.

In the last two years, China had pushed the United States out of the number one spot for supercomputers. The Tianhe-1A located at the National Supercomputing Center in Tianjin (http://www.nscc-tj.gov.cn/en/), China, was the fastest computer in the world from October 2010 to June 2011.

For those looking to see how they can make the most of the growing supercomputer capability in Africa, examples from other countries offer a good idea. Supercomputers can be used for weather forecasting, climate research, oil and gas exploration, physical simulations like when testing aircraft, complex modelling for medical research, processing complex social data necessary for delivering effective social programmes or running modern health care systems.

By David South, Development Challenges, South-South Solutions

Published: October 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Indonesian Food Company Helps Itself by Making Farmers More Efficient

The current global economic crisis is taking place at the same time as a global food crisis. Food inflation took off at the beginning of 2011. This is having a devastating affect on countries dependent on food imports and experiencing decreasing domestic production capabilities. The least developed countries (LDCs) saw food imports rise from US $9 billion in 2002, to US $23 billion by 2008 (UNCTAD), prompting Supachai Panitchpakdi, secretary general of UNCTAD, to say “the import dependence has become quite devastating.”

Garuda Food (www.garudafood.com), one of Indonesia’s leading snack food and drink manufacturers, has been boosting its own productivity by investing in improving the productivity of domestic small-scale farmers. This led to a doubling of crop purchases from peanut farmers between 2007 and 2009. By stabilising the market for peanuts and better guaranteeing income, it has attracted more people into becoming peanut farmers in the region.

This is crucial for the future of feeding the planet: we need more farmers.

Indonesia is the world’s fourth most populous country, with a population of over 238 million, spread out over a network of islands. Peanut farmers in West Nusa Tenggara (http://en.wikipedia.org/wiki/West_Nusa_Tenggara) (one of Indonesia’s poorest places) are a key part of the region’s wealth. Peanuts are the area’s third largest crop after rice, maize and soybeans, and the region supplies six percent of the country’s peanut production and 10 percent of Garuda Food’s needs.

Garuda Food says investing in farmers has raised its own productivity by a third. Turning past practices on its head, this large agri-food company is supporting small-scale farmers and helping them to boost their productivity and incomes. Conventional wisdom had been to view small-scale farmers as an inefficient hold-over from the past – the quicker they were driven out of business, the better.

The Indonesian peanut farmers were using traditional farming methods and local seeds. Knowledge of more sustainable farming methods and land management techniques was poor. The farmers were also beholden to the whims of local buyers and fluctuating market prices.

Then Garuda Food stepped in. The company’s field staff offer the farmers training, and through its subsidiary PT Bumi Mekar Tani, it spreads knowledge about new agricultural practices and provides the farmers with quality seeds and farming equipment.

The company buys crops directly from the farmers, rather than from middlemen, increasing the amount the farmer makes. A premium is also paid if the farmer achieves better quality for their crop.

“We receive substantial supply from peanut farmers in NTB (West Nusa Tenggara) and we hope the arrangement will continue,” Garuda Food’s managing director Hartono Atmadja told the Enchanting Lombok website.

Garuda Food’s initiative, with support from the World Bank’s International Finance Corporation and AusAID, through the Australia Indonesia Partnership, has raised the productivity for 8,000 small-scale farmers by 30 percent: an income boost for the farmers of 3.9 million Indonesian rupiah (US $456) per hectare annually.

Peanut farmer H. Sajidin told the IFC (International Finance Corporation): “My farm’s productivity doubled, my income improved significantly, and I can sleep peacefully at night knowing that Garuda Food will buy my crops at agreed prices.”

Raj Patel, author of Stuffed and Starved: Markets, Power and the Hidden Battle for the World Food System (http://stuffedandstarved.org/drupal/frontpage), has grappled with the conundrum of how to feed a rapidly growing planet. He finds the world is not lacking in food, but distributes its bounty very poorly and wastefully, leaving a planet where some people are literally ‘stuffed’ with too much food (the well-documented global obesity crisis) and others left to starve.

He finds the solution is often local.

“It turns out that if you’re keen to make the world’s poorest people better off, it’s smarter to invest in their farms and workplaces than to send them packing to the cities,” Patel wrote recently in Foreign Policy. “In its 2008 World Development Report, the World Bank found that, indeed, investment in peasants was among the most efficient and effective ways of raising people out of poverty and hunger.”

Patel uses the example of the southern African nation of Malawi, where “according to one estimate, the marginal cost of importing a ton of food-aid maize is $400, versus $200 a ton to import it commercially, and only $50 to source it domestically using fertilizers.”

By David South, Development Challenges, South-South Solutions

Published: May 2011

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Innovation Villages Tackling MDGs

 

The global economic crisis that began to roll across the world in September 2008 is threatening gains made against poverty and hunger all over the South. As Kevin Watkins from UNESCO’s Global Monitoring Report told the Financial Times, “With the slowdown in growth in 2009, we estimate that the average income of the 391 million Africans living on less than US $1.25 a day will take a 20 percent hit.”

How well millions of people survive the economic turmoil will depend on how local communities respond. And there are innovating communities across the South that show it is possible to succeed. By studying the microcosm of test villages, where quantifiable results are being tracked, lessons are being learned on how to achieve the Millennium Development Goals (http://www.undp.org/mdg/).

