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Abstract_MGG1German Development Institute /
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3
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Axel Berger China and the Global Governance of Foreign Direct
Investment: The Effects of Growing Outward Foreign Direct
Investment on Chinese Bilateral Investment Treaties
5
Romy Chevallier Addressing climate change in the context of the
development agenda
6
Delane Botelho Policies and institutions related to TNC-SME
linkages: The Brazilian case
7
Qinsile Delwa The State Machinery and Economic Growth in South
Africa
8
Denise Laufer India as an actor in global governance – an
analysis
9
Yang Guoliang The Sustainable Trade Policy and Cooperation
Architecture Between China and the EU
10
Hu Dawei Conflict or Cooperation? China’s energy diplomacy in the
era of globalization
11
Sachin Joshi India’s Relations with Africa. Practice and Potentials
from an Indian Perspective
12
Ana Patricia Silva Vera Balancing the Agenda: Are Conditioned Cash
Transfer Programmers With a Gender Approach Having an Impact on
Women’s Empowerment?
13
Article on best practices for innovation within public institutions
(untitled)
14
Global Environmental Governance – a Brazilian Perspective 15
Sandhya S. Iyer Aligning Aid Effectiveness for Public Spending on
Social Sectors: An Analysis for South Asia and Sub-Saharan
Africa
16
Wang Hao German Development Cooperation. What Can China Learn from
It?
17
Ye Meng Analysis of the policies and practices of the information
society in the European Union
18
Zhan Shiming The International Community and the Settlement of
Internal Conflicts in Africa – A Case Study of Sierra Leone
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20
Zhu Ming The European Union’s Development Policy in Africa
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3
Abstract José Eduardo Alatorre Bremont, Peter Nunnenkamp
FDI in Mexico: An Empirical Assessment of Employment Effects Mexico
is fairly attractive for foreign direct investment (FDI). It has
participated more than proportionally in booming FDI since the
early 1990s. Inward FDI stocks amounted to 8.5 percent of Mexico’s
GDP in 1990, closely resembling the share of worldwide FDI stocks
in world GDP at that time. Reviewing the existing literature,
recent research shows that Mexico has derived significant economic
benefit from FDI inflows, e.g. in terms of higher and incomes and
wages. Nevertheless, no empirical assessment of the impact on the
Mexican labor market, with its growing labor force, has been
carried out so far, so that we lack a reliable basis for policy
recommendations concerning the promotion of FDI and its structure.
Since the manufacturing sector and financial services received
three quarters of FDI inflows in 1994-2004, and the importance of
the financial sector for the labor market is very low, the present
analysis focuses on the measurable impact of FDI on the employment
of almost 200 enterprises in the Mexican manufacturing sector
between 1994 and 2006. Some interesting empirical findings were
made on the basis of estimates of the influence of export
orientation, wage and capacity levels. It turns out that FDI has a
significantly positive, though quantitatively modest, impact on
employment for both blue-collar (low/un-skilled) and white-collar
(highly skilled) workers. Moreover, the findings do not support the
widely held view that FDI adds to white-collar employment in the
first place. Furthermore, FDI-induced total employment effects
become more pronounced when the export ratio increases. Although
there is no evidence for a correlation between capital intensity
and employment effects once FDI has been implemented, the
interaction of FDI with capital intensity proves to be
significantly positive, reaching a level of 10 percent, for
white-collar employment. This tends to support the view that
physical capital and skilled labor are complementary factors of
production, which means that white-collar workers benefit more from
FDI-induced employment effects in industries with higher capital
intensity. In the end, all this offers an important policy lesson,
namely that generalized verdicts on the employment implications of
FDI are not warranted. Many proponents and critics of FDI have in
common that they ignore the heterogeneity of FDI, i.e. whether the
investments under consideration go into manufacturing or financial
or other services. The case of Mexico clearly suggests that the
employment effects of FDI depend on various factors. On the one
hand, this calls into question the euphoria about FDI currently
prevalent among policymakers. On the other hand, our results
indicate that it is equally unreasonable to argue that FDI only
deepens the divide within the labor force at the expense of poor
and unskilled workers in host countries such as Mexico.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
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Abstract Carlos Alberto Arellano Esparza
Local Development: A Feasible Future In the XXI century,
underdevelopment in particular regions of the world, with its
consequences of social exclusion, marginalization and inequity,
remain a core issue to be tackled. Underdevelopment is here
understood as an imported product, whose characteristics have
nothing to do with the historical conditions, the social processes
and structures of those places in which it was meant to be
inserted. Once the impact of European- and later North American-
shaped capitalism forced more and more regions into the globalized
market, it cancelled the natural evolution of those societies,
keeping them from finding a way of their own to endogenous,
self-determined development. Localness is understood as a minor
geographic location of the kind found in the relation between rural
communities and small cities. Traditionally, the local dimension
has been relegated to a secondary position in the context of the
development of modern society, the reason being the centralist
inertia of the accumulation of economic and political power at the
state or national level. In this regard, localness is merely a
stepping-stone for politicians, or it is effectively designed to
entitle people with power to preserve it. But the significance of
localness is different. Localness shapes habits and the
accumulation of knowledge. It is in this micro space that local
development can be pushed forward, and where local public and
private actors have information about their concrete needs and the
legitimacy of development processes is generated – or not, due to
the extent to which this information is integrated within
development activities. After all, local development is an
endogenous process that takes place within small territorial units
and that enables economic growth and improves the quality of life
of their inhabitants. Therefore, the essence of local development
rests on three pillars that are mutually interdependent and
reciprocally influence one another: processes within local
territories, institutional consolidation and social participation.
