Supporting UK foreign direct investment in ASEAN

The stock of UK foreign direct investment (FDI) in ASEAN1 has been volatile in the past five years – recording strong growth
of 15% (to £23 billion) in 2018 and 27% (to £29 billion) in 2019, following double-digit contractions in 2016 to 2017 (owing to
negative FDI flows). The level in 2019 was nearly the same as in 2015.
The share of ASEAN in UK’s FDI stock abroad fell by a quarter from 2.6% in 2015 to 1.9% in 2019. However, profits on UK
FDI in ASEAN have been consistently more than double those in Organisation for Economic Co-operation and Development
(OECD) countries, and there is now a government push to increase trade and investment links with the region.
The stock of UK FDI in the region is currently invested largely in Singapore (50%), Indonesia (22%) and Malaysia (14%). UK
investment in relatively lower-income ASEAN members remains low and stagnant, but UK FDI in Vietnam has been
increasing at a fast rate.
The UK has been investing relatively less (in terms of percentage share of FDI stock) in ASEAN compared to Chinese and
US investors. As with other major investment partners, UK FDI in the region is concentrated in financial services.

Sherillyn Raga and Dirk Willem te Velde, 22 June 2021

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The UK’s integrated review indicated more efforts towards deepening engagement with Indo-Pacific countries by sustaining and supporting bilateral and multilateral partnerships in the region, including with the
ASEAN. In June 2020, the UK applied to be one of ASEAN’s
Dialogue Partners
, which would allow the UK to attend high-level
ASEAN meetings together with the US and China, and
would facilitate further practical cooperation with the regional
bloc. All ASEAN countries are also members of the Regional
Comprehensive Economic Partnership (RCEP), while some
are in the Comprehensive and Progressive Agreement
Trans-Pacific Partnership (CPTPP), with whose members
the UK recently launched accession talks. This note
presents the trends in UK FDI in ASEAN, compares UK
investment with that of other major investors such as China
and US, and makes recommendations for boosting the role
of the UK in bringing quality investment to the region,
especially to the poorer ASEAN members.

Photo: Virtual Meeting Between ASEAN Foreign Ministers and The Foreign Secretary of The United Kingdom on COVID-19. ASEAN Secretariat/ Kusuma Pandu WijayaLicence: (CC BY-NC-ND 2.0)

The UK’s Indo-Pacific tilt: a trade and development perspective

The UK has expressed interest in enhancing its trade and investment links with Asia, most recently through the Integrated Review, which emphasises the Indo-Pacific. Many free trade agreements (FTAs) and partnerships have been set in motion.
The UK’s development objectives prioritise trade and development. Trade, investment and global value chains have been crucial in helping Asian countries to develop and transform. The share of Asia is 16.8% in UK goods exports, 11.8% in UK services exports and 12.3% in UK foreign direct investment stock.
The UK’s new international development strategy and putting the ‘Indo-Pacific tilt’ into operation could lead to new, enhanced and differentiated aid and trade relationships between the UK and countries across Asia.

Dirk Willem te Velde, 7 May 2021

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Asia-Pacific is the world’s largest region in terms of population and the most heterogeneous in terms of geography and economic development. It is expected to see a multi-paced recovery from the Covid-19 pandemic, depending on the spread of the virus, the rollout of vaccines and economic ties with East Asia, which is seeing signs of economic recovery. How Global Britain can best engage with a multi-speed region remains to be seen. ODI’s Asia 2025 study argues that vulnerabilities of Asian middle-income countries (MICs) differ markedly. Development partners, therefore, need to continue to support them with more and better aid, trade and investment, albeit in smart and changing ways.

Photo: Quay cranes on docks in Sri Lanka. Dominic Sansoni / World BankLicence: (CC BY-NC-ND 2.0)

Digital trade provisions in the AfCFTA: What can we learn from South–South trade agreements?

The Heads of State and Government of the African Union in their decisions Assembly/AU/4(XXXIII) of 10 February 2020 and Ext/Assembly/AU/Decl.1(XII) of 5 January 2021 mandated negotiations for an E-commerce Protocol to the African Continental Free Trade Area and endorsed December 2021 as the deadline for its conclusion, respectively. This paper analyses digital trade provisions in existing South–South (S–S) trade agreements, with the aim of helping negotiators and policymakers from Africa better understand the practical policy implications behind typically existing and upcoming digital trade-related provisions. This can help guide the design of an effective E-commerce Protocol in the AfCFTA that facilitates inclusive development in Africa.

Karishma Banga, Jamie Macleod and Max Mendez-Parra, April 2021

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The Heads of State and Government of the African Union in their decisions Assembly/AU/4(XXXIII) of 10 February 2020 and Ext/Assembly/AU/Decl.1(XII) of 5 January 2021 mandated negotiations for an E-commerce Protocol to the African Continental Free Trade Area and endorsed December 2021 as the deadline for its conclusion, respectively. This paper analyses digital trade provisions in existing South–South (S–S) trade agreements, with the aim of helping negotiators and policymakers from Africa better understand the practical policy implications behind typically existing and upcoming digital trade-related provisions. This can help guide the design of an effective E-commerce Protocol in the AfCFTA that facilitates inclusive development in Africa.

Digital trade involves products ordered digitally but delivered physically through online marketplaces (e.g. ordering a book from Amazon) as well as products that are wholly electronically delivered (e.g. buying an e-book) – that is, electronically transmitted or ET products. Digital trade provisions, for the purposes of this report, involve the rights and obligations in trade agreements that affect e-commerce. The African market is an important destination for the ET exports of African countries. South Africa, Mozambique, Kenya, Tanzania and Mauritius emerge as the top 5 African countries driving intra-African exports of potentially digitable products i.e. potential ET products, with South Africa accounting for 46% of total intra-African exports and 31% of intra-African ET imports. Some countries are highly dependent on intra-African trade for ET products; 70% of exports of digitable products by Rwanda, Mauritius, Namibia, Burundi, Togo, Zambia, Ghana, Zimbabwe and Eswatini are intra-African.

Photo: African Continental Free Trade Area. © African Union, , 2003. All rights reserved.

How the G20 can make the global recovery from Covid-19 more inclusive

The poorest countries are experiencing a double blow to their recovery from Covid-19. They have significantly lower resources for fiscal stimulus (2% of GDP) as well as low vaccination order coverage (27% of population). This is compared to G20 counterparts whose fiscal packages reach 17% of GDP and who have already secured orders for vaccines covering 58% of their population.
The G20 can play a significant role in promoting a more globally inclusive recovery by facilitating greater global policy coordination on: access to vaccines, debt restructuring, allocation of resources for a liquidity and sustainability facility to support low income countries, and monetary policy accommodation.
A transfer of resources would be efficient as the cost of finance is lower in the G20, while fiscal multipliers tend to be higher in countries which have lower capital stocks and higher share of credit constrained firms and/or households.

Sherillyn Raga and Dirk Willem te Velde, 25 February 2021

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The emerging picture of recovery from Covid-19 is that of inequality – in countries like Canada, each person has been allocated almost 5 sets of Covid-19 vaccines and $8,141 worth of government stimulus. In low-income countries (LICs) like Bangladesh, current vaccine orders only cover 14 in every 100 people, with announced fiscal stimulus equivalent to only $26 per capita The significantly higher level of public investment in sustainable green and digital sectors as part of Covid-19 recovery plans in advanced economies compared to LICs will further exacerbate divergent growth patterns.

This note discusses (1) the context of the poorest countries in terms of fiscal resources and access to vaccines; (2) the options for implementing fiscal measures that have higher multiplier effects in LIC contexts; and (3) the greater role for the G20 to promote a recovery that is inclusive of LICs.

Photo: Ongoing discussions in a previous G20 meeting. © G20 Website. CC BY-NC-ND 2.0.

Shaping the macro-economy in response to COVID-19: A responsible economic stimulus, a stable financial sector and a revival in exports. Methodology Paper

Countries around the world are shaping the macro-economy in response to the Covid-19 crisis and have an opportunity to introduce fiscal, monetary and trade policies that support a fast recovery that can also build back better.
This paper provides a methodology that can be used to assess macroeconomic policy options in Bangladesh, Kenya, Peru, Sri Lanka and Tanzania.
It suggests five steps (in three core tasks) that can be applied at country level to assess macroeconomic policy options. These broad steps will be supported by detailed analyses at a later stage, for example through trade policy modelling.

Jodie Keane, Max Mendez-Parra, Phyllis Papadavid, Laetitia Pettinotti, Sherillyn Raga and Dirk Willem te Velde, February 2021

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Ensuring a healthy macro-economy is crucial for a high-quality recovery from Covid-19. Engineering appropriate stimulus packages, keeping a stable financial sector and reviving high value-added exports are core tasks of governments across the world as they also try to recover from the economic effects of the pandemic in 2020–2023. Unfortunately, the context in low-income settings looks more depressed because of lack of finance and more vulnerable economies.

Informing policy options for a better macro-economy in lower-income settings is a core task of an International Development Research Centre (IDRC)-funded project undertaken by the Overseas Development Institute (ODI) and five other think-tanks. This paper presents a methodology and a range of methods to provide quality research and analysis that can underpin such policy advice. The project aims to inform policy-makers in Bangladesh, Sri Lanka, Kenya, Peru and Tanzania on appropriate policies to address the Covid-19 recession and recovery over 2021–2023, with a focus on the interface between macroeconomic policies and economic, social (especially gender) and environmental outcomes.

