The New Basle Capital Accord and Developing Countries: Issues, Implications and Policy Proposals

Risk-management, Internal-ratings, Pro-cyclicality, Net impact

Ensuring Developing Countries Benefit from Big Data

Big data is already creating a big impact. Some herald it as the new ‘data revolution’, others worry it is a tool for manipulation, while many in development cite it as key to successfully implementing the Sustainable Development Goals. Major decisions on big data are being taken now, but much more needs to be done to ensure the risks are minimised and the benefits shared equitably and not just among rich individuals, corporations and developed nations.UK Department for International Developmen

Environmental Taxation and Development: A Scoping Study

Developing countries face increasing environmental pressures across a range of dimensions. At the same time, the capacity of these governments to effectively pursue policy goals is often constrained by a lack of resources, with tax revenues in many countries being half of what is common in developed economies. For some, these are distinct issues that should be considered separately. For others, they can and should be dealt with together. This paper reviews the potential of one type of mechanism to address both goals simultaneously: environmental taxation. After distinguishing between different forms, the paper uses a Pigouvian framework to organise and analyse theoretical and empirical evidence on the impacts of environmental taxes in developing countries. Despite limited evidence it is possible to draw some conclusions. First, taxes that are carefully designed and reflect local conditions can be effective in achieving environmental goals, and may be the best instruments under some conditions. Second, while it is possible to raise significant revenues, there may be less potential than is often supposed: environmental goals are more likely to be achieved where tax revenues are used, in part, to further the same ends; it may also be necessary – and desirable – to use some revenue to offset regressive effects; also, support for environmental taxes is likely to be undermined if they are seen to be revenue raising tools. More broadly, limits to the effectiveness of environmental taxes become more severe as the number of policy goals increases: achieving ‘double-dividends’ may be hard, and ‘triple-dividends’ harder still. A more realistic aim, therefore, may be a ‘one and a half’ dividend approach, with the environmental goal being the primary focus. Third, regardless of the quality of design, environmental taxes may fail without strong, high-level political support, particularly where they conflict with other policy goals that do have this support. In the light of this analysis, the penultimate section of the paper develops a decision-making framework, designed to help policy-makers weigh the merits of environmental taxes to achieve specified goals. The paper concludes with a comprehensive research agenda.DfI

Taking the Next Step - Implementing a Currency Transaction Development Levy

As we approach the half-way point for the achievement of many of the Millennium Development Goals (MDGs) the spotlight is shining ever more intently on the urgent need for new sources of revenue to pay for them. With the first international development duty launched, in the form of the ‘pilot’ solidarity levy on air travel, the momentum needs to continue to the implementation in quick succession of a second such initiative to provide another long term predictable source of additional finance. Innovation is required not just in financing but also in delivery. UNITAID’s mission is to transform a situation of high cost drugs for the treatment of the few to low cost drugs for the care of the many. In so doing its potential value is exponentially greater than a simple addition of extra revenue. The choice of how and where the next new stream of finance is spent also needs to be to be similarly strategic. The Core Group1 Governments rightly pride themselves on an international development policy that has, as one of its pillars, the tackling of global inequality which has risen rapidly in the latest phase of globalisation. For example President Chirac opened the Paris conference held in February 2006 in Paris stating that ‘despite the continuous increase in global wealth, a third of humankind still lives on less than a euro a day’, and that ‘…globalisation, far from bridging the (poverty) gap, is widening it even further’. In this report, we offer some suggestions for tackling global inequality through concrete proposals for both raising substantial new revenue equitably and spending it in ways that strategically target the ‘weak spots’ in the international development effort. The financial services industry has been one of the biggest beneficiaries of globalisation. Annual turnover in the global market for currencies, has, for instance, expanded from about $4 trillion in 1973 to$40 trillion in the mid 1980s to more than $450 trillion now – a more than 100 fold increase.2 Profits at financial services firms are also at a record high with the top two most profitable banks, Citibank and HSBC, posting more than$40 billion of profits between them in 2005 alone. At the same time as industries such as airlines and financial services have benefited from globalisation, populations in many of the poorest countries, especially those in sub- Saharan Africa, have been left behind – or worse, harmed. Average life expectancy in these countries is in fact down from 50 years in 1990 to 45 years now, just over half the almost 80-year life expectancy in countries such as Norway. The health, education and productivity problems caused by a lack of access to basics such as clean drinking water and sanitation facilities, the added decimation wrought by global pandemics such as HIV/AIDS on the ability of the populations and systems in poor countries to cope, and the increased vulnerability linked to climate change, all threaten to undermine and, in fact, roll back the slow progress that has been made to date towards meeting the MDGs. In Section 2 we demonstrate in some detail how, by introducing a very small levy of less than a hundredth of one per cent on currency transactions, many countries can unilaterally generate substantial resources for development from those who can most afford to pay. Such a levy is simple and inexpensive to apply in this age of electronic transfers. Whilst this proposal is specific to the currency market, it can be generalised to apply to other financial markets many of which already pay some form of a levy. The possible uses for this revenue that we propose in Section 4 have been shaped by the need to lever maximum results from the resources generated. The three potential areas for immediate financing that we have identified would generate positive additional outcomes towards the achievement of several seemingly unrelated development goals. First, provision of clean water and sanitation, as it is a foundation stone that underlies the ability to make meaningful progress with the vast majority of the MDGs. Second, providing human resources for health, because without sufficient trained health workers, medicines and infrastructure are simply not enough on their own to contain the raging pandemics of HIV/AIDS, TB and malaria. Third, providing a long term predictable source of funds to an expanded UN Central Emergency Response Fund, to create a more robust response to the growing threat of natural disasters and humanitarian emergencies.currency tax; tobin tax; MDG; Financial markets; Financial Transaction Taxes

Big Data and International Development: Impacts, Scenarios and Policy Options

Many people are excited about data, particularly when those data are big. Big data, we are told, will be the fuel that drives the next industrial revolution, radically reshaping economic structures, employment patterns and reaching into every aspect of economic and social life. The numbers are certainly impressive. In 1946, one of the first computers weighed 30 tonnes and could do 500 calculations per second. Today, IBM’s ‘Watson’ supercomputer can process 500 gigabytes of data per second. Every day, 39 per cent of the global population use the internet. Facebook has more than 1.3 billion active users, and after the United States the countries with the most subscribers are India, Brazil and Indonesia. In 2007, Twitter had 400,000 tweets per quarter. By 2013, there were 500 million per day. Ninety per cent of data in existence were created in the past two years, and the quantity is doubling every two years. The size and cost of storage has fallen by a third every year since the 1970s, making it possible to store these vast new pools of data. New statistical techniques and tools such as machine-learning algorithms can process and analyse these data dynamically, at a scale and speed that would have been unimaginable just a few years ago. These changes are already having major effects and will continue to do so. Beyond that little is clear, however. In the world of data, size obviously matters. But how much will it matter in the end, in what ways will these effects be felt and by whom. Perhaps most importantly, what can be done to influence this? While considering the potential impacts of big data in a broad sense, this paper applies these questions specifically to developing countries.UK Department for International Developmen

Development Banks from the BRICS

The BRIC acronym was created at the beginning of the 2000s to represent a group of four fast-growing economies – Brazil, Russia, India and China – and was changed to BRICS in December 2010 with the inclusion of South Africa. At its fifth annual summit in Durban at the end of March 2013, the group announced the future establishment of a New Development Bank (NDB) to meet infrastructure investment needs in the developing world. At their sixth annual summit in Fortaleza the following year (July 2014), the BRICS finally agreed on the broader arrangements for the bank – an initial US$50bn fund – and coupled this achievement with the launch of the Contingency Reserve Arrangement (CRA) – US$100bn to be accessed to alleviate members’ financial difficulties (US$41bn from China, US$5bn from South Africa and US$18bn from each of the others). The Bank will start lending in 2016. Despite this achievement, commentators estimate that even if the NDB eventually increases its capital to US$100bn with injections from non-BRICS states and institutions (up to a maximum capital share from non-BRICS countries of 45 per cent), most infrastructure needs in the developing world will remain unmet. Compared to the World Bank and Asian Development Bank – whose subscribed capital is US$223bn and US$162bn respectively – the additional capital available from the NDB is too small to fill the financing gap (Spratt 2014). According to World Bank estimates, South Asia alone requires US$2.5tn over the next ten years, while overall the BRICS states are estimated to need a total of more than US$4.5tn over the next five years for infrastructure development. In consideration of the limited amount of lending that the NDB may provide, the bank may create ‘special funds’ – i.e. separately funded and managed mechanisms – designed to get round this capital constraint (Spratt 2014).UK Department for International Developmen

What Next For the Brics Bank?

A new development bank to be created by the ‘Rising Powers’ of Brazil, Russia, India, China and South Africa (BRICS) is intended to promote greater cooperation between developing countries, and address what is seen by many as a history of misguidance and underinvestment by the World Bank and the International Monetary Fund (IMF). However, several questions remain about the establishment of the BRICS bank and its potential impact on future development cooperation. The timeframe for its creation is still uncertain and economic and political links between the BRICS countries need to be strengthened in order for them to agree a clear development agenda to underpin the new institution

The Political Economy of Low-carbon Investments: Insights from the Wind and Solar Power Sectors in India

The primary motivation behind this research is the need to accelerate the supply of renewable energy because of the important role that it plays in mitigating climate change and in fostering sustainable development. Understanding past drivers for low-carbon investment can help us identify those for the future, and what could accelerate such investment. Investment in renewable energy can be modelled as a problem of technical asset allocation or optimisation at the firm or sectoral level, but is not entirely explained by this approach – the context in which actors are involved, their motivations and the wider systems in which they operate must also be taken into account. The interactions between actors may sometimes accelerate investment and sometimes prevent it; however, understanding the dynamics of these processes is crucial if we are to shape them. This study, which focuses on the wind and solar power sectors in India and China, aims to find and compare drivers for investment in renewable energy. Our point of entry for this piece of the study is that India is already seeing significant investment activity in renewable energy. During 2010/11, investment in renewables grew by 62 per cent to US$13bn (although it slowed drastically in 2011/12 to US$6.5bn). In 2010 the Indian government announced a National Solar Mission that aimed to add 20 gigawatts (GW) of solar power generation capacity by 2020; wind power capacity has grown steadily at a compound annual growth rate of 17.9 per cent since 2007 and now contributes more than 20GW, or just over 70 per cent, of total renewable energy capacity. Almost all of this is private investment. However, these levels will need to increase sharply in the coming years and decades if India is to reach China’s levels (who, in 2013, became the world leader with US$67bn invested in renewables) and make a greater contribution to the US$1tn needed.UK Department for International Developmen