The outreach of these three might be intensified and broadened if
an external agent is incorporated: international cooperation. The
latter has to be seen as an outsider-induced ‘system shock’ that
may change substantially the course of a social system that is
‘locked into’ a certain development path.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
5
Abstract Axel Berger
China and the Global Governance of Foreign Direct Investment: The
Effects of Growing Outward Foreign Direct Investment on Chinese
Bilateral Investment Treaties The economic and political rise of
China will have significant impacts on the structure of global
governance. In this context rapidly growing outward foreign direct
investments (OFDIs) by Chinese companies are one of the most recent
trends in the integration process of China into the world economy.
Especially, Chinese investment activity in developing countries has
been increasing recently, and while this has influenced
significantly China’s policies towards these countries, it also
goes hand in hand with opportunities in China’s overall foreign
trade and business policy strategy. However, apart from the strong
absolute growth of foreign investments by Chinese enterprises,
OFDIs are still subordinate relative to inward foreign direct
investments (IFDI) in the Chinese economy. Therefore China has to
balance its interest and related policy as a net capital importer
with a growing significance of capital exports. Several reasons
suggest that Chinese OFDIs will grow strongly in the future and
will have an increasing influence on Chinese international
investment policy-making. The underlying rationale of expanding
Chinese OFDIs can be generally distinguished into two sets of
reasons: commercial interests of the enterprises involved in
foreign investments and China’s strategic interests stemming from
its growing dependence on imports of natural resources. The “Going
Global” strategy of the Chinese government marked the transition of
the Chinese OFDI policy from regulation to encouragement of foreign
investments. It was first announced in 1998 and was later embedded
in the Tenth Five-Year Plan for National Economy and Social
Development in 2001. It mainly refers to foreign investment
activities by Chinese enterprises and has resulted in the emergence
of an independent OFDI policy in China. Since bilateral investment
treaties (BITs) are the most important legal tool for China to
protect inward as well as outward FDI, the development of the
Chinese BIT policy is an important indicator for estimating what
role China intends to play, and by what means, in the future
concerning global economic integration and development. In addition
to OFDI promotion measures the Chinese government introduced at the
domestic level following the “Going Global” strategy, China has
also been very active in signing BITs. In the 1990s China
introduced a gradual policy change towards stronger and more
comprehensive investment protection in its BITs. The renegotiated
BITs with developed countries contain all of the standard
provisions that are common to modern BIT practice worldwide. This
analyses shows that China has fully agreed to international
standards on legal protection of FDI. As far as developing
countries are concerned, the Chinese government is negotiating BITs
as a capital exporting country and insists on protection of its own
investments, which are likely to be exposed to non-commercial risks
that stem from weak legal systems and unstable political situations
as compared to developed countries. China is therefore starting to
adopt the position of an important global governance actor in the
field of foreign investment.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
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Abstract Romy Chevallier
Addressing climate change in the context of the development agenda
The Intergovernmental Panel on Climate Change (IPCC) has presented
evidence that climate change will have significant development
consequences for all, above all for the most vulnerable (developing
countries). According to the OECD, environmental sustainability is
important for economic and human development, as environmental
‘costs’ at the global, national and local levels bear heaviest upon
the poor. Climate variability therefore aggravates poverty and
should be considered as an integral part of the international
development agenda. Despite this recognition of the detrimental
effects of climate change on the poor, the great challenge involved
in ensuring developing-country participation in the reduction of
harmful GHG emissions still remains. Climate change is not seen as
a priority by developing countries, which are more preoccupied with
immediate economic challenges and more pressing development needs
on their domestic fronts. This comes particularly in light of a
rapidly changing geo-political landscape, with the growth and
emergence of ‘threshold countries’ and new developing economies
with high emissions potential (namely China, India and Brazil).
According to the Climate Change and Development Bulletin of the
Institute of Development Studies (IDS), ‘increased contributions
from developing countries are projected to match industrialized
countries’ levels by 2020. Even though the interdependence of
climate change and development – such as reduction of the coal
exports of developing countries due to substitution of energy
sources in the developed countries or growth of GHG emissions
caused by advancing industrialization in developing countries - are
the object of increasing scientific and public attention, the
international development agenda still lacks an incorporation of
environmental policy into the programming of the development agenda
at the global level. The dominant tendency is still a top-down
approach like that found in the UNFCCC (1994), Kyoto (1997) and the
main focus of the previous climate change dialogue, which was
concerned more with setting quantified emission limitation targets
than with implementing policies for sustainable development. There
are two proposed instruments to add to this a bottom-up approach
that take particular national interests and development priorities
into account. The Sustainable Development Policies and Measures
(Winkler), which are firmly entrenched within the national
sustainable development priorities of the host country but are
still included in an international climate framework, and the
“co-benefit” approach of the EU, which focuses on creating
development- needs-oriented efforts to address climate change, or
simply put, in duplicating areas of action for development and
climate change. Such a multidisciplinary approach would include a
more substantial and in-depth discussion of climate policies and
bring together various opinions, best practice experiences, and it
could more easily identify anticipated challenges concerning the
viability and success of mainstreaming.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
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Abstract Delane Botelho
Policies and institutions related to transnational corporations -
small and medium sized enterprise linkages: The Brazilian case One
important source of inflows of development and technology into
developing and emerging host countries is related to the
externalities resulting from the linkages that local suppliers can
forge with the foreign affiliates of transnational corporations
(TNCs). The growing role of TNCs in global governance and world
trade and the rising number of small and medium-sized enterprises
(SMEs) included in international chains of production suggest that
much of future SME activities will be situated within or around TNC
production systems. Business linkages between TNCs and SMEs can
create spillovers allowing small local producers to benefit from an
exchange of relevant information and technical knowledge and
promote production efficiency, productivity growth and market
diversification, among other benefits. Also, there is evidence that
the more TNCs are intertwined with local companies through supplier
or other linkages, the more likely they are to maintain their
operations in the country in the long term. TNCs also have
strategic interest in forging links with domestic suppliers, but
public policies and institutions (such as investment promotion
agencies - IPAs) can play a crucial role in promoting linkages. On
the other hand, the direct development impact of TNCs in developing
countries is well documented (UNCTAD, 2005) and includes tax
revenues, exports, research and development (R&D) and
employment generated by their affiliates. What is crucial for a
successful incorporation of TNC activities linked to their foreign
direct investment (FDI) in Brazil’s economy, the largest recipient
and source of FDI in Latin America, is the host country’s policy
framework and economic climate. The Brazilian investment climate
has improved significantly since 1994. The regulations in place
ensure FDI access to the market and practically unrestricted
national treatment in the area of goods. Such national treatment is
firmly entrenched in administrative and legal practice. Micro and
small enterprises in Brazil are what is known as the “social force
of economy,” accounting for 99.2% of all enterprises registered in
the country. Due to this importance as well as to the fact that
these firms often find a less favourable position in international
trade, Brazil has established an active and permanent policy to
promote SMEs and their linkages with TNC, including programmes and
institutions that offer credit access, provide and match
information about TNC and SME activities in their particular
sectors, promote local clusters, and strengthen local capacity
building in SMEs. The activities of the IPAs also take into account
issues of general political interest which are considered not
market endogenous, such as the green procurement concept and
Restriction of Hazardous Substances (RoHS) Directive (in
manufacturing electronic and electrical equipments) or regional
disparities. To conclude, the creation of TNC-SME linkages is, in
fact, neither easy nor automatic. The existing levels of host
country technological and structural development will determine
what types of linkages will be the most appropriate. So Brazil
needs to identify the types of investment that are most likely to
form the types of linkage best suited to the country's stage of
development, and to ensure that barriers to those types of linkage
are minimized.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
8
Abstract Qinisile Delwa
The State Machinery and Economic Growth in South Africa South
Africa this year celebrates 13 years of democracy. In this period
the country has improved access to social services for the poor,
enhanced rapid economic growth with the economy firmly integrated
into the global economy, fully entrenched democracy, all these
leading to the improvement of the standard of living for many South
Africans. Beyond this success the government still faces the
challenge of “creating a transformative state within the parameters
of a market driven economic system”. These ideals are further
reflected in the concept of a developmental state as state that
seeks to foster equitable distribution of wealth between the rich
and poor, addressing socio-economic imbalances caused by Apartheid.
The South Africa government has acknowledged that the current
economic climate is not conducive for the realization of the
country’s development goals because of the nature of the county’s
economic system, which is divided between the first (developed) and
second (underdeveloped) economy. The developed part of the economy
suffers from a lack of cost competitiveness in relation to the
global economy. The underdeveloped part of the economy, which
represents the experiences of a high proportion of South Africans,
is an area where economic potential is not being enabled and
harnessed due to backlogs and under-investment in social and
productive capital. The current dual economy perpetuates inequality
between the minority of the population that holds the maximum
wealth of the country and the majority of the population living in
unemployment and poverty. The theoretical concept of the
developmental state features a state led economic project in
partnership with the private sector and civil society and creates
an effective bureaucracy that is able to pursue the development
agenda. In South Africa this concept has been adopted by running
the AsgiSA programme with a dual strategy: Responses to the
macroeconomic (First Economy) targets remain the competence of
government economic departments, which in essence deal with the
more formal aspects of economic processes, while the social (Second
Economy) aspects of AsgiSA are dealt with by government departments
that traditionally deal with social services.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
9
Abstract Denise Laufer
India as an actor in global governance – an analysis Since its
independence in 1947 India has followed a multilateral
international policy concept which was based on its colonial
experiences with repression, racism and lack of national
sovereignty. From its idealistic concept of a foreign policy
formulated by its political and spiritual leaders in the time of
independence, Ghandi and Neru, it derived the initiative to group
the countries of the south in the Non-Alignment-Movement and to
provide strong support for the UN institutions.
In recent years, since 1991, it must be noted that India has
shifted towards a more classic configuration of foreign policy due
to its negative experiences in the multilateral forums, including
e.g. the international decisions concerning the Cashmere-conflict
in the 1970s, the Western dominated negotiations in the World Trade
Organization in the 1990s or the recent stagnating reform of the UN
system, especially the Security Council. Therefore Indian politics
has re-evaluated certain characteristics of classical power such as
military strength (nuclear tests in 1998) and economic growth
(liberalization and world market integration since 1991) as
necessary tools to defend its own interests. Despite regional
tensions with its powerful neighbors Pakistan and China due to
security and territorial interests, rational consideration of the
economic advantages of regional integration and the need for
regional defence of interests in the arenas of global politics have
contributed to a more pragmatic approach of Indian foreign policy
aimed at strengthening regional governance structures such as the
South Indian Association for Regional Cooperation (SAARC). As an
emerging economic power with improved classic power capabilities,
India still has a substantial interest in multilateral global
governance. It has started to expend resources on economic
cooperation with less developed countries in South Asia and in
Africa, and it is still willing to participate in multilateral
negotiations within the WTO framework and to foster the UN system,
both aiming to secure national resource needs and market access for
the country’s growing economy as well as to rebalance adverse power
relations on the global level. It is up to a consolidated European
strategy towards a multilateral world order to integrate this
potential partner, that, in contrast to the other regional power,
China, is strongly committed to democratic values. On such
integration will also depends whether internal Indian politics tend
towards a non-conditioned international development policy designed
to defend India’s national interest or whether India is going to be
a partner in the building of democratically inspired global
governance structures.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
10
Abstract Guoliang Yang
The Sustainable Trade Policy & Cooperation Architecture between
China and the EU In the last years the relationship between China
and the European Union has featured a certain contrariness. On the
one hand, bilateral trade between China and the EU has enlarged
rapidly and the level of cooperation has been improved gradually.
On the other hand, trade friction has heightened, including
disputes about merchandise trade, i.e. over textiles and clothing
in 2005, shoes in 2006 and, finally, over steel products in 2007.
Since its accession to the World Trade Organization (WTO) China has
been serious about observing the respective rules and has opened
its domestic markets. China complied quickly with its commitments
to cut tariffs from an average of 15.3% in 2001 to 9.9% in 2006.
China’s WTO membership has therefore improved the bilateral trade
environment, with the EU now having become China’s most important
trading partner. The EU’s strategy concerning trade relations with
China has lately been reflected in the Communication approved by
the EU Commission, Parliament and Council and entitled “EU- China:
Closer partners, growing responsibilities” of October 2006. These
documents set out a framework for future China-EU economic
relations, with the foremost objective to improve and balance trade
relations through further opening of Chinese markets and adjustment
to international standards. But the EU has also established some
particular anti-dumping measures, Technical Barriers to Trade (TBT)
and Sanitary and Phytosanitary (SPS) measures in order to ensure
that domestic standards on the environment, public health and
consumer safety are met. Another important aspect in the recent
development of EU-China trade relations is the enlargement of the
EU, which has brought into the common market several eastern
European countries whose economic features, including low labor
costs and relatively high industrial levels, will mean competition
for Chinese import products. To foster their mutual trade
relationship, which has contributed significantly to the economic
prosperity of both, China and the EU should first of all try to
balance the economic benefits, strengthening the comparative rather
than complementary advantages of their respective economies.
Secondly, both China and the EU should create a cooperation
architecture to anticipate and regulate dispute settlement.
Thirdly, Chinese corporations should look abroad and invest in EU
member states with a view to gaining managerial and technical
spillovers.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
11
Abstract Hu Dawei
Conflict or Cooperation? China’s energy diplomacy in the era of
globalization China’s economic growth in the last three decades has
become a challenge for the world markets for raw materials and
energy provision. According to the calculation made by the China
National Statistic Bureau, China’s average annual GDP increase was
9.6% from 1979 to 2004. The total volume of the economy in 2004
expanded to 32 times its size in 1978. Before 2001 the growth rate
of energy consumption figured below the growth rate of the economy,
but from 2002 on there has been a turn-around. Since then energy
consumption has increased 14.4%, reaching over 15% in 2003 and
2004, far higher than GDP growth. In more detail, the reasons for
China’s growing energy demand can be found in an extreme dynamic
urbanization process, with an increase in urban population of about
314% from 1978 to 2004, the still large population benefiting from
greater prosperity, and extensive growth of energy intensive
industries like steel, cement or car manufacturing, which are usual
for this stage of development of a modern economy. Although China
has became a net importer of energy products from 1993 on, it still
has significant domestic energy production, mainly based in coal
and covering 65% of China’s needs. Its own oil resources lack a
huge and growing internal demand, and for this reason Chinese
corporations like SINOPEC, CNOOC and CNPC have been exploring and
exploiting oil sources abroad in the Middle East, North Africa,
Russia and South America. Western powers have perceived this
Chinese expansion with certain reservations, experiencing growing
competition in the energy market with rising energy prices.
Moreover, natural resources are limited, and this contributes to a
more conflictual scenario in a zero-sum-game for the future
decades. Counter to those rather geo-strategic fears about probable
economic or even military conflicts in this field, the author
states that the market process will lead, through its price
indicators, to a rational substitution of oil and also coal based
energy products by alternative energy sources and energy saving
economic behavior. Still, there is a need for better inclusion of
China, with its still growing energy demand in multilateral
institutions like the International Energy Agency (IEA) in order to
stabilize and strengthen the functioning of these markets.
Confidence in market induced regulation is justified by the
interdependence of the world’s economies, with the dominant powers,
like the USA or Europe, fundamentally interested in a stable and
therefore well supplied China.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
12
Abstract Sachin Joshi
India’s Relations with Africa Practice and Potentials from an
Indian Perspective India, the world’s second most populous country,
is already the fourth largest economy in the world in terms of
purchasing power parity. India, along with China, is perceived as
the next engine of world economic growth. The two countries with
their phenomenal growth rates, demand for natural resources, and
their growing economic and political power will re-shape the world
economy and provide both competition and opportunities across the
board to major trading partners in OECD countries, to developing
countries, and to other emerging economies. India is also an
important actor in global institutional reforms, global
negotiations such as those on trade and climate change, and a
regional player. Historically, India has been widely acknowledged
as a leader of the non-aligned (developing) world, including
Africa, and it aspires to continue to play or even expand that
role. Ever since economic liberalization started in 1991, India’s
foreign policy has been increasingly driven towards finding export
markets and attracting foreign capital and technological know-how.
Africa, due to its historical links and geographic location, is one
of the main targets of this policy. Based on the pillars trade,
direct investment and development assistance, India has expanded
its role in Africa during the last 15 years. The recent surge in
bilateral trade substantiates its importance. India-Africa
bilateral trade increased almost tenfold from US$967 million in
1990-91 to US$9.14 billion in 2004-05. India’s development
assistance consists mainly of financial assistance (for instance,
providing subsidised credits) and technical assistance (for
instance, training officials and providing know-how). India set up
the ‘India Development Initiative’ (IDI) so as to intensify its
development collaboration with developing/ least developed
countries from the South. Concerning business cooperation, Indian
companies expanding overseas are arguably fundamentally different
from Chinese investment, in that many of these companies are from
the private sector (though this goes for few companies in the oil
business) and enjoy less backing by the Indian government – which
has less leverage on the continent. The geographical proximity to
European markets could boost the attractiveness of trade due to
liberalization arrangements (i.e. Cotonou) between Europe and
Africa - even further if they account for savings on shipping and
inventory costs.
India benefits in this context from its leading role for the
developing countries, first of all taking a pro-active role at the
WTO negotiations. Most of the African states are also affected by
agricultural subsidies and have lauded the role of India in the
Doha round of negotiations, which have stalled over a divide
between the European Union and the United States, on the one hand,
and the major developing countries, on the other.
Presenting three possible scenarios concerning the probable
development of the African-Indian relationship, Joshi arrives at
the conclusion that it is likely that India will pursue a balanced
Africa strategy in accordance with its image of being a ‘soft
power’. Africa, as a continent, is critical to India’s economic
growth, domestic energy requirements, and global standing. The
Africa strategy will continue to be a mix of economic and
development policies with an increasing role for private actors.
The Indian government as well as private actors will increasingly
become proactive to tap various opportunities and not lose out in
the race to competitors such as China.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
13
Abstract Ana Patricia Silva Vara
Balancing the agenda: are Conditioned Cash Transfer Programmes with
a gender approach having an impact on women’s empowerment? In her
case study Patricia Silva Vara analyses the Oportundidades
programme launched in 2002 by the federal government of Mexico. The
program is a so called Conditioned Cash Transfer Program (CCTP)
with a gender approach targeting, as a new tool, aid to the female
heads of families living in extreme poverty, in an attempt to
invest in the human capital of poor people, and as a way to help
them to break the intergenerational poverty cycle. Conditioned
transfer programmes were born from the concept of social protection
as human capital investment. Their premise is that reproduction of
poverty across generations is due to a lack of investment in human
capital, and they seek to foster this investment by attaching
conditions to transfers.
Moreover, as Vara points out, in the 1990s policy makers and
institutions first acknowledged that women are the largest
vulnerable group and that measures need to be taken in order to
help them empower themselves and break the poverty cycle. Following
these criteria, women are increasingly targeted as beneficiaries of
anti-poverty interventions, either to improve their well-being
directly or as a mechanism for indirectly targeting other groups,
especially young children, since it is assumed that women can
maximise the positive impacts of cash and food transfers,
especially on child nutrition. The instrument of the CCTP and the
gender approach were combined by the Oportundidades programme,
giving targeted aid for a three-year period in the form of cash
transfers (money for food and scholarships for their children) and
food transfers (nutritional supplements) directly to the female
head of the family. The scholarships offered privilege girls to
compensate for the inequality of opportunities that girls face. In
return, the beneficiaries have to attend educational seminars on
different topics regarding health, nutrition, family planning and
hygiene. Analyzing the qualitative impact of the Oportundiades
programme, Vara cites evaluations which show that significant
progress has been achieved in improving the capability of the
beneficiaries to manage resources and to use them in ways that help
the family, although the opportunity cost of getting the aid is
high for poor women facing social and cultural contradictions. Vara
concludes, finally, that even though Oportunidades is definitely
having a positive impact on women’s human capital, within both
their families and communities, social and cultural changes need to
take place in order for deeper women’s empowerment to happen,
including in particular changes related to the conception of
women’s role in society, both at the family and the social
level.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
14
Abstract José Manuel Rivas Ochoa
Article on best practices for innovation within public institutions
(untitled) In the 21st century global markets are placing countries
into a completely new competitive environment in terms of trade,
labour force, production, foreign direct investment, etc. Country
competitiveness levels have become the key indicator for
forecasting national aptitudes for growth in the global
environment. Within these new varying conditions it is necessary to
create and constantly redesign strategies of innovation in the
technical base of the economy as well as in the field of business
administration in order to achieve positive performance.
To foster these strategies, public administrations would be well
advised to devise their own internal innovation strategies to find
new solutions to improve public policy concerning research and
development or promotion of certain economic sectors and private
enterprise. Public policies can exploit their own internal
capabilities and resources even without requiring more public
money.
Such strategies may consist of common public areas in the physical
domicile of an institution, where the work of the overall
institution can be visibly shared among the personnel, or can serve
to implement better working conditions by providing of recreational
facilities. More generally, instruments designed to decrease
technical and less innovative work burdens can also increase the
output of new ideas and political concepts, outsourcing parts of
the technical administration of projects and programmes.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
15
Abstract Rodrigo Martins Vieira
Global Environmental Governance, a Brazilian Perspective Global
warming is one of the most threatening consequences of the
environmental disorder linked with deforestation and
desertification. Experiences reveal that the effects of our actions
now with regard to the climate will be reflected in the next 40 or
50 years. To aggravate the problem, the impacts of climate change
are unevenly distributed, and this indicates that the poorest
countries will suffer more from the effects of global warming.
First, because they are at a geographical disadvantage and they are
already warmer than the industrialized regions. Secondly, because
they are more dependent on agriculture, which is very sensitive to
climate change. Thirdly, because they are poor, and for this reason
adaptation will be more difficult.
Seeking to respond to this development, governments have therefore
created, during the last 30 years, a large number of multilateral
environmental agreements (MEAs) and several multilateral
organizations such as the UN Environment Programme (UNEP). New
environmental laws have been created and issues concerning
environmental diplomacy raised. However, all these measures have so
far not been able to respond effectively to the challenges posed by
globalization to world development. Proliferation of these
agreements and the reluctance of many countries to share power with
global governance institutions are producing a lack of cooperation
and coordination among them. The rapid growth of actors dealing
with environmental governance has made coordination more important,
while the existing UNEP has proved unable to fulfill this
requirement. In the face of this obvious development, discussions
over the reform of global environmental governance have been
intensified since the World Summit on Sustainable Development in
Johannesburg in 2002, especially by European countries that have
supported radical changes in the system and proposed the creation
of a specialized United Nations Environmental Organization (UNEO).
Developing countries, on the other hand, differ with the European
proposal, but also recognize that changes in the area of
environmental governance are necessary. It is argued that the
creation of a super agency would be a step back in the process,
since environmental issues, also involving related economic and
social issues, have been negotiated under the broad scope of
sustainable development. So developing countries tend more to
strengthen the UNEP and its regional offices. Other proposals
include creation of a World Environment Court to enforce sanctions
on activities detrimental to the environment or efforts to
strengthen the role of environmental issues in the context of the
WTO. As a compromise to promote coordination between nation states,
civil society and international organizations concerning global
environmental governance, Viera suggests expanding the activity and
resources of the Global Environment Facility (GEF) as an
independent financial organization.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
16
Abstract Sandhya S. Iyer
Aligning aid effectiveness for public spending on social sectors:
An analysis for South Asia and Sub-Saharan Africa Economic
integration amidst pervasive income and human poverty was the
peculiarity of globalization in the last few decades of the 20th
century. For the first time, there has been a global commitment to
address the trade-off between rising poverty and rapid economic
growth, known since 2001 as the Millennium Development Goals
(MDGs). Official development assistance (ODA) has been an
instrument to ensure redistribution of global resources to promote
equitable global economic development and welfare in order to meet
the MDGs, but empirical evidence on the impact of aid on economic
growth has not been able to establish a causal relationship between
the two variables. The background for the empirical analysis of the
impact of international aid on national public spending is the
capability based approach of Amartya Sen, where he argues that
individual claims are to be assessed not in terms of the resources
or primary goods (like rights, liberties, income and wealth) that
they actually hold but by the freedoms people actually enjoy to
choose the lives that they have reason to value. This approach
considers income to be only one factor among many that influence
the real opportunities that people enjoy. The income and human
deprivation observed in most middle and low income aid recipient
countries has been inhibiting economic and social opportunities for
individuals to enhance their capabilities. A mere emphasis on
growth-led strategies would be inadequate to ensure human freedom.
In such societies, improvements in human development achievement
can be sought only through the egalitarian and redistributive ethos
that permeates all public policies. Though there are certain
countries that are more aid-dependent than others, aid singularly
may not be sufficient to address larger problems of income and
social deprivation. It is therefore increasingly crucial to build
synergies of aid and public spending in recipient countries to
achieve broader developmental goals. The central conclusion of the
empirical analysis is that there is a positive relationship between
aid and public spending which is statistically significant. This
shows that aid disbursements induce recipient countries to enhance
public spending, although the results show as well that to realize
an effective impact on aid and public spending there is a need to
tackle macro-economic constraints that affect both structural
conditions and foreign trade. In a comparison of South Asia and
Sub-Saharan Africa, it was noted that highly aid-dependent
countries are also more vulnerable because their macro-economic
indicators are not stable enough to ensure sustainability of public
spending; at the same time, the volatility of aid disbursements has
pushed these countries into the low level equilibrium trap.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
17
Abstract Wang Hao
German Development Cooperation -What Can China Learn from It?
Germany is one of the major bilateral donors of world development
cooperation, with a history of nearly 50 years in this field. On
the other hand, with the rapid economic development of China in the
last two decades, China is becoming a more and more important donor
to developing countries. Therefore an analysis of the German
experience concerning institutions and processes of development
cooperation can help China to avoid difficulties and improve its
own upcoming development strategy. Examining German development
policy, we can identify four mayor goals, which are: poverty
reduction worldwide, building peace and democracy, promotion of
equitable forms of globalization and protection of the natural
environment. Like most other donors, Germany has committed itself
in the European context to increase its official development
assistance (ODA) in support of the Millennium Development Goals
(MDGs) up to 0.51 percent of gross national income by 2010 and to
0.7 percent by 2015. Considering the overall tight fiscal situation
and the need to balance the federal budget in a context of economic
and social reform difficulties, this will be a big challenge for
Germany. German official bilateral cooperation is executed via
financial assistance (i.e. loans, non- repayable grants, joint
financing), technical cooperation, strengthening human resources,
debt relief and humanitarian aid. The second important approach
used to conduct German development policy is the work of civil
society organizations such as political foundations, churches and
NGOs, which are mostly co-financed by the state, but also by
private donors. Thirdly, the multilateral cooperation in which
Germany collaborates has been gaining importance in recent years,
mainly on the level of EU institutions, but also in the form of
contributions for UN agencies. The German development cooperation
system is multi-organizational. The Federal Ministry for Economic
Cooperation and Development (BMZ) is the core of the framework. The
BMZ differs from other government bodies in that it does not have a
typical institutional sub-structure. In fact, the ministry
commissions the so-called implementing organizations, such as the
Agency for Technical Co-operation(GTZ), the KfW Development Bank
(KfW), InWEnt (Capacity Building International), the German
Development Service (DED) and the German Development Institute
(DIE). This structure allows for flexible and dynamic activity of
the involved institutions. Some problems arise from this
differentiated structure because there are responsibilities that
overlap in part as well as a certain competition among these
agencies to hold or extend their budget shares. Several strategies
designed to deal with these problems are discussed, i.e. the
creation of coordinating inter-institutional country teams or even
merging agencies with related duties. The author recommends the
creation of a separate ministry for development cooperation similar
to the German model but with a reduced number of implementing
agencies.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
18
Abstract Ye Meng
Analysis of the policies and practices of the information society
in the European Union The importance of the information and
communication technologies (ICT) for global society is beyond
doubt, indeed it can be even seen as one of the major causes of
globalization processes in the first place. Given the rapid
evolution of ICT and its penetration into nearly all spheres of
human life, the term “information society,” though widely used, is
still not well defined. In the European Union experiences with
regional integration and creation of a single market are the
guidelines used to structure and foster the development of ICTs,
ensuring that they achieve what is considered desirable for
society. With the i2010 program, the European Union set up a
framework to address different aspects of the possibilities offered
by ICTs. Creating a single European Information Space follows the
general principles of market integration in the EU, suppressing
market obstacles. An electronic communications regulatory framework
is the most important element to avoid technical market barriers.
This regulatory framework involves both telecommunication and
broadcasting networks. For instance, EU activity in this field led
to the reduction of roaming charges for travellers in the EU.
Furthermore, regulation and management of service and applications
is needed to alleviate market exchange, especially concerning
e-commerce. Protection and encouragement of cultural variety and
heritage as well as human dignity in communication markets is also
part of EU integration in this field. Here we may cite the example
of the European Digital Libraries as the flagship of the i2010
programme. To improve competitiveness, EU actors promote innovation
and technological leadership in the ICT sector by providing
financial support for research and development and encouraging
private R&D investment. Finally, the political and social
impact of the ICTs is also an objective of EU policies.
Transparency of public activities and facilitation of access to
public services can be named as major goals of the eGovernement
action plan of 2006. But also in other political fields such as
social inclusion, health, the environment and safety, the uses of
ICT are being investigated and enhanced by the EU.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
19
Abstract Zhan Shiming
The International Community and the Settlement of Internal
Conflicts in Africa: A Case Study of Sierra Leone The economic and
social development of the African continent is seriously hindered
by frequent civil wars and internal conflicts. Since most affected
African countries lack the capabilities to solve internal conflicts
by themselves, the active involvement of international society is
of great significance. The case of Sierra Leone is a recent example
of how the international community played a very important role
during the long and tortuous process from conflict to peace between
1991 and 2001. Particularly the United Nations (UN), the United
Kingdom (UK) and the United States (USA), but also neighboring
African countries such as Nigeria, Guinea, Ghana and Mali pushed
the peace process forward. The conflict between the national
government and the so-called RUF rebel group are rooted more in
different economic interests of internal groups than in tribal
conflicts. Especially the diamond industry attracted attention by
several external actors. Controlling diamond exports gave
sufficient material support for the conflicting parties to maintain
their forces and carry on in the bloody civil war. During the 1990s
UN commitment was limited due to the decreasing interest that the
main powers had in Africa after the end of the cold war and because
of the then urgent emerging conflicts in Yugoslavia. As the only
significant Nation, the United Kingdom, the former colonial mother
country, intervened at the end of the 1990s, sending own military
units, and even contracting private mercenary troops to contain the
activities of rebel forces. A formal peace agreement was achieved
in 2001, although the situation is still not stable in all
respects. Finally, the growing commitment of China in UN
peacekeeping actions, as was the case in Sierra Leone as well,
reflects China’s interest of broadening its economic influence in a
continent like Africa which is naturally rich in resources and
which represents potential future consumer markets. Furthermore,
China uses its participation in UN missions like the one in Sierra
Leone to train its military personnel and gain positive legitimacy
in these kinds of international enterprises, as is customary for
other regional and world powers as well.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
20
Abstract Zhou Xiaohui
Regulation of Hedge Funds Hedge funds, a private investment vehicle
that pools the contributions of investors in order to invest in a
variety of assets, have attracted growing attention from policy
makers, financial market participants and the general public due to
their rapid growth and substantial scale, their importance to banks
as clients and the impact of their trading activity on global
capital markets. In part, the greater attention has also been the
result of concerns that hedge funds could in some circumstances
exert a destabilizing influence on financial markets due to their
limited transparency and their lack of regulation.
Although most hedge funds are legally based in offshore locations,
such as the Cayman Islands, the British Virgin Islands, Bermuda,
and so on, the United States is still home to the largest number of
fund managers, responsible for managing nearly two-thirds of global
assets in 2006, but there are an increasing number of Europe-based
managers, particularly in London, and the hedge fund presence in
Asia is also growing, reaching USD 115 billion. Concerning hedge
fund products in Germany, the Investment Act (Investitionsgesetz)
of 1 January 2004 permitted hedge funds as regulated investment
products, although demand for on-shore hedge funds is still limited
here. The benefit of hedge funds for the financial market consists
in price transparency based on the use of considerable resources
for market research, provision of products covering part of that
range to investors seeking different combinations of risk and
return and the effect of market clearing and liquidity. On the
other hand, hedge funds could cause systemic risk as a result of
market abuse (collusive actions by market players), or through herd
behaviour. Despite these risks, hedge funds are generally not
structured in a way that allows them to be regulated as harmonised
funds under the European Investment Fund Directive (UCITS
Directive). In particular, hedge funds do not adopt investment
policies that comply with the strict investment limits imposed on
authorised funds (UCITS). As a result, hedge funds have been
promoted under a legislative patchwork, which varies across EU
Member States. Even so, since 1998 the LTCM crisis risk management
practice and capacity in investment banks and some large hedge
funds have been substantially enhanced on the international level.
Several public and private initiatives have been launched to
improve the risk management practices of the counterparties to the
funds, i.e. by the US President’s Working Group on Financial
Markets and the G7/G8 ministers of finance in 2007. These
strategies include improvement of data collection, risk measuring
methods and stress test capabilities, among others. Concluding the
study recommends a practicable regulation of hedge funds in China,
which today still hardly exist, while taking into account the risks
analyzed and the benefits named above.
© Deutsches Institut für Entwicklungspolitik (DIE) and InWEnt
21
Abstract Zhu Ming
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