Photo: Central Bank of Kenya. World Bank. Licence: (CC BY-NC-ND 2.0)

An inclusive digital trade policy in 2021

Digitalisation is rapidly changing the nature of trade, in terms of both what and how trade is conducted. The Covid-19 crisis has reinforced this trend.
A range of trade policy events in 2021 could shape a new digital trade policy, to (i) support an economic recovery; (ii) modernise the policy environment; and (iii) accommodate the needs of the poorest countries.
AfCFTA, CHOGM, the WTO, (UK) FTAs and the G7 should all be used to enhance inclusive digital trade in 2021.

Karishma Banga and Dirk Willem te Velde, February 2021

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Digitalisation is changing the nature, content and modalities of trade, and Covid-19 has reinforced recent trends. A range of international trade events in 2021 could shape digital trade policy. E-commerce discussions will take place at upcoming Commonwealth Heads of Governments Meetings (CHOGMs) and the 12th World Trade Organization (WTO) Ministerial Conference (MC12).

The African Continental Free Trade Area (AfCFTA) should also bring forward discussions on e-commerce. In addition, the UK is signing and reviewing free trade agreements (FTAs) with a range of partners and will chair G7 discussions on trade, health and climate.

This note sets out key issues around the digital economy, trade and development, discusses the digital divide and presents ways the global trade community and bilateral players can facilitate inclusive digital trade.

 

Photo: Access to mobile phone in a fishing village in Nigeria. Arne Hoel / World Bank. Licence: (CC BY-NC-ND 2.0)

Supporting UK foreign direct investment in Africa in 2021

UK FDI flows to Africa fell 42% to $7.9 billion (£6.2 billion) in 2019, but the stock increased 10% to $64.6 billion (£50.6 billion), driven by increases in the extractives and finance sectors. Profits on UK FDI in Africa are double those in OECD countries.
UK FDI stocks and flows to Africa are higher than FDI by other major investors such as the US and China, but they remain more concentrated in extractives and financial services than those from US and China.
After the second UK-Africa investment summit on 21 January 2021, the UK should work more closely with its African partners and the AfCFTA to step up aid, trade and investment relationships with a focus on sustainable finance and the digital economy this year.

Sherillyn Raga and Dirk Willem te Veldde, January 2021

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The UK aims to be Africa’s partner of choice, by growing investment relationships to deliver more exports, jobs and economic growth that benefit both African and British businesses as well as to help African countries recover and build back from the Covid-19 pandemic. The recent second UK–Africa summit aimed to revive foreign direct investment (FDI) to African countries, in a context in which the pandemic has already led to sharp declines in overall FDI flows (-28%), mergers and acquisitions (-44%) and greenfield projects announcements (-66%) in Africa during the first half of 2020 alone.

This note aims to present the trends in UK FDI in Africa, how UK investors compare with other major investors (i.e. China and the US) in the continent and insights on constraints and recommendations to boost the role of UK in bringing quality FDI to Africa.

Photo: UK-Africa Investment summit. Graham Carlow/FCDO. Licence: (CC BY-NC-ND 2.0)

Max Mendez-Parra and Dirk Willem te Velde (ODI) |An ambitious UK trade for development policy in 2021

Ensuring a trade-based recovery from Covid-19, promoting digital trade and e-commerce, making trade climate-compatible, promoting a new post-Brexit trade policy and delivering effective Aid for Trade are some of the key issues facing UK trade policy-makers at present.
In 2021, the UK will make a number of crucial decisions, for example about its own trade policy and trade preference scheme, and chair and/or make commitments at international fora such as the WTO, the UNFCCC/COP, the G7/20 and CHOGM.
The UK should aim for an ambitious trade for development agenda in 2021.

Max Mendez-Parra (Senior Research Fellow, ODI) and Dirk Willem te Velde (Principal Research Fellow, ODI)

8 January 2021

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A number of critical trade issues and trade policy events will make 2021 a significant year for trade policy-making, in the UK and globally. Decisions made this year will affect many lives in years to come, including in the poorest economies.

Several trade issues are currently right at the front of policy-making, including a trade-based recovery from Covid-19, digital trade and e-commerce, trade and the climate, a post-Brexit trade policy and Aid for Trade.

In 2021, the UK will make a number of decisions, for example about its own trade policy or trade preference scheme, and make commitments at international fora such as the World Trade Organization (WTO), the United Nations Framework Convention on Climate Change Conference of the Parties (UNFCCC/COP), the G7/G20 and the Commonwealth Heads of Government Meeting (CHOGM).

This note reviews key trade issues and international events to map out an ambitious trade for development policy agenda that goes beyond the trade continuity the UK was seeking post-Brexit.

Photo: A trading port in Tunisia. Dana Smillie / World Bank. CC BY-NC-ND 2.0

Carbon border adjustment: a discussion on effectiveness and efficiency

If the European Union adopts BCAs unilaterally, this instrument is likely to be ineffective in bringing down global emissions in the most critical sectors. For example, most steel production is for domestic markets.
BCAs efficiency is questionable compared to standards, if they do not reflect significant shifts in consumers’ choices.
Even if developing countries – with historically low emissions – are excluded from BCAs they may still be affected through knock-on effects on complex supply chains.

Jodie Keane, Laetitia Pettinotti and Maximiliano Mendez-Parra, December 2020

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If the European Union adopts BCAs unilaterally, this instrument is likely to be ineffective in bringing down global emissions in the most critical sectors. For example, most steel production is for domestic markets. BCAs efficiency is questionable compared to standards, if they do not reflect significant shifts in consumers’ choices. Even if developing countries – with historically low emissions – are excluded from BCAs they may still be affected through knock-on effects on complex supply chains.

Photo:The port in Tema, Ghana. Jonathan Ernst / World Bank. Licence: (CC BY-NC-ND 2.0)

14 December 2020 | COVID-19 and Investor State Dispute Settlement provisions: Challenges and actions to protect the economic recovery in Africa Event

THe African Union Commission (AUC) and Overseas Development Institute (ODI) with the support of the Foreign, Commonwealth and Development Office (FCDO) will be hosting an online event on “COVID-19 and Investor State Dispute Settlement provisions: Challenges and actions to protect the economic recovery in Africa” on Monday 14 December 2020.

The purpose of this event is twofold. Firstly, it aims to discuss the use of ISDS by investors in the current context and assess the impact that it may have on African states. It will discuss both the legality of potential claims and the economic assessment of the ISDS actions. Secondly, the event will discuss the options available to governments to protect their countries and people from these claims. It also aims to explore the political discussions that can be undertaken with the agreement of counterparts to, for example, suspend the scope of these provisions.

Monday 14 December 2020, 12:30 -14:30 (GMT+3), Zoom Platform

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The African continent is currently progressing an ambitious regional integration agenda consisting of different phases and topics, including the key topic of regional investment provisions. Unfortunately, current Covid-19 pandemic is providing a new context for these negotiations. Governments need to protect the health of the population from the effects of the pandemic, including by introducing several restrictions on the activities of people and institutions. They have also deployed a wide range of policies and actions to secure the provision of healthcare. Governments have further aimed at protecting incomes and livelihoods of people affected by the lockdowns restrictions, and have introduced measures and policies to speed up the economic recovery after such an economic crisis.

The African Union Commission (AUC) and Overseas Development Institute (ODI) with the support of the Foreign, Commonwealth and Development Office (FCDO) will be hosting an online event on “COVID-19 and Investor State Dispute Settlement provisions: Challenges and actions to protect the economic recovery in Africa” on Monday 14 December 2020 from 12:30 -14:30 (GMT+3). Interpretation into the AU official languages will be available. Given the current worldwide travel restrictions, the event will be virtual. 

To register for the event,  click on the link below: 

https://zoom.us/meeting/register/tJckfuitqDsvHtRtrk-j0yCIn_vy9r5BbuY

 

Photo: Representatives from the FCDO, AUC , panellists and participants attending the event. Overseas Development Institute.

Assessment of World Bank Prioritisation of Economic Transformation in Country Strategies and Country Project Portfolios

The World Bank has introduced jobs and economic transformation (JET) as a core objective of the Eighteenth Replenishment of the International Development Association (IDA18). To monitor and measure the JET content in country partnership frameworks (CPFs), the World Bank (WB) has introduced four economic transformation indicators in the IDA18 results measurement system (RMS). The IDA18 mid-term review (MTR) awarded six out of eight CPFs a transformation tag. The IDA Deputies and Borrowers call for a strengthened role of the JET special theme under the IDA19 and this offers scope to reflect on the appropriateness of these RMS indicators.

This paper assesses the extent to which economic transformation is prioritised in the recent CPFs of Benin, Burkina Faso, Guinea, Mauritania, Moldova, Nicaragua, Niger and Tanzania . It also reviews and provides suggestions on how the IDA18 RMS indicators on economic transformation might be improved. The analysis further includes a complementary examination of economic transformation content of active IDA project portfolios in Benin and Tanzania from 2015 to 2019. The project level analysis can also serve as an indicator of the WB effort in pushing the economic transformation theme through time, especially after the IDA18. The paper concludes by offering suggestions for how the WB can improve the focus of and reporting around IDA projects for economic transformation and job creation.

Sherillyn Raga, November 2020

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The World Bank has introduced jobs and economic transformation (JET) as a core objective of the Eighteenth Replenishment of the International Development Association (IDA18). To monitor and measure the JET content in country partnership frameworks (CPFs), the World Bank (WB) has introduced four economic transformation indicators  in the IDA18 results measurement system (RMS). The IDA18 mid-term review (MTR) awarded six out of eight CPFs a transformation tag. The IDA Deputies and Borrowers call for a strengthened role of the JET special theme under the IDA19  and this offers scope to reflect on the appropriateness of these RMS indicators.


