I’ve always had the impression that sentences that include the words “many poor countries” tend to be questionable, or even plain dumb. I’ve run a google search to confirm if my worries are right. Here’s what I found:

  • ” In many poor countries the only people overweight are the rich”. (link)
  • “We know that in many poor countries, the poor spend a lot of money on tobacco”. (link)
  • “watermelons are in abundance in many poor countries in Africa and Asia”. (link)
  • “In many poor countries, virtually everything is for sale”. (link)
  • “In many poor countries, tourist travel guides and even the guards at these places often try to sell small stones or relics of the visited places for tourists”. (link)
  • “In many poor countries, most young girls, regardless of age, are forced to demonstrate their fertility once they are married” (link)
  •  “In many poor countries, the cost of sex with a prostitute is abysmally low; the median price for many prostitutes in South Africa is $1″. (link)
  • “in many poor countries like Nigeria, life is very cheap” (link)
  • “In many poor countries, governments give men the power to feel superior” (link)
  •  “In many poor countries there is one dominant party responsible for making decisions”. (link)
  • “In fact in many poor countries like Malawi and Zambia, AIDS is killing teachers faster than they can be replaced”. (link)
  • “in many poor countries, the wait for a prohibitively expensive land line can take years and may even require political connections” (link)
  • “So the growth of cell phone usage may have raised economic growth by between 0.5 and 1 percent per year in many poor countries” (link)
  • “in many poor countries of what is called the global South there are imaginative and successful small efforts to deal with personal and community breakdowns” (link)
  • “In many poor countries, including many Muslim countries, income growth is low” (link)
  • “In many poor countries, only a very small proportion of trips is undertaken using motorised vehicles”.  (link)
  • “In many poor countries around the world, health care is episodic” (link)‎
  • “ketamine is the mainstay of anaesthesia in many poor countries but this has not been the subject of a systematic review”. (link)
  • “Tariffs and VAT in many poor countries are a significant factor in determining the end-user price of drugs, driving them up sometimes by as much as 55%” (link)
  • “In many poor countries, stray dogs constitute a serious health problem, spreading diseases and attacking people” (link)
  • “In many poor countries and communities, marrying off a daughter relieves a family of an extra mouth to feed”. (link)

This is all you need to know to be a development expert.

I’m about to enter the critical phase of my PhD dissertation writing, so blogging might be intermittent  over the next few weeks until the end of the year.


A recent report released by the World Economic Forum  says that border administration and infrastructure are the biggest problem to international trade.

Reducing supply chain barriers to trade could increase GDP by nearly 5% and trade by 15%

If every country improved just two key supply chain barriers – border administration and transport and communications infrastructure and related services – even halfway to the world’s best practices, global GDP could increase by US$ 2.6 trillion (4.7%) and exports by US$ 1.6 trillion (14.5%). For comparison, completely eliminating tariffs could increase global GDP by US$ 0.4 trillion (0.7%) and exports by US$ 1.1 trillion (10.1%). The estimates of the impact of barrier reduction are conservative; they reflect improvements in only two of four major supply chain categories.

Why is lowering barriers so effective? The reason is that it eliminates resource waste, whereas abolishing tariffs mainly reallocates resources. Moreover, the gains from reducing barriers are more evenly distributed among nations than the gains from eliminating tariffs.

Of course, reducing supply chain barriers requires investment, while tariff reductions require only the stroke of a pen. However, many barriers can be traced to regulation. Detailed analysis can enable policymakers to prioritize the investments that are most critical and cost-efficient.

Tariffs are of course very important (see figure).

Source: WEF (2013)

Source: WEF (2013)

But removing supply-chain barriers would be even more successful, especially  in Africa (click on the image to enlarge).

Source: WEF (2013

Source: WEF (2013

I’m really bad at bargaining so I shouldn’t give advice on this issue. But the trick recommended in this paper really seems to make sense:

When negotiating for a salary, most of us reach for a nice, round number like $65,000. Or $90,000. Or $120,000.

But, by favoring all those zeros, we may be missing an opportunity to score a better deal, according to a new paper from researchers at Columbia Business School. They found that using more precise numbers in an initial request—or anchor, as it is known in negotiating parlance—generally results in a higher final settlement.

Precision conveys the impression that the job candidate has done extensive research and deeply understands the market for his services, said Malia Mason, the lead author of the paper and a professor at Columbia who teaches a course on managerial negotiations. When people use round numbers, by contrast, they’re conveying that they have only a general sense of the market rate for their skills.

…In one experiment, Ms. Mason and her team had 130 sets of people negotiate the price of a used car. When buyers suggested a round anchor, they ended up paying an average of $2,963 more than their initial offer. But buyers who suggested a precise number for a first offer paid only $2,256 more, on average, than that number in the end.

