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Scoreboard: China 5.0, Russia 0.5

Kester Kenn Klomegah

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Lack of credit support and investment guarantees from the Russian government and financial institutions have been cited as the major impediments for Russian companies willing to invest in the African continent. These setbacks have culminated in the world’s biggest country by size lagging behind such economic powerhouses as the United States and China in expanding a footprint in Africa.

Companies from Russia, the Eurasian country, are said to be seeking to expand its business ties with Africa, most particularly in line with the country being grouped alongside South Africa in the BRICS (acronym Brazil, Russia, India, China and South Africa bloc, a formation of the world’s fastest growing economies.

In an interview, business leaders said the lack of credit lines and guarantees were stumbling blocks, recommending this had to change through political authorities and Russian financial institutions systematically working out a comprehensive policy plan towards improving the economic engagement with Africa.

“An increased economic partnership between Russia and African countries is necessary and will reaffirm the desire to continue developing business dialogue with interested companies in efforts to pursue active involvement in international programmes and projects for Africa,” said Dmitry Golovanov, Chairman of the Management Board of Eximbank of Russia.

In addition, he raised some specific proposals necessary for facilitating business between Russia and Africa. Besides, joint implementation of projects in the area of infrastructural development will positively influence development of contracts between Russian and African companies, he said. Golovanov, however, pointed out that transparency and possibilities for medium and small business to access contracts within the framework of implementation of major projects are required.

Such projects, said, generally had significant multiplicative effect in terms of comprehensive development of territories. One more direction of stimulation of cooperation may be provision of Russian and African companies with assistance in creation of value-added chains, including creation of joint ventures which base their competitive potential on the use of country advantages, Golovanov added in an interview.

“Russia is a large developing market with growing purchasing capacity, interested in development of competition and improvement of quality of products supplied from abroad. We often face a problem that companies willing to enter international markets cannot simply find foreign purchasers for their products,” said Golovanov.

Dr Scott Firsing, a visiting Bradlow fellow at the South African Institute for International Affairs (SAIIA), and a senior lecturer in international studies at Monash University in Johannesburg, concurred.

“The absence of export credit guarantees can be a real obstacle to some in countries such as Russia because there are businesses and policy holders that look for these guarantees to help alleviate the fear of doing business in high risk markets like Africa,” he added. Firsing highlighted the crucial role played by American institutions like their Export-Import Bank that supports American companies and their expansion into African markets.

These readily provided credits for American investors seeking to expand into this continent, a stance Firsing said was worth adopting by the Eximbank of Russia.

A good example of the continued willingness to fund American companies willing to invest in Africa, President Barack Obama’s latest African Power Initiative sees the Export-Import Bank granting up to US$5 billion in support of US exports for the development of power projects across sub-Saharan Africa.

“Russia can learn a lot from the approach of these countries,” said Firsing.

In an emailed response, Dr Martyn Davies, the Chief Executive Officer of the South African-based Frontier Advisory (Pty), suggested the adoption of a model by China to readily fund its companies interested in investing in Africa. He explained that the Chinese model of financing various infrastructure and construction projects in Africa had enhanced investments by the Asian country into the continent.

China, the world’s second-biggest economy after the United States, is currently Africa’s largest trading partner. There are an estimated 800 Chinese corporations doing business in Africa, most of which are private companies investing in the infrastructure, energy and banking sectors.

Davies pointed out and the main factor that had assisted this speedy market engagement between Africa and China was that Russian banks had “de-risked” the projects in Africa from a financial perspective.

“Russia’s banking sector operates quite differently” Davies said. He highlighted that When the former Chinese President, Hu Jintao, while delivering a speech at the opening ceremony of the Fifth Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC) held in Beijing in 2012, he indicated explicitly that “China will expand cooperation in investment and financing to support sustainable development in Africa.”

China has provided US$20 billion of credit line to African countries to assist them in developing infrastructure, agriculture, manufacturing and small and medium-sized enterprises.

