After the Pandemic Vol II: A Global Economic Recovery Roadmap

AFTER THE PANDEMIC A GLOBAL ECONOMIC RECOVERY ROADMAP VOL II | JUNE 2020 A Bookazine Edition by

A Bookazine Edition by

AFTER THE PANDEMIC A GLOBAL ECONOMIC RECOVERY ROADMAP VOL II | JUNE 2020

PUBLISHER DIPLOMATIC COURIER | MEDAURAS GLOBAL WASHINGTON, DC

Published in collaboration with the Center for International Private Enterprise

Copyright © by Diplomatic Courier/Medauras Global Publishing 2006-2020 All rights reserved under International and Pan-American Copyright Conventions. First Published 2006. Published in the United States by Medauras Global and Diplomatic Courier. Mailing Address: 1660 L Street, NW, Suite 501, Washington, DC, 20036 | www.diplomaticourier.com Library of Congress Cataloging-in-Publication Data ISBN: 978-1-942772-07-1 (Digital) ISBN: 978-1-942772-06-4 (Print) LEGAL NOTICE. No part of this book may be reproduced in any form—except brief excerpts for the purpose of review—without written consent from the publisher and the authors. Every effort has been made to ensure the accuracy of information in this publication; however, the authors, the editors, Diplomatic Courier, and Medauras Global make no warranties, express or implied, in regards to the information and disclaim all liability for any loss, damages, errors, or omissions.

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4 | AFTER THE PANDEMIC

A Global Affairs Media Network

AFTER THE PANDEMIC A GLOBAL ECONOMIC RECOVERY ROADMAP VOL II | JUNE 2020

EDITOR-IN-CHIEF ANA C. ROLD MANAGING EDITOR SHANE SZARKOWSKI ASSOCIATE EDITORS ADAM RATZLAFF MERCEDES YANORA GUEST EDITORS PAMELA KELLEY LAUDER RICHARD TUCKER ANDREW WILSON FOREWORD GREG LEBEDEV CONTRIBUTING AUTHORS KIM BETTCHER FRANK BROWN MORGAN FROST ADAM GOLDSTEIN BARBARA LANGLEY STEPHEN ROSENLUND LOUISA TOMAR ANDREW WILSON JOHN ZEMKO

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CONTENTS 09

EDITORS’ NOTE

BUILDING BACK BETTER | THE EDITORS

12

FOREWORD

LIVING WITH COVID-19 | GREG LEBEDEV

FEATURES 19

RESTARTING ECONOMIES AMID COVID-19 | KIM BETTCHER

25

THE GREAT RESHORING | ANDREW WILSON

33

CORRUPTION IS LIKE A CORONAVIRUS | FRANK BROWN

39

PROTECTING DEMOCRACY AMID THE COVID-19 CRISIS | JOHN ZEMKO

45

COVID-19 BRINGS NEW ECONOMIC CHALLENGES FOR WOMEN | BARBARA LANGLEY

51

THE INFORMAL SECTOR: FACING CRISIS ON THE OUTSIDE OF THE SYSTEM | KIM BETTCHER AND ADAM GOLDSTEIN

57

PROMOTING INCLUSIVE PARTICIPATION IN THE DIGITAL ECONOMY | LOUISA TOMAR AND MORGAN FROST

61

ASSOCIATIONS AND CHAMBERS ARE SHAPING THE POST-COVID-19 FUTURE | STEPHEN ROSENLUND

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8 | AFTER THE PANDEMIC

WELCOME A NOTE BY THE EDITORS

THE ROAD TO GLOBAL ECONOMIC RECOVERY

S

ince the early days of the COVID-19 lockdowns Diplomatic Courier has been striving to reimagine our postpandemic future. With our series “Life After the Pandemic” we set out to do something we haven’t done very often the last decade; we sent out a “Call for Articles.” The response was overwhelming and resulted in a prolific first edition that chronicled often under-recognized challenges posed by COVID-19 to the world’s societies—and the innovative ways those societies are meeting those challenges.

Since our first anthology in May, we have partnered with global leading organizations to produce monthly rapid-fire bookazine editions, which will zero in with expert focus on the fundamental changes being accelerated in the economy, education and work, governance, politics, exponential technologies, and more.

In this second volume, we partnered with the Center for International Private Enterprise (CIPE), laying out a global economic recovery roadmap that can provide guidance post-pandemic for nations and corporations for years to come.

While it took two teams working seamlessly—our Diplomatic Courier editors and the guest editors and writers at CIPE—we would be remiss if we didn’t first thank Andrew Wilson, CIPE’s Executive Director and co-architect of this edition. It was his special feature “Six Essential Themes for an Economic Recovery Roadmap” that inspired the editorial lineup for this edition.

CIPE experts across the globe have used Andrew’s roadmap to expand on these six essential themes as well as other factors that will help usher us to a global economic recovery.

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We start with a singular and overarching theme: “Restarting Economies,” where Dr. Kim Bettcher cautions us, “The complexity of restarting economies worldwide will entail more than just allowing businesses to hang an ‘open’ sign and limiting the number of customers. For starters, there may be no door.” Ultimately, policy and business leaders will have to cooperate to completely reimagine how they shape their national strategies for recovery.

In the “Great Reshoring” Andrew Wilson discusses the current risks and challenges that established supply chains are experiencing. The pandemic has greatly accelerated the need for change and diversifying risk. Policies rooted in liberal-democratic values will have a leg up in kick-starting a new era of sustainable growth.

Liberal market values are not to be taken for granted, however.

In “Corruption Is Like a Coronavirus” Frank Brown explains that corruption, just like a virus, is adaptable, pernicious, and has found the ideal conditions to flourish. And just like with a pandemic, our focus should not just be on the short-term battle of containment, but also on the long-term goal of reduction— and even eradication—of the disease.

The pandemic has produced a moment of opportunity for authoritarians around the world. While all nations grapple with the immediate crisis response, undemocratic actors are flourishing under the radar. “The world’s democracies must take a more aggressive approach to holding authoritarians accountable,” says John Zemko in “Protecting Democracy Amid the COVID-19 Crisis,” outlining opportunities to change this narrative.

We have covered extensively how in the COVID-19 world women have the most to lose. But there are even more burdens placed on women we hadn’t fully considered yet. In her piece “COVID-19 Brings New Economic Challenges for Women,” Barbara Langley vividly illustrates how the pandemic threatens to undo decades of advancement for women’s economic empowerment. No national economic recovery stands a chance if this progress rolls back.

Just like women, those outside of the system face the biggest threats. In their piece “The Informal Sector: Facing Crisis on the Outside of the System,” Dr. Kim Bettcher and Adam Goldstein examine the hidden risks to economic recovery when entire sectors of the economy—the informal sector—are excluded from stimulus and other social benefit systems. “A resilient recovery is unachievable without hearing and substantively in10 | AFTER THE PANDEMIC

cluding the voices of business owners who operate outside the formal system,” they explain.

When the lockdowns started, the digital economy’s development accelerated. Adoption of cashless practices, e-commerce, and work from home are just some of the ways businesses around the world are coping with the new normal. Louisa Tomar and Morgan Frost see “Inclusive Participation in the Digital Economy” as paramount to economic recovery. Now more than ever we have an opportunity to close this gap that permeates every sector of business and society.

So, what of the future? Look to “Association and Chambers” for solutions says Stephen Rosenlund in this concluding essay. Already, chambers of commerce and business associations around the world are taking the lead in recovery efforts around the world. They are uniquely positioned to do so as their very existence hinges on a resilient and prosperous membership.

The world around us is still in a very grim place. The pandemic has aggravated disorders that were already embedded within our systems. Yet we have much to be hopeful—even optimistic— about. Every sector, each industry is fighting a singular enemy.

Our response needs to be as coordinated as this virus.

The Editors Washington, DC June 2020

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FOREWORD LIVING WITH COVID-19

BY GREG LEBEDEV

There is an uncomfortable possibility we may have to accept: COVID-19 may be with us for some time to come.

A

dversity is an unexpected and unwelcome ingredient in life, and it necessarily prompts one of two responses, which shape our destiny. We can confront the challenge and work to redirect its negative effects, or we can capitulate to the intruder and accept the consequences. The COVID-19 pandemic presented that behavioral fork in the road, and Americans did what we have done for years. We set aside our squabbles and spirit of individuality and collectively took up the fight. For a period of more than three months, Americans did a remarkable job of recognizing the seriousness of the pandemic, isolating themselves from the illness and adopting masks and social distancing as the best medicine available.

We did what the doctor ordered, and the prescription was largely successful. But without such strict mitigation practices, we might have seen fatalities two or three times larger than the more than 120,000 deaths America has sadly experienced thus far. We have also learned that confinement can be unsettling for some and emotionally unhealthy for others. Even those fortunate enough to have a portable job, working from home can, over time, be considerably more stressful than a day at the office. And this says nothing of the horrendous impact on those who simply cannot do their work remotely or have no work at all. Lastly, the uncounted ways the pandemic and the consequential economic crisis have unevenly impacted disadvantaged communities and highlighted critical yet unaddressed issues must be explored in greater depth.

Understandably, Americans are ready to get on with their lives, but there are conflicting considerations that are getting in the way.

