CFR Presents

Development Channel

Issues and innovations in global economic development

Cleaning Up Global Supply Chains

by Shannon K. O'Neil Thursday, March 10, 2016
Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010. A spate of nine employee deaths at global contract electronics manufacturer Foxconn, Apple's main supplier of iPhones, has cast a spotlight on some of the harsher aspects of blue-collar life on the Chinese factory floor (Reuters/Bobby Yip). Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010. A spate of nine employee deaths at global contract electronics manufacturer Foxconn, Apple's main supplier of iPhones, has cast a spotlight on some of the harsher aspects of blue-collar life on the Chinese factory floor (Reuters/Bobby Yip).

The UK’s Modern Slavery Act now requires companies to report efforts to prevent human trafficking and slavery in the making of every part and every process of production, from headquarters down to individual suppliers along production chains. In the United States, the Dodd Frank Act’s disclosure rules for conflict minerals hold mining and technology companies to similar standards. But surveys and reports show companies still fail to monitor their suppliers, let alone prevent abuses.

Read more »

Anticorruption Efforts in Mexico

by Shannon K. O'Neil Tuesday, March 8, 2016
Relatives hold pictures of some of the 43 missing students of Ayotzinapa College Raul Isidro Burgos and shout during a news conference after a private meeting with Mexico's President Enrique Pena Nieto, ahead of the first anniversary of the students' disappearance (Reuters/Henry Romero). Relatives hold pictures of some of the 43 missing students of Ayotzinapa College Raul Isidro Burgos and shout during a news conference after a private meeting with Mexico's President Enrique Pena Nieto, ahead of the first anniversary of the students' disappearance (Reuters/Henry Romero).

Corruption dominates Mexico’s headlines: helicopter rides for officials’ family members, housing deals from favored government contractors, the still unexplained disappearance of 43 students, and a drug lord escaping a maximum-security prison, for the second time. In a recent survey, Mexicans listed corruption as the country’s top problem, ahead of security and the economy.

Read more »

This Week in Markets and Democracy: Malaysia’s Corruption Probes, Ghost Workers, and Lax OECD Bribery Laws

by Shannon K. O'Neil Friday, March 4, 2016
Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-general said on Tuesday that $681 million transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris). Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-general said on Tuesday that $681 million transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris).

International Investigations Take Over as Domestic Malaysian Justice Fails
New evidence shows that transfers from troubled state investment fund 1MDB into Malaysian Prime Minister Najib Razak’s personal bank accounts may top $1 billion—$300 million higher than previously thought. Yet Malaysian authorities continue to clear him of wrongdoing. The attorney general’s office ended its case, saying it found no evidence of graft, and Parliament is delaying a long-awaited investigatory report on the fund. The government has also shut down a Malaysian news site reporting on corruption and threatened harsh punishments for journalists who leak “official secrets”—a thinly-veiled warning to would-be whistleblowers. Less politically malleable are international authorities who continue to probe the cross-border case. Singapore recently seized a “large number” of related bank accounts. Criminal proceedings in Switzerland allege misappropriation of up to $4 billion in state money. And in the United States, the Department of Justice opened an inquiry into Najib’s U.S. real estate holdings and the Federal Bureau of Investigation (FBI) into the 1MDB case itself. Najib maintains the money was a political donation from an unnamed Saudi royal, a claim that conflicts with the growing financial paper trail.

Read more »

The Long Arm of U.S. Law and Latin America’s Corruption Malaise

by Matthew Taylor Wednesday, March 2, 2016
A demonstrator holds inflatable dolls depicting Brazil's former president Luiz Inacio Lula da Silva (R) and Brazil's President Dilma Rousseff during a protest calling for the impeachment of Rousseff near the National Congress in Brasilia, Brazil, December 13, 2015 (Ueslei Marcelino/Reuters). A demonstrator holds inflatable dolls depicting Brazil's former president Luiz Inacio Lula da Silva (R) and Brazil's President Dilma Rousseff during a protest calling for the impeachment of Rousseff near the National Congress in Brasilia, Brazil, December 13, 2015 (Ueslei Marcelino/Reuters).

Latin America’s corruption scandals of the past two years are moving slowly toward resolution. As they move forward, it is interesting to note that in a region that has been particularly protective of its sovereignty, foreign cooperation has played a significant role, whether it is via bilateral exchanges between prosecutors, mutual legal assistance treaties, or even United Nations support, as in the case of Guatemala’s International Commission Against Impunity (CICIG). But these various forms of international cooperation may soon be joined by another international anti-corruption effort that is less well understood in Latin America: prosecution by U.S. attorneys.

Read more »

This Week in Markets and Democracy: Central America’s Anticorruption Support, UNDP at Fifty, Foreign Bribery Action

by Shannon K. O'Neil Friday, February 26, 2016
Demonstrators hold candles as they sing the national anthem during a march to demand the resignation of Honduras' President Juan Orlando Hernandez, in Tegucigalpa, September 11, 2015. The protesters are calling for the resignation of Hernandez over a $200-million corruption scandal at the Honduran Institute of Social Security (Reuters/Jorge Cabrera). Demonstrators hold candles as they sing the national anthem during a march to demand the resignation of Honduras' President Juan Orlando Hernandez, in Tegucigalpa, September 11, 2015. The protesters are calling for the resignation of Hernandez over a $200-million corruption scandal at the Honduran Institute of Social Security (Reuters/Jorge Cabrera).

Central America’s Anticorruption Support
The presidents of El Salvador, Guatemala, and Honduras were in Washington to discuss plans for the $750 million that Congress authorized to help their nations take on violence and boost economic development. The outlay comes in the wake of a record uptick in Central American migration to the United States. Nearly 3 million people have fled their homes and neighborhoods, including 100,000 unaccompanied minors who arrived at the southern border between October 2013 and July 2015. The U.S. funding requires Northern Triangle governments to address myriad domestic problems, including strengthening legal systems, protecting human rights, and rooting out corruption. U.S. anticorruption efforts will be met with broad civil society and multilateral support, dovetailing with grassroots campaigns against graft and high-level impunity in Honduras and Guatemala, and furthering the resolve of multilateral-backed bodies such as Honduras’s new Mission Against Corruption and Impunity (MACCIH).

Read more »

This Week in Markets and Democracy: Mexico’s Anticorruption Pressure, Ukraine’s Stalled Reforms, and U.S. Acts on Forced Labor

by Shannon K. O'Neil Friday, February 19, 2016
Pope Francis (C), Mexico's President Enrique Pena Nieto (R) and his wife, Mexico's first lady Angelica Rivera stand together during a farewell ceremony in Ciudad Juarez, Mexico, February 17, 2016 (Reuters/Jose Luis Gonzalez). Pope Francis (C), Mexico's President Enrique Pena Nieto (R) and his wife, Mexico's first lady Angelica Rivera stand together during a farewell ceremony in Ciudad Juarez, Mexico, February 17, 2016 (Reuters/Jose Luis Gonzalez).

Pressure for Mexican Action on Corruption
During a five-day visit to Mexico, Pope Francis repeatedly denounced corruption, decrying the “path of privileges or benefits for a few to the detriment of the good of all.” His message coincides with a strong push by civil society groups to change the status quo. Many are monitoring Congress to ensure it meets a May deadline for secondary legislation to get the National Anticorruption System, signed last year by President Peña Nieto, working. Others are behind the Ley3de3 campaign, which would introduce legislation that defines official corruption and conflicts of interest, and increases the ability to prosecute and convict perpetrators. Coalescing around a social media campaign, active business involvement, academic backing, and even a nod from the pope, the movement needs 100,000 signatures; they hope to collect many times that. Then the question will be whether politicians will tie their own hands.

Read more »

This Week in Markets and Democracy: India’s Growth, U.S. Development Seeks Private Investment, and Ugandan Elections

by Shannon K. O'Neil Friday, February 12, 2016
Workers erect scaffolding at the construction site of a metro station in Greater Noida on the outskirts of New Delhi, India, September 30, 2015. India's annual infrastructure output growth picked up in August to 2.6 percent from a year ago, mainly driven by higher cement and electricity generation, government data showed on Wednesday (Reuters/Anindito Mukherjee). Workers erect scaffolding at the construction site of a metro station in Greater Noida on the outskirts of New Delhi, India, September 30, 2015. India's annual infrastructure output growth picked up in August to 2.6 percent from a year ago, mainly driven by higher cement and electricity generation, government data showed on Wednesday (Reuters/Anindito Mukherjee).

Can India Avoid Emerging Market Slump?
India outpaced China as the world’s fastest growing economy in 2015, with gross domestic product (GDP) rising 7.5 percent. Consumption by the nation’s 1.3 billion citizens drove the gains, along with public infrastructure spending to upgrade the nation’s roads, railways, ports, and power grids. India’s government is on track to spend over a trillion dollars on infrastructure as part of a 2012-2017 five year plan, as one of the emerging markets able to borrow at low international rates (debt to GDP is for now a manageable 50 percent). Yet private sector investment hasn’t followed suit. Bureaucratic difficulties in acquiring land and permits and financing snafus show how difficult it is to do business – India is ranked 130 of 189 in the World Bank’s Ease of Doing Business Report. A tough external environment led to a decline in exports and an outflow of portfolio investments. To attract the private investment needed for long term growth, Prime Minister Narendra Modi will have to tackle issues including labor regulations, taxes, and onerous import and export documentation.

Read more »

Five Questions with Dean Karlan

by Guest Blogger for Shannon K. O'Neil Thursday, February 11, 2016
A girl studies while sitting on top of a taxi outside her shanty home at a roadside in Mumbai, India (Shailesh Andrade/Reuters). A girl studies while sitting on top of a taxi outside her shanty home at a roadside in Mumbai, India (Shailesh Andrade/Reuters).

Emerging Voices highlights new research, thinking, and approaches to development challenges from contributing scholars and practitioners. This post features a conversation with Dean Karlan, professor of economics at Yale University, president and founder of Innovations for Poverty Action, and founder of ImpactMatters, a newly-launched organization that assesses how well nonprofits use and produce evidence of impact.

1) How have development economics and the study of poverty evolved in recent years?

Until about fifteen years ago, there were two different strands of development work, both with limitations. The first asked a big, monolithic policy question—“does aid work?—and compared how aid affected development outcomes across countries. But the cross-country research lacked the necessary data and an understanding of critical micro-level mechanisms, or the obvious first step of why some countries get more aid than others. It led to big debates, but failed to determine causality.

Read more »

The Political Salience of Latin Americans’ Perceptions of Corruption

by Matthew Taylor Tuesday, February 9, 2016
A demonstrator holds a scarf during a march to demand for the resignation of Honduran President Juan Orlando Hernandez in Tegucigalpa August 14, 2015. Thousands of protesters have been continuing demonstrations in Tegucigalpa, calling for the resignation of Hernandez over a $200 million corruption scandal at the Honduran Institute of Social Security (Jorge Cabrera/Reuters). A demonstrator holds a scarf during a march to demand for the resignation of Honduran President Juan Orlando Hernandez in Tegucigalpa August 14, 2015. Thousands of protesters have been continuing demonstrations in Tegucigalpa, calling for the resignation of Hernandez over a $200 million corruption scandal at the Honduran Institute of Social Security (Jorge Cabrera/Reuters).

Once a year, policymakers and the press are forcibly reminded of the terrible costs of corruption. This year, it fell on January 27, when Transparency International’s Corruption Perceptions Index (CPI) was released, inciting the ritual gnashing of teeth and beating of chests about relative national corruption gains and losses.

Read more »

This Week in Markets and Democracy: Moldova’s Protests, Investors Take on Graft, Corruption’s Costs in Nigeria

by Shannon K. O'Neil Friday, February 5, 2016
People hold a protest in front of the parliament building in Chisinau, Moldova, January 21, 2016. At least 8,000 people protested in the Moldovan capital on Thursday against the appointment of Prime Minister Pavel Filip, whose hasty swearing-in ceremony at midnight also prompted a government spokesman to resign (Reuters/Viktor Dimitrov). People hold a protest in front of the parliament building in Chisinau, Moldova, January 21, 2016. At least 8,000 people protested in the Moldovan capital on Thursday against the appointment of Prime Minister Pavel Filip, whose hasty swearing-in ceremony at midnight also prompted a government spokesman to resign (Reuters/Viktor Dimitrov).

Moldova’s Corruption Undermines EU Bid
Moldova’s corruption continues despite deepening European Union (EU) ties. New Prime Minister Pavel Filip’s pro-EU party is linked to a $1 billion bank embezzlement scheme that saw nearly 13 percent of gross domestic product (GDP) disappear. Two former prime ministers fell in the scandal, one to a no confidence vote while another is in jail. Now, despite government rhetoric accepting the EU Association Agreement governance statutes and promising to stamp out corruption, protesters are calling for Filip’s resignation. It is unlikely that Moldova will move beyond EU “partner” status anytime soon.

Read more »