When it comes to negotiating salary, Ms. Mason’s research indicates that a job candidate asking for $63,500 might receive a counteroffer of $62,000, while the request for $65,000 is more likely to yield a counteroffer of, say, $60,000, as the hiring manager assumes the candidate has thrown out a broad ballpark estimate.

Usually I bargain when I am buying stuff, like a pair of shoes, a souvenir, or a cab ride home. Negotiating salaries does not happen very often. Here are some thoughts about the bargaining process in no particular order:

  • In theory you should determine how much you are willing to spend and stick to that decision. In reality, you don’t want to spend more than other people do.
  • The problem is that you often don’t know the “normal” (i.e.. average) price for some goods. That makes the asking price of the seller and your common sense the only reference points for your bargaining strategy.
  • (Asymmetric) information can make bargaining quite stressful. You keep asking yourself: am I being overcharged? Or the opposite: am I asking ridiculously low prices?
  • In the bargaining game (with asymmetric information), having the last word ends up being as important as the price itself. Sometimes you can be happy about very bad deals. Other times you might have a bitter mouth even though you got a very decent price.
  • If you show high interest for some items, the asking price will probably go higher. You should always try to signal low interest and low willingness to spend.

Yep, I often find the experience quite stressful.

HT Marginal Revolution

Ernst & Young’s recent “Africa Attractiveness Survey” (pdf) shows that 2012 was a rather disappointing year for foreign direct investment in Africa. But digging more into the data leaves some space for optimism. Some excerpts from the report (click to enlarge):

Ernst & Young "Africa Attractiveness Report"

Ernst & Young “Africa Attractiveness Survey”

 At face value, 2012 was a disappointing year, in that it reversed the year-on-year growth we experienced in 2011, and somewhat dampened our expectations of steady growth in FDI projects. Having said that, we do need to put these trends in perspective:

  • Globally, greenfield projects were down by over 15% year on year in 2012, so the background is one of decline across the board.
  • In this context, Africa’s proportional share of global greenfield projects actually grew, continuing a trend that has seen this share grow, in the course of a decade, from 3.5% of the global total in 2003 to 5.6% in 2012.
  • It is also worth noting that the 764 new greenfield projects this year is still higher than the 678 in 2010, and significantly higher than anything that preceded the peak of 2008.

The geographical origin of FDIs in Africa is experiencing major changes:

Investment from developed markets in particular was disappointing.  Although FDI projects from the UK grew, those from the US and France, the other two leading developed market investors in Africa, were considerably down. In contrast, greenfield investments from emerging markets into Africa grew once again in 2012, continuing the trend of the past three years. In the period since 2007, this category of investment from emerging markets into Africa has grown at a healthy compound rate of over 20.7%, in comparison to investment from developed markets, which has grown at only 8.4%.

Intra-African investment has been particularly impressive over this period since 2007, growing at a 32.5% compound rate. (…) This underlines a broader trend of growing confidence and optimism among Africans themselves about the continent’s progress and future.

Other figures in the report show that -as we’ve often said in this blog- manufacturing in Africa has stagnated over the last decade. However several countries could reach a middle income status by 2025

Source: Ernst & Young

Source: Ernst & Young

Source: Ernst & Young

Source: Ernst & Young

The question was asked on Quora. There are plenty of interesting answers:

In January 1914, Henry Ford announced a radical decision. He increased the worker wages from $2.34/day to $5/day and reduced the working time from 9 hours to 8 hours per day. Other businessmen derided Ford as a socialist, while common public heralded him as a hero. People even prodded him to run for a President. Even today, Ford’s 5 dollar workday is widely remembered in the US.

Puma paying Pele to tie his shoes in the middle of the field seconds before the kickoff of the World Cup final in Mexico (1970)… The camera made a close up and the whole world realized that the best player back then was wearing Puma shoes… Life changed for Puma after that event…

Oakley sent a pair of shades to the Chilean miners who were stuck in the mine. They sent them to protect their eyes from the sun after not having been exposed to it for a very extended period of time. When the miners emerged from the dark mine, the extremely extensive media coverage filmed and talked about how each one of them was wearing a pair of Oakley sunglasses.

And how Richard Branson started Virgin Atlantic.

In 1979, while on vacation with his fiancee in The British Virgin Islands, he was catching a flight to Puerto Rico which ended up cancelled. Richard decided to phone up some charter companies and chartered a plane for $2,000. After splitting the cost between the available seats, he grabbed a blackboard and wrote: VIRGIN AIRWAYS: $39 for a single flight to Puerto Rico.He walked around the airport terminal and soon filled every seat. When they arrived in Puerto Rico a passenger reportedly said: “Virgin Airways isn’t too bad – smarten up the services a little and you could be in business”.