This paper assesses the extent to which economic transformation is prioritised in the recent CPFs of Benin, Burkina Faso, Guinea, Mauritania, Moldova, Nicaragua, Niger and Tanzania . It also reviews and provides suggestions on how the IDA18 RMS indicators on economic transformation might be improved. The analysis further includes a complementary examination of economic transformation content of active IDA project portfolios in Benin and Tanzania from 2015 to 2019. The project level analysis can also serve as an indicator of the WB effort in pushing the economic transformation theme through time, especially after the IDA18. The paper concludes by offering suggestions for how the WB can improve the focus of and reporting around IDA projects for economic transformation and job creation.

 

Photo: Women in Niger operating a processing unit to create products using local grains. Stephan Gladieu / World Bank. Licence: (CC BY-NC-ND 2.0)

The evolving fiscal and liquidity stimulus packages in response to COVID-19 in Sub-Saharan Africa

Huge size disparities in economic stimulus packages persist between G20 (27% of GDP) and SSA (3% of GDP) countries.
The financing of COVID-19 responses in SSA has evolved over time from accommodative monetary policy at the onset of the pandemic to more fiscal support measures but policy space remains very limited.
The IMF and World Bank are providing funding to COVID-19 the economic policy response in most SSA countries but this so far falls short of what is needed.
Given significant existing funding gaps and limited fiscal space, COVID-19 stimulus packages in SSA are mostly supporting immediate short-term responses to the crisis; funding for long-term ‘building back better’ recovery measures is elusive.
‘Smarter’ economic and social policies are needed to mitigate the impacts of the crisis and promote an inclusive and sustainable recovery.

Sherillyn Raga and Bouba Housseini, October 2020

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COVID-19 is taking its toll on Sub-Saharan Africa (SSA). To date, there have been 1.2 million infections and about 30,000 deaths on the continent. The pandemic has widely repressed mobility, disrupted economic production, decreased investment and remittance flows, created massive unemployment and pushed more people into poverty. Meanwhile, many governments increased spending in response to the health and economic crises but, given pre-existing vulnerabilities and limited fiscal space, compounded by an annual COVID-19 financing gap of $100 billion, policy-makers have been grappling with not only mobilising funds but also allocating limited resources to measures that will create the most impact. Utilising the ODI COVID-19 tracker, this note explores the evolution of SSA policy responses from the onset of the pandemic to the present, as well as recovery issues for policy-makers and stakeholders moving forward.

Photo: Empty streets in Nairobi as a result of Covid-19. World Bank/ Sambrian Mbaabu. Licence: (CC BY-NC-ND 2.0)

Assessing Sri Lanka’s economic transformation pathways, 1977-2019

This study analyses Sri Lanka’s transformation pathways, particularly the country’s shift from an agriculture-based society to a more industrial and services-based economy. It undertakes a granular exploration of economic transformation at a sectoral level in Sri Lanka from the late 1970s to 2019. It focuses on the garments sector within the industrial sector, and two services sectors – the tourism sector and the information and communications technology/business process management (ICT/BPM) sector.

Ganeshan Wignaraja and Angela Hüttemann, October 2020

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This study analyses Sri Lanka’s transformation pathways, particularly the country’s shift from an agriculture-based society to a more industrial and services-based economy. It undertakes a granular exploration of economic transformation at a sectoral level in Sri Lanka from the late 1970s to 2019. It focuses on the garments sector within the industrial sector, and two services sectors – the tourism sector and the information and communications technology/business process management (ICT/BPM) sector.

The study adopts a common approach to analysing the transformation pathways of each sector over time by considering sectoral performance (including value addition, employment and exports), key enabling factors, policies and challenges. By looking at the long-term dynamics of specific sectors, it contributes to the literature on economic transformation in Sri Lanka.

 

Photo: Economic transformation in Sri Lanka.  Chamindu Perera/ Unsplash. Licence: (CC BY-NC-ND 2.0)

Digitally enabled economic transformation and poverty reduction: Evidence from Kenya and Cambodia

Economic transformation is crucial to poverty reduction, through transforming production opportunities, lowering the costs and increasing the variety of consumption and enabling government services and other factors to provide better services. Digitalisation affects all of these channels in fundamental ways. This paper develops a framework to understand how. It argues that digitalisation can have positive and less positive or even negative effects in all of these channels but with likely overall net positive effects, sometimes large. It applies the framework to the cases of Kenya and Cambodia. It also argues that policy matters greatly for whether these positive effects materialise.

Karishma Banga, Adria Rius Rodriguez and Dirk Willem te Velde, September 2020

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Economic transformation is crucial to poverty reduction, through transforming production opportunities, lowering the costs and increasing the variety of consumption and enabling government services and other factors to provide better services. Digitalisation affects all of these channels in fundamental ways. This paper develops a framework to understand how. It argues that digitalisation can have positive and less positive or even negative effects in all of these channels but with likely overall net positive effects, sometimes large. It applies the framework to the cases of Kenya and Cambodia. It also argues that policy matters greatly for whether these positive effects materialise.

Digitally enabled economic transformation and poverty reduction: a framework

Economic transformation is brought about through productivity improvements by means of (i) structural changes – that is, movement of the labour force from less productive sectors of agriculture to manufacturing and services – or (ii) within-sector productivity shifts as a result of firms upgrading or firm entry/exit. It affects poverty reduction through three channels: production structures (the poor as producers), consumption of goods and services (the poor as consumers) and service delivery.

Digitally enabled economic transformation (DEET) affects poverty reduction under each of the channels. If managed well, DEET will reduce poverty, but digital technologies can also pose a threat and exacerbate existing inequalities and/or create new ones. How successfully these channels are able to reduce poverty will further depend on the enabling policy environment, comprising three sets of policies, related to building digital capabilities, fostering inclusive digital change and promoting competitiveness.

 

Photo: A woman attending to some seedlings on a farm in Kenya. Flore de Preneuf/ World Bank. Licence: (CC BY-NC-ND 2.0)

Enhancing the resilience of global value chains to climate change: lessons from Covid-19

Climate shocks often translate into trade shocks for countries. Building resilience – the capacity to cope with crises – within different types of global value chains (GVCs) is essential to sustain and support socioeconomic development and welfare gains.
Resilience to trade shocks within GVCs comes from stock management and just-in-time strategies as well as investing in trading relations and supporting export diversification.
While promotion of the shortening and reshoring of GVCs can score short-term political gains, it risks increasing economic and climate vulnerability, with mixed evidence on climate mitigation gains.

Jodie Keane, Laetitia Pettinotti and Maximiliano Mendez-Parra, September 2020

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The increase in global trade over recent decades through the expansion of production networks and the integration of newly industrialised economies within global value chains (GVCs) has contributed to unprecedented socioeconomic gains and reductions in poverty. But socioeconomic development’s reliance on fossil fuels has led to climate change and environmental damage, which ultimately leads to social and economic cost. The rise in global temperatures and associated impacts has and will continue to affect trade adversely. Trade within GVCs can be especially vulnerable as shocks can be transmitted instantaneously along supply chains, disproportionally affecting suppliers upstream in poorer countries.

Lockdown policies to limit the spread of Covid-19 may provide lessons for a global and simultaneous climate change impact: bringing to a standstill or drastically reducing supply through GVCs. While the global and sudden disruption the virus has caused is of a scale and immediacy that is greater than any currently experienced climate impact, there are nonetheless lessons to be learnt from the Covid-19-induced disruption for climate resilience, given projected abrupt changes in our climate.

Photo: Farmers sorting out tomatoes in Ethiopia. Stephan Bachenheimer / World Bank. Licence: (CC BY-NC-ND 2.0)

Promoting prosperity: Ten opportunities on economic development for the new Foreign, Commonwealth and Development Office

The recent merger of the FCO and DFID into the FCDO provides a range of opportunities in the area of economic development.

We list 10 opportunities:

1. Publish a coherent UK-Africa strategy
2. Co-ordinate an effective import policy for national security
3. Promote resilient value chains
4. Incentivise the City of London for development
5. Promote UK outward investment to poor countries
6. Make a step change in business partnerships
7. Transform UK development finance
8. Support job creation and economic transformation for self-reliance
9. Using aid to provide global public goods in middle-income countries
10. Liaise with China

Each presents an opportunity from a trade or investment angle for both the UK and developing counties. However, there is also a risk that economic development may not feature prominently in the new FCDO, whose organogram has matrix management across several themes and geographies.

FCDO management will need to ensure the economic development agenda in the above 10 points land well in the upcoming discussions.

 

The essays in this volume have been written by Alberto Lemma, Jodie Keane, Max Mendez-Parra, Judith Tyson, Linda Calabrese and Dirk Willem te Velde.

Dirk Willem te Velde (editor), September 2020

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The UK Foreign & Commonwealth Office (FCO) and Department for International Development (DFID) merged into the Foreign, Commonwealth & Development Office (FCDO) on 2 September 2020, following an announcement to this effect in June 2020 by UK Prime Minister Boris Johnson. The government outlined the senior leadership in August 2020 but still needs to work out the precise ways in which the departments will be merged.

There has been much attention to the organisational issues around the merger. However, it is more important to consider the intended benefits of the merger in substance terms – which entail bringing foreign affairs and development interests closer together. One area in which the benefits could be large and visible is economic development, yet so far there has been little attention to the role of the FCDO as an economics ministry. This is perhaps surprising, as DFID is rightly proud of its recent experience in managing economic development programmes.

This set of essays considers areas in which the experience the FCO and DFID have gained can be bundled into economic policy under the FCDO. We consider a range of opportunities around aid, trade, investment and finance, focusing on the prosperity agenda, which includes support to job creation and economic transformation. Some ideas are new opportunities; some are enhancements of previous policies.