The challenge of matching improving living standards and quality of life with environmental sustainability has been taken up by one village in Colombia. The technologies it has developed over the past few decades have been adopted around the country.

In Las Gaviotas, Colombia a unique experiment was hatched at the end of the 1960s: to see if a village could survive – and even thrive – while eschewing fossil fuels and industrial agriculture. It found its first test in the oil crisis of the early 1970s. For Las Gaviotas’ survival, meeting energy needs became paramount.

One of the simple concepts the community applied is a take on the physical reality that energy is never created or destroyed, it just moves from one medium to another. Las Gaviotas believes in using all the sources for energy that can be found in a local area first, before seeking out others.

Founded by development specialist Paolo Lugari,Las Gaviotas (http://www.friendsofgaviotas.org) is located in a desert region of Colombia. The area covers a vast territory comprising three-fifths of the country but is home to just 10 percent of the population. To Lugari, the harsh environment is a challenge to be overcome. To begin to reverse the arid environment at Las Gaviotas, the villagers reversed the dry climate by planting trees.

This had the effect of increasing local rainfall by 10 percent, making it possible to do other economic activities.”The only deserts that exist in this world are deserts of the imagination,” Lugari told the New York Times.

The 200 people living in Las Gaviotas have been able to get by without guns, police, a mayor, cellphones, television or the Internet. Nobody uses a job title — instead the adults in the community rotate jobs.

While the villagers do not use many of the technological tools people associate with modern life and prosperity, they do have a culture of invention. The inventions they have come up with include a solar kettle for sterilizing water and a 8,012 hectare pine forest which is harvested for resin to make biofuel for trucks and motorcycles. The resin is also used to make varnishes and linseed oil.

For years Colombia’s ongoing civil war raged around the community. Violent drug traffickers and private armies destabilized the country for decades. But despite this mayhem, Las Gaviotas has attracted rural peasants seeking to double their wages (US $500 a month) and enjoy the quiet life away from the war.

“We try to live a quiet life, depending on nothing but our own labor and ingenuity,” said Teresa Valencia, a teacher who has lived in Las Gaviotas for three decades.

Other products developed by the village included a turbine powered by a small, one metre high dam that produced 10 kilowatts of electricity, a windmill that was able to spin despite light breezes, and a pump strong enough to draw water from the hard-to-reach savannah water table.

Pride of place was the village’s hospital. Despite hot temperatures and high humidity, the hospital used clever technologies like subsurface tunnels and double ventilation systems in the walls to cool its operating theatre. The roof slid off to allow ultraviolet sunlight to disinfect rooms. After healthcare reforms in Colombia, the hospital was closed. Undefeated, the village turned the hospital’s kitchen into a potable water bottling facility, and reduced the need for hospital visits by making sure everyone in the area had access to clean water.

The community’s approach inspired scientists and architects, who came to design homes, laboratories and factories for Las Gaviotas.

One significant success has been the windmill-driven water pumps developed by Las Gaviotas. Invented by Jorge Zapp, head of the mechanical engineering department of Bogota’s Universidad de Los Andes, it is a lightweight windmill unit weighing barely 45 kilograms. The blades use the airfoil found on airplane propellers to make the most of light breezes.

In the 1980s, UNDP hired the Gaviotas team to install water and windmill pumps in other places in Colombia. Thousands have now been installed in Colombia and the design has been copied throughout Latin America.

Other inventions include a solar-powered kitchen, a water pump powered by a children’s see-saw, and a zeppelin that floats above the savannah plains to detect forest fires.

While the community has been able to forge a success, it can’t avoid the ups and downs of the global economy entirely. Competition from cheap imports of pine resin have pushed down the price the community can charge.

But in a topsy-turvy world, and surrounded by a civil war, what Las Gaviotas has achieved still seems impressive. “We have survived,” said Andrea Beltran. “Maybe, at this time and place in Colombia, that is enough.”

More recently, a much-publicized experiment is also underway in the Millennium villages. The Millennium Villages (http://www.millenniumvillages.org/index.htm) is a joint project between Columbia University’s The Earth Institute and UNDP, and is a bold experiment working with villages in Africa to identify and test solutions to help in achieving the Millennium Development Goals (http://www.undp.org/mdg/).

Britain’s Guardian newspaper has also been sponsoring and tracking changes in the villages of Katine sub-county in Uganda (http://www.guardian.co.uk/katine). Comprising 25,000 people, the project began in October 2007, and is conducted in partnership with the African Medical and Research Foundation (Amref) and Farm-Africa in Katine.

What is useful to people looking for solutions is the way the project is being tracked in detail on the newspaper’s website.

In India, the Model Village India (www.modelvillageindia.org.in) concept pioneered by Rangeswamy Elango, a head of the village of Kuthampakkam near Chennai, has now expanded to 30 model villages. Its approach is about being positive, eschewing griping about problems and instead getting down to work to solve them. Its success is based on an ancient Indian self-organizing model, the Panchayat, and Elango has modernized it to become what he calls The “Network Growth Economy Model” – a direct challenge to the “special economic zones that benefit only capitalist owners,” he said.

Gaviotas: A Village to Reinvent the World – 10th Anniversary Edition by Alan Weisman details further the achievements of the village (www.amazon.com)

By David South, Development Challenges, South-South Solutions

Published: November 2009

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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