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Fear. There are scores of medical experts, public health officials, and miscellaneous politicians who argue that “the battle is not yet won” and to re-open too soon is to reactivate the coronavirus and invite one or more “second waves.” This is, indeed, a worrisome and fear-inducing forecast that may well be correct in varying degrees, and is unfortunately amplified by a broadcast and print media that thrive on reporting death and destruction rather than resilience and recovery. There’s no better example than the recent New York Times front page article “U.S. Deaths Near 100,000, An Incalculable Loss” that appropriately recognizes the tragic loss of life, but consciously avoids highlighting the risk of age and infirmity since more than 80 percent of all fatalities were individuals age 65 or above or otherwise medically at-risk, according to the National Center for Health Statistics. And, responding to this uneasy environment and using the “abundance of caution” rationale, some major universities and other public services are already opting to curtail activities for unspecified periods through the Fall. There is a legitimate basis to be afraid of a deadly disease, but rather than being scared straight, we’re allowing ourselves to be scared to inaction.

Economic Damage. On the other hand, it is increasingly

apparent to economists, business men and women, and even medical professionals that the longer society is locked down, the greater the damage to the economy and its citizens, and the longer the period of recovery. There are already more than 35 million Americans out of work; one in five small businesses are in danger of permanently closing in a matter of months; sustained unemployment has long been recognized as having negative impacts on worker skills, health and family stability; the national debt, as a share of GDP, will exceed the amount at the end of World War II; and reestablishing 2019 levels of prosperity is now being measured in years, not months. Even sheltering-in-place can trigger its own health conditions, as recently acknowledged by NIH’s Dr. Anthony Fauci, and this is further suggested by the report that the INOVA hospital system lost more than $100 million in revenue from elective surgeries not conducted due to COVID-19. And, the more than 90 percent of Americans whose health was never touched by the virus and those who live in the parts of the country where the disease never lingered can’t understand why it’s taking so long to move away from the temporarily helpful but economically damaging mandates of sustained isolation.

How to Re-open. Polls are beginning to confirm that a grow-

ing number of Americans are ready to get back to work, and all 50 states are re-opening in some fashion… but there’s a problem.

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It is generally agreed that the re-entry into life will be uneven because of geographic differences in the distribution of the disease and the need to deploy the appropriate precautions. There is a myriad of serious “recovery playbooks” from which to choose… but this is America, where everyone wants to do it their own way. Consequently, mixed signals coupled with mixed attitudes are the order of the day, with the result that no one really knows quite what to do.

Too Many Voices. Messages from the president, 50 state governors, and assorted other public officials and medical professionals on exactly what steps should be taken can be easily misunderstood as they use many of the same words and ideas but intend them to have different meanings. Some say re-open now; others say it’s too soon. Does a 50% capacity in a restaurant make it safe, or should they only serve outside? Social distancing makes sense but too few people carry a yardstick. If gloves really help, how do you take them off without re-contamination?

And who knows who’s wearing an effective mask, or does it matter? Medical experts are quick to discuss various combinations of the 3 T’s—tracing, testing, and temperatures—as protocols for safely re-entering workplaces or other public spaces. But the same medical community also acknowledges that tracing is best accomplished in contained populations or at the outbreak of epidemics; that antibody tests, according to the Centers for Disease Control (CDC) “… might be wrong up to half the time;” and, a former New Jersey Health Commissioner observed that “The absence of an elevated body temperature is not a seal of approval.”

Finally, the tilt toward “one size fits all” is a shaky approach to guidelines when we’re not sure what we’re trying on.

So, what are we to do? Because the economic realities, medical anxieties, and inconsistent solutions are real, they must be harmonized in some fashion sooner rather than later. There’s an abundance of expertise but a paucity of consensus, and in the absence of clear direction we (and the stock market) take comfort in the persistent conversation about the development of a vaccine… because most want to believe it will, in one stroke, resolve all of the COVID-19 problems. It would be the proverbial silver bullet!

We imagine that a vaccine will allow an accelerated re-opening of businesses without massive restructuring. It will relieve the need for so many every-day medical precautions except for the high-risk elderly. The threat of hospital over-crowding would disappear. Its mere existence would begin to alleviate the public’s fear of flying.

We could once again go to football games and we could resume shaking hands and giving hugs. In short, it would allow the world to “return to normal.”

14 | AFTER THE PANDEMIC

But there’s a rub. What if a COVID-19 vaccine is never discovered? Multiple pharmaceutical companies around the world are undertaking herculean efforts to solve the problem, but vaccines were never discovered for SARS and HIV, which have haunted populations in recent years. And as we know, it usually takes years of research to create a vaccine and even if one is developed it may not protect against all strains of a virus, as is the case with the old-fashioned flu shot that’s made available every season. In fact, former FDA Associate Commissioner Dr. Peter Pitts has observed that the coronavirus is particularly “wily” and is already mutating and may outrun immunological solutions. Finally, the hopeful conversations around a COVID-19 vaccine presuppose that the usually lengthy safetyensuring clinical trials are somehow short-circuited, that massive manufacturing and stockpiling can be accomplished overnight, and that sophisticated and equitable global distribution systems will be immediately available to allow billions of people around the world to get a ten second shot in the arm. The availability of a vaccine in the near future is not impossible, but is certainly problematic.

But there is good news! There might not be a silver bullet,

but we have an ample supply of ammunition and it resides in the strength and skills and common sense that Americans already employ: we have learned to live with risk and make plans and employ strategies that “work around” it every day. We routinely drive carefully to avoid the risk of traffic accidents, which take the lives of about 39,000 people annually. Parents closely monitor summer swimming as pool accidents account for over 7,000 deaths (mostly kids) every year. We are increasingly screened for cancer, take statins for heart disease, and mitigate myriad other serious conditions from which hundreds of thousands of people perish every year. We wear hard hats at construction sites, erect barriers at railroad crossings, install metal detectors at airports, deploy fire stations in neighborhoods, and place smoke detectors on our ceilings. In the language of today, “We got it.”

Living with risk is the game of life. We do it every day

in one way or another and, if necessary, we will learn to live with COVID-19. Immunologists will remind us that there are a variety of virus strains and other diseases with which we currently co-exist because they are not of pandemic or epidemic proportion. And COVID-19 may join that crowd as the curve flattens, outbreaks diminish, immunities are established, fatalities are brought under control, and therapeutics are developed that mitigate the severity of the disease and hopefully limit the number of fatalities.

We are now just beginning the process of emerging from the medical and economic tsunami—the twin tragedies of the DIPLOMATIC COURIER | 15

global pandemic—without the aid of a vaccine or established therapeutics. And, with or without the silver bullet there are at least five already-learned lessons to be immediately considered by public officials and citizens alike in order to successfully move from re-opening to economic recovery: • Take the necessary steps to protect the ill and the elderly, as recent experience has clearly shown that they are the primary target of this coronavirus.

• Broadly advertise the fact that with proper precautions we can simultaneously manage a stubborn virus and go about living and working in a relatively normal fashion.

• Study a couple of the best “recovery playbooks” (one of which is the U.S. Chamber’s Digital Resource Center work on “Reopening Business”), tailor the most appropriate suggested practices to the state or local circumstance, and widely communicate these as your “approved recovery guidelines” to ensure that most everyone is following the same script.

• The response to a second or third wave of COVID-19 infections—which will likely occur in some places to varying degrees—should be to immediately quarantine the problem, be they individuals, business facilities, or even neighborhoods, and follow the established protocols, but not again lockdown an entire community or a state as a twice-shuttered economy, large or small, will likely never fully recover a second time.

• Finally, since a “return to work is the return to life,” federal, state, and local officials must do everything to enable business recovery and three key steps would be to agree that facilitating “guidelines” are not intended to be mandatory regulations, provide liability protections for those businesses that “play by the rules,” and resist the temptation to tax businesses and individuals whose budgets are already broken.

Experts tell us that there will likely be other epidemics, if not pandemics. At some point we will encounter COVID-20, Ebola 2, or some other form of Swine Flu for which there will be no vaccine, and we will be expected to live with it because turning the lights out on business around the world will no longer be an option.

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The United States leads not only the global economy, but the liberal world order and mindful of those responsibilities, Andrew Wilson and his team at the Center for International Private Enterprise (CIPE)—the international NGO whose mission is to advance free market economics and democratic governance— have developed six essential themes and other factors that will not only assist governments throughout the world with the ongoing recovery, but anticipate post-recovery global risks which the United States and others will need to address in the years ahead. These big ideas and more are explored in the chapters that follow. ***** About the author: Greg Lebedev is Chairman of the Center for International Private Enterprise (CIPE) and a Senior Editorial Advisor to Diplomatic Courier.

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IMAGE BY TIM MOSSHOLDER VIA UNSPLASH.

RESTARTING ECONOMIES AMID COVID-19

BY KIM BETTCHER

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he COVID-19 economic depression will require that governments make difficult policy decisions that balance the need for short-term economic relief with longer-term goals for economic growth. As governments around the world attempt to get people back to work safely despite continued pandemic concerns, it is important to keep in mind that recovery will look different from country to country. The complexity of restarting economies worldwide will entail more than just allowing businesses to hang an “open” sign and limiting the number of customers. For starters, there may be no door.

Increasingly, multinational enterprises are announcing “work from home forever” and “work from anywhere” models. However, many countries lack the infrastructure and technology to accommodate these rapidly changing policies and there is the much-discussed relocation of value chains from China. Furthermore, there is doubt that many hopeful host countries have the infrastructure to accommodate the complex manufacturing needs associated with such a shift anytime soon. Additionally, the “informal” sector makes up more than half of total employment in some regions of the world. That may make it impossible to track, in a useful way, when millions of people are back in business or back on the job.

