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June 13, 2009

Indian outsourcer Infosys outsources to Brazil

Indian operations-outsourcing and software giant Infosys Technologies Ltd. plans to join its rivals by moving some of its business to Brazil, according to an Indian press report early Monday.

The new Brazilian software-development and back-office center is expected start operations within next the three to four months, with about 100 employees, the Economic Times reported, citing its interview with Infosys Chief Financial Officer V. Balakrishnan.

"Some of our U.S. customers asked for a center in Brazil, as the country falls in the same time zone," Balakrishnan was quoted as saying.

The Africa Competitiveness Report 2009

Africa Competitiveness Report 2009

African businesses can become far more competitive, but African governments and their international partners will need to improve access to finance, resist pressure to erect trade barriers, upgrade infrastructure, improve healthcare and educational systems, and strengthen institutions.

The conclusions, released today at the launch of a major new report, The Africa Competitiveness Report 2009, reflect research efforts of three institutions – the World Economic Forum, the African Development Bank and the World Bank. Limited access to financial services remains a major obstacle for African enterprises, but underdeveloped infrastructure, limited healthcare and educational services, and poor institutional frameworks also make African countries less competitive in the global marketplace. The report also points to a number of success stories in the region that highlight steps countries can take to improve the business environment.

The report highlights two short-term and three longer term policy themes for improving the competitiveness of African economies.

The two short-term themes are:
1) Increasing access to finance through market-enabling policies.
2) Keeping markets open to trade.

The three longer term themes are:
3) Infrastructure remains one of the top constraints to businesses in Africa.
4) Inefficient basic education and healthcare systems constrain Africa’s productive potential.
5) More examples of good governance and strong and visionary leadership are needed. 

Read the Report

It's Our Turn to Eat: The Story of a Kenyan Whistleblower

It's Our Turn to Eat

In January 2003, Kenya—seen as the most stable country in Africa—was hailed as a model of democracy after the peaceful election of its new president, Mwai Kibaki. By appointing respected longtime reformer John Githongo as anticorruption czar, the new Kikuyu government signaled its determination to end the corrupt practices that had tainted the previous regime. Yet only two years later, Githongo himself was on the run, having discovered that the new administration was ruthlessly pillaging public funds.

"Under former President Moi, his Kalenjin tribesmen ate. Now it's our turn to eat," politicians and civil servants close to the president told Githongo. As a member of the government and the president's own Kikuyu tribe, Githongo was expected to cooperate. But he refused to be bound by ethnic loyalty. Githongo had secretly compiled evidence of official malfeasance and, at great personal risk, made the painful choice to go public. The result was Kenya's version of Watergate.

Michela Wrong's account of how a pillar of the establishment turned whistle-blower, becoming simultaneously one of the most hated and admired men in Kenya, reads like a political thriller. At the same time, by exploring the factors that continue to blight Africa—ethnic favoritism, government corruption, and the smug complacency of Western donor nations—It's Our Turn to Eat probes the very roots of the continent's predicament.

Read Matthew Hennessey's interview with the author:

MATTHEW HENNESSEY: You're pretty hard on Western governments and aid agencies, even people like Jeffrey Sachs whom you accuse of "wishful thinking" with regard to the current crop of African leaders and their commitment to governance. What is wrong with the Western approach to African development?

MICHELA WRONG: A Kenyan journalist once said to me, "Western governments need to lend to us more than we need to be lent to." There is such a western liberal guilt complex toward Africa. Our default position is to feel sorry for Africans, then to feel guilty, and then to throw money at the problem.

I don't think we should cut all aid. There are levels of aid that will always have to be there because they save lives and prevent people starving and dying of malaria. But I can't agree with the Jeffrey Sachs position, which is that what we need to fix things is essentially more aid, and more and more and more. This strikes me as a form of neo-colonial thinking which puts all the emphasis on Western intervention in order to save Africa from itself.

It's been said many times: countries are not built on aid. There are no examples. In our desire to keep lending to Africa I think we can do a great deal of harm. And I think we often do. In our desire to keep lending, it becomes irrelevant what effect that aid is having on Africa. It becomes irrelevant that it may be encouraging people like Mwai Kibaki to think he can rig Kenya's elections and we won't mind. Or that he can stage a massive $750 million scam to divert state funds into his reelection campaign and it won't really matter because the West will end up picking up the tab for the health system, and the education system, and the road building.

