Increasing geopolitical tensions from the end of the 2010s gave rise to a technological Cold War. In all likelihood, whichever world order—liberalism or authoritarianism—achieves technological supremacy will be able to fend off its challenger. This chapter aims to understand which world order is better suited for driving and maintaining innovation. To do so, we take historical factors that have shaped past waves of innovation and review these alongside data from the Atlantic Council’s Freedom and Prosperity Indexes. This chapter finds that, even though the liberal order seems better positioned to foster technological innovation, there are ways in which authoritarian regimes can elbow their way into innovation. 

Introduction 

As different worldviews have become increasingly wary of each other, the basic geopolitical fabric of the last few decades has been remade. Throughout the 2000s, the Western worldview appeared to run out of steam, particularly after the 2007 and 2008 financial crises ravaged the welfare of citizens in the West. Increasingly, Western leadership fell out of touch with everyday citizens by burdening them with failed policies aimed at generating economic prosperity. And citizens seemed to regard their leaders as hypocritical elites that did not care for the general welfare of the population. Meanwhile, nationalistic movements, such as the Brexit campaign and referendum in the United Kingdom and the Make America Great Again movement, seemed appealing to voters in the Western world—even if, or precisely because, these movements appeared to break with the status quo. 

As events in the Western world appeared to be dismembering the liberal order, authoritarian leaders seemed encouraged and determined to out-compete the West. Vladimir Putin, for example, moved to break the “rules-based world order” by invading Georgia in 2008 and annexing Crimea in 2014. In China, Xi Jinping broke with his country’s political norms by extending his period as prem-ier, accelerating the “integration” of Hong Kong, and increasing the threat of annexation of the territory of Taiwan. Even the COVID-19 pandemic, in the beginning, appeared to be making the case for authoritarian regimes, as President Xi seemed to have controlled the spread by implementing a draconian “zero-COVID” policy; and both Russia and China seemed to be able to produce vaccines within the first months of the pandemic and mandate inoculation of their populations, bypassing the bureaucracy that appeared to stifle the West. 

Even if, in retrospect, both China’s COVID pandemic blunders and failed imperialistic exercises like Putin’s invasion of Ukraine have removed some of the bravado from authoritarian leaders, it is still unclear how the events of 1990–2020 will remake the geopolitical fabric. What appears increasingly clear is that scientific and technological tools, such as the ones used to create a vaccine in record time or monitor public compliance with draconian measures like “zero COVID,” will become extremely important in shaping the new geopolitical order. 

Emerging technologies, such as online social media and its “rabbit hole” of recommendation algorithms, allowed anti-liberal movements to occur. For example, machine learning and artificial intelligence technologies allow the Communist Party in China to keep track of its citizens and enable the diffusion of misinformation and propaganda. Moreover, this technological revolution powered the development of know-how to harness existing chipsets, new chip architectures, and investment into new technologies like artificial intelligence and machine learning. Thus, a “new arms race” between world superpowers has emerged as theoretical research has shown these new technologies—like quantum computing—could upend our current encryption technologies and supercharge machine learning development. 

However, it is precisely the development of these technologies that is enabling the discovery of new, lifesaving drugs, improving the efficiency all sorts of manufacturing techniques, and allowing more people access to all kinds of information; they will also allow humanity to simulate and explore the farthest reaches of space and look into unimaginable places like black holes. Furthermore, emerging challenges, such as the climate crisis or the new space race, have allowed technologies such as nuclear fusion and reusable rockets to emerge. But, once again, the question will be whether countries use these innovations to bolster prosperity or curtail freedom; this will be the choice that remakes the geopolitical fabric of the days to come. In short, technology and the way it is used will tilt the balance of power in this new era. 

Because of its importance in shaping the new world order, the question “Which order—liberalism or authoritarianism—is better prepared to foster technological innovation?” deserves some consideration. Below, we compare factors that social scientists deem relevant to innovation. By reviewing these factors through a historical lens, this chapter aims to help readers form an opinion of which worldview is better positioned to foster innovation. In addition, this chapter informs policy recommendations by taking a data-driven view of the positions of the different orders, and outlining factors that might help technological innovation. 