These are just a few of the concerns expressed by global economists and experts, including top Latin American think tanks such as Fedesarrollo in Colombia and Argentina-based Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento. These organizations warn that many citizens may be left behind if the technology and information gaps are not addressed soon… and the global economy cannot afford that. Resilience and sustainable growth will depend on new and nimble policies that juggle shifting market structures, private sector needs, and demands for a new social contract. Amid the layers of complexity, decision-makers must address this over-arching question: What are the new needs of business?

New Policy Challenges Governments the world over are looking to the private sector for answers and partnerships to address human needs and rights. In developing countries like Argentina and Colombia, that daunting task may be compounded by serious pre-COVID-19 challenges: major debt, governance issues, high corruption levels, soaring unemployment, and few reliable systems for social support.

Efforts to balance the needs of production, transportation, and service provisions with requirements for social distancing will introduce a host of new challenges for everyone. These issues represent untested 20 | AFTER THE PANDEMIC

policy needs that governments must address to help create a business enabling environment. Traditional toolboxes available to policymakers are insufficient for this new multi-faceted crisis. The challenges are not completely unfamiliar to seasoned lawmakers and businessmen, but the challenge will be in facilitating adaptation at scale.

The world’s small and medium-sized enterprises (SMEs) are at greater risk of failure than large companies, which typically have more resources. Since government bailouts are finite, policymakers face tough choices in deciding which SMEs to assist. Governments should prioritize supporting innovative entrepreneurs and “at-risk” businesses struggling to restart instead of “high-risk” businesses that may not have been competitive in the market to begin with. In addition to access to capital, SMEs will likely need some short-term tax relief and non-financial support such as information services, access to talent, and training to adapt to their new business environments.

The work of associations and chambers of commerce will be instrumental to providing this support. For example, business groups in Ukraine recently facilitated discussions with the central government on tax relief measures, while in Burma groups are collecting feedback from SMEs about how they will use resources from the country’s new COVID-19 Fund.

Creating A Better Business Environment Following short-term relief, the best way to support the small business sector will be to get the fundamentals right. This means creating legal and regulatory environments that lower barriers to business and create an ethical business environment. Although informal businesses can be remarkably resilient, their largely unmonitored and untaxed status leaves them out of many relief efforts. Their reliance on face-to-face commerce and cash-only transactions makes them particularly disadvantaged by social distancing policies. In some countries, the informal sector makes up a large and important component of the national economy. For example, in Zimbabwe the informal sector accounts for nearly 90% of the workforce. Policymakers need to find ways to support the informal sector, while staying vigilant to the drag that informal competition places on the formal economy and its tendency to undermine public goods and regulation. Recovery planning should include integrated reforms that go beyond business registration and tax enforcement to establish long-term incentives that allow formal operations.

Repairing Supply Chains Mobilizing and attracting investment will be at the heart of any recovery scheme. Yet, the Organisation for Economic Co-operation and DIPLOMATIC COURIER | 21

Development (OECD) is forecasting a 30% drop in foreign direct investment flows this year. As companies seek new offshore supply opportunities in low-cost and logistic-friendly markets, some countries can find opportunities for large-scale private investment.

As they seek to build supply chain resilience, companies will seek to mitigate business and political risks. Countries that provide stable business environments, predictable rule of law, protection of assets, and low levels of corruption will thus be attractive venues for investment. Reforms required to create this environment can be tough to push through, but COVID-19 is a rare paradigm-busting occurrence that may provide the needed political impetus.

The COVID-19 crisis has made clear that business and society need investments in health, digitalization, infrastructure, transportation, and education. Governments that are intent on encouraging innovation and global competitiveness—or conversely on protecting older, threatened industries—may be drawn to industrial policies that direct investment independent of market forces. Policies that encourage innovation and a competitive playing field should be valued over those that promote the interests of political cronies or poorly governed state-owned enterprises.

Role of E-Commerce The digital economy represents another paradigm shift for policy makers. It offers a democratization of opportunity not seen since the industrial revolution. E-commerce coupled with trade facilitation policies can be the great equalizer of globalization, allowing SMEs to trade across borders with the ease of multinationals. However, the digital divide will require a policy focus on both the macro and micro operating environments.

On the macro-side, countries will need to grapple with value-driven concepts such as freedom of information, the cashless economy, intellectual property, and data privacy. Simultaneously, programs that prepare entrepreneurs for e-commerce and internet access are needed on the micro-side. Together these elements require large infrastructure and human capacity investments as well as commitments to liberal democratic reforms in the digital space. These efforts are boosted by programs such as the Open Internet for Democracy Initiative, which focuses on digital rights and accountability issues in emerging economies.

A New Social Contract To find the right balance of growth and need, a new social contract is called for in which business plays an active role. Findings from the 22 | AFTER THE PANDEMIC

Edelman Trust Barometer suggest this is a feasible shift. People rank business highest in competence over government and non-governmental organizations, while 75% of respondents trust their employer to do the right thing. Conversely, only about one-third of people believe that business does a good job of partnering with governments or non-government organizations (NGOs) for the common good. Societies that value and embrace the private sector as a source of wealth and partnership will do better than those who see it as a golden-egg laying goose.

For their part, companies must come to the table as constructive and ethical partners. Business membership organizations including the Kenya Private Sector Alliance and the country’s national chamber of commerce are asserting leadership in working with their government on economic response frameworks. Others are organizing community relief operations. For instance, the Kurdistan Economic Development Organization has been helping local government workers sterilize streets and markets. To be sure, purpose-driven business models and stakeholder-friendly models of corporate governance will be a growing part of the landscape.

Many governments look to the private sector tax base as a politically expedient and accessible route to government finance. However, over-taxation at a time of high business risk not only drains corporations of needed assets, but also discourages the investment and long-term commitments needed to drive sustainable growth. It also overlooks the potential of business to discover innovative solutions even during recessions.

Restarting the economy presents both opportunities and perils for policymakers. COVID-19 could refocus attention on creating an economic order based on opportunity, fairness, competition, and innovation. However, short-term thinking could threaten recovery efforts. Such thinking could allow authoritarians and crony capitalist thinking to overcome the liberal order and imperil market recovery. An open, inclusive approach to economic policy can lead to growth that is sustainable, ethical, and widely shared. This will require policy leaders and business leaders to jointly seize the occasion to shape national strategies for recovery. ***** About the author: Dr. Kim Bettcher leads CIPE’s Knowledge Management initiative. Dr. Bettcher has written and edited numerous publications and resources on democratic development, governance reform, public-private dialogue, and anti-corruption. He is active with The Free Enterprise and Democracy Network (FEDN), which provides technical assistance and guidance on market reform in democratic transitions.

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IMAGE VIA UNSPLASH.

THE GREAT RESHORING

BY ANDREW WILSON

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lready tenuous economic relationships with China are being tested even further due to global outrage over Beijing’s recent crackdowns on trade hub Hong Kong and increased military activities in the South China Sea. Meanwhile, the pressures of the coronavirus pandemic are accelerating the “decoupling” of global trade and leading to reshoring efforts by a multitude of companies, including those based in the United States and Australia. Supply chains on everything from toilet paper to toys and medical supplies are still snarled following COVID-19 related lockdowns, prompting businesses to explore a return to home soil more seriously than ever before. But before citizens laud an impending influx of new jobs back home, it is important to understand how new and urgent relocation efforts may take shape, as well as the impact on global trading systems and role of emerging economies.

Rethinking Supply Chain Design To this point, the term reshoring has usually described a company’s return of overseas production facilities to its home country, home continent, or the location where the goods will be sold.

In today’s COVID-19 economy, the term reshoring is being used more flexibly to reference the move of supply chains away from dependence on a single country—mainland China in most cases now. These supply chain redesigns would not necessarily result in the return of manufacturing jobs to the countries of origin.

For many companies with China-dependent operations, reshoring conversations may include so-called greenfield or brownfield investments, which would involve moving operations to newly created subsidiaries in other countries, including emerging economies nearby. Alternatively, China Plus One strategies center around moving some assets, but not all, to new locations. In the past, experts would have been quicker to label these relocation efforts as additional offshoring to other countries or near-shoring to countries closer to home base.

Big hurdles remain for companies deliberating the change, with cost and efficiency being among the key drivers. In the United States, labor markets are expensive, heavily regulated, and energy costs are high compared to other countries. At a recent U.S. Chamber of Commerce event, CEOs of several multinational enterprises said that additional infrastructure needs could impact the return to U.S. domestic production. Building new facilities for complex operations could take up to five or ten years, which would be prohibitive. Companies also want to hear more about possible incentives for relocation and many governments are responding. U.S. officials are exploring the idea of creating a large 26 | AFTER THE PANDEMIC

reshoring fund and other measures. Japan is offering to offset construction costs for companies that build active pharmaceutical ingredient plants. In this era of advanced automation, 5G phone technology, and 3D printing, businesses also need more workforce with high STEM skills.

It should be noted that the reshoring push has been growing for years, with experts warning about overreliance on a single source for manufacturing. An estimated 180,000 manufacturing jobs returned to the United States in 2018, up from 6,000 jobs in 2010, according to trackers such as the Reshoring Initiative. Most of those were from China. Companies attracted to China years ago with the promise of perks and cheap labor now complain that the business environment there is increasingly unfair for foreign investors and heavily favors state-owned firms. They also cite stronger internal operating constraints by Beijing’s Communist regime and rampant intellectual property theft. Additionally, Chinese labor costs have increased significantly over the past decade.

