Poverty reduction
Do investors prefer countries
with good institutions?
New investments in the African oil and gas sector may not be good news for ordinary Africans.
It seems in Africa exploiting corrupt countries with large natural resources is the name of the investment game. A recently published CMI article suggests that corporate social responsibility (CSR) activities of Western oil companies in Angola, feed into the institutional problems of the country, impairing rather than supporting its development prospects. Good institutions may not be in the interest of corporations. Instead, corporations view poor institutions with collective complacency.
It has been suggested that the increasing presence of Chinese companies in developing countries is one reason behind low corporate standards. CMI studies on Chinese foreign investment find that China is attracted to host economies with large natural resources, and that the worse the economic institutions are, the more attractive its resources seem to be. Chinese foreign investment appears to be attracted by the type of institutional dysfunctions which are at the core of the so-called resource curse. This is not limited to Chinese investments, however. African states with large resources and poor institutions attract more global foreign investment flows than states with solid institutions. The established assumption that foreign investment is good for a country and that corporations prefer good host country institutions, requires revision.
Communication has had high priority. The research on Chinese foreign investment and CSR in Angola has been disseminated to policy makers, the research community and the general public through seminars and conferences, reports and academic articles, and media appearances. Highlights include a presentation to the Norwegian business community in Angola in July 2009, where the results were less than enthusiastically received, and presentations in conferences in Angola, South Africa and Norway. This work builds on other research on the resource curse, which has led to the publication of five international journal articles in 2009, including a paper on transparency and corruption in World Development. Several of these articles are policy focused and evaluate international initiatives that address the resource curse, such as the Extractive Industries Transparency Initiative, and the Norwegian Oil for Development Aid Programme. The results have been communicated to high-level policy makers. Still, it remains to be seen whether or not policy makers will take the necessary steps to address the shortcomings of the current policy.
Both employers and employees may benefit from the use of social networks
Social networks and labour migration in South-Asia tracks labor migrants from villages on the Gangetic plains in Nepal and in Uttar Pradesh, to their work places in cities of India and in the Persian Gulf. The aim is to understand how people use social networks to get attractive jobs outside the village. Both employers and employees may benefit from the use of social networks. Work ethics and job satisfaction may improve as employers hire people from the same social network. The flip-side is that talented people who lack social connections may not get access to lucrative labour markets. Rich data sets on social networks and labour contracts have been collected, and will be analysed in the coming years. Village data from Nepal indicates that both caste position and the social network of the household affect the chances of getting government jobs as well as migrant jobs.
Pathways out of poverty is the focus of three projects in Nepal. CMI collaborates with the National Labour Academy looking at long term poverty dynamics, poverty traps in industries with low barriers and the role of social networks in labour migration. These studies will be expanded to India and Bangladesh.
In cooperation with the Development Workshop and the Catholic University of Angola, CMI has initiated a project on constraints to performance of micro-entrepreneurs. This is a topic that will be further pursued by the poverty reduction research group in the years to come.
