Energy to top the African Development Bank’s agenda

The FT reports:

Akinwumi Adesina, who took over as president of Africa’s lead development lender in September, has said that his flagship project aims to raise $55bn of investment to close the energy deficit in the next decade.

He says the bank will take a leadership role, coordinating with existing multinational initiatives and pushing member states to move faster to privatise and liberalise their energy sectors.

More on this here.

The paper also has a neat report on African economies’ adjustment to China’s slowdown, US pension funds’ move into the PE space in Africa, the grievances that fuel extremism in Africa, among others.

Full report is here (unfortunately, gated).

How is the world reacting to China’s rise?

China has experienced a spectacular economic growth in recent decades. Its economy grew more than 48 times from 1980 to 2013. How are the other countries reacting to China’s rise? Do they see it as an economic opportunity or a security threat? In this paper, we answer this question by analyzing online news reports about China published in Australia, France, Germany, Japan, Russia, South Korea, the UK and the US. More specifically, we first analyze the frequency with which China has appeared in news headlines, which is a measure of China’s influence in the world. Second, we build a Naive Bayes classifier to study the evolving nature of the news reports, i.e., whether they are economic or political. We then evaluate the friendliness of the news coverage based on sentiment analysis. Empirical results indicate that there has been increasing news coverage of China in all the countries under study. We also find that the emphasis of the reports is generally shifting towards China’s economy. Here Japan and South Korea are exceptions: they are reporting more on Chinese politics. In terms of global sentiment, the picture is quite gloomy. With the exception of Australia and, to some extent, France, all the other countries under examination are becoming less positive towards China.

That’s Yuan, Wang and Luo writing in a neat paper that analyzes news coverage of China in different countries.

More on this here (HT Jay Ulfelder).

On the Continent opinion survey data from a select set of countries show high favorability ratings for China — by about two thirds or more of survey respondents. The same countries have seen some decline in US favorability ratings over the last few years. As you’d expect, people’s reaction to China’s rise is based on perceptions of the potential material impact it will have on their lives. On average, the survey evidence suggests that most Africans view China’s rise as a good thing.

It is interesting that across the globe young people, on average, have a more positive view of China’s rise than older people. Younger people probably associate China more with glitzy gadgets in their pockets; and less with cultural revolutions and famine-inducing autocracy.

On Child Mortality

Max Roser has some interesting graphs on child mortality here.

Screen Shot 2015-06-21 at 4.25.48 PM

He also makes an interesting observation on the fluctuations in mortality rates in the 19th century:

A second interesting characteristic that is immediately noticeable is that the series are very ‘spikey’ in the 19th century and are then much smoother in the 20th century. This is partly because the data quality is improving over time but it also shows how frequent crises were in pre-modern times. The decline of crises is an important aspect of improving ‘living standards’. In the ‘Our World in Data’ entry on food price volatility you find a long-run series of food price volatility in Pisa by Cormac O Grada that shows how frequent food crises were.

This is an important observation. One of the key differences between wealthy and relatively poorer countries is the variance in their growth rates. Most advanced economies grow (and have historically grown) at a steady rate (Tyler Cowen for example notes that Denmark never had a “growth miracle”). Developing countries on the other hand experience relatively greater levels of both longitudinal and cross-sectional variation in growth rates. The boom-burst cycles often make it hard for meaningful accumulation of wealth and steady growth of per capita income.

Kenya’s Milk Consumption is the Highest in the Developing World

Last year the French company Danone (maker of Activia yogurt) bought a 40% stake in the Kenyan dairy firm Brookside, a sign of the growing importance of the dairy market in the wider eastern Africa region. But the story doesn’t end with the big household names. Smallholder farmers are also getting a piece of the dairy bonanza in Kenya:

HT Sarora Dairies

On a related note, here is how a company in China is helping industrialize the country’s dairy sector:

A milk scandal erupted in China in 2008 when the industrial chemical melamine was found in dairy products nationwide. While many Chinese dairy companies faced huge losses or bankruptcy as a result, one small firm, Dairy United, accelerated its development. Dairy United is one of the fastest-growing and most innovative Chinese dairy producers, one that features an unusual organizational structure and business model. Unlike most corporate and cooperative dairies that purchase cows on the market, Dairy United leases dairy cows from local farmers, giving it access to its primary asset without a large up-front investment, and letting the firm grow its dairy herds with newborn heifers. In return, farmers receive fixed payments biannually, but relinquish control rights and residual claims to the firm. Thus, Dairy United’s leasing is helping transform Chinese milk production from a backyard, labor-intensive activity to a more industrialized mode of farming. The case is particularly interesting for understanding applications of agency theory in agribusiness.

That is according to a new paper in the American Journal of Agricultural Economics (which I hope chaps at the Ministry of Agriculture in Nairobi subscribe to).

Quick links

1. “Shame on me: Why it was wrong to cost the Millennium Development Goals” : Shanta Devarajan, Chief Economist for MENA at the Bank, on why he thinks that costing the MDGs may have “helped shift attention away from what is needed to reach the goals, and hence contributed to the perpetuation of poverty.”

2. Is teaching in college no longer a middle class job?

3. Dark Leviathan: How even the deep web, in desperate need to signal credibility, cannot escape the need for the “law merchant” (and eventually the state, or some generalizable norms a la Avner Greif).