Photo:  Prime Minister Boris Johnson at the opening of the UK-Africa Invesment summit in London, January 2020. DFID/ Michael Hughes. Licence: (CC BY-NC-ND 2.0)

AG-Platforms in East Africa: National and regional policy gaps

The growth of the platform economy, within agriculture, is increasingly becoming an important pathway to development. In the context of Sub-Saharan Africa, this is critical as, according to Cleland (2017), about 65% of the population relies on farming and about 20% on the non-agricultural informal sector; only around 15% are wage earners working in services and less than 3% are employed in industry. Agricultural digital platforms (such as farming apps) are driving e-commerce and the servicification of agriculture in developing regions. Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, South Africa, Uganda and Zimbabwe have been described as hotspots for digital-tech solutions (GSMA, 2018). Of these, Ag-platforms, or farming apps, are some of the most common forms through which farmers have been ‘platformised’ in agricultural value chains. Our research paper on ‘AgriTech Disruptors in East Africa’ shows that, of a sample of 70 AgriTech innovative firms (e.g. Ag biotech, Precision Ag and robotics, innovative food and data-connected agriculture) in 2018 in the East African Community (EAC), between 66% and 86% of firms specialised in data-connected agriculture – that is, farming apps or providing enabling services for app development (Krishnan et al., 2020).

Aarti Krishnan, Karishma Banga and Joseph Feyertag, July 2020

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The growth of the platform economy, within agriculture, is increasingly becoming an important pathway to development. In the context of Sub-Saharan Africa, this is critical as, according to Cleland (2017), about 65% of the population relies on farming and about 20% on the non-agricultural informal sector; only around 15% are wage earners working in services and less than 3% are employed in industry. Agricultural digital platforms (such as farming apps) are driving e-commerce and the servicification of agriculture in developing regions. Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, South Africa, Uganda and Zimbabwe have been described as hotspots for digital-tech solutions (GSMA, 2018). Of these, Ag-platforms, or farming apps, are some of the most common forms through which farmers have been ‘platformised’ in agricultural value chains. Our research paper on ‘AgriTech Disruptors in East Africa’ shows that, of a sample of 70 AgriTech innovative firms (e.g. Ag biotech, Precision Ag and robotics, innovative food and data-connected agriculture) in 2018 in the East African Community (EAC), between 66% and 86% of firms specialised in data-connected agriculture – that is, farming apps or providing enabling services for app development (Krishnan et al., 2020).

This report aims to discuss how various business models of Ag-platforms can be used to bridge national and regional policy gaps in East Africa, drawing on case study evidence from Uganda and Rwanda.

Photo: A farmer tilling the land on his farm. Peter Kapuscinski / World Bank. Licence: (CC BY-NC-ND 2.0)

 

Platforms in agricultural value chains: emergence of new business models

This report aims to develop typologies of business models of the Ag-platforms that exist, identifying the challenges and opportunities of using these business models and the extent to which they can create value capture opportunities for farmers, youth and women in agriculture. These opportunities include Ag-productivity gains; value addition and diversification; creation of more, decent and formal jobs for youth; gender inclusion; knowledge accumulation; and absorptive capacity. Drawing on case study evidence from Uganda and Rwanda, we deep-dive into the business models of Ag-platforms, unpacking the 3Cs of Costs, Complexity and Capabilities, to indicate the potential ways in which platformisation may exacerbate existing inequalities rather than supporting value creation for the poorest. Ultimately, we develop a roadmap for policy-makers to facilitate the development and proliferation of sustainable Ag-platforms.

Aarti Krishnan, Karishma Banga and Joseph Feyertag, July 2020

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This report aims to develop typologies of business models of the Ag-platforms that exist, identifying the challenges and opportunities of using these business models and the extent to which they can create value capture opportunities for farmers, youth and women in agriculture. These opportunities include Ag-productivity gains; value addition and diversification; creation of more, decent and formal jobs for youth; gender inclusion; knowledge accumulation; and absorptive capacity.

Drawing on case study evidence from Uganda and Rwanda, we deep-dive into the business models of Ag-platforms, unpacking the 3Cs of Costs, Complexity and Capabilities, to indicate the potential ways in which platformisation may exacerbate existing inequalities rather than supporting value creation for the poorest. Ultimately, we develop a roadmap for policy-makers to facilitate the development and proliferation of sustainable Ag-platforms.

Photo: Young women working on a cotton farm. Yosef Hadar / World Bank. Licence: (CC BY-NC-ND 2.0)

Securing climate-compatible trade for development

Climate, development and trade need to be articulated together for fair and efficient outcomes for all nations. Improved trade policies that work for climate and development require strengthened international governance, as well as regional and domestic alignment.
The ClimXTrade Discussion series seeks to identify how to secure climate-compatible trade for development, with triple wins for trade, development and the climate, ahead of COP26.

Laetitia Pettinotti,  Jodie Keane and Maximiliano Mendez-Parra, July 2020

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Climate, development and trade need to be articulated together for fair and efficient outcomes for all nations. Improved trade policies that work for climate and development require strengthened international governance, as well as regional and domestic alignment. The ClimXTrade Discussion series seeks to identify how to secure climate-compatible trade for development, with triple wins for trade, development and the climate, ahead of COP26.

Photo: Promotion of Green technology – Integrated Combined Cycle Thermo-Solar Power. Dana Smillie / World Bank. CC BY-NC-ND 2.0

Sherillyn Raga (ODI) |Halted economic transformation as a consequence of coronavirus: evidence and implications from employment data in the Philippines

The lockdown in the Philippines not only led to the loss of millions of jobs but also pushed those who remained employed towards lower-productivity agriculture and informal sector work. To preserve the existing skills necessary for economic transformation, the government and its partners need to make a conscious effort to ensure that those who have been laid off in high-productivity sectors such as manufacturing can return to previous or similar employment. Moving forward, it is continued public investment in higher-level education that will increase job security, ensuring the economy is more resilient in similar crises in the future.
This blog examines disaggregated sectoral employment data in the Philippines through the lens of economic transformation, which has implications for the Philippines’ medium- to long-term economic growth, and which may be of relevance to other low- and middle-income countries.

Sherillyn Raga (Senior Research Officer, ODI)

8 July 2020

The lockdown in the Philippines not only led to the loss of millions of jobs but also pushed those who remained employed towards lower-productivity agriculture and informal sector work. To preserve the existing skills necessary for economic transformation, the government and its partners need to make a conscious effort to ensure that those who have been laid off in high-productivity sectors such as manufacturing can return to previous or similar employment. Moving forward, it is continued public investment in higher-level education that will increase job security, ensuring the economy is more resilient in similar crises in the future.

As of April 2020, the unemployment rate in the Philippines was at a record high of 17.7%, accounting for 7.3 million Filipinos. Labour force participation among those aged 15 years and older had declined to a historic low of 55.6%, and average hours per week had dropped to 35 hours from 41.8 in April 2019. Among those employed, more than a third (38%) were not at work, and a third (32%) were in part-time employment. This negative impact on aggregate employment indicators highlights the consequences of the economic and labour market shutdown following the lockdown implemented from 13 March to 15 May 2020.

This blog examines disaggregated sectoral employment data in the Philippines through the lens of economic transformation, which has implications for the Philippines’ medium- to long-term economic growth, and which may be of relevance to other low- and middle-income countries. The IMF and World Bank Development Committee defines economic transformation as a ‘shifting from lower to higher productivity activities, within and across firms, from rural to urban areas, and from self- to wage-employment’. The impact of the coronavirus on the Philippines’ economic transformation is now evident in the shift in the employment share towards agriculture, the informal sector, less skilled occupations and rural employment.

The latest employment data from the Philippines show that a larger share of workers has been pushed towards agriculture and the informal sector. The agriculture sector’s share in total employment had increased by more than 4 percentage points to 26% in April 2020 from 22% in April 2019, while the shares of industry and services had declined by 2 percentage points, to 17% and 57%, respectively. Within the industry sector, the combined share of employment in manufacturing and construction in total employment had fallen by more than 2 percentage points, with 2.3 million fewer workers in these sectors during the month compared with pre-COVID-19 April 2019.

The share of relatively high-skilled professions has declined. While the lockdown has negatively affected the number of employees in all types of occupation, the share in total employment of those employed as managers, technicians,  associate professionals (e.g., bookkeepers, interior designers, medical  representatives, human resource and marketing assistants), plant and machine operators and assemblers, and services and sales workers has declined compared with April 2019. Meanwhile, the share of workers engaged in relatively low-productivity jobs such as elementary occupations and skilled agricultural, forestry and fishery work has increased by 1.5 and 2.6 percentage points, respectively.

Wage and salary workers in the private sector have been more affected during the lockdown. By class of worker, the share in total employment of jobs with a relatively stable income in the private sector had fallen by 2.4 percentage points to 47.9% in April 2020 from 50.2%, indicating a decline of 4.8 million workers in private establishments during the month compared with April 2019. Meanwhile, the share of wage workers in households and self-employed and unpaid family workers in total employment had gone up by 2 percentage points in April 2020 compared to same month last year.

Most of the unemployed during the lockdown are those without or with a low level of educational attainment, highlighting the need for upskilling to increase job security in times of crisis. The share in total unemployment during the lockdown in April of those with no educational grade completed or who have obtained only elementary and junior high school education had risen by 12 percentage points to 64% compared with April 2019. Notably, those who have obtained senior high school to graduate education have witnessed a fall in unemployment in terms of share and absolute number.

Unemployment has been more prevalent in rural areas during the pandemic, reflecting fragility of rural employment. The national unemployment rate as of April 2020 is 17.7%, but the rate is lower in Metro Manila (capital), at 12%, and higher outside the capital (average across regions), at 19%. In contrast, last April 2019, Metro Manila had a relatively higher share of unemployment (6.3%) than did the non-capital regions (4.8%).