Aid can be damaging. But I'm not going to say that it's always damaging, and I certainly don't think it should be entirely switched off, but we do need to wise up.

MATTHEW HENNESSEY: What does the phrase, "You don't fight corruption by fighting corruption" mean?

MICHELA WRONG: That's a phrase I heard from Daniel Kaufmann, who is a former World Bank expert on corruption, and what he meant is that when Western donors to go into Africa looking to fight corruption, the first thing they find is that the police are incompetent and the judiciary is corrupt.

So what they do is set up an anti-corruption commission or a special investigation unit within the presidency or a special police unit to tackle high-level corruption. And then at the top of these units you'd have these very high profile individuals, people like
John Githongo. It's kind of a silver bullet approach and Western donors are often willing to pay for these units and expect them to solve everything.

This is what we've seen in country after country after country. The story I tell in this book is not only Kenya's story. It has happened in Nigeria and South Africa. What you see is that the anti-corruption authority is subverted very quickly. They are either neutered, or they end up being staffed by people who are so clearly part of the corrupt establishment that it is laughable.

The point that Kaufmann is making is that there are tools that already exist in most African states—the police force, the civil service, the judiciary. You don't need new regulations or new codes of practices or new legislation passed. Although the West does like to make a big fuss about those types of things, what you really need are for those institutions which have been systemically eviscerated and hollowed out by the president of the day, you need those to be given back their impetus, their mojo.

That's a really hard job. That's really difficult to do. But that's where you should spend your money if you're a Western donor. You need to have a decent judiciary that is independent of the political process. You need to have policemen who have cars so that they can actually get to the scene of a crime instead of sitting in the office. It's ridiculous, but in Kenya, if you're robbed you actually have to go and get the police to come to your house because they don't have fuel and they don't have cars.

These organs already exist. Don't try and reinvent the wheel. Try to get the old wheel to work again.

MATTHEW HENNESSEY: There was some pretty serious violence during the last presidential election in Kenya which, I think it's fair to say, caught a lot of people off guard. What were we missing about Kenya?

MICHELA WRONG: Kenya's always had a kind of golden aura around it—an image of safaris and people with pith helmets. But Kenya has got vast disparities in wealth. The most squalid slums in Africa are in Nairobi. Journalists who were covering the story saw this but thought that the place would somehow muddle along, because that was what always happened in the past. What happened last year was suddenly the nation stopped muddling along and all those things coalesced into this really nasty explosion of violence.

The worrying thing is that everyone I speak to in Kenya is predicting a resumption of exactly that kind of violence before the next election. Only this time it will be worse because everyone has armed in preparation, and the weapons being handed out to ethnic militias are not just machetes or bows and arrows, but guns.

MATTHEW HENNESSEY: Where does that leave John Githongo, the corruption fighter who is the subject of your book? Didn't he recently return to Kenya?

MICHELA WRONG: Well, he's returned because he felt his country was facing a crisis and he had to be there. I think he's taking a risk, but he didn't want to be away any longer and I can understand that. If I were a Kenyan, I would want to be there too, because these are difficult times and if you stand back, you're sort of opting out. People with brains, and training, and experience need to go back and try and do what they can.

MATTHEW HENNESSEY: How has writing this book affected your own ability to live and work in Kenya?

MICHELA WRONG: I don't know, to be honest. I know I have trodden on a lot of toes and I will have become very unpopular in certain quarters. There's been a very strong reaction to the book. Much stronger than I would have expected, in fact, because a lot of the details of the scandal where already well known in Kenya.

I thought, "Well it's all old hat and nobody's going to get worked up about it." But there's been a huge amount of discussion about the book. People can't buy it locally. Booksellers refuse to sell it. So it's been pirated in electronic form. People are smuggling it in from neighboring states. There's been a huge fuss about it.

To a certain extent I'm happy just to let it happen and die away. Maybe then I'll go back and resume just being a normal reporter. I don't want to go back and be staging press conferences and giving speeches. John is there, this is his story. That's up to him.