Preparing New Partners Vietnam, India, and Mexico are among those already attracting China’s disillusioned investors. They and other countries can often offer foreign companies lower labor costs, often less political interference, and possibly their own forms of incentive. New overseas partners can also offer shorter transit times to other key markets, including Europe and Asian countries, where consumer demands are growing. But the constraints that previously kept these relationships from blossoming still remain. In many cases, it is the lack of a business enabling environment.

Typically, countries with established democratic institutions and more market-based economies are better positioned to accept investors with shared values. From a practical matter, top roadblocks for multinational enterprises include the lack of alignment among trading partners and differences in standards on everything from regulatory matters to parts measurements. CEOs also lament a lack of infrastructure and advance manufacturing capacity, including fair and efficient customs processes, necessary utilities, and too few skilled workers, as well as concerns about corruption. Unclear laws or documentation on ownership of land and buildings are another major issue.

Pacts and free trade areas, such as those created by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the African Continental Free Trade Area, which will create a continent-wide market of more than a billion people, are a good DIPLOMATIC COURIER | 27

start to building new business relationships abroad and finding common ground. For a lot of would-be host countries, more groundwork will be needed in the coming months and years to attract and secure capital. Even before COVID-19, many less-developed economies were already beset with serious challenges: major debt, governance issues, rampant corruption, high unemployment, large informal sectors, and few reliable systems for social support. Some now face double digit drops in GDP due to coronavirus.

Facilitating Innovation So, what will it take? In short, these countries must demonstrate improvement in the rule of law and governance matters, as well as modernize and expedite key processes to launch businesses and move goods across borders. Such initiatives must also include steps to reduce corruption and measures to foster transparency and accurate reporting mechanisms, so firms can make predictable and long-term investments. Greater public-private partnership will be key. Efforts on the ground are already underway in many countries, such as work by the multilateral Global Alliance for Trade Facilitation (GATF) and local partners. GATF is among the international organizations already working with companies on both ends of the supply chain and customs officials in numerous countries, including Malawi, Sri Lanka, and Brazil, to alleviate urgent problems and border clearance issues. Amid COVID-19 they have increased attention to moving medical supplies and implementing rapid response measures for emergencies.

GATF, which is jointly led by CIPE, the International Chamber of Commerce, and the World Economic Forum, just completed a groundbreaking project with the Colombia National Food and Drug Surveillance Institute (INVIMA). They introduced a new risk management system for inspecting and moving food and beverages through the country’s ports, borders, and airports. This should reduce the need for in person inspections by 30% and cut the time to clear goods from three days to two hours in some cases. Savings to importers were estimated to be over $8 million in the first 18 months.

The formation of business associations within sectors to foster collective action, dialogue with government, and activities related to corporate social responsibility, can be another big step. During this time of economic recovery, many governments want to hear the voice of business. Lebanon’s minister of industry credits much of its new coronavirus recovery program to recommendations by the Association of Lebanese Industrialists. Government 28 | AFTER THE PANDEMIC

officials in Kenya are reviewing COVID-19 Response Frameworks and other proposals by a number of active private sector groups.

Meanwhile, associations and chambers in Ethiopia are working with the government to create awareness about coronavirus and fundraise for the National COVID Response Fund, which will be used to increase testing capability, equip health professionals with protective supplies, and develop isolation centers.

E-commerce conditions must also improve. And factors including internet infrastructure, access, inclusivity, and literacy will be key to building and managing trade flows, as well as fostering the capacity of domestic firms to participate in trade. In many countries, including Bangladesh and Jordan, the overwhelming majority of businesses are micro, small, and medium-sized.

They also have large “informal� sectors, meaning vendors who are not registered with the government. Their activities are not easily tracked. Many sales are done with cash and at open markets among participants who do not have bank accounts. Facing prolonged stay at home orders, and even work from home forever mandates by some companies, their overseas partners must find new ways to get products to market and ensure access to reliable electronic means of moving capital. Experts, including the Center for International Media Assistance, assert that digital freedoms will become more important than they ever have been.

The internet is increasingly viewed as a right, not just a delivery method. For most people, it is now the top tool to keep them informed, alive, and employed.

Private Sector Push How can we foster efforts to facilitate trade among emerging and advanced economies? Western development and aid policies should work to help potential host nations and governments achieve these standards and norms, and to build the capacity of local private sectors to participate in the global economy. The next round of globalization should look to build an international economy of opportunity and good governance. To do so, policymakers must realize that a competing variant of globalization is being put forward by authoritarian states. The authoritarian version impedes rule of law, embraces corruption, tolerates labor and environmental abuse, and only offers economic access to the few and well connected.

The COVID-19 crisis has been used by autocrats in numerous countries, including Russia, the Philippines, and Hungary, to consolidate power. In addition to edicts controlling the economy, laws and limitations framed as medical and security safeDIPLOMATIC COURIER | 29

guards have led to increased surveillance on citizens, opposition figure arrests, bans on some political parties, and censorship.

Fact-checking and time limits or “sunset provisions” for some COVID-19 related laws are among the controls and accountability measures that the private sector in these economies should be doing or demanding in concert with civil society allies. For example, experts in Serbia, North Macedonia, and Bosnia and Herzegovina are working to analyze the gaps in governance that facilitate inflows of “corrosive capital” and may facilitate foreign meddling in the Western Balkans. They say the activities are encouraging an exodus of the best and brightest from the region.

Ensuring that quality local standards are reinforced and rewarded by the global trading system means that we must also focus on getting World Trade Organization reform right, protecting ethical business standards, and ensuring that digital trade standards reflect democratic ideals and norms. In Latin America, prominent think tanks in Argentina, Mexico, and other countries are coming together to identify specific issues that are holding back the workforce and investment in their countries. The leaders of México Evalúa, Colombia-based Fedesarrollo, and Argentinian think tank CIPPEC (Center for the Implementation of Public Policies to Promote Equity and Growth) say big technology gaps, large informal sectors, slow information, and fake news are among the major challenges in their countries.

Freedom Wins In the meantime, the International Chamber of Commerce is among those who stress that current, established supply chains are an important form of protection for frontline workers and urge decision-makers to strongly analyze alternatives that maximize resilience before making drastic moves or enacting highly protectionist policies. Such actions might invite retaliation and other unforeseen problems. Furthermore, U.S. Chamber of Commerce CEO Tom Donohue reminds that the majority of customers for U.S. businesses “live beyond our shores” and companies and governments must strike the right balance of security and risk management to ensure economic vitality. They should “see supply chains for what they are: instruments of opportunity, not conduits of risk,” said Donohue. Regarding the relationship between the United States. and China, many economists note that the two still need each other very much—perhaps more than ever before in some ways—in order to recover economically from the pandemic.

In short, promoting democracy, freedom, and trade will not be easy. But a coherent policy strategy based on liberal-democratic 30 | AFTER THE PANDEMIC

values can ensure strategic coherence and improve the chances of success to create trusted trade partners. The result will be a truly competitive global business environment that is fair to all, including American companies and American workers. Done right, this can help kick-start a new era of sustainable growth. ***** About the author: Andrew Wilson is the Executive Director of the Center for International Private Enterprise (CIPE), headquartered in Washington, DC. CIPE is home to the Trade Lab, a center of excellence specializing in trade issues. CIPE also jointly leads the Global Alliance for Trade Facilitation with the International Chamber of Commerce and the World Economic Forum. Wilson has extensive experience working with the private sector on development issues in conflict and post-conflict settings, crafting successful business strategies to reduce corruption, encouraging entrepreneurship development, strengthening business advocacy, improving corporate governance standards, and promoting economic reform.

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IMAGE BY NIELS STEEMAN VIA UNSPLASH.

CORRUPTION IS LIKE A CORONAVIRUS

BY FRANK BROWN

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s with a virus, corruption is adaptable, pernicious, and has found the ideal conditions to flourish. Real estate fraud is on the rise in Africa, along with new illicit trade schemes in Southeast Asia and shady oil deals in the Middle East and Eurasia petrostates. In Iraq alone, one Parliament member estimates that corruption now swallows nearly 90% of national customs revenue, making it a top threat to the country’s stability. In Latin America, a former Ecuadorian president is among the high profile figures caught up in coronavirus corruption scandals involving large-scale theft of ventilators and other medical equipment from public hospitals.

The elite in some countries are bribing their way into lucrative government contracts and out of quarantine situations. This endangers the health of others and further demonstrates the growing chasm between the haves and have nots.

There is growing concern that the speed and scale of COVID-19 response measures by many governments, especially those with unchecked emergency powers, are leaving countries more vulnerable than ever to new forms of corruption and fraud. This could keep lifesaving assistance and protection from those who need it the most, due to the exploitation of their evolving governance and procurement processes. With trillions of dollars pledged for coronavirus support worldwide, a significant amount of money may be lost if there is not adequate scrutiny. This makes it imperative that the international community and private sector actors push for transparency and controls to mitigate these risks.