To be clear, this author does not believe there is a clear path to technological innovation. Because the liberal order of the nineties itself aimed at spreading freedom and democracy through the free market and flow of information, much of the world we still live in now is connected; a large portion of the products we use in the West are manufactured in China, with processes developed in the West, coupled with locally grown know-how. As much as talks of “decoupling” and “reshoring” are happening now, disentangling manufacturing, value chains, and knowledge networks created during the “golden age of liberalism” will be difficult, if not impossible. Because the information has flowed freely during the last decades (at least from West to East), it is nearly impossible to know which world order will harness this information in the best possible way. But the exercise within this chapter aims to understand which is the most fertile ground for innovation in an era of decoupling. 

Determinants of invention and innovation 

Innovation is social by its very nature. Social factors are the ones that will ultimately determine which societies nurture or discourage innovation. As Joel Mokyr puts it, summarizing Joseph Schumpeter’s argument: “The enemies of technological progress were not the lack of useful new ideas but social forces that for one reason or another tried to preserve the status quo.”¹

Conditions conducive to invention and innovation can be broken into the individual component and, for lack of a better term, the environmental component. However, the individual part is probably the most difficult to quantify, as doing so requires measuring the ingenuity required for invention. As such, this chapter will turn its attention away from this component. 

On the other hand, even if not entirely quantifiable, environ-mental features can be assessed to a certain degree. To further our analysis, we will divide such environmental issues into two elements: one related to aspects of societies that may affect the individual or their behavior, and a second related to the “structure” of the society in which he or she lives. The former includes values, willingness to accept risk, attitudes toward science, and resistance to innovation. The latter involves demographics, labor costs, politics and the state, and path dependency. 

Factors related to innovation 

Demographics. Adam Smith, in The Wealth of Nations, observed that the demographics of a specific population were essential determinants of technological innovation.² Smith’s concept of innovation referred to the generation of know-how in production. Smith argued that the larger the population, the more specialization in labor; and the more specialized the labor force, the more know-how the workforce would develop. In sum, Smith argued that large populations tend to be more innovative. 

Labor. Another factor—closely related, yet contrary to Smith’s demographic argument—is the size of the labor force. It can be said that the larger the labor force, the cheaper this factor of production (labor) will be. Because this production factor is cheap, there will be fewer incentives to complement or substitute work with technology. In this manner, the argument contradicts Smith: the larger the population, the less innovative it will be. 

Risk. The argument related to risk also has different shades. First, societies more averse to risk can develop innovation through constant, incremental steps. However, societies more prone to taking considerable risks could reap the rewards of larger innovation bets, possibly resulting in paradigm-shifting innovations. As such, Mokyr argues that it is precisely societies that are less averse to riskier, long-term projects that are more conducive to innovation.³

Science and technology. Closely related to risks are attitudes towards science and technology. Societies like Germany and France have a long-established tradition of producing theoretical research.⁴ Such practices might be more conducive to incremental innovations. On the other hand, societies like the United Kingdom and United States, although they have now developed and become established in their theoretical research capabilities, have been better positioned to create innovations through engin-eering: a more hands-on approach to innovation. Such a modus operandi might allow these societies to innovate by “thinking out of the box.” 

Values. Attitudes toward risk and science and technology are part of a multidimensional set of values, which might also include “aspirations.” Graduates from Western universities might aspire to work in the tech sector, for example. Another critical value is the appreciation of diversity. For example, Mokyr argues that more inclusive, diverse societies have historically tended to incorporate and improve upon innovations coming from outside, thus providing a potential boost to innovation.⁵ The corollary is that more inward-looking communities tend to overlook innovations from outside, potentially curtailing their potential applicability. 

Even if not exhaustive, this list of behavioral factors allows us to, if not understand, at least sketch a society’s attitudes toward innovation. Behavioral factors and individual ingenuity shape a society’s attitudes toward innovation. However, this is only one part of the picture. A society’s structural factors, those affecting an individual’s system of incentives, make for the other part. 