MATTHEW HENNESSEY: Can you explain the role of the "tribe" in modern African life?

MICHELA WRONG: In the West it's become a politically incorrect word to use but most of African society and politics would be incomprehensible if you eliminated the tribe, or the ethnic concept from the equation. I think often you get some slanted and strange reporting on Africa because Western journalists fall over themselves trying to avoid using that word.

In Kenya, as in so many African states, your entire life's chances are based on which ethnic group you belong to. And there is this mentality spread across Kenyan society that once your tribe gets into power then state assets are yours to do with as you wish. And since the previous tenant had exactly the same approach, then of course you are completely justified to be very greedy to compensate for how your group was treated in the past.

So, "It's Our Turn to Eat" really means, "It's our community's turn at the trough."

MATTHEW HENNESSEY: Everyone knows that Barack Obama's father was Kenyan. Why isn't he visiting the country on his first presidential visit to Africa in July?

MICHELA WRONG: Africans regard Obama as one of their own who miraculously ended up in the White House. As far as they're concerned, he's not only U.S. president, he's also king of the world. There is enormous good will toward Obama, and it gives him leeway and influence that I don't believe any other American president has had in Africa. Although so far, he's been quite careful how he uses it.

If I were in his shoes I would probably do the same thing and bypass Kenya. Kenya is in political crisis mode at the moment, with a coalition government that was set up after the elections thanks to international pressure and the influence of Kofi Annan, which is very close to falling apart. If Obama goes there, the danger is that it gets read as a gesture of approval and support. The visit would get put to all sorts of political uses—most of them unhealthy.

Instead he's visiting Ghana, which recently had a very close election. But the ruling party there accepted its loss and stood down. So Obama is going there and implicitly expressing respect for the fact that the ruling party in Ghana did not go down the route that the Kenyans went down, tampering with the results when they saw they were losing.

Source:
Policy Innovations

 

Creative Commons License This article is licensed under a Creative Commons License.

Policy Innovations online magazine for a fairer globalization

Africa's investment climate

Ade Animashahun, Managing Director of Investec Asset Management, speaking at the World Economic Forum on Africa. Interesting and informative five minute video interview.

June 05, 2009

Bringing Quality Health Care to Poor Populations

Bringing quality health care to poor populations remains a huge challenge. Hear what Paul Farmer, founder of Partners in Health and subject of Tracy Kidder's Mountains Beyond Mountains,has learned about how to do it right.

Medical anthropologist and doctor Paul Farmer has spent most of his career providing healthcare to some of the world’s most destitute communities, through his organization Partners in Health, which he co-founded in 1987. In this podcast, Dr. Farmer speaks with McKinsey’s Mary Kuntz about his organization’s approach to treating chronic diseases such as HIV and tuberculosis in countries around the world such as Haiti, Peru, Russia, and Rwanda. He also discusses the medical and moral imperative for affluent nations to provide assistance, and the future of global health.

Source: McKinsey’s What Matters > download podcast > read transcript.

May 29, 2009

Squandering the Boom Years

History will regard the Indian boom years of 2003-2008 as one big squandered fiscal opportunity” writes Peterson Institute for International Economics and Center for Global Development senior fellow Arvind Subramanian, in India’s Business Standard. He argues that India can learn from China’s strong public finances – a sound fiscal position is crucial for establishing international influence. “The lesson for superpower-aspiring India from superpower-arriving China is simple: A strong fiscal situation, undergirding the ability to respond to a crisis, is an essential ingredient for any global leadership role.”