4. The American South, on the map and in the mind.

5. Doing a book tour in China (with a censor in tow).

More on debt, macroeconomic stability, and natural resources in Africa (Uganda Edition)

See earlier posts on this subject here and here. Below is a quote from FP on Uganda’s growing petroleum sector (see also the Global Witness report on Uganda’s secret oil contracts here):

Source: Global Witness

Uganda’s Projected Oil Production Curve. Source: Global Witness

The bulk of Ugandan government borrowing against future oil revenues has focused on grand infrastructure schemes built and funded by the Chinese. In 2014 alone, the government signed deals with China to build two hydropower dams worth $2.2 billion, a standard gauge railway that could cost up to $8 billion, and a $600 million fertilizer plant. Additional projects include a $2 billion oil field being developed by the state-owned China National Offshore Oil Corporation and a $350 million roadbetween Uganda’s capital, Kampala, and Entebbe International Airport. The possibility has even been raised that a Chinese bank may bail out Ugandan parliamentarians in danger of going to jail for failure to honor their debts.

And how efficiently is Uganda spending the [expensive] borrowed money?

Costs for the Ugandan section of the East African Standard Gauge Railway are especially out of control. The project had an initial price tag of $4.5 billion for the Ugandan side of the railway, compared to $3.8 billion for the Kenyan side. Estimated costs in Uganda subsequently shot up, first to $8 billion and then to a staggering $11 billion

So what will happen when China decides to deal with its public debt situation and the effects propagate to its many public companies involved in mega-projects in Africa?

To reiterate, let’s not declare mission accomplished in the war against the resource in Africa just yet.

quick hits

1. Our Man in Africa: A great article on former president of Chad Hissene Habre. Also, is current Chadian president Idris Deby a clandestine state-builder in the Sahel or is all this just empty waste of oil money? Whatever the answer, I think the Chadian state might have reached a point where it can’t be threatened by a bunch of bandits on technicals.

2. On the hunt for human uniqueness: If you dropped a dozen human toddlers on a beautiful Polynesian island with shelter and enough to eat, but no computers, no cell phones, and no metal tools, would they grow up to be like humans we recognize or like other primates? Would they invent language? Without the magic sauce of culture and technology, would humans be that different from chimpanzees? More here.

3. Will e-cigarettes re-normalize smoking? E-cigarettes are already allowed in jails where traditional cigarettes are banned.

4. The Unruled World: Global disorder is here to stay, so the challenge is to make it work as well as possible.

5. and How China is ruled.

Will trade win China the battle for supremacy in Asia-Pacific and the Indian Ocean?

China is the number one trading partner for all the countries in red; and number two for the countries in orange. 


This image reminded me of Gowa and Mansfield (1993); and got me thinking about whether trade links (and associated opportunity costs) would ever matter in the choices to take sides of the two European offshoots in Asia-Pacific (and Japan) if stuff ever hit the fan in Sino-American relations. But then again that might not happen any time soon since China is already America’s No. 2 trading partner, and the US is still by far the strongest super-power the world has ever seen. By a massive margin. 

That said, the Great War is still an important cautionary tale about the dangers of getting all giddy and complacent about the end of Great Power wars on account of trade and global interconnectedness. Let’s hope that power transition theory will not apply to the case of Chinese economic (and military) rise to rival the United States of America.

How does Chinese aid interact with level of democracy in poor countries?

It is a commonly accepted idea in IR theory that states have the habit of externalizing their domestic institutions [and accompanying economic and political systems] in their engagements within the international system (See Katzenstein, 1976 [pdf, gated]) – think democracy promotion, Reagan-Thatcherist free market evangelism, or Sino-Russian coziness with states that have an authoritarian bend. 

This phenomenon has non-trivial implications for development assistance. For instance, poor countries receiving capacity development assistance from say a Scandinavian liberal democracy often need to also adopt related practices beyond the narrow specific field (say tax reform) that is being addressed by the capacity development program. Many projects fail to produce the desired results because of this. Indeed past research has shown that “though aid [from wealthier, mostly Western democracies] does not affect quality of life in the aggregate, it is effective when combined with democracy, and ineffective (and possibly harmful) in autocracies.” [Kosack, 2003- pdf]

So does the effect of Chinese aid/finance to poorer countries follow this pattern? In other words, does the institutional incongruence effect also hold for autocratic donors? Image

The folks at Aid Data blog think it does: 

…… we estimate the relationship between Chinese development finance and human development in democratic and autocratic recipient countries. Our results show a negative relationship between Chinese development finance and human development in democratic countries. Interestingly, these results also suggest that Chinese development finance can successfully promote HDI growth for autocratic recipients. Kosack found the opposite pattern in his study of Western aid.

The findings are preliminary and may not withstand robustness checks, but all the same interesting.

More on this here.

Also, check out the Economist for a neat analysis of the potential impact of a Chinese economic slowdown on African economies.

Who runs the world?

May be it is just because my adviser at some point studied the politics of language and identity (see here and here), but this morning over breakfast as I was watching the newly elected appointed successor of Hu Jintao as president of China give his inaugural speech to the press I was reminded of the continued soft (and hard) power of the English speaking North Atlantic world – or just simply the US.

In my opinion, it says a lot that the Chinese authorities felt the need to have a translator in the room, and for Mr. Xi Jinping to wait after every paragraph or so for the English translation to go through (they may have had translations to other languages as well, I was watching it live on the BBC).

Imagine the day when a newly elected US president, standing on the steps of the Capitol, gives a speech in English but has to wait every now and then for a Mandarin Chinese translation to go through.

I may be making too much of this. It all might have been a deliberate attempt to engage the rest of the world. As Time reports, Mr. Xi urged the press to facilitate more exchanges between China and the rest of the world:

But most of all, Xi was in a celebratory mood, advising the gathered press to do their part in furthering cross-cultural awareness. “Friends from the press, just as China needs to learn more about the world, so does the world need to learn more about China,” he said in a jocular tone. “I hope you will continue your efforts to deepen mutual understanding between China and the world.”

Language is very central to human interactions, and whoever has power over language usually has a lot of sway (as is argued in the books above). This morning someone won the politics of language. And it was not Beijing.