The developments above suggest three policy implications:

First, in times of pandemic and imposed lockdown, private sector employees suffer the most and workers are pushed towards lower-productivity jobs and the informal sector. It is of the utmost urgency to alleviate the impact of COVID-19 on the poorest segment of the country. However, it is likewise critical that the government, in cooperation with the private sector and potentially development banks, assist businesses to bounce back and ensure that those who have been laid off in high-productivity sectors who already possess the necessary job skills can return to previous or similar employment.

Second, while we are witnessing a shift in employment from a decreased share in high-skilled professions towards an increased share in relatively less skilled occupations, it seems that those with a higher level of education are less likely to be unemployed in pandemic crisis times. This emphasises the importance of continued public investment in higher education to increase job security at the individual level and to sustain the contribution of this (e.g. through continued income tax if more educated workers are retained even under a lockdown period) to national revenues, making the economy as a whole more resilient in similar crises in the future. This is especially relevant for the currently weak educational quality in the country, as indicated by its bottom ranking in terms of 15-year-old students’ reading comprehension and expenditure per student relative to other 79 countries.

Third, higher unemployment outside the capital reflects the twin problem of concentrated opportunities in the capital and low and/or fragile job opportunities outside Metro Manila. Urbanisation is generally associated with faster economic transformation as resources (labour and capital) move from lower-productivity farm to higher-productivity non-farm activities, as well as with agglomeration benefits. Thus, the government’s Balik Probinsya, Balik Pag-asa (‘Return to Provinces, Return Hope’) programme, which aims to decongest cities and encourage people to relocate to their provinces during this pandemic, may work against the country’s economic transformation, given that the provinces are largely agricultural and do not have the infrastructure, high-productivity sectors and job opportunities (yet) to absorb labour supply from the city.

Photo: Farmer scattering rice grains in a rice field in Sta. Cruz, Laguna, Philippine. Danilo Pinzon / World Bank. CC BY-NC-ND 2.0

Karishma Banga and Dirk Willem te Velde (ODI) | Seven ways to harness Cambodia’s digital sector in the recovery from COVID-19

Cambodia has one of the lowest numbers of coronavirus cases in the world but it is facing among the world’s highest economic losses in the wake of the COVID-19 crisis. The IMF expects incomes to contract by 1.6% in 2020 in the baseline scenario as a consequence of major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as information and communication technology (ICT) and e-commerce, but these industries need to be nurtured more actively and the opportunities need to be made more inclusive if they are to be a significant base for a prosperous and more inclusive recovery.

Karishma Banga (Research Fellow, ODI ) and Dirk Willem te Velde (Principal Research Fellow, ODI)

7 July 2020

Cambodia has one of the lowest numbers of coronavirus cases in the world but it is facing among the world’s highest economic losses in the wake of the COVID-19 crisis. The IMF expects incomes to contract by 1.6% in 2020 in the baseline scenario as a consequence of major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as information and communication technology (ICT) and e-commerce, but these industries need to be nurtured more actively and the opportunities need to be made more inclusive if they are to be a significant base for a prosperous and more inclusive recovery.

The Royal Government of Cambodia is preparing a long-term policy framework for the digital economy. Over the past year, ODI and CDRI have supported this process (supported by the Australian government) using analysis, case studies, a background report, interviews and a set of roundtables, including with the government’s digital economy task force. A new study aims to inform this process by providing a range of policy suggestions for the policy framework, which has taken on increased significance in the context of COVID-19.

COVID-19 has had a major impact on Cambodia, through the channels of manufacturing and services. Emerging evidence highlights the negative economic impact of the pandemic on tourism, construction and business services, with fewer impacts on insurance, financial, telecoms and computer-related services. Revenue at Angkor Wat (a major source of tourism revenues) fell by an astonishing 99.5% at the start of the crisis. Within manufacturing, garment exports have been particularly hit, owing to falling demand from retailers in Europe and the US coupled with reduced access to inputs from China. The Garment Manufacturing Association in Cambodia has reported the suspension of operations by many garment factories. More than 150,000 workers were suspended in May without any clear indication on whether or when work would resume. The withdrawal of Cambodia from the Everything But Arms initiative may further affect Cambodian exports to the EU.

However, a range of services industries could help mitigate the impact of the economic crisis:

  1. Communication and audio-visual services, including digital animation: Cambodia has a small number of interesting high-quality providers of animation services.
  2. IT-enabled business process outsourcing (BPO) services: Cambodia’s IT industry is located in the BPO segment, offering services to international clients, such as in data processing, data analysis, document processing and non-voice call centres (e.g. chat services or IT support).
  3. Post and telecoms for e-commerce: Cambodia has the highest internet connectivity growth in the Asia-Pacific region and a very young population, which allowed most e-commerce ventures to reach a clientele of 15,000 consumers in 2017. E-commerce has enabled Cambodia to diversify its export basket of manufacturing products. Given cargo delays and border closures during the pandemic, it is important for Cambodia to leverage domestic platforms, such as Tinh Tinh. This may enable greater micro, small and medium-size enterprise (MSME) participation in e-commerce platforms, which has otherwise been low as a result of the high cost of membership and the commission charged on third-party platforms.

The government’s long-term strategy for the digital economy for the decades ahead needs to harness the digital economy and also target closing the digital divide by boosting an inclusive digital transformation in the wake of economic losses from COVID-19. Currently, there exists a multi-faceted digital divide in Cambodia; firms’ adoption of digital technologies is lower than comparator companies; business and financial services are more digitalised than other industries; internet access is mainly dominated by the 15-25 age group; and there exist specific gaps in the availability of digital skills. To leverage digital industries in the COVID-19 recovery, a report by ODI and CDRI lays the foundation (see summary here) for a seven-point plan for inclusive digital transformation:

1. Radically transform innovation in the manufacturing sector. In response to the crisis, there is a need to leverage digital technology and innovation to adapt existing local manufacturing capabilities in Cambodia towards much-needed medical equipment and personal protective equipment manufacturing for domestic consumption and export. The government needs to support manufacturers in changing current production lines towards production of essential goods to deal with the pandemic. A new incentives package (offering an ecosystem that encourages digital technology) can help attract technologically more intensive investment, encourage upgrading technology in factories and promote relevant skills, for example through an enhanced Skills Development Fund and targeted technical and vocational education and training placements. It could also embrace the concept of digital small and medium enterprise clusters.

2. Provide appropriate and good quality skills for the future. The pandemic is fuelling e-commerce growth in Cambodia, with the potential to create new employment opportunities. For instance, Grocerdel – an online start-up that delivers fresh farm produce in Phnom Penh – has seen its sales go up by over 165%, and has had to increase its staff intake by 50% to meet the spike in demand. Establishing and bringing new dynamism into the sector skills councils to embrace a digital economy would be a helpful, targeted measure. Skills development in the digital age requires supply-side policies on education and skills and demand-side policies on innovation and research and development, along with the facilitation of linkages between the supply and demand of skills through institutional intermediaries and complementary policies on technology transfer. There will also need to be more emphasis on education through digital means.

3. Nurture the digital start-up economy for an inclusive economy. The start-up economy in Cambodia is very dynamic but a challenge lies in seeking a better link between this and how it delivers for the poorest. Several organisations already support or invest in tech start-ups. New incentives by the government for collective action by start-ups could redirect some efforts to develop apps with relevant applications for the poorest. According to the Ministry of Commerce, the government has reduced the cost of registration by 40% to ease the burden of formalisation for start-ups (UNCTAD, 2020). The digital start-up economy will be essential to advancing Cambodia’s recovery from the fall-out of COVID-19.

4. Facilitate digital infrastructure development to enable the most vulnerable groups to take part in the digital economy. In response to the pandemic, businesses are increasingly shifting online, people are being asked to work from home and there has been a rise in e-commerce activities and digital work – all of which is placing pressure on existing digital infrastructure. Targeted policies are required for digital infrastructure development during the crisis. For instance, Cambodia has very low fixed-broadband penetration and low mobile broadband penetration compared with other Asian economies, and its market is currently dominated by low-quality residential broadband services. Targeted support is also required to ensure that those who lose out from new technologies in industries can take part elsewhere in the economy. This could take the form of rolling out digital infrastructure to those who need it most or raising digital literacy in vulnerable groupings.

China is an important player in Cambodia’s digital development plans; in March 2019, Cambodia signed an agreement with Chinese Huawei to develop 5G mobile network technology in the country. This was followed by an announcement in July of collaboration between Smart Axiata, Cambodia’s leading mobile telecommunications company, and Chinese Huawei in building the 5G network in Cambodia. Wuhan – the worst hit city in China by COVID-19 – is the world’s largest supplier of fibre optic cables. Therefore, development of digital infrastructure in Cambodia may itself be affected by the pandemic.

5. Ensure a public sector that leads by example. Digital leadership will be very important in the next few years as Cambodia manages its economic recovery after the pandemic. Managing the process towards a new framework for a digital economy in a coordinated way is essential. Currently, for instance, the government is finalising an e-commerce strategy for Cambodia with the support of the Enhanced Integrated Framework, involving various key ministries. Institutional strengthening inside the government around the digital economy, and securing a lead role of the Ministry of Economy and Finance, working with others such as the recently upgraded Ministry of Industry, Science, Technology and Innovation (MISTI) will be vital. It is also important for the government to progress on e-governance and electronic services by accelerating efforts towards adopting its e-Government Master Plan 2017–2022. E-government services can make it easier for consumers to pay their bills online and reduce evasion, coupled with better monitoring of tax collection. This can ultimately lead to increased government revenue, which can be spent on support to the poor, particularly during the pandemic.