“Even before this global crisis, China was building up its superpower credentials courtesy of its size, spectacular growth, and integration, not to mention its military might. The crisis has allowed these credentials to be consolidated further. China has moved beyond being the superpower-to-be. One important reason for this consolidation relates to China’s public-sector balance sheet…

“The one major country that has had the ability to take short-term action to offset the effects of crisis without remotely jeopardizing its long-run economic strength has been China. Its public debt will remain at close to 20 percent of GDP after the crisis while the corresponding number for the United States is estimated to be close to 75 percent of GDP. China seems to be the one fiscal safe haven even as all the other powers wobble under the weight of their fiscal burden. As the mighty fall, China is standing economically and fiscally tall…

“So when India goes through its next growth spurt, it should be mindful of avoiding the mistake of the previous one. Good boom-time fiscal management provides the firepower for times of bust. The reasons for doing so are and must be overwhelmingly domestic. But there may also be strategic, external benefits from doing so. Fixing the fiscal roof when the sun was shining was China’s way out of this crisis and way to solidifying its superpower status. That is a lesson that strategically minded Indian policymakers should take away from China’s experience in the crisis.” Adapted from Superpower Lessons by David Kampf. Source: China shows that strong public finances are important for global leadership by Arvind Subramanian.

May 20, 2009

How Corporate America Views Africa for Investment

A new survey by Baird’s CMC and the US Chamber of Commerce highlights key reasons for lack of US business interest in the second largest and most populous continent. These reasons include: The likely return is not commensurate with the risks; other continents, countries, and regions offer better investment options; and Africa is viewed as needing excessive work to be an attractive investment choice.

To make Africa more attractive to US investment, respondents sought:

  • Investment in the health and education of the African people to create a large pool of skilled and productive human resources.

  • Investment in and maintaining of infrastructure -- transportation, communications, electricity, and security -- so that there will be a reliable societies in which to operate.

  • Building functioning legal systems to ensure the rule of law, transparency, and fair play.

  • Creating a positive climate for foreign investments by reducing bureaucratic processes, eliminating corruption, and reforming tax systems, irrespective of country of origin.

  • Ensuring stable political environments - that may or may not be based on western democratic principles - that work toward the common good of all stakeholders in society.

As a continent covering 20% of the world’s total land area, a population nearing 1 billion people speaking 1,000 languages across its 53 countries, such aspirations provide a generalized framework but transformation realities are clearly particularly complex and certainly situational. This being said the survey provides very interesting and credible insights to inform our thinking and shape future policy and  corporate, governmental and societal strategy. Source: The Conversation Behind Closed Doors - Inside the Boardroom: How Corporate America Really Views Africa; Baird’s CMC and the US Chamber of Commerce, May 2009.

Google’s retention math

Google is starting to lose employees; Fortune’s best company to work for in 2007 and 2008 is starting to test an algorithm to predict which employees are most likely to leave – in order to proactively change their circumstances and prevent their departure.

Current and former Googlers said the company is losing talent because some employees feel they can't make the same impact as the company matures. Several said Google provides little formal career planning, and some found the company's human-resources programs too impersonal.

The Internet search giant recently began crunching data from employee reviews and promotion and pay histories in a mathematical formula; Google officials are reluctant to share details of the formula, which is still being tested. The inputs include information from surveys and peer reviews, and Google says the algorithm already has identified employees who felt underused, a key complaint among those who contemplate leaving.

Applying a complex equation to a basic human-resource problem is pure Google, a company that made using heavy data to drive decisions one of its "Ten Golden Rules" outlined in 2005, reports The Wall Street Journal. This being said, so few companies apply intelligence to their organizational data. Millions are spent on data capture and storage, but the conversion of data and information to actionable knowledge is still an underdeveloped competency and practice in many companies. As Yogi Berra once famously said, “You can see a lot by watching…”

May 14, 2009

Social Security and Medicare: Trying to Tackle Two 800-pound Gorillas

While many people worry about the billions of dollars spent bailing out banks, auto makers and other sectors, shortfalls in Medicare and Social Security are what could ultimately sink efforts to revive the U.S. economy. As 78 million baby boomers begin to retire, funding for the government's two primary old-age security plans grows increasingly precarious, suggest several Wharton faculty. A report released earlier this week by trustees of Social Security and Medicare echoes those concerns. Source: Knowledge at Wharton

May 13, 2009

Straight Talk about Corporate Social Responsibility

Critical thinking about "corporate social responsibility" (CSR) is needed, because there are few topics where discussions feature greater ratios of heat to light. With this in mind, three Harvard professors Bruce Hay, Robert Stavins and Richard Vietor co-edited a new book, Environmental Protection and the Social Responsibility of Firms: Perspectives from Law, Economics, and Business.