Institutions and property rights. The mechanism through which property rights incentivize innovation is simple. By protecting property rights, the innovator can exploit the rights to their cre-ation. Simply put, it incentivizes innovation by cre-ating a monopoly over the invention. This rationale assumes the inventor knows how to exploit their innovation, which is only sometimes true. Together with property rights come institutional strength. Among the different roles institutions play in society, one is the protection of such property rights by ensuring the law is observed. Other roles include creating a level playing field through regulation, or supporting promising innovations to make it to the market through financing. Most relevant, good institutional strength will ensure markets operate as well as possible, thus incentivizing the innovator by creating conditions for their inventions to be commercialized. In sum, a healthy institutional environment will protect the innovator and create the right conditions to make their creation reach its full potential. 

Politics and the state. Closely related to institutions is the way in which politics and the state operate. It is usually the political process that slowly but surely impacts the operation of institutions. A political process separated from institutions will allow the latter to function in as frictionless a way as possible. If, on the other hand, politics interferes with the dynamics of institutions, their operation will become distorted. Such distortions will indeed modify the incentive structure, thus stifling innovation. 

Path dependency. Even if not frequently discussed, path dependency is likely one of the essential factors in determining innovation. Path dependency refers to the ways in which decisions made in the past impact and constrain current and future decisions. As such, countries that enjoy higher levels of innovation because of higher institutional strength, leaner political processes, or the right amount of state intervention are more likely to continue enjoying such high levels of innovation. On the contrary, countries where institutions are weak, or where the political process and state regu-larly interfere with institutions, are likely to follow their path and continue experiencing low levels of innovation. It is worth noting, however, that path dependency is not a “law,” and structural changes may allow a country to set a new course. But alas, this is rarely the case. 

Our brief review shows that most behavioral and structural factors conducive to innovations are closely entangled. It is often the case that unique behavioral characteristics, such as an appetite for risk, affect structural elements such as institutions. And because of path dependence, the relationship between factors is circular, making it extremely difficult to point towards a single factor conducive to innovation. Because of this, we need to clarify which worldview might be better prepared to foster the next wave of technological innovation. Our aim in the following section will be to review, rather than evaluate, the differences between liberal and authoritarian regimes to paint a picture of the current state of factors conducive to innovation in these two different worldviews. 

The road to technological domination 

Historically, the factors discussed above interact in complex ways to determine technological innovation. It is worth noting that no single factor can predict which worldview might dominate over the following decades. However, a simple survey of several pre-requisites for innovation will allow us to understand which worldview is better positioned to develop technology in the years ahead. 

As an illustrative exercise, we will use components from the Freedom and Prosperity Indexes to generate a single composite indicator of factors conducive to innovation, which will allow us to understand which countries, with their regimes, are better positioned to sustain innovation. The exercise will not be entirely rigorous and will necessarily lack some important indicators of technological progress. As such, the reader should take this exercise with a grain of salt. Nevertheless, it will still prove helpful for building a quantitative understanding of the different worldviews’ standing and approaches. 

Specifically, this exercise will use the following components as imperfect proxies for the abovementioned features. But, again, this experiment intends to illustrate rather than provide definitive answers. 

• Investment. Among other things, investment flows can indicate the existence of potential innovation projects— whether privately or state led. As such, they can be an important (if highly imperfect) measure of risk, as every project will have a risk profile, and some certainly involve a science and technology aspect.
• Productivity. This exercise uses a constant total factor productivity measure. Labor and capital are both measured, and one of the factors includes technology. Because of this, productivity can be considered a proxy for both labor and science and technology.
• Education. The intention of including education in our exercise is to use it as a proxy for science and technology and, even if tangentially, to help assess specific attitudes and values; for example, it would be expected that societies that value education more highly might have greater chances of producing innovations.
• Property rights. The measurement of property rights is the most straightforward. Protecting property allows the inventor/innovator to safeguard and exploit its creation. The greater the protection of such rights, the larger the incentives for innovation.
• Trade freedom. Trade allows for the free exchange of goods and, alongside, ideas that might be relevant for innovation. Moreover, it provides access to different markets, thus creating incentives for inventors/innovators.
• Minority rights. In our exercise, this indicator serves as a proxy for attitudes toward the inclusion of minorities. As discussed above, the inclusion of minorities might help innovation by enabling the exchange of different ideas.
• Political freedom. This indicator is used in this exercise as a proxy for the state and the degree to which it intervenes in markets and institutions.
• Legal freedom. This indicator is a proxy for the functioning of a country’s institutions, and how their interaction with political freedom will affect the incentives inventors will face.