6. Digitalise trade facilitation and boost e-commerce. All trade-related agencies must adopt and deploy the ICT system to simplify and automate their trade-related procedures, which will contribute towards building Cambodia’s economic resilience against pandemics, climate change and other challenges. Currently, there is an absence of coordinating institutional mechanisms, though some efforts are being made to leverage the digital economy for trade facilitation. E-commerce can help mitigate some of the economic losses that Cambodia faces in traditional sectors owing to the pandemic but inclusive recovery from the crisis will require targeted efforts to increase participation of MSMEs in the digital economy. This can be done by increasing their access to domestic and international digital platforms, addressing challenges pertaining to information asymmetry between platforms and sellers, providing training in digital skills, facilitating digital payment uptake and addressing issues around transport, logistics and delivery.  

7. Revise and extend social protection mechanisms to the most vulnerable, who are most at risk of losing their jobs owing to the pandemic. It is key to note that digital technologies can help improve the viability and efficacy of policy solutions, including those facilitating the extension of social protection. In the longer term, digital technologies can support an increasingly harmonised social protection system, which can facilitate better coordination across IDPoor, the National Social Security Fund and other cash transfer and social assistance programmes.

In conclusion, the Royal Government of Cambodia can facilitate to use the digital sector to recover from COVID-19. By following the sevens steps above, it can facilitate an inclusive digital transformation that can foster a more inclusive and resilient future.

Photo: Use of digital technology as key tool to facilitate an inclusive digital transformation to recover from COVID-19. Roxana Bravo / World Bank. CC BY-NC-ND 2.0.

Fostering an inclusive digital transformation in Cambodia

Cambodia’s digital transformation is gathering pace but with different results and prospects across different groups in the economy. Mobile phone and social media use has grown rapidly. New apps are being developed, tested and implemented frequently. There is a budding digital start-up sector. And new sectors with new job opportunities based on digital technology are emerging.
Such positive developments are helping Cambodia advance significantly in economic and social terms. But there is another side, and that is the uneven impacts. While business and financial services have implemented more digital apps, the agriculture sector, which remains the main source of employment, is catching up more slowly through blockchain or precision agriculture. The tourism sector, a major source of forex, has untapped opportunities, and, crucially, the manufacturing sector, which is a major source of female employment and foreign exchange, will be highly vulnerable unless it embraces innovation and digitalisation more fully. Further, digitalisation within the public sector is lagging behind that in the private sector.

Dirk Willem te Velde, Ouch Chandarany , Hiev Hokkheang, Yang Monyoudom, Tim Kelsall, Alberto Lemma, Aarti Krishnan, Karishma Banga, Astrid Broden, Michelle Nourrice and Jessica Evans, July 2020.

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Cambodia’s digital transformation is gathering pace but with different results and prospects across different groups in the economy. Mobile phone and social media use has grown rapidly. New apps are being developed, tested and implemented frequently. There is a budding digital start-up sector. And new sectors with new job opportunities based on digital technology are emerging.

Such positive developments are helping Cambodia advance significantly in economic and social terms. But there is another side, and that is the uneven impacts. While business and financial services have implemented more digital apps, the agriculture sector, which remains the main source of employment, is catching up more slowly through blockchain or precision agriculture. The tourism sector, a major source of forex, has untapped opportunities, and, crucially, the manufacturing sector, which is a major source of female employment and foreign exchange, will be highly vulnerable unless it embraces innovation and digitalisation more fully. Further, digitalisation within the public sector is lagging behind that in the private sector.

The Royal Government of Cambodia is preparing a long-term policy framework for the digital economy. Over the past year, ODI and CDRI have supported this process using analysis, case studies, interviews and a set of round tables including with the Governments’ digital economy task force. This study highlights the potentially significant distributional effects of digitalisation, and presents five policy suggestions to make the digital economy work for inclusive development..

Photo: Digital transformation inclusion in trade in Cambodia Chhor Sokunthea / World Bank . Licence: (CC BY-NC-ND 2.0)

Fostering an inclusive digital transformation in Cambodia Summary Briefing

The Royal Government of Cambodia is developing a long-term strategic framework to support a digital economy. This centres on the following areas: digital infrastructure; digital human resources including technical, cognitive and soft skills; business ecosystems; e-government; and digital trustworthiness.
Cambodia’s digital transformation is gathering pace and can help Cambodia recover from the downturn. However, our analysis suggests there are different impacts and prospects among different groups and sectors. Managing the differential impacts of digitalisation will be crucial to maintain inclusiveness along the digital transformation path.
Cambodia should enhance the inclusiveness of its digital transformation by: (i) radically transforming innovation in the manufacturing sector; (ii) providing skills for the future; (iii) nurturing the digital start-up economy for an inclusive economy; (iv) protecting and enabling the most vulnerable groups; v) promoting a public sector that leads by example.

ODI and CDRI, July 2020

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Cambodia has advanced significantly towards the digital economy. The Royal Government of Cambodia (RGC) is developing a long-term strategic framework to support it. This move towards a digital economy cannot come soon enough for Cambodia. The current corona virus outbreak, threats to withdraw trade preferences, and a ban on online gambling have laid bare the fragility of Cambodia’s development success. Over the past few months, construction and gambling activities have tumbled, tourism has fallen sharply, and Cambodia’s garments face $100 million of additional duties in the EU after withdrawal of trade preferences in August 2020. Cambodia is looking for a broader base to transform and recover in an inclusive way from the coronavirus crisis.

Digital transformation is a promising area, but it does not automatically support all members of society to the same extent. Complementary measures that include skills development are critical to make digital transformation inclusive. This briefing discusses Cambodia’s digital profile and policies and examples of the current and expected distributional impacts of its digital transformation; and proposes a range of policy areas to enhance a more inclusive transformation.

Photo: Use of information technology and communications to promote digital transformation. Simone D. McCourti/ World Bank . Licence: (CC BY-NC-ND 2.0)

Cambodia, COVID-19 and inclusive digital transformation: a seven-point plan

Cambodia has one of the lowest numbers of coronavirus cases in the world, but it is facing amongst the world’s highest economic losses in the wake of the COVID-19 crisis. The IMF expects incomes to contract by 1.6% in 2020 in the baseline scenario due to major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as the information and communication technology and e-commerce, but these industries need to be nurtured more actively and the opportunities need to be made more inclusive if they are to be a significant base for a prosperous and more inclusive recovery.

Karishma Banga and Dirk Willem te Velde, July 2020

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Cambodia has one of the lowest numbers of coronavirus cases in the world, but it is facing amongst the world’s highest economic losses in the wake of the COVID-19 crisis. The IMF expects incomes to contract by 1.6% in 2020 in the baseline scenario due to major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as the information and communication technology and e-commerce, but these industries need to be nurtured more actively and the opportunities need to be made more inclusive if they are to be a significant base for a prosperous and more inclusive recovery.

The Royal Government of Cambodia is preparing a long-term policy framework for the digital economy. Over the past year, ODI and CDRI have supported this process using analysis, case studies, interviews and a set of round tables including with the Governments’ digital economy task force. The current study argues that policy framework needs to harness the digital economy and also target closing the digital divide by boosting an inclusive digital transformation in the wake of economic losses from COVID-19. To leverage digital industries in the COVID-19 recovery, we lay out a seven-point plan for inclusive digital transformation:

  1. Radically transform innovation in the manufacturing sector;
  2. Provide appropriate and quality skills for the future;
  3. Nurture the digital start-up economy for an inclusive economy;
  4. Protect and enable the most vulnerable groups to take part in the digital economy
  5. Ensure a public sector that leads by example;
  6. Digitalise trade facilitation and boost e-commerce; and
  7. Revise and extend social protection mechanisms to vulnerable groups.

Photo:  A telecommunications tower in the Kandal province, Cambodia. AChhor Sokunthea / World Bank. Licence: (CC BY-NC-ND 2.0)

June 2020| Negotiating and implementing investment policies in the AfCFTA – Online Capacity building event

Economic transformation is one of the main pillars of the African Union Agenda 2063. Increasing trade and investment in general and specifically amongst AU Member States is critical to achieve economic transformation and the African Continental Free Trade Area (AfCFTA) helps to achieve both goals.
Phase I of the negotiations finalised in late 2017 established protocols on the liberalisation of intra-African trade in goods and services as well as the Dispute Settlement Mechanism. Phase II, launched in early 2018 and to be concluded in early 2020, will be oriented towards including provisions on investment, competition policy and intellectual property rights. The increase of intra and extra-African investment in Africa is critical to developing and improving the productive capabilities required to raise productivity and create employment.

June 2020

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Economic transformation is one of the main pillars of the African Union Agenda 2063. Increasing trade and investment in general and specifically amongst AU Member States is critical to achieve economic transformation and the African Continental Free Trade Area (AfCFTA) helps to achieve both goals.

Phase I of the negotiations finalised in late 2017 established protocols on the liberalisation of intra-African trade in goods and services as well as the Dispute Settlement Mechanism. Phase II, launched in early 2018 and to be concluded in early 2020, will be oriented towards including provisions on investment, competition policy and intellectual property rights. The increase of intra and extra-African investment in Africa is critical to developing and improving the productive capabilities required to raise productivity and create employment.

The Capacity building exercise aims to address the range of investment development and treaty challenges for the African Union and its Member States, as well as build the negotiating capacities of Member States and the AUC. It is important to have an adequate understanding of the links between the proliferation of bilateral investment treaties, exiting investment protocols within the Regional Economic Communities (RECs) and the negotiations on investment in AfCFTA.