The Pathology of Corruption The sheer volume of money being mobilized due to COVID-19 may thwart good budgeting and expenditure controls within stretched governments. Additionally, as idled companies and dormant supply chains come back to life, there will be tremendous pressure to cut corners and restore cash flow. State-owned enterprises, which comprise 22% of the world’s largest companies, may be more susceptible to corruption. Law enforcement agencies and anti-corruption compliance officers may find themselves overwhelmed by demands to loosen oversight in the name of restoring the economy. Other related developments that threaten to undermine public trust: judicial oversight confusion, possible election delays, and political finance scams or shows of favoritism, according to the International Foundation of Electoral Systems.

Developing a vaccine for COVID-19 requires understanding the pathology of the virus and how it works. The same is true for 34 | AFTER THE PANDEMIC

fighting corruption. The most effective strategy comes about from reverse engineering the mechanisms of corruption, determining the method for interrupting their progress, and inoculating institutions against future possible infection. Testing, or oversight and monitoring in this case, is key to any successful approach. Meanwhile, the United Nation’s Sustainable Development Goals have spurred increased investment in technology and automation that can improve data for analysis, monitoring, and accountability.

Actions to catch the most common forms of corruption include the diligent review of government procurement contracts, public budgeting, and state-owned industry activity. Patterns can be very telling. Specific types of real estate and insurance transactions are also red flags that may indicate illegal activity, according to anti-money laundering experts. Non-government organizations and watchdog groups, such as Transparency International, may also play a role here.

Corruption Treatment Protocols What are the treatment protocols we can prescribe for corruption in the COVID era? The pathology of the illness has been identified: large flows of public funds and goods are moving without oversight, government contracts are being steered to undeserving parties, and weakened firms are resorting to corruption as a survival strategy. The key to fighting the corruption pandemic is public and political will to continue the battle. In reducing corruption there is no substitute for good governance.

Governments and business must fast-track procurement in a transparent way that still upholds procurement and accounting best practices, including adherence to international standards and applicable local law. Public-private dialogue mechanisms, such as advisory boards and councils, can help shape laws and procedures that support healthy supply chains and keep revenue flowing. A concerted campaign by companies and government officials to underscore the need for business integrity and the risk of violating anti-corruption laws may be helpful in bolstering the resolve of compliance officers. This includes education initiatives at all levels covering legal requirements and company policies. It also requires whistleblower protections for those who report fraud or abuse.

Civil society and business organizations can offer guidance on what tools compliance officers can use to hold the line and help their companies maintain the integrity standards, such as DIPLOMATIC COURIER | 35

the Ethics 1st certification program launched at the 2019 Africa Business Ethics Conference. Another tactic is enabling private sector groups that have local, on-the-ground knowledge of the operating environment to oversee the flow of aid and in-country procurement. In previous crises, in-country businesses have been uniquely positioned to report on abuses.

One example is Thailand’s Private Sector Collective Action Against Corruption Coalition, which comprises more than 1,000 companies. The coalition has become one of many touchstones in Southeast Asia for setting standards of business integrity and the creation of robust training modules, covering everything from cybersecurity issues to overall compliance and implementation of corruption risk matrices. Their core message is that ethical companies are better positioned to cope with the pandemic, can be trusted trading partners, and can credibly voice concerns to their governments to create a fairer and business enabling environment.

Authoritarian states may require a more aggressive form of treatment. Containment and isolation are often effective strategies. The international community can contain authoritarian corruption by clearly identifying and calling out egregious behavior. Isolation—in the form of closing loopholes that allow kleptocrats to move their money to safe havens abroad—makes hiding these ill-gotten gains more difficult.

Embracing A Value-Driven Economy As with fighting a pandemic, we should not just focus on the short-term battle of containing corruption, but also on the longer-term goal of a significant reduction in the disease. Intolerance is a key weapon and there is more of a stigma attached to corruption these days. Additionally, the technologies for fighting corruption have improved over the last decade. These innovations have afforded automated detection, fast access to big data for better analyses, and immediate sharing. Among the results: more prosecutions of corrupt public officials, the rise of a “compliance culture” in corporations, and networks of media and non-governmental organizations dedicated to the eradication of corruption. While these activities may not stop all corruption, they provide a disincentive. As the saying goes, sunshine is a powerful disinfectant. *****

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About the author: Frank Brown is the Director of CIPE’s AntiCorruption & Governance Center, which focuses on innovative approaches to fighting corruption and fostering accountability and compliance measures in developing countries. Brown has an extensive background in anti-corruption and crosstrade program work, including much time in Central Asia, Russia, and Ukraine.

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IMAGE BY TOBI OLUREMI VIA UNSPLASH.

PROTECTING DEMOCRACY AMID THE COVID-19 CRISIS

BY JOHN ZEMKO

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he COVID-19 crisis is a moment of opportunity for authoritarians around the world. They see the pandemic as a golden chance to further consolidate political and economic power both at home and abroad. Meanwhile, liberal democracies, distracted by their own internal crises, may only be able to pay fleeting attention to the greatest of transgressions. Smaller anti-democratic actions that threaten to slowly erode individual and economic freedoms are even more likely to fly under the radar.

The world’s democracies must take a more aggressive approach to holding authoritarians accountable. For their part, marketbased democracies will need to prove that they represent the most effective path to restoring prosperity, opportunity, security, and resilience.

China’s actions amid the pandemic serve as obvious examples of possible exploitation attempts. After first covering up and then somewhat containing the coronavirus outbreak, China has employed “mask diplomacy” efforts in an effort to reform its image.

This involves supplying free, albeit often faulty, medical equipment and other aid and is widely viewed as a not-so-subtle move to extend China’s broader foreign policy agenda while reinforcing its networks of influence in strong-man regimes and at-risk democracies. Furthermore, China has taken advantage of global powers’ divided attention to expand its influence in the contentious South China Sea and attempted to exert greater control over Hong Kong.

Changing the Pandemic Narrative Meanwhile, populist leaders and dictators alike are changing the pandemic narrative through a variety of means: disinformation campaigns and cyberattacks, increased military activity, limits on personal freedoms, intimidation tactics, and realignment of government resources to benefit political allies and cronies or enable corruption. For example, Tanzania’s government is among those that stopped releasing COVID-19 data to the public, with leaders claiming that God helped end the pandemic there. This is despite reports from both the U.S. embassy and individual hospitals that Tanzania’s hospitals are being overwhelmed by sick people.

The range of other alarming actions includes the following: • Russia and Venezuela: Conspiracy theories to consolidate support, where the governments assert the disease was brought in by foreign powers or groups.

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• Nicaragua: Refusal to acknowledge the COVID-19 crisis and suppressing dissent.

• Saudi Arabia and Hong Kong: A crackdown on the justice system.

• Pakistan: Greater military control, including health response aspects.

• Nigeria: Budget and governance shifts, where the government recently cut the budgets of anti-corruption agencies, essentially making them non-existent.

• Foreign direct investments known as “corrosive capital,” which exploit governance gaps in recipient countries.

• Zimbabwe: Authorities are using COVID-19 as a rationale for destroying marketplaces and trading locations.

• China and Hungary: Propaganda with perceived shortcomings of democracy related to pandemic responses.

• Some countries have pressured journalists, including revoking press credentials and threatening their residency status, over articles about the COVID-19 pandemic.

In the current environment, what can freedom-supporting organizations do to help counter the potential impact of these messages and actions? While each country has its own particular institutions and situations, an effective response often requires action on several levels. The Center for International Private Enterprise (CIPE) has collaborated with entities in the private sector and civil society to identify best practices for encouraging positive reform.

These best practices are outlined below.

Fostering Change and Reform Call out bad behavior. Democratic governments must distinguish between legitimate reactions to the public health crisis and actions clearly intended to limit the rights and freedoms of citizens.

International watchdogs and their local counterparts must identify and communicate government restrictions that threaten both freedom and public health.

Encourage independent oversight. Civil society within democracies demands oversight of pandemic-related expenditures, a feature absent from authoritarian ones. For example, OnWatch in DIPLOMATIC COURIER | 41

Turkey has a COVID-19 website page that provides the public with data-driven information, including total COVID-19 cases, related deaths, recovery numbers, and figures from other countries.

Protect the role of the press. A free press, through both traditional and digital media, delivers a key check on expenditure and government decision-making and journalists must help others understand the impact. For example, The Gambia adopted new oversight mechanisms due to reporting by the Organized Crime and Corruption Reporting Project with local journalists. These journalists exposed corrupt networks and illicit financial flows that sustained the regime of toppled dictator Yahya Jammeh.

Link economic recovery success to good governance. Fact-checking and “sunset provisions” for some COVID-19 related laws are among the controls and accountability measures that the private sector in these economies should be demanding in concert with civil society allies. Many associations in Africa are embracing anticorruption and compliance initiatives, including a new business integrity program called “Ethics First” certification process, aimed at creating a network of trusted trade partners.

Global Community. International donors should enhance programs that provide support to local champions of accountability. The International Chamber of Commerce Academy and CIPE made a short, universal anti-corruption training video for business associations. They also support programs that promote digital freedoms and an open internet.

Lead by example. Market-based democracies should realize that their own citizens, as well as observers around the world, will pass judgement on how effectively they have coped with the pandemic. This will be influenced by how well their own economies recover after the COVID-19 economic emergency. The Business Fights Poverty organization is among those with a guidebook of global best practices for a COVID-19 Response Framework, to include mobilizing peers and funding for local action.

Restoring Opportunity As the debate over the impact of COVID-19 and the future of globalism continues, many are searching for guidance and assistance.