At issue is the appropriate role of business with regard to environmental protection. Everyone agrees that firms should obey the law. But beyond the law -- beyond compliance with regulations -- do firms have additional responsibilities to commit resources to environmental protection? How should we think about the notion of firms sacrificing profits in the social interest?

Much of what has been written on this question has been both confused and confusing. Advocates, as well as academics, have entangled what ought to be four distinct questions about corporate social responsibility: may they, can they, should they, and do they.

First, may firms sacrifice profits in the social interest -- given their fiduciary responsibilities to shareholders? Does management have a fiduciary duty to maximize corporate profits in the interest of shareholders, or can it sacrifice profits by voluntarily exceeding the requirements of environmental law? Einer Elhauge, a professor at Harvard Law School, challenges the conventional wisdom that managers have a simple legal duty to maximize corporate profits. He argues that managers have freedom to diverge from the goal of profit maximization, partly because their legal duties to shareholders are governed by the "business judgment rule," which gives them broad discretion to use corporate resources as they see fit.

If a company's managers decide, for example, to use "green" inputs, devise cleaner production technologies, or dispose of their waste more safely, courts will not stop them from doing so, no matter how disgruntled shareholders may be at such acts of public charity. The reason is that for all a judge knows, such measures -- particularly when they are well publicized -- will add to the firm's bottom line in the long run by increasing public goodwill. But this line of argument contradicts the very premise, since it is based upon the notion that the actions are not sacrificing profits, but contributing to them.

This leads directly to the second question. Can firms sacrifice profits in the social interest on a sustainable basis, or will the forces of a competitive market render such efforts transient at best? Paul Portney, Dean of the Eller College of Management at the University of Arizona, notes that for firms that enjoy monopoly positions or produce products for well-defined niche markets, such extra costs can well be passed on to customers. But for the majority of firms in competitive industries -- particularly firms that produce commodities -- it is difficult or impossible to pass on such voluntarily incurred costs to customers. Such firms have to absorb those extra costs in the form of reduced profits, reduced shareholder dividends, and/or reduced compensation, suggesting that, in the face of competition, such behavior is not sustainable.

This leads to the third question of CSR: even if firms may carry out such profit-sacrificing activities, and can do so, should they -- from society's perspective? Is this likely to lead to an efficient use of social resources? To be more specific, under what conditions are firms' CSR activities likely to be welfare-enhancing? Portney finds that this is most likely to be the case if firms pursuing CSR strategies are doing so because it is good business -- that is, profitable. Once again, a positive response violates the premise of the question. But for more costly CSR investments, concern exists about the opportunity costs that will be involved for firms. Further, in the case of companies that behave strategically with CSR to anticipate and shape future regulations, welfare may be reduced if the result is less stringent standards (that would have been justified).

Finally, do firms behave this way? Do some firms reduce their earnings by voluntarily engaging in environmental stewardship? Forest Reinhardt of the Harvard Business School addresses this question by surveying the performance of a broad cross-section of firms, and finds that only rarely does it pay to be green. That said, situations do exist in which it does pay. Where one can increase customers' willingness to pay, reduce one's costs, manage future risk, or anticipate and defer costly governmental regulation, then it may pay to be green. Overall, Reinhardt acknowledges the existence of these opportunities for some firms - examples such as Patagonia and DuPont stand out -- but the empirical evidence does not support broad claims of pervasive opportunities.

So, where does this leave us? May firms engage in CSR, beyond the law? An affirmative though conditional answer seems appropriate. Can firms do so on a sustainable basis? Outside of monopolies and limited niche markets, the answer is probably negative. Should they carry out such beyond-compliance efforts, even when doing so is not profitable? Here -- if the alternative is sound and effective government policy -- the answer may not be encouraging. And the last question -- do firms generally carry out such activities -- seems to lead to a negative assessment, at least if we restrict our attention to real cases of "sacrificing profits in the social interest."

But definitive answers to these questions await the results of rigorous, empirical research. In the meantime, we ought to prevent muddled thinking by keeping separate these four questions of corporation social responsibility.

Source: Robert Stavins, Director of the Harvard Environmental Economics Program in the Huffington Post