The investment capacity building training was conducted using Zoom virtual platform. The training took place over four days (16th, 17th, 23rd and 24th June) and saw the participation of over 190 participants from AU member states, regional economic communities (RECs) such as COMESA, EAC, ECOWAS, SADC among others, and international partners such as AFDB and GFA. Participants were provided with training materials translated into Arabic, French and Portuguese to ensure good preparation prior to the event.

The training was facilitated by experts from ODI, AUC, African Trade Policy Centre – UNECA, International Institute for Sustainable Development (IISD) and Columbia Centre on Sustainable Development (CCSI) and covered a range of topics relating to investment and the AfCFTA.

Photo: Opening ceremony of the online training, with officials from ODI, African Union Commission and the AfCFTA Secretariat. Overseas Development Institute.

Jodie Keane (ODI)| Enhancing resilience within global value chains: the implications of COVID-19 for climate change adaptation and mitigation policies

The increase in global trade in recent decades, through the expansion of production networks and the integration of newly industrialised economies within global value chains (GVCs), has contributed to unprecedented reductions in poverty and historically unparalleled socioeconomic progress. However, severe environmental costs, and other losers within specific industries, have accompanied these socioeconomic gains. Even without consideration of climate change, the coronavirus crisis has laid bare the fragility of global supply chains and of the nature of relationships with suppliers in poorer countries. With a few lead firms (buyers and traders) typically controlling access to end markets, suppliers have reduced market power, which limits their capacity to adapt to demand shocks. Reduced inventory management as a result of just-in-time delivery has presented visceral limitations during the coronavirus pandemic.

Jodie Keane (Senior Research Fellow, ODI)

20 May 2020

The increase in global trade in recent decades, through the expansion of production networks and the integration of newly industrialised economies within global value chains (GVCs), has contributed to unprecedented reductions in poverty and historically unparalleled socioeconomic progress. However, severe environmental costs, and other losers within specific industries, have accompanied these socioeconomic gains. Even without consideration of climate change, the coronavirus crisis has laid bare the fragility of global supply chains and of the nature of relationships with suppliers in poorer countries. With a few lead firms (buyers and traders) typically controlling access to end markets, suppliers have reduced market power, which limits their capacity to adapt to demand shocks. Reduced inventory management as a result of just-in-time delivery has presented visceral limitations during the coronavirus pandemic.

In view of the vulnerabilities exposed – such as shortages, the inability to source relevant equipment, imposed export restrictions and so on – many policy-makers are adapting trade policy to emphasise ‘resilience’. Within this debate, although diversification is a recognised means to reduce risks, it comes at a cost. Hence, inducing domestic production in selected sectors is now being advocated as a form of ‘strategic autonomy’; calls to regain industrial sovereignty are getting louder. The shortening of GVCs, either reducing the contribution of foreign value added or decreasing the number of stages of production, could accelerate if policy matches the rhetoric of policy-makers (e.g. subsidies to bring production back home).

As policy-makers seek to enhance resilience by reducing dependence on external suppliers, there are risks that poor countries will lose access to markets that provide vital footholds out of poverty. Coupled with the effects of climate change, the post-COVID-19 trade landscape could become even more challenging for poor countries to navigate. This blog discusses the implications of the COVID-19 crisis in relation to trade within GVCs given the looming climate change crisis, focusing on the following questions: How can resilience within GVCs be enhanced? What can we learn from the current disruption, to enhance the climate resilience of GVCs? What are the implications of the shortening of GVCs for climate change adaptation and mitigation efforts?  

Building resilience within GVCs: where do you start?

Diversification of supply sources requires deeper and wider production networks, including at the regional and domestic levels. Lead firms typically make decisions in this regard based on the nature of the technology involved, the ability to codify information and producer capabilities, as well as on issues such as contract enforcement capacity, comparative costs of production and so on. While some developed countries are seeking to reduce their dependence on a single source country, in view of the implications of COVID-19, developing country suppliers typically struggle with the power dynamics inherent within those GVCs driven by one or a few buyers. What has been alarmingly exposed during this global pandemic is just how fragile these relationships are: some of the poorest countries in the world have been battling with multinational firms to ensure contracts are fulfilled and payment is made for goods produced and already in transit.

Developed countries taking back control of stages of GVCs in order to enhance resilience may further accentuate these power asymmetries, which could increase the risks for developing country suppliers in view of future shocks, including climatic shocks. For many developing countries, enhancing resilience means not only confronting the severe economic vulnerabilities that arise as a result of a lack of export diversification and dependence on a few firms to access end markets, but also adapting now to an increasing susceptibility to environmental shocks.

Globally, it is now recognised that these shocks are increasing as temperatures rise. Overnight, productive structures can be, and have been, wiped out. Given weak infrastructure, the costs of trade are rising, which is negatively compounding efforts to diversify economically. These aspects of persistent economic vulnerability for least developed countries and small vulnerable economies will worsen unless efforts to ramp up Nationally Determined Contributions to emissions reductions are secured at the forthcoming COP26 – postponed to early 2021.

While diversifying and solidifying GVCs in some sectors, including strategic stockpiling where necessary, forms part of the move towards building resilience in the developed world, many developing country producers lack the economic clout to achieve similar objectives. Despite the stalemate at the WTO (as well as challenges in view of the recent resignation of the WTO DG), it is imperative that members charged with the obligation to secure open and resilient value chains consider how best to achieve this in an inclusive and sustainable way. Just as firms have disclosed their COVID-19 risks, now is the time to get real about climate risks.  

What are the implications of the shortening of GVCs for climate change policy?

Notwithstanding the economics of the debate, re-shoring of specific GVC activities by countries that are committed to the Paris Agreement must now be undertaken within a carbon budget. Emissions trading schemes were designed because undertaking emissions reductions and associated costs are cheaper in developing than in developed countries; it is also typically cheaper for production to take place in developing countries, and the recycling of comparative advantages provides a vital foothold out of poverty, if successfully managed.

The reasons for supply chains becoming more domestic rather than more regional – with an estimated ‘erosion’ in globalisation (i.e. a reduction in the average length of supply chains since 2012) of 52 km per year – may be either structural, related to the digital transformation or a result of production becoming closer to consumers. These trends can contribute to emissions reductions, for example through reduced transportation (using subsidised fuel). COVID-19 is surely accelerating trends towards the increased use of digital technology, which can assist in the reduction of carbon emissions. But until our sources of energy change dramatically towards more renewable forms, these trends could be a lose–lose for development and trade and carbon emissions reductions; more evidence is needed to assess the overall implications of movement towards shorter GVCs.

Concluding remarks

This year was meant to see achievement of a multilateral trade deal and enhanced commitments to limit anthropogenic climate change. Instead, we have experienced the steepest decline in both global trade and emissions of modern times. Decisions on trade and climate have been delayed while more immediate action has been sought on securing the finance to react to the global pandemic; major accomplishments have been achieved regarding international collaboration to develop a vaccine; some of the poorest in the world have secured debt forgiveness. Some WTO members have announced important increases in Aid for Trade resources to help poor countries adapt to the trade shocks unleashed.

But the provision of support to firms adapting to COVID-19 in the developed and developing world must heed the warnings regarding the next environmental crises. Firms will be forced by their shareholders and rating agencies to think about the resilience of their GVCs, as well as by governments and consumers to reduce associated carbon emissions. Support to firms should now entail provisions to enhance their environmental resilience. The current crisis has provided the global economy community with more opportunity to get the right frameworks in place ahead of COP26 and as we enter this last decade of action for the advancement of the 2030 Agenda.

Photo: Carbon emissions from factories. John Hogg/World Bank. CC BY-NC-ND 2.0

Monetary policy and financial stability in Africa during COVID-19.

African countries will not only see a contraction in economic activity, but also a likely resurgence in financial instability. African central banks have lowered interest rates and reserve rations, bought government bonds, and provided additional liquidity, but in some countries, there are now limits to more action (e.g. lower interest rates).
Ensuring both financial stability and increased economic activity in Africa needs careful monitoring and additional steps.

Phyllis Papadavid and Dirk Willem te Velde, May 2020

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The cost of COVID-19 for Africa is considerable. The IMF, the World Bank, UNECA and ODI all forecast economic costs of at least 5% of GDP in 2020. More than 20 million jobs will be lost. Foreign portfolio flows are fast receding; remittances and FDI are slowing considerably. African countries will not only see a contraction in economic activity but also resurgence in financial instability, driven in part by the need for (and in some cases the shortfall in) liquidity and monetary stimulus.

An EABC survey suggests major reduction in cash flow in East Africa varying by sector: tourism (92%), logistics (75%), retail and real estate (60%), financial (50%) and other sectors (25–50%). In April 2020, in Kenya, the seven largest banks restructured loans worth KSh 176 billion or 6.2% of the industry’s total gross loan book, including tourism (31%), real estate (17.2%), building and construction (17%) and trade (12.4%). The share of non-performing loans (NPLs) in the total loan book rose to a high 12.7% in February 2020 from 12% in December 2019. Defaults are growing in the manufacturing, energy and household sectors. The NPL ratio is above a five-year average of 8.2%, meaning that banks are cautious of new lending.

Photo: Workers at the Akuapem Rural Bank in Mamfe, Ghana. Jonathan Ernst / World Bank Licence: (CC BY-NC-ND 2.0)

Dirk Willem te Velde (ODI) | Using high frequency data to monitor the economic impacts of crises

Dirk Willem te Velde (Principal Research Fellow, ODI)

18 May 2020

A multitude of trackers cover policy responses to COVID-19 but when it comes to up-to-date monitoring of actual social and economic impacts there appears to be a gap. Impact data are not collected systematically and in a comprehensive manner. Obtaining access to reliable, good quality statistical data for the poorest countries is a challenge; it is even more difficult to monitor economic data in real time or at high frequency and with a short time lag.