A former U.S. White House official once explained that: “…you never want a serious crisis to go to waste.” He elaborated that disasters tend to expand one’s way of thinking and ability to solve old problems in new ways. This well-known maxim is a positive message about democratic values and creative thinking in times of adversity.

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Conversely, modern authoritarians excel at identifying good governance gaps in less-developed countries. While authoritarian systems possess basic contradictions that make good governance a pipe dream, many are highly adept at utilizing and exporting “political technology,” a term created years ago by the Kremlin to describe the strategic use (or manipulation) of information via sophisticated tools and platforms. This helps explain why regimes based on coercion and suppression may at first appear stable, strong, and effective in their response to crises.

Authoritarian governments have poor track records of providing credible governance during health crises and other emergencies.

Furthermore, they are likely to utilize the controls enacted under the guise of public health and safety to continually or further limit rights and freedoms in COVID-19’s aftermath. To push back, champions of democracy must be ready to support those who act for freedom anywhere, as our own freedom and prosperity will be shaped and affected by their success in our globalized world. ***** About the author: John Zemko is CIPE’s Regional Director for Latin America and the Caribbean, which focuses on a variety of themes pertinent to the region, such as citizen security, the strengthening of democratic institutions, enhanced citizen participation, and women and youth entrepreneurship.

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IMAGE BY GERVYN LOUIS VIA UNSPLASH.

COVID-19 BRINGS NEW ECONOMIC CHALLENGES FOR WOMEN

BY BARBARA LANGLEY

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he world will not defeat COVID-19 by destroying business assets. Yet that is what is happening to many business owners around the world. Their property and livelihoods are being destroyed in the rush to implement lockdowns and isolation orders, and women business owners are being disproportionally affected. In one small country, a CIPE local chamber of commerce partner witnessed authorities violently break up an outdoor market, dispersing vendors for defying lockdown orders. They destroyed everything. The produce for sale. The display tables. Everything…leaving many women business owners with nothing and little hope of earning money.

Fortunately, the chamber leader raised this issue with a coalition of private and public sector leaders. Within 24 hours the coalition acted and the government responded with a hotline to report police brutality. This effectively sparked a cultural shift to empower women in a place where simply speaking out against excessive force has been taboo.

New Burdens on Women Despite this particular success, the pandemic’s impact threatens to roll back decades of advancement in women’s empowerment.

Women are under-represented in both the governing bodies that levy the crisis response policies and business support organizations that advocate on behalf of the private sector. Successful COVID-19 responses require policies informed by women’s perspectives because the barriers to female participation are more complex and often tied to the social norms and problems of the communities in which women live. For example, social distancing policies exacerbate women’s disproportionate burden of care for children, elderly relatives, and the home. UN estimates prior to COVID-19 valued this work at nearly $11 trillion of global GDP. Tragically, many women are unsafe at home. Bangladesh, the Philippines, and Kenya, countries that imposed mandatory stayat-home orders, are among those reporting dramatic surges in domestic and gender-based violence (GBV). UN officials are sounding the alarm bells: COVID-19 could critically undermine progress made in recent years to end GBV, child marriage, and other harmful practices in low-income countries. Unintended pregnancy and maternal death rates are also expected to skyrocket because of disruptions to reproductive healthcare access. This all underscores the need to better understand the ultimate impact of COVID-19 public health responses on women’s economic well-being. A thorough understanding of this impact should shape necessary economic and social policy responses.

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Unfortunately, sound policy is often undermined by the differing interests between the informal and registered small business sectors–both of which represent a great many women workers. In much of the world, the informal sector serves as both an entry point into entrepreneurship and the only mode of economic survival. For women, it offers a low-cost and flexible environment to manage the many demands on their time and effort. Selling in open-air markets for cash, and the “suitcase trade” of carrying products from one place to another, are for many women a lifeline. The restrictions on movement and the closing of open-air markets has put many in economic peril. While many small businesses receive government support to tide them over until the crisis wanes, these informal actors remain outside the rule of law and thus cannot access the benefits extended to registered and taxpaying businesses.

Reinforcing Gender Inequalities Many women in the informal sector lack political representation through organized business associations because they operate outside the system. Their needs often go unarticulated, and thus are given lower priority by policy makers, reinforcing gender inequalities. Few programs exist to encourage women’s participation and membership in gender-oriented business associations is traditionally low. In many cases, useful business data either simply does not exist or is not shared broadly with economic actors in developing markets.

Ten million registered women-owned businesses exist across every sector of the global economy. Most of these are smallscale businesses focused on retail, trade, and light manufacturing. A recent survey by the Afghanistan Women’s Chamber of Commerce and Industry noted that 85% of women-owned businesses had to close in order to comply with government lockdown restrictions, yet were still required to pay rent to landlords.

Ninety percent of those respondents expressed hopelessness to reopen their businesses if the lockdown order stretched beyond two or three months. Women-owned businesses, particularly those which have surpassed the microfinance level and are poised to create more jobs, often find their access to credit hampered by lending practices that are intentionally or unintentionally discriminatory. For example, collateral requirements do not often recognize assets held by women, such as jewelry or equipment. Also, bankers are less likely to offer loans using moveable collateral during times of financial crisis.

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Identifying New Opportunities Despite these challenges, opportunity can grow from black swan events like COVID-19. Imaginative entrepreneurs and policy makers alike should use this moment to further women’s economic empowerment. Building the capacity of established networks, women’s chambers of commerce, and business associations may be key. The Afghanistan Women Chamber of Commerce and Industry and the vast South Asia Regional Network of Women’s Business Organizations are among those leading efforts in their countries and regions to bring more attention and resources to women-owned businesses, usually small and medium-sized enterprises (SMEs).

Building on previous work to create women’s business agendas, the groups are recognized in their communities and are helping to exchange information between women owners, workers, and their governments about issues from social distancing policies to training and funding opportunities. The Women’s Business Resource Center in Papua New Guinea has helped more than 2,000 women since opening its doors three years ago and is gearing up a number of events and activities to support them through COVID-19 recovery. The activities include policy advocacy work to help inform leaders of women’s business needs during the pandemic. The networks are also serving as a conduit for corporate-social responsibility by organizing business leaders to donate money or personal protective equipment for medical workers. Meanwhile, several women’s chambers of commerce in Latin American countries are getting creative about providing an array of services for members, including psycho-social support such as free online yoga, music, and art courses.

As countries start to reopen segments of their economies, a realignment of trade patterns and shopping habits is invigorating digital commerce, a gender-neutral platform where women-owned businesses can compete and find scale. Building the appropriate framework for e-commerce is fairly universal and the lessons are replicable with the right tools. Women business owners can be empowered in this area by increasing internet access, particularly in rural areas, and aspiring women e-traders must be trained. Digital commerce does require a degree of formalization as electronic transfers and international shipping requirements often demand recognized citizenship credentials and associated licenses and permits. Women in many emerging economies will have the opportunity to register their citizenship and activate the accompanying civil and political rights.

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Organize and Act Ultimately the ability for women businessowners to weather the COVID-19 storm depends on their ability to organize and act. This underscores the most critical function of chambers of commerce and other business support organizations worldwide and offers a clear example of activism as a key pillar of democracy. No other system of government today offers the tools necessary for every citizen, especially those marginalized by the powerful, to organize and act on behalf of their constituents.

Given this and the competitive nature of policy development in resource-starved times, those who shout the loudest, longest, and with the most convincing argument are likely to succeed.

While COVID-19 has hit SMEs and the informal sector hardest, the nature of commerce also offers resiliency, allowing for a fast start up once conditions improve. By taking the correct steps now, we can empower women for years after this crisis is past. ***** About the author: Barbara Langley is the Director for CIPE’s Center for Women’s Economic Empowerment, which focuses on democratizing opportunity for women by fostering ecosystems for entrepreneurship. She has worked extensively with marginalized sectors of society including women, youth, and persons with disabilities around the globe.

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IMAGE BY GERVYN LOUIS VIA UNSPLASH.

THE INFORMAL SECTOR: FACING CRISIS ON THE OUTSIDE OF THE SYSTEM

BY KIM BETTCHER AND ADAM GOLDSTEIN

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he COVID-19 pandemic is particularly threatening to informal entrepreneurs and the people who depend on them.

Off the books and unable to access formal systems, these entrepreneurs are unlikely or unable to tap into health services or other relief measures. Meanwhile, workers in informal enterprises are usually excluded from social welfare systems.

It gets worse. In some countries, lockdowns implemented to control the spread of disease have completely closed essential marketplaces, often in a punitive fashion. Says the Zimbabwe Chamber of Informal Economy Associations, “whenever there is an outbreak, either cholera, or typhoid fever, informal economy workers and traders are blamed as the causes, now we have COVID-19, they are victims again.” Zimbabwe’s government destroyed informal marketplaces and vendors’ stalls because they lacked the capacity to provide sanitization and did not possess legal titles. Confidential sources in Papua New Guinea—whose identities are being withheld at their request—told CIPE that authorities enforcing lockdowns have beaten women informal traders.

The informal economy—often referred to as the “hidden” or “underground” economy—comprises anywhere from 51% to 82% of non-agricultural employment across Latin America, Sub-Saharan Africa, and Asia. The informal economy exists parallel to the formal economy as a space outside of a government’s ability to effectively regulate, protect, and tax. While it provides livelihoods as well as goods and services to millions of people, the informal sector is also associated with low productivity, low growth, tax evasion, and unfair competition.