More on Quora (you might have to sign up)

I was slightly depressed after reading the highlights of the 2013 Kenya Economic Survey (pdf). Almost all topics we discuss in this blog, like employment, wages, industrial development and balance of trade, do not look good. Here are some highlights of the highlights:

Industrial development: not really happening

The manufacturing Sector decelerated from an  expansion 3.4 per cent in 2011 to a growth rate of  3.1 per cent in 2012. The slower growth was due to high cost of production, stiff competition from imported goods, high cost of credit and political uncertainty due to the 2013 General  Elections

Employment: 90 percent of new jobs are informal. Wages are falling

  • The labour market recorded 659.4 thousand new jobs in 2012, 89.7 percent of them were in the informal sector representing an increase of 5.5 per cent.
  • Real average wages declined by 4.8 per cent due to inflation.
  • The creation of new jobs in the “modern sector” declined from 74.2 thousands in 2011 to 68.0 thousand in 2012.

 International trade: a growing deficit

  • Kenya’s trade balance worsened further by 8.7 per cent in 2012 compared to 46.7 per cent in 2011
  • The current account deteriorated to a deficit of KSh359.5 billion in 2012 from a deficit of 340.2 billion in 2011.

There are not only bad news in the report, for example there has been increased job creation in the construction sector, ICT industries as well as the education and health activities. And inflation has gone down, which is very good news for the lower income population. But that’s not enough for sustained economic growth over the long term.

Tourism has gone down too by the way. More here

I’ve always wondered how thousands of cab drivers organize themselves in a chaotic place like the Nairobi Central Business District. So I did a small research on my own. The sample size is 1, David my awesome cab-driver.

The story is that if you want to be a cab driver anywhere in town you must become a member of the taxi-drivers association in charge of that area. The association where David works controls the Nakumatt Lifestyle area, the Tuskys Supermarket area (that’s where David is always parked) and the street in front of Uchumi supermarket. Membership comes at a cost of 5000 KSh per year (about $60).

For the first three years, you are obliged to rent a car from the association at a fixed cost of 1500KSh per day (about $20) and a variable cost based on mileage. You cannot own the car you use for work. This means that some rental cars are available only at night time, others only during the day time. David prefers the daytime shift but for more than two years he was forced to work at night -all the cars were already taken during the day. Only a couple of months ago he was able to change, but he says that “traffic is horrible” during the day.  So sometimes he works both day and night.

If you’ve been loyal to the association, after three years you become a senior member  and you’re allowed to buy your own car. The cost for a car in Kenya is very high – second hand cars go from KSh 400,000 to 600.000 (about $5000 to $7000). And that is for a 10-years old basic model. You can easily spend KSh 1 million ($12,000) if you want a slightly newer or fancier car. If you own more than one car, you can rent one of them to the association’s junior members.

Owning your car instead of renting it means higher profits, as well as higher risks and maintenance costs. Most people would rather own their vehicle anyway, but only a few are able to obtain a bank loan or borrow from family or friends. David will become a senior member in 6 months and his plan is apply for a loan at Equity bank and buy a Toyota for about KSh 450,00. He says that Toyota cars never break and spare parts are cheaper and easier to find in Nairobi. His main worry is that he’ll get carjacked again.

Long reads:

It looks like environmental scientists are not jumping into the Afro-optimist bandwagon. Marchiori, Maystadt, and Schumacher (2012) predict that climate change will force migratory flows from the coastal areas to the mainland in Africa, and East Africa will be particularly affected  (click on the image to enlarge).

Marchiori, Maystadt, and Schumacher (2012)

Marchiori, Maystadt, and Schumacher (2012)

Such a mapping gives an idea of the potential centripetal process induced by environmental migration. While there has been a long tradition of migration to the coastal agglomerations in Africa (Adepoju 2006), coastal areas could experience a significant proportion of their population fleeing toward African mainland due to climate change by 2099. In West Africa, Benin, Ghana, Guinea, Guinea-Bissau, Nigeria and Sierra Leone may be among the most affected countries. In Eastern Africa, Kenya, Madagascar, Mozambique, Tanzania and Uganda may constitute a cluster of sending countries of environmental migrants. In Southern Africa, Angola and Botswana could become important sources of environmental migrants while Congo and Gabon could also be pointed out in Central Africa. Without jumping too quickly to predictive conclusions, such a centripetal pattern of flows could warn about some potential destabilizing effects. On the one hand, massive population movements could speed up the transmission of epidemic diseases such as e.g. malaria (Montalvo and ReynalQuerol, 2007) in areas where the population has not yet developed protective genetic modifications (Boko et al., 2007). On the other hand, the expected move towards mainland Africa where population density has been recognized as a factor enhancing conflict could become a major geopolitical concern; for instance, North-Kivu in Congo, Burundi (Bundervoet, 2009), Rwanda (Andre and Platteau, 1998), and Darfur (Fadul, 2006).

More here (pdf)


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