ODI has monitored a range of macroeconomic crises (e.g. the global financial crisis, the Eurozone crisis and crises related to oil prices and food price hikes) using economic data. This work provides lessons with regard to what high frequency data can be used to monitor the impacts of COVID-19 globally, and specifically those on the poorest countries.

The table below presents data sources in the following areas:

  • Commodity prices, food prices and hunger;
  • Global and bilateral trade, trade costs and mobility;
  • Capital markets, finance flows and fiscal and monetary statistics; and
  • Employment and production.

High frequency data are published daily, weekly, monthly or quarterly. Some are available immediately; some come with a time lag of a few days or weeks; yet others take several months to become available. Some data include noise (rather than signal) and much variability; others are cleaned, adjusted for variability or more robust. Some data are publicly available (we focus mostly on these); others are available behind a paywall.

So far, data for commodity and food prices appear to be covered well, perhaps in part because the G20 has paid attention to monitoring these for several years. Trade data are also available but with a time lag. Data on capital markets and finance flows are available but patchy, and often behind paywalls for use by investors. High frequency data on employment and production tend to be weakest: they are not available for a few months and there are well-known challenges with such data.

DOWNLOAD HIGH FREQUENCY DATA TABLE

Commodity prices, food prices and hunger
   Source and frequencyComments on useHyperlinks and examples
Commodity prices (global prices)Available immediately (e.g. FT for oil/copper prices; IMF/WB weekly/monthly averages with a short time lag (a few weeks)Variable reflecting many issues such as supply/demand and othersOil price (paywall)  

IMF  

World Bank Price data (pink sheet)  

GroAgro
Food prices (domestic prices)FAO food prices, monthly (a week time lag)   IFPRI’s Food Price Monitor covers daily price data for domestic markets in India, Rwanda, Uganda and Burundi   National statistics officesLocalised data patchyFAO food price index  

IFPRI dashboard
HungerWFP, number of people with insufficient food consumption, countries with very high levels of hunger, updated daily and weeklyLimited countries now (9 African now) but 16 more planned in coming weeks; it is a forecast. Weekly snapshots for 14 countriesWFP Food Hunger Map  

WFP daily report  

Weekly snapshots
COVID cases, deathsDaily across countriesAvailable widely, commonly used sources but difficult to compare across countriesJohns Hopkins
High frequency telephone interviews around social and food security impactsMonthly updates from May 2020. Cover topics including (i) knowledge of existence of and channels of transmission of COVID-19; (ii) knowledge of and compliance with preventive measures with specific emphasis on social distancing and self-isolation; (iii) prices and access to food and non-food necessities; (iv) employment; (v) food insecurity; and (6) subjective well-being – with a focus on understanding the dynamics of economic impactsOnce available will be very valuable, for Ethiopia, Malawi, Nigeria, Tanzania, Uganda     LSMS high frequency phone surveys,
Global and bilateral trade, trade costs and mobility
   Source and frequencyComments on useHyperlinks and examples
Trade costs Baltic Exchange Dry Index Trading Economics, dailySpecific cost measure, does not cover many transport uses/modesTrading Economics
World tradeCPB world trade indicator, monthly, available with a one- to two-month time lag     IMF tracking of world trade using real-time shipping dataPartly a leading indicator, partly real data   Uses data for dry bulk, contain, vehicle, oil shipping dataCPB indicator described in FT      
IMF tracker
Bilateral tradeNational statistics office and ITC trade map (monthly data for major countries such as UK, EU, US, China and Japan available with a six-week time lag; annual data for low-income country source)   International data reported monthly with time lag (UN Comtrade)Trade data variable but long-runs are availableUK monthly trade stats  

German monthly data  

Comtrade
Mobility and entertainmentAircraft departures, bus and rail journeys; Google searches for entertainment, seated diners, retail footfall (updated daily)   Google Mobility data for retail, grocery, parks, transit, workplaces, residential visits (weekly)  Not easily available beyond reports       Google data for all countries on a weekly basisBank of England Monetary Policy Report Chart 2.26    

COVID-19 Community Mobility Reports
Capital markets, finance flows and monetary statistics
 Source and frequencyComments on useHyperlinks and examples
RemittancesCentral banks, monthly data, available with one to three months time lagCan vary much between monthsNigeria  

Kenya
Stock market prices, exchange rates, bond yieldsAvailable daily and immediately, e.g. FT or central bank    Bond prices and bond spreads (yield difference countries and safe havens such as US/German bonds)Varied sources but often subscription is needed   FT/Bloomberg often report statistics/figuresFT (paywall)
Private capital flows to emerging marketsIIF monthly updates on portfolio flow but not FDI flows, available with one to two years of lag (committed FDI data more recent)Lacks country detailsIIF
Bank lending statisticsBIF international bank lending, quarterly, available with five-month time lag BIS
Monetary statistics (central bank)Central banks maintain monthly and quarterly data on the monetary base and broad money, credit aggregates (e.g. to the private sector) and foreign assets and liabilities. Includes claims by banks on governmentQuality data on a select number of variablesKenya
Debt interest paymentsMonthly/quarterly, central bank websites, lags can be six months Kenya (Table 13)  

Nigeria debt service in 2019  
Ethiopia
Aid flowsOECD DAC   Humanitarian finance: COVID-19 Global Humanitarian Response PlanDAC (and national) data are available with long time gaps (a year) but humanitarian finance data are updated weekly; announcements are availableOCHA  

ODI donor announcement tracker
Employment and production
 Source and frequencyComments on useHyperlinks and examples
EmploymentILOSTAT provides monthly and quarterly labour force statistics (with a time lag of at least two months)Up-to-date data are patchy with respect to country coverageILO COVID-19 and labour market statistics
ProductionNational accounts, quarterly, available with six-week time lag in developed countries, or a lag of three to five months in some poorer countries   UNIDO has recent data on industrial production, e.g. for the US, China, Russia, Korea, Vietnam, Argentina, Chile, PolandData available with long time lag, and industrial production data cover few countriesUNIDO on impact of COVID-19 on manufacturing  
Others (selected)
 Source and frequencyComments on useHyperlinks and examples
Data PortalsWorld Bank, updated in an ongoing manner   Several others exist   ODI’s tracker of trackers (tba) Datasets from the World Bank

  World Bank: COVID and trade  

UN Global Partnership for Sustainable Development Data

Photo: Changes in food prices as a result of Covid-19.  John Mackedon / World Bank . CC BY-NC-ND 2.0

Donor responses to COVID-19: country allocations

We examine IMF, World Bank and European Commission country allocations in response to the COVID-19 pandemic. IMF allocations cover around 1–1.5% of GDP whereas World Bank allocations are worth 0.1% of GDP. Whereas only a small portion of total funding is dedicated to loan facilities, grants and debt relief for the poorest economies, overall donors allocate more (as a share of GDP) to poorer countries. The IMF allocates more to countries that are more dependent on exports and remittances and to countries expected to see output cut the most. However, donors do not allocate more resources to countries with less health spending or that are overall more vulnerable

Sherillyn Raga and Dirk Willem te Velde, May 2020

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The confirmed number of coronavirus cases reached 3.5 million on 4 May, affecting 187 countries. The global economy is projected to contract by 3% (or 5% less than was forecast only four months ago). World trade may fall by up to 32%. The African region may witness its first recession since the 1970s.

The financing gaps in poorer countries have increased and, as these countries cannot afford a stimulus, they turn to donors. Already by 3 April, more than 90 countries had requested support from the IMF. This note provides an overview of donor responses since the outbreak, financial instruments, the regional coverage of funding and country allocations.

Photo: World Bank Group President in a press conference with the IMF Managing Director to address the economic challenges posed by coronavirus.. World Bank / Simone D. McCourtie. Licence: (CC BY-NC-ND 2.0)

A global action plan for developing countries to address the coronavirus crisis: Southern perspectives

Developing countries face the deepest recession in a generation. Complying with lockdown guidance in developing countries will be very challenging, given the level of informality and the state of poverty and health capacities. The G20 and UN need to address shortcomings to enable inclusive, collective and coherent global leadership. Urgent actions required to address the health and socio-economic costs include global actions plans on aid and finance, trade and food security, and free flows of knowledge and mobility of health workers.

Lorena Alcázar Valdivia, Debapriya Bhattacharya, Andrea Ordóñez, Tausi Kida, Dirk Willem te Velde, April 2020

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COVID-19 reached the poorest countries with a time lag but now they are facing multiple shocks. Commodity prices, especially oil prices, have fallen steeply, global demand for their products has gone down sharply, tourism receipts have reduced markedly and retail outlets and restaurants are closed, leading to massive global supply chain problems. In addition, the coronavirus has now reached most countries, resulting in lockdowns in developing countries, leading to a further slowdown (some estimate by 2–3% of annual GDP each month). While countries around the world, primarily developed ones, plan for stimulus packages to confront the crisis, many developing countries lack the fiscal space to implement such measures.

Developing countries face additional constraints owing to the level of informality, poverty and refugee numbers. Most poor people cannot afford not to try to engage in economic activities, as they will face starvation otherwise. The poor are often the least resilient to shocks, and if they lose urban jobs they will need to return to rural areas. There are heightened fears of the coronavirus reaching refugee camps. The coronavirus shock will thus hit the poor hardest. Estimates suggest the number of malnourished and acute hungry will double by the end of this year, from 800 million to 1.6 billion and from 130 million to some 260 million, respectively.

Photo: Covid-19 testing. World Bank / Henitsoa Rafalia. Licence: (CC BY-NC-ND 2.0)