Challenges facing the informal economy must not be ignored as we think though pandemic responses and recovery efforts. Yet its largely hidden nature makes it easy to overlook. The crisis has disrupted informal businesses’ access to supply chains and their ability to distribute commodities, increasing food insecurity. Furthermore, the informal sector will likely only grow as formal employment drops.

Business recovery will be stunted wherever informal status limits access to mainstream opportunities such as acquiring lines of credit, rights to public services, enforceable contracts, and business support services.

Public systems will be tested as tax revenues fall due to both recession and growing informality. Meanwhile, the regulatory and institutional weaknesses fostering informality in the first place could be compounded if trust in institutions drops, further accelerating entrepreneur withdrawal from formal ecosystems. Disparities in society are aggravated by the formal-informal divide and those in the informal sector are easily disenfranchised by their lack of legal rights.

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Coordinating Solutions Methods for coping with disruption can be found within the informal sector itself. These methods, particularly ecosystem approaches, digital solutions, and collective action, offer hope for more innovative solutions suited to the needs of informal communities. Ultimately, building bridges to formality will offer the best opportunity and strengthen public systems.

One way to understand the specific problems and assets of the informal sector is through an ecosystem lens. In 2018, the Center for International Private Enterprise (CIPE) and SITE Enterprise Promotion mapped the ecosystem in Mathare, an informal settlement in Nairobi. The purpose of this exercise was to link Mathare and the greater Nairobi economy, to engage entrepreneurs collectively in policy dialogue, and to understand the barriers facing entrepreneurs. These barriers included public waste management, sanitation, electricity, clean water, and storage space for perishable goods—all of which have implications in a public health crisis.

Having identified ecosystem gaps, CIPE and SITE convened public-private dialogue in search of solutions. This dialogue revealed opportunities for better planning and linkages. The county government committed to include the community in the budget planning process and to set aside open spaces that can be used for trading spaces. A process for allocating workspaces had the advantages of facilitating service delivery to business clusters and facilitating business linkages to the greater Nairobi economy. On the groundwork of the ecosystem initiative, SITE formed a partnership with the county chamber to link outside businesses with distributors in the Mathare market. Members of a stakeholder advisory group have continued to engage ward managers and sub-county administrators to allocate trading spaces and improve water and sanitation services.

Digital solutions might seem beyond the reach of informal business, but in recent years relatively sophisticated platforms have appeared. Twiga Foods combines a mobile ordering platform, a licensed distribution facility, transparent pricing, and financial services to bring informal vendors into the formal market for produce and other retail goods. Another successful digital platform is Lynk, a website and smartphone application connecting independent service workers such as cooks, electricians, and plumbers to households or formal businesses seeking specific services.

These platforms have evolved, gaining functionality to build confidence in transactions, thereby demonstrating the informal entrepreneur community’s capacity to work and collaborate outside of public regulation.

Thus, the digital market offers new opportunities for market entry and relationship building. Mobile phone banking platforms could facilitate access to formal financial services—as M-Pesa did—by reducing the DIPLOMATIC COURIER | 53

transaction costs of serving informal business and allowing businesses to build credit histories through digital payments. A cashless economy also facilitates transparency and auditing of transactions for compliance with tax laws and other regulations. Although growing linkages to formal financial services are indeed welcome, it is important to remember that the path to innovative financial services still depends on an enabling regulatory environment for e-payments and fintech, and that the growth potential of financial customers is still tied to their legal status.

Ecosystem analysis and digital platforms offer ways to coordinate solutions to the business and social challenges facing informal entrepreneurs. Yet successful coordination of solutions requires a third element: the organization of informal business, principally through associations.

Throughout the COVID-19 pandemic, CIPE has observed business associations leading and coordinating business responses, sometimes being better informed and prepared than governments. Informal sector business associations continue to actively inform members about safety practices and financial relief, conduct charitable relief efforts, and communicate priority business needs to policymakers.

Zimbabwe’s informal vendor associations are advancing advocacy efforts to draw attention to the sector’s struggles. A joint statement endorsed by the Vendors Initiative for Social Transformation, Bulawayo Vendors and Traders Association, National Vendors Union Zimbabwe, and ZCIEA calls for an “immediate stop to the demolitions across the country.” The statement highlights the situation in Gweru, a city in central Zimbabwe, where the government gave informal traders a single day to empty their stalls. The short notice, along with a lack of capacity to secure transport and storage, meant that many of their goods were destroyed. For a poor business community, needlessly losing what little capital they possess will prove devastating in both the short and long-term. In response, the associations called on the government to provide alternative trading spaces and to consult representatives of the sector as it creates new policies. Town hall meetings organized by CIPE in collaboration with ZCIEA could be a model for consultation, as could participatory decision making. The bottom line is that an inclusive democratic decision-making process is required to better empower the informal sector.

What Can Be Done?

Economic informality has persisted through decades of attempts to suppress or reform such activity. There are no quick fixes and no universal answers. However, CIPE has compiled the following list of lessons from its work with on-the-ground partners and extensive literature reviews. These lessons can help mitigate harm, open up opportunities, and promote inclusive market systems.

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• Heavy-handed enforcement of legal and tax compliance displaces business and threatens livelihoods without solving the problem.

• Informal associations and networks facilitate information and resource sharing and access to services.

• A mix of positive and negative incentives is required to shift business behavior toward formal compliance and away from undeclared activity.

• Most micro-enterprises are not suited for growth and therefore will not benefit from formal status. It is better to offer informal business owners social protection than to push them into formality.

• Creating linkages to formal value chains may be an effective way to encourage and enable greater formalization with its attendant benefits.

• Short-term financial relief may save some businesses with low cash reserves, but it is important to use policy-reform to build resilience and a more robust business ecosystem.

• Consultation and innovation will produce some of the most effective arrangements that promote efficiency, meet informal sector needs, and promote complementarity with formal systems.

A resilient recovery is unachievable without hearing and substantively including the voices of business owners who operate outside the formal system. Democratic governance can produce policies that increase economic activity and mitigate poverty in informal communities. Consultation, citizen participation, and collective action through informal sector associations create the space to build capacity, negotiate rules that work, and build commitment to public services and market solutions. Informal entrepreneurs are resourceful and can provide solutions if the system extends them an opening. ***** About the authors: Dr. Kim Bettcher leads CIPE’s Knowledge Management initiative. Dr. Bettcher has written and edited numerous publications and resources on democratic development, governance reform, public-private dialogue, and anti-corruption. Adam Goldstein is the Program Associate for CIPE’s Knowledge Management Department, with a main focus on association development work and activities of the Free Enterprise & Democracy Network (FEDN).

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IMAGE BY GERVYN LOUIS VIA UNSPLASH.

PROMOTING INCLUSIVE PARTICIPATION IN THE DIGITAL ECONOMY

BY LOUISA TOMAR AND MORGAN FROST

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T

he digital economy, broadly defined to include the digitalization of all economic activity for individuals and businesses, can be an important driver of democratic and economic development. Leveraging online marketplaces to democratize economic opportunity creates new market channels for local businesses, promotes inclusive trade, and boosts tax revenue to expand access to essential services. The COVID-19 pandemic has accelerated the scale and necessity of the digital economy, as internet connectivity and the digital ecosystem around it have become indispensable for access to information, communication, and conduct of all forms of online commerce.

Since the beginning of the pandemic, online data traffic has risen by 20%, while the use of communications platforms has more than doubled. Livelihoods and businesses are reliant on the internet and online transactions for everything from working remotely to marketing products for shipping or curbside pickup and delivery. This crisis boosted the use of social media platforms for commerce and precipitated wider adoption of e-payments, as central banks and governments encouraged consumers in India, Indonesia, Georgia, and several other countries to go cashless to limit the spread of COVID-19. An e-commerce platform Jumia, a Nigerian-based company operating in 11 African countries, adapted its business for COVID-19 recovery by reducing fees for its e-payment service, JumiaPay, and offering African governments the use of its last-mile delivery network to distribute supplies to healthcare facilities and workers.

The Need for Policy Dialogue on Frameworks The pandemic has also underscored the digital divide. Across the globe, there is deep concern that small businesses unable to move operations online may not survive. Yet, many entrepreneurs and businesses still have difficulty just navigating unclear, conflicting, or non-existent legal frameworks that govern entry into the digital ecosystem. This has created an enormous need for new or betterdefined policy frameworks, laws, and standards that are rooted in supporting digital inclusion, streamlining tax laws, and protecting consumer privacy.

National policies, laws, and regulations governing the digital space heavily influence development outcomes. It is increasingly clear that the benefits of technological innovation and the digital economy have not been equitably distributed or felt by all people, economic sectors, or countries. As economic activity increasingly takes place online, local business communities must have a say in how the rules and regulations for e-commerce and digital trade are designed and implemented to ensure their participation and sustainability on- and offline.

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Chambers of commerce and business associations around the world are important vehicles for reform, especially in times of crisis, such as the COVID-19 pandemic. To address the urgent need to facilitate this kind of multi-stakeholder dialogue around policies governing the digital economy, CIPE and New Markets Lab developed an in-depth legal and advocacy resource, the Digital Economy Enabling Environment Guide: Key Areas of Dialogue for Business and Policymakers.

The guide was designed to facilitate a greater understanding and dialogue around key legal and regulatory considerations, and has been used to support public-private dialogues on digital transformation in Kenya, Ethiopia, Bangladesh, and Tunisia. Additionally, in 2019, the Government of Kenya released the Digital Economy Blueprint outlining its official national strategy for digital transformation, in which it referenced the guide for promoting local private sector engagement in the policy development process.