Because this is only an exploratory exercise, it must be understood that: (a) Many previously discussed factors still need to be included. (b) Many of the chosen variables have overlapping factors. And (c) many of the factors are heavily correlated among themselves. For these reasons, our indicator will only take the average of these components to show where we can expect a fertile ground for innovation in the years to come. 

At the outset, we use the scores from the Political Freedom sub-index (of the Atlantic Council’s Freedom Index) to group the countries into four categories: Free, Mostly Free, Mostly Unfree, and Unfree. For any given year, a country that scores more than 75 in Political Freedom would be classified as Free. A score between 50 and 75 will be Mostly Free. A country that scores between 25 and 50 will be categorized as Mostly Unfree. And finally a score below 25 will be classified as Unfree. In addition to the abovementioned caveats, it is essential to underscore that cutoffs between categories leave countries that might reasonably belong to another category. However, once again, the aim is to provide a picture rather than explicitly and irrevocably offer a causal explanation. 

Figure 1 shows the number of countries in each of the four categories. Because of nuances in the methodology used by different sources to produce the Index, most of the countries in the sample are categorized as Free. Also, because of the temporality of the Index, changes in the number belonging to each category cannot be fully appreciated. Because of this, the more informative graphic in Figure 2 tracks the changes in the number of countries of every type. Figure 2 shows that the number of Free countries plateaued in the early 2000s. Interestingly, in the first decade of the 2000s, the number of Unfree countries decreased as the number of Mostly Unfree countries rose. However, looking further into the decade of the 2010s, a wave of undemocratic movements begins to make gains. 

When looking into the average of factors conducive to innov-ation (investment, productivity, education, property rights, trade freedom, minority rights, political freedom, and legal freedom), Figure 3 shows that Free countries are ahead of any other classification. Moreover, these trends appear not to change over time. However, when looking at percentage changes using 1995 as an initial base, as in Figure 4, the Unfree world appears to be making gains after 2007. This trend is fed by the increased number of countries in the Unfree category but also coincides with the backlash against the liberal order caused by the 2007 and 2008 financial crises. 

A possible explanation for this change might be that one component dominates or distorts our composite indicator. For example, when we look at one factor alone—investment (shown in Figures 5 and 6)—the investment score in Unfree countries increased by almost 20 percent compared to the beginning of the financial crisis. 

The trends presented in this exercise reveal that the Free world still holds an enormous advantage in some factors conducive to innovation. They also show that whatever shortcomings different worldviews might have, these can be compensated to a great extent by effective policies, including investment. Below, we discuss the factors and potential advantages that each worldview might have. 

Discussion 

A quick look into the factors mentioned above clarifies that soci-eties with different political organizations, liberal or authoritarian, also have other features that might allow them to take the lead vis-à-vis technological innovation. For example, some authoritarian or not entirely free regimes enjoy large, young populations that they can exploit to copy and develop know-how. Authoritarian regimes can also “mandate” innovation by investment, streamlining the development of specific technologies, and often avoiding ethical concerns. The threat to Western technological dominance has been so significant that Western powers, including the United States and the European Union, have directed tremendous investments to develop strategic competencies in artificial intelligence, quantum computing, and green energies. However, upon closer reexamination of the components outlined above, it becomes clear that the Western order might still hold an edge in technological innovation. 

Demographics. In the two decades prior to 2010, China’s population explosion led to a bonanza in terms of productivity. Outsourcing from the West allowed Chinese manufacturers to employ their large workforce and develop specialized production in many industries. Assisted by lax regulation in terms of intellectual property protection, China was able to build know-how in different industrial sectors. These shortcuts also allowed China to quickly catch up to the West in technological terms, and by the end of the 2010s, China had created good technological capabilities. For instance, the Chinese could harness the data produced by their large population to develop and train complex artificial intelligence systems. However, as China’s authoritarian regime became increasingly assertive and the Western countries decided to begin severing China from their technological supply chains, it became increasingly clear that China had yet to reach the West’s level of development. One of the possible explanations is that China had always been able to rely on its large workforce to cheaply produce everything in its factories, thus reducing the need for technological innovation. Contrast this with the case of Germany and its aging population. As its workforce became smaller, Germany needed to fulfill the need for factors of production. This phenomenon led to an explosion in the development and adoption of automation technologies that complemented human labor and helped keep German factor-ies afloat and running. 

Labor. China’s population is aging and its birth rate is decreasing. These two factors will eventually build pressure on the labor market as China’s workforce “ages out.” Because it is not being replaced at the same rate, this factor is likely to become problematic. 

At the time of writing, the population of India, the largest democracy on Earth, is about to exceed that of China, thus creating more competition for Chinese manufacturers, as regards labor costs. These pressures might increase China’s incentives to innovate by adopting automation technologies like Germany. On the other hand, Western countries have been facing the problem of a shrinking labor force for two decades now. In fact, not only are manufacturers in Germany developing new automation technologies but also, manufacturers in the United States and Europe are rethinking the whole concept of work. From automation technologies to efficiency tools such as remote work, these economies must deal with new labor-related challenges that have pushed them to innovate. 

Risks. Another labor-related challenge—addressed in diametrically different ways by the two worldviews—was how to respond to the COVID pandemic. On the one hand, democratic societies adopted riskier attitudes toward the pandemic, from using unproven technologies to reopen societies, such as MRNA vaccines, to organizational innovations, such as furlough, the four-day work week, or work-from-home policies. These riskier attitudes allowed most Western countries to return to pre-pandemic production levels. By contrast, risk-averse policies in authoritarian regimes, with China being the most evident example, adopted very conservative policies like “zero COVID.” Even though these approaches created the impression of public protection, in the end they stifled growth and innovation. These measures had such an impact on production and services that many firms began redrawing their supply chains, and if Chinese producers are removed from supply chains, this might deprive them of the know-how required to expand their own technological innovation. 

Science and technology. In all likelihood, the feature where both liberal and authoritarian regimes are most similar is in their approach to science. Both worldviews have realized the outsized importance of science and technology in generating prosperity. As such, they have both sought to finance significant scientific endeavors. For example, until the outbreak of the nationwide war in Ukraine in 2022, there was still cooperation in space exploration between Russia and the West. European and US astronauts used to travel to the International Space Station (ISS) in Russian-made rockets launched from Russian launchpads. 

Similarly, the Chinese regime developed its space programme by building a space station like the ISS. Liberal and autocratic regimes have followed similar, state-led approaches in developing chips, quantum computing, and artificial intelligence. These efforts exemplify similarities between state-led worldviews. However, their differences become clear when deploying scientific insights into technological innovations. Because of the nature of authoritarian regimes, these tend to use industrial policy to deploy their technologies and grow their prosperity. Even if liberal societies have made use of industrial policies for the very same reason, Western societies have tended to rely on “the invisible hand” of the market to allow their innovations to percolate through society. Liberal societies have developed vibrant venture capital investment industries and a “startup engineering” culture that has successfully taken some scientific developments—begun in government laboratories—and deployed them throughout the market. The most notable example is the internet and the many innovations it set in motion, such as social media, online financial services, e-commerce, and so on. But, most recently, there has been a marked movement from government-led research to private industry in liberal societies, noticeable in space exploration, quantum computing, and green energies. Even if Western venture capital has sought to replicate this model in authoritarian regimes, these have resisted the push through institutional intervention. Because of this intervention, the percolation of technological innovation in these societies has frequently lagged. 

Values. Value sets and systems are markedly different between authoritarian and liberal worldviews, and these differences are both consequence and cause of the behavioral aspects above. While graduates from top universities in democratic societies might look for jobs they consider attractive, well-paid, and prestigious in the technology sector, graduates in authoritarian societies look for jobs they consider secure and prestigious in the public sector. A second dimension within the value systems is their tolