Development

Did you know that …

• … how many per cent of global income accounts the poorest 40 percent of the world´s population?
  5 per cent. The richest 20 per cent accounts for three-quarters of world income.
• … how many people entered the 21st century unable to read a book or sign their names?
  Nearly a billion people
• … the wealth of how many richest people in the world combined is more than the GDP (gross domestic product) of the Heavily indebted poor countries (567 million people)?
• … how many people live without electricity?
  1.6 billion people
• … how many people live in slum conditions?
  Approximately 1 billion people.
• … what was the status of China and India before globalization?
  Poorer than most of the poor countries.
• … that natural resources may lead to poverty?
  Huge incomes from natural resources weaken political discipline (corruption, bribes and misuse of money from state budget). Rents from those natural resources radically decreasing need of taxes. When countries rich in natural resources do not need to levy taxes, they do not encourage in their citizens the feeling of monitoring the way, how the taxes are used.
• … that in 1980-ties international financial institutions decided to force governments of developing countries to make necessary reforms by “conditioning”?
  A country in majority world could get money for development cooperation only in case that they promise to change some of their economic politics. It did not work out well because for example Kenya took money from the World Bank by way of exchange for the same reform for 5 times in 15 years. The reform was not carried out or only formally and afterwards it was cancelled. Most surprising is that the money for development cooperation is still flowing. Why is it so? Because officer of the World Bank was working the same way as officers in any commercial bank – more loans they provide, better for their career.
• … that statistical evidences imply, that development cooperation underlie to the rule of “descending order”?
  That means more development aid you give, less impact you get: first million is more productive than the second. Centre for Global Development estimates in their study, that when development cooperation reaches 16% of GDP of target country, it becomes ineffective. In Africa, the finance from development cooperation were close to this rate even before G8 summit in Gleneagles. In June 2005 in Gleneagles, the most powerful countries promised, that they double finance for development cooperation to Africa.
• … how can civil society influence big international corporations in their corporate behavior in favor of development?
  After pressure of NGOs, De Beers (the largest diamonds extracting company) was convinced to start certifying their diamonds (Kimberley process of certification of diamonds). It was proved that closing eyes to this problem (money from the diamonds are used to finance civil wars in many countries of majority world) will have serious consequences: if idea of blood diamond naturalize to the minds of buyers, the prices of the diamonds will decrease rapidly.
• … that in the mid-nineties, a survey on the public finance flow in Uganda revealed that only 20% of the money, which was allocated by the Ministry of Finance for primary schools (apart of the teachers’ salaries) reached the schools?
  After that General Secretary of the Ministry of Finance and Planning Emmanuel Tumusiime-Mutebile decided to change the situation and used innovative approach. Every time the Ministry of Finance sent money to each school, they sent the report about it to local media and school itself, where was stated how much money they should get. After 3 years, they repeated the survey and amount of money increased from 20% to 90%.
• … what was one of the first decisions of the Ministry of Finance in Nigeria Ngozi Okonjo-Iwealaová in 2003?
  To publish reports on amounts of money which flows to each region of the country on monthly basis. Number of sold copies of the report reached the maximum at the first day – people wanted to know where their money goes. Reaction of the people and death threats to the minister were the signs that she is on the right track.
• … what happened in 1978 in a small village Xiaogang, in An-chuej province, in the heart of of China, where the rice is cultivated?
  20 families had a secret meeting. Villagers were poor and were falling into desperation. System of communities, which were established by Chinese Communists all over the country, ended by break down of food production. Within this system, everybody was responsible for cultivating fields and everybody shared the profit. A person, who worked hard got the same amount of food as a person who did not do anything, and that is why not many people were willing to work. Villagers from Xiaogang decided to split the fields and each of them would cultivate them and have the profit from them. They did not talk about the agreement, so that Communist offices would not find out. Productions of rice in the village skyrocketed. Such results were not possible to hide for a long time. Neighbor villages wanted to know, how the people from Xiaogang were able to scale up the production of rice. And also the others started to do the same.
• … how to eliminate the obstacles which stop development of business in poor countries?
  Simeon Djankov from the World Bank together with his colleagues found out, that in a country, where business does not go well is a type of country, where a person needs to overcome several bureaucratic restrictions, there is bigger corruption and informal businesses are more frequent. Business does not go well also in a country, where the recovery of debt repayments and following the contracts is poor, it is difficult to register the property and recovery from bankrupted business partner is difficult. Founding of a company in Maputo takes 153 days, in Toronto only 2. Registration of the property in Abuji requires 21 different steps, in Helsinky only 3. When a debtor is insolvent and calls bankrupt, creditors get 13 cents out of one dollar in Mumbaj, in Tokio more than 90 cents out of one dollar. Djankov's survey increased attention to the issue of various conditions for starting a bussines in different countries. Every year, he publishes a report about the countries which improved and which did not. These reports are accessible to everybody and can influence ability of state to attract the capital.
• … how many loans were paid up in Grameen Bank, established for purpose of providing loans to the poorest people of Bangladesh?
  More than 98% of loans were paid up, which means that money of Grameen Bank can be borrowed again and again to the poor people. Grameen Bank have 7,58 million borrowers and from the time of its formation, it borrowed 7,4 billion dollars. Everything started when a Professor of economics, Dr. Muhammad Yunus visited rural Bangladesh in 1976. He met there Sufiya, a very poor woman, which was struggling to feed her family by production of bamboo chairs. Sufiya was in a trap. She needed to borrow 20 cents per day to buy material, but bank did not give her a loan, because she did not have acceptable guarantee and amount of money was too low. That's why Sufiya had to borrow money from moneylenders with very high interest rate. That enabled her to get only 2 cents profit from 12 hours of work a day. Sufiya´s neighbors experienced the same frustration. Professor removed his wallet and borrowed Sufiya and 41 neighbors 27 dollars in total. Surprisingly, everything was paid up on time. In contrary to general belief, it was possible to borrow money to poor people and get them back. 35 years later, this professor became a laureate of the Nobel Price.