Challenges and Opportunities Ahead The nature of technology policy and digital transformation is complex. The rapidly changing technology landscape also means that the terminology of key elements within the digital economy and policy solutions in this space continue to evolve. For example, data privacy is now a fundamental component of consumer protection legislation, while data protection and cyber resiliency is now a cornerstone of national security and tend to involve numerous public agencies and international trade agreements.

Urgent policy changes are needed in the wake of COVID-19 to ensure that the digital economy is developed in a way that advances democratic values and access. This requires coordinated multi-stakeholder efforts at a local level to ensure diverse participation in policy development and implementation. Such efforts must include local business communities, women, and marginalized groups that are too often excluded in the decision-making processes that affect their lives and livelihoods.

Moreover, international discussions that shape global norms and standards of the digital economy still have insufficient participation from local business communities and marginalized groups, undermining efforts to resolve persistent divides and policy gaps. To realize an equitable post-COVID-19 recovery, the inclusion of local business communities in regional and global dialogues that focus on the digital economy is essential. ***** About the authors: Louisa Tomar and Morgan Frost are Program Officers on the Global team at the Center for International Private Enterprise (CIPE) specializing in public policy on the digital economy, internet freedom, and women’s economic empowerment.

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IMAGE BY ANDRE SERANO VIA UNSPLASH.

ASSOCIATIONS AND CHAMBERS ARE SHAPING THE POSTCOVID-19 FUTURE

BY STEPHEN ROSENLUND

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C

itizens around the world are looking primarily to governments to help them restart their economies. However, economic recovery is dependent on how businesses perform, produce, and hire. Chambers and associations exist to be champions for the interests of their member groups and thus are uniquely positioned to understand how the COVID-19 crisis is affecting businesses, identify solutions, and convert them into actionable policy recommendations for governments to catalyze change. Chambers of commerce and business associations thus have the opportunity and responsibility to assume a leadership role in getting the global economy on track.

This is already happening around the globe. Chambers of commerce and business associations in the United States, Kenya, Ukraine, Lebanon, and Venezuela are among those that quickly submitted COVID-19 response policy recommendations and proposals to administrations. These have included specifics on possible stimulus packages, tax breaks, and better banking access for citizens, to name a few ideas. Groups are using a variety of platforms to get their message across: videos and podcast interviews in Egypt, surveys in Slovakia, articles in Ethiopia, and position papers in Yemen.

Business-Led Solutions Business membership organizations around the world have taken prominent positions on government commissions and task forces to address a variety of issues, including to help formulate the conditions for lockdowns, set parameters around reopening businesses, and design economic recovery strategies. Groups and coalitions of every size and sector, from the Nigeria SME Business-Owners Working Group to the Confederation of Indian Industries, have been articulating agendas to shape the roadmap for reopening economies and resuming economic growth.

Meanwhile, businesses are looking for leadership to navigate the crisis and emerge intact and even stronger on the other side, especially the millions of small and medium-sized companies with limited resources.

Advocacy under such extraordinary circumstances has various dimensions and requires careful balancing of interrelated interests in record time. Much of the current COVID-19 response work by chambers and associations has fallen into four categories, which are aligned with core and current functions of membership-based business organizations. As Union of Ukrainian Entrepreneurs Executive Director Kateryna Glazkova recently said, “Associations are made for times like these.�

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Policy Advocacy. As the pandemic hit, business organiza-

tions around the world have utilized existing networks to perform quick assessments and offer economic policy recommendations and other assistance to governments. Key actions included: • Tracking needs. The Global Alliance for Trade Facilitation, already conducting projects in Colombia, Brazil, and other countries, had teams poll customs officials about their most urgent supply chain and border customs clearance issues, with a focus on food and medical supplies.

• Coordinating with governments. Business associations in Ukraine facilitated discussions with the central government on how to provide tax relief for businesses.

• Promoting openness. In Lebanon, a “Transparency Saves Lives” campaign by the Lebanese Transparency Association is urging the government to keep charitable work and procurement transparent and incorporate anticorruption measures.

Information. Chambers and associations should help mem-

bers and other stakeholders cut through the clutter and curate relevant, timely, and needed updates, as well as analysis, perspective, and guidance. Outreach related to coronavirus: • Analyzing. In Egypt and Ethiopia, CIPE staff and partners are releasing economic analyses in news articles and podcasts.

• Updating. On Watch in Turkey uses online and social media platforms to issue current and accurate information about COVID-19 matters. Kenya’s Private Sector Alliance launched a digital portal and toll-free call center for businesses and associations.

• Connecting. In Tunisia, IACE (Institut Arabe des Chefs d’Entreprises) sends daily email updates to members and policymakers. It also creates informational videos and provides analyses on economic impact and potential solutions.

• Resource sharing. The U.S. Chamber of Commerce, the world’s largest independent business federation and an affiliate of CIPE, produces frequent web events, workshops, toolkits, and many other resources for businesses to augment its advocacy work.

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Services. Chambers and associations must also help entrepre-

neurs and companies build capacity–more essential than ever as many businesses are under threat of failing. Examples amid COVID-19 include: • Training. In Jordan, Business and Professional Women-Amman is conducting an online training series for members via Facebook on business and personal development during the crisis.

• Consulting and partnerships. In Georgia, the European Business Association and the HR Professionals Association offer joint webinars and consulting to companies shifting to telework. The Georgian Retailers Association distributed masks, gloves, and hand sanitizer to members, which are mostly small grocery stores that remain open.

• Expanding. In Guatemala, CIEN (Centro de Investigaciones Economicas Nacionales) has increased its online presence to monitor government response to the pandemic and held a press conference on citizen security via Facebook Live.

Corporate Social Responsibility. Chambers and associations are providing leadership and delivering services and resources to their communities. Recent philanthropic efforts: • Volunteering. In Iraq, volunteers from the Kurdistan Economic Development Organization help local government workers sterilize streets and markets every day.

• Donating. In Lebanon, the Association of Lebanese Industrialists and Beirut Bar Association are providing $100,000 worth of sanitizing supplies to prisons, to help prevent an outbreak within incarcerated populations.

• Coordinating. In Tunisia, the Union of Small and Medium Industries is helping to coordinate business and civic responses in the coastal city of Sfax. Reponses range from possible fabrication of hospital pumps to educational radio segments.

Public-Private Partnerships The voice of think tanks and other interest groups are also getting louder. Many are helping to collect valuable information and data about the impact of COVID-19 and community needs.

For example, the Center for Indonesian Policy Studies is providing analysis on regulatory issues related to coronavirus and food 64 | AFTER THE PANDEMIC

security. Think tank Vérité in Sri Lanka hosted a forum about government response to the coronavirus with select Members of Parliament. Meanwhile, México Evalúa has been providing analysis to media outlets about the impact of the pandemic on state-owned enterprises in the energy sector.

Governments need input from these civil society organizations to strike the right balance between appropriate restrictions to protect public health and the imperative of economic activity that underpins sustainable livelihoods. The pandemic dramatically upended the terrain for business operations and decision-making, denying businesses and investors the predictable business enabling environment they crave, and we have not seen the end of the crisis yet. While some degree of government intervention is appropriate in most cases, there is a danger that some governments may seek to use the crisis as a cover to exert greater control over market economies. Business advocacy organizations like independent chambers and associations thus find themselves presented with unfamiliar advocacy challenges, all within vastly accelerated timelines that defy normal policymaking cycles.

Shaping the Future It helps for organizations to have clarity of purpose during times like this. As always, an organization’s mission and strategic plan should guide its work, but a plan is only a platform for the response which needs to be adjusted and adapted to ensure relevance. The most successful organizations are using this crisis as an opportunity to fundamentally revisit how they do business—focusing on what really matters to their members and jettisoning what doesn’t. This brings home the need for good governance within organizations, where directors, in partnership with staff executives, are not just fiduciaries that provide oversight but also bring the critical insights and foresights to set the course for a successful future.

As a recent Boardroom article put it, “In the past years, associations, no matter where they are based, no matter how big or small, have had to face challenges: loss of market share, exponential changes in technology, higher member expectations, increased competition, diverse member markets.” Because of the pandemic, however, almost every sector in every country is in crisis. Think tanks, chambers, and associations are needed now more than ever to support the economic recovery that is so critical to a prosperous future. ***** About the author: Stephen Rosenlund, Esq., CAE, IOM, is CIPE’s Deputy Regional Director, Middle East and North Africa. He manages various chamber and association capacity building programs in the region.

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CHRONICLING COVID-19 What the COVID-19 pandemic has done— as most crises do—is magnify socio-economic inequities. It’s no news that we live in an age of paradoxes: we produce enough food to feed the entire world, but people still go to bed hungry. Healthcare innovators are extending our lifespan, but people still die from preventable diseases. Online education has never been more robust and abundant, but it remains inaccessible to those without a device or data plan. At all levels, this pandemic is testing what kind of a society we want to be. “Life After the Pandemic” is an anthology of essays that chronicle our society’s response to the challenges exposed so that we don’t just go “back to normal” but back to better.

In this second volume, we partnered with the Center for International Private Enterprise (CIPE), laying out a global economic recovery roadmap that can provide guidance post-pandemic for nations and corporations for years to come. www.diplomaticourier.com