Building Markets

cubiculo:

(Shoes Piled Up Outside Afri-Pads Factory)

I met up with Carrie-Jane who is the founder of Afri-Pads last week. She lived for a chunk of time in rural Uganda. And her legacy is quite amazing. It is also very simple. Afri-Pads is a local, small factory that makes washable, reusable cloth menstrual pads. It rents a small factory space from the local secondary school. It employs local women in an area where there is next to no work beyond subsistence farming. And it has a great outreach program to help combat menstrual related absenteeism in schools. Check out this amazing video of it here (super inspiring).

I showed her the video for One Day Without Shoes and while she watched the video, I watched her reaction (here is a link to the counter-campaign). I could see everything she felt on her face. It started with confusion- why would people think that shoes are desperately needed? She reminded me of all the little shoe stores in the nearby town. How most of the stores sell shoes, clothing, food, and mobile phones. She said that people can get flip flops for only a few shillings if they really wanted them. She said plenty of people did go shoeless but often it was a choice – they saved their nice shoes for school or for church and did their chores shoeless. She said that most of these children would rather have money for school. And we talked about how parents would rather have healthy children with access to good medicine, inoculations, food, and education. I could see her face turn from confusion to disappointment and frustration. Why would people get so excited about such a silly cause? Why would people think this was good aid?

I was chatting with another friend about why it is so important to support the local economy in developing communities… why it is not a good idea to send free stuff (new or old). And I explained to her about Afri-Pads. I explained that it is a factory that relies on orders. When they get a big order for their pads, they work at full capacity. This means that people have a job to come to and they can get paid a salary. (They can pay for their kids’ school, medicine, food, clothing, and so on.) When no orders come in, when a charity chooses to bring in free tampons and pads from other countries, then the factory needs to scale back and people don’t get work, so they don’t (they can’t) get paid.

Afri-Pads is a Ugandan company. It is a social enterprise in its infancy and still relies on support from outside funders. It has greatly benefitted from a relationship with Lunapads a local Vancouver company that makes reuseable, washable pads for the North American market. Lunapads provided the prototype that Afri-Pads uses and they also helped Afri-Pads secure a good price on cotton. Lunapads supports other start ups wanting to do the same thing.

Now that is what I consider cool- a Ugandan company that employs local people and tackles a real issue (absenteeism from school), parents that can pay for their own children’s education, food and so on (and yes, shoes), and a Canadian for profit company that supports good social enterprises overseas.

(source: Stratosphere International)

For other reasons why TOMS is bad aid and bad development and an overall Bad Idea, go here.

Morgan Ashenfelter for Peace Dividend Trust—

President Obama’s speech on the US presence in Afghanistan last night left me with more questions than answers. What about Afghanistan beyond troop reductions? What happens once the troops leave? That’s something we’ve been thinking about at Peace Dividend Trust (PDT) for the past several years. Our response: build Afghanistan’s markets.

Imagine our surprise when we recently saw data about those markets that indicate that “an estimated 97 percent of Afghanistan’s gross domestic product (GDP) is derived from spending related to the international military and donor community presence.” That’s from a recent Senate Foreign Relations Committee report.

Data can be deceptive. That’s an important fact to consider, especially in this age of impact measurement where data trumps anecdotes, as it should and, instead, leads us to solutions based on evidence.

But when looking at a recent Senate report on Afghanistan, I had to pause and ponder some of the information. Was that 97 percent true? No wonder Washington is worried that the country will be “plunged into a deep recession” once the US military withdraws. And no wonder David Brooks wrote in his most recent column that this infusion “created dependency, fed corruption, contributed to insecurity and undermined the host government’s capacity to oversee sustainable programs.”

Yet after chatting with our in-house PDT economist, Lucy Heady, I realize Washington can breathe a little easier. The percentage quoted in the committee report (from an unpublished World Bank memo) is presented in an extremely misleading way. Washington misrepresented the data.

What the report should say about the 97 percent is that “‘spending related to the international military and donor community presence is equivalent to 97% of Afghanistan’s GDP,’” explains Heady. Huh?

To the non-economist, this might not sound like much of a difference, but consider this: GDP is consumption, investment and exports minus imports, which means that all of the money spent by the military and international donors on imported goods barely affects the measurement of Afghanistan’s GDP at all and expenditure on foreign consultants does not affect it at all.

In other words, foreign military and donor spending is equivalent to 97 percent of Afghanistan’s GDP ratherthan 97 percent of Afghanistan’s GDP actually being reliant on this spending. Most of the foreign money being spent is not going into Afghanistan’s local economy.

What about the money that actually is making it into the local economy? Because no one is tracking this, no one can predict how much US troop withdrawal will affect Afghanistan’s economy.

“It will certainly have a serious negative impact at withdrawal,” Heady says. “But to imply that Afghanistan’s GDP will fall by 97 percent is ludicrous.”

Such a negative impact caused by a quick rise in a country’s income from foreign sources is called Dutch Disease. This phenomenon is always on PDT’s radar. To combat it in Afghanistan PDT has focused on facilitating contracts between the national government and local businesses.

Heady suggests the US should play a similar, but more broad role:

“The military should be training the businesses that they procure from in accessing other markets and helping them invest in the skills or machinery that would help them to service sectors of the economy that are growing.”

The concern over Dutch Disease has been exacerbated by the notion that after 2014, the US will simply abandon the country, both militarily and economically. Obama has done little to ease these fears. In May both his Middle East speech and joint briefing to the British Parliament reiterated the withdrawal of troops without any mention of future economic partnerships.

Many experts recommend a ramp up of the US’s Afghan First policy. But promoting regional trade will be just as, if not more, important. The Central Asia Study Group released seven key recommendations for the US’s agenda in Central Asia, one of which was promoting regional trade. Regional cooperation, in the form of unfettered trade, will do the most to promote stability in Afghanistan and surrounding countries.

Spurring the US to review its economic policies in Afghanistan is an important and welcome result coming out of this report. Going forward, the US should continue its Afghan First policy while focusing on local SME capacity building and promoting regional trade.

We’re Peace Dividend Trust (or PDTglobal, if you want our nickname), a non-profit social enterprise that tests & scales ideas to improve foreign aid and peacekeeping. We do this by building markets, creating jobs, and sustaining peace in developing countries by championing local entrepreneurs and connecting them to new business opportunities using the Peace Dividend Marketplace.

We work in Afghanistan, Haiti, Timor-Leste, and soon in Liberia. To find out more about why we do what we do, and why more money from humanitarian operations needs to go into local economies, watch this short video.

We’ll be using this tumblr to share interesting articles, blog posts, photographs, infographics, videos, and more to start conversations about international development, aid, entrepreneurship, and peacekeeping. Example: One thing I noticed? When I searched the #afghanistan and #dr congo tags, I saw primarily negative images and stories from two incredibly vibrant countries full of opportunity and amazing potential. We’ll be trying to diversify the perspectives of people living in developing countries and their lives and to encourage critical examination of aid, development, and charity ideas.

If you have any questions at all (we like questions!), feedback, or want to chat, drop a line in our ask, or contact us on Twitter and Facebook! Let us know what you’d like to see more of and share any development news you have.

Looking forward to it,

-the PDTglobal team.