Comparatively, Japan has made a five-year commitment of $32 billion dollars in public and private funding to Africa, and the money to be used in areas prioritized as necessary for growth by the Fifth Tokyo International Conference on African Development (TICAD). TICAD is a conference held every five years in Tokyo, Japan, with the objective “to promote high-level policy dialogue between African leaders and development partners.”

Comparatively, apart from a $4 billion investment in an oil refinery in Uganda and $3 billion in a platinum mine in Zimbabwe, Russian investments in Africa are not as prominent as United States, the United Kingdom, France and China eclipse it.

Professors Aleksei Vasiliev and Evgeny Korendiasov, both from the Russian Academy of Sciences, Institute of African Studies (IAS), believe that that the situation in Russian-African foreign trade will considerably change for the better, if Russian industry undergoes technological modernization, the state provides Russian businessmen systematic and meaningful support, and small and medium businesses receive wider access to foreign economic cooperation with Africa.

Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Economy

Social Mobility and Stronger Private Sector Role are Keys to Growth in the Arab World

MD Staff

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In spite of unprecedented improvements in technological readiness, the Arab World continues to struggle to innovate and create broad-based opportunities for its youth. Government-led investment alone will not suffice to channel the energies of society toward more private sector initiative, better education and ultimately more productive jobs and increased social mobility. The Arab World Competitiveness Report 2018 published by the World Economic Forum and the World Bank Group outlines recommendations for the Arab countries to prepare for a new economic context.

The gap between the competitiveness of the Gulf Cooperation Council (GCC) and of the other economies of the region, especially the ones affected by conflict and violence, has further increased over the last decade. However, similarities exist as the drop in oil prices of the past few years has forced even the most affluent countries in the region to question their existing social and economic models. Across the entire region, education is currently not rewarded with better opportunities to the point where the more educated the Arab youth is, the more likely they are to remain unemployed. Financial resources, while available through banks, are rarely distributed out of a small circle of large and established companies; and a complex legal system limits access to resources locked in place and distorts private initiative.

At the same time, a number of countries in the region are trying out new solutions to previously existing barriers to competitiveness.

  • In ten years, Morocco has nearly halved its average import tariff from 18.9 to 10.5 percent, facilitated trade and investment and benefited from sustained growth.
  • The United Arab Emirates has increased equity investment in technology firms from 100 million to 1.7 billion USD in just two years.
  • Bahrain is piloting a new flexi-permit for foreign workers to go beyond the usual sponsorship system that has segmented and created inefficiencies in the labour market of most GCC countries.
  • Saudi Arabia has committed to significant changes to its economy and society as part of its Vision 2030 reform plan, and Algeria has tripled internet access among its population in just five years.

“We hope that the 2018 Arab World Competitiveness Report will stimulate discussions resulting in government reforms that could unlock the entrepreneurial potential of the region and its youth,” said Philippe Le Houérou, IFC’s CEO. “We must accelerate progress toward an innovation-driven economic model that creates productive jobs and widespread opportunities.”

“The world is adapting to unprecedented technological changes, shifts in income distribution and the need for more sustainable pathways to economic growth, “added Mirek Dusek, Deputy Head of Geopolitical and Regional Affairs at the World Economic Forum. “Diversification and entrepreneurship are important in generating opportunities for the Arab youth and preparing their countries for the Fourth Industrial Revolution.”

With a few exceptions, such as Jordan, Tunisia and Lebanon, most Arab countries have much less diversified economies than countries in other regions with a similar level of income. For all of them, the way toward less oil-dependent economies is through robust macroeconomic policies that facilitate investment and trade, promotion of exports, improvements in education and initiatives to increase innovation and technological adoption among firms.

Entrepreneurship and broad-based private sector initiative must be a key ingredient to any diversification recipe.

The Arab Competitiveness Report 2018 also features country profiles, available here: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, United Arab Emirates.

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The impact of labour market trainings on unemployment process in the global labour economy

Gunel Abdullayeva

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Since the 1990s, the persistence of high unemployment has been followed by two downturns, which affected an economic life over the world across the nation-states. The overt consequences cost unpleasantly social and economic outcomes for the states as well as societies. Henceforth, activation turn has observed once more shifting passive employment policies within the active policy actions of countries upon labour market at the beginning of a new millennium. It was supposed that the activation of jobless people through keeping employees occupied, job-search assistance, job creation and work experience programs, training and invest in up skilling, is an open way to fight against high unemployment and secure economic growth as well. Hereby, the idea of an active labour market policy (ALMP) became again pivotal tool in the domestic policy agendas of states in order to engage in new challenges of labour markets. Since the 1950s,it is an apparent fact that in Europe and the Nordic countries that the effectiveness of ALMPs engenders diminution in a structural and long-term unemployment and leads to increase net income together with the employment ratio of targeted groups in national economies.

With the XXI century’s new technological vicissitudes and industrialization, the active employment policies have been designed to support people with monetary (income) and non-monetary (education) incentives in order to reduce inequality, keep the balance of social inclusion, and stimulate market beyond to decrease unemployment. Consequently, labour market training grew into to become an important measure of ALMP strategies in the background of “welfare to workfare policy approach” to create better-skilled workforce as well as to surge adequate match between skilled manpower and needs of progressive demand in labour markets.

In fact, the scholarly studies state significant impacts of training and vocational programs in the activation of the workforce. For example, the 1950-1960s – Post War Era characterized with the rapid economic growth and labour supply shortage in the European industry. And as a solution, national employment policies started to focus on labour trainings. So that Sweden with its successful retraining system has been the pioneer of ALMP idea in the history. On the other hand, Germany with 1969`s Employment Promotion Act considered training as a principal component of active employment policies to upskill workforce in terms of new industrial needs by market demand.

The UN 2009 reports that education is considered one of the main indicators of poverty reduction: education and human resource investments contribute to an economic development of nation-states and societies. Higher educated people or up-skilled workforce boost up productivity and react the positively to technological changes. Some scholars and interlocutors claim that in long-term perspectives ALMPs should have to aim to develop an education and training system that enhances the productivity and employability of a labour force. Because of the fact that the skilled manpower is one of the cornerstones of the higher employment, developed economy, higher net income and well-being of the whole society.

Many types of research have been carried out to identify the prominence of labour market training, however, the Katz`s study (1993) shows the significant point of job market training as turning “unskilled labour” into “skilled labour”. Perceptibly, the unemployment problem is more common among less skilled individuals and new entrants to the market. Shifting in demand against unskilled labour force causes an unemployment among those people. In contrast to unskilled force reservation wage and labour demand is high for skilled manpower in the market. Here, the training policy helps turn out unskilled to a skilled workforce and to increase total employment in order to decrease unskilled unemployment. Research argues that training policy extends the skilled labour force and close the gap between the unskilled and skilled workers. Caruana and Theuma (2012) refer to Katz (1993) argue that in order to push jobless people towards work, some trainings improve the qualification of those workers who are already in the market. Hence, Katz (1993) emphasizes the importance of labour market training in reducing the unemployment rate of unskilled labour by transferring more workers to the skilled labour pool. They also underline the significant role of a training policy in improving the skills of employees and increasing, the supply of skilled manpower in the economy. The following figure “Development of Unskilled Labour Force” visualizes Katz`s statement andshows how training measure affects the job market in both ways. The points where demand curves intersect supply curves, which are given wages for skilled and unskilled labour respectively. As the author explains, the wages represent the remuneration of foregone opportunity costs that, logically, is higher for skilled labour than for unskilled one. Since labour demand for the skilled labour is stronger than that of unskilled labour, thus, the demand curve for the former one is more elastic. As the figure illustrates, after the implementation of training, part of unskilled labour is moving up to the skilled.

At the same time, scholar states that wage setting regulation, training, and education systems affect differently net income and employment perspectives. Consequently, education and labour training policies create an equal distribution of skills and able to reduce supply and demand shifting on wages and employment. Another study by Calmfors et al., (2001) argue that training programs increase the reservation wage of attendees. However, salary growth and employment perspectives are possible by time after long run participation in the program.

To sum up, the training policy is considered as a main supply-side policy tool of activation to tackle unemployment. Scholars argue that training programs are useful to prevent the long run unemployment and to keep unemployed active in the market via participation. However, ex-post evaluation of training programs is controversial. Country case studies show that training programs are more effective in the background of vocational education reforms and collaboration with demand-side active labour market policies.

Reference list:

  • , Forslund A., &Hemstrom M., (2001), Does Active Labour Market Policy Work? Lessons from Swedish experiences, Swedish Economy Policy Review, 85, 61-124
  • Caruana C. &Theuma M., (2012), The next leap – From Labour Market Programmes to Active Labour Market Policy.
  • Katz, F.L., (1993), Active Labor Market Policies to Expand Employment and Opportunity.
  • United Nations, (2009), Rethinking Poverty: Report on the World Social Situation 2010, Retrieved from http://www.un.org/esa/socdev/rwss/docs/2010/fullreport.pdf
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Paid and well-designed internships work

Shane Niall O’Higgins

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“Before, they would ask for your diploma and maybe your grades. Now, when you are entering the labour market, you are asked for multiple internships and work experience here and there so I feel the pressure to intern so as to be better prepared for the labour market.”

That was what secondary school student, Georgia, told me while I was carrying out some focus group research last year for an ILO survey on youth aspirations.

Her frustration and worry are typical these days of many young people entering the labour market. They face the daunting task of finding a decent job and then keeping it when they do.

Unemployment and the proportion of young people not in employment, education or training are high, and new and emerging forms of ‘non-standard’ employment such as temporary, part-time and gig work are rapidly expanding.

These types of ‘non-standard’ jobs now dominate young people’s early labour market experiences, along with internships, which are becoming ever more common – not only in high income countries where they originated but also in low and middle income countries.

The idea is that internships help break that Catch 22 that many young jobseekers face – not having enough experience to get a job and not being able to get the experience needed because of not having a job.

But, just how effective are internships as a means of promoting the long term job prospects of young people like Georgia?

The fact is, there hasn’t been much solid research. Above-all, very little at all is known about the impact of so-called ‘open-market’ internships which are not undertaken as part of either an educational course or as part of an active labour market programme. In many – if not most- countries, these remain under-studied and under-regulated

This is the question that my colleague Luis Pinedo and I set out to answer in a new ILO working paper,  “Interns and outcomes: Just how effective are internships as a bridge to stable employment?”, which reviews existing studies and analyses primary data using surveys of interns undertaken by the European Commission and the Fair Internship Initiative (FII), an intern advocacy coalition.

We came to three main conclusions:

Not all internships improve career prospects

The impact of internships on the longer term integration of youth into work appears to be modest. Internships are, on average, less effective than either student jobs or apprenticeships as a means to bridge the gap between education and regular employment.

Paying interns pays off

It is clear, however, that paid internships offer better job prospects for youth in the long run than unpaid ones and that paid interns are more likely to find a job than those who were not remunerated. This may be because the payment itself may be linked to other positive features of a well-designed internship programme. These include the presence of a mentor; similar working conditions as regular employees; access to health insurance, and internships that are long enough for the young person to acquire and improve their skills. In addition, formal certification of the completed internship and/or undertaking the internship in a big firm both influence employment prospects and can also have a positive long-term impact.  However, the likelihood of finding a job does not increase in relation to the amount paid to the intern.

More and better research is needed

As yet, far too few studies have been carried out and those that do exist rarely make a serious attempt at identifying the causal links between internship programme features and post-internship labour market outcomes. Moreover, analyses of open market internships are even rarer. The task is clearly made more complicated by the fact that there is no agreement about what precisely is an internship. However, the lack of analysis is particularly worrisome not least because it is precisely open market internships which are least covered by existing forms of regulation. This paper, along with its two companion papers listed below mark a first step by the ILO to rectifying this information gap.

See the two other working papers that are part of the series:

Employment working paper no. 240: The regulation of internships: A comparative study Andrew Stewart, Rosemary Owens, Anne Hewitt and Irene Nikoloudakis

Employment working paper no. 242: Does work-based learning facilitate transitions to decent work? Laura Brewer and Paul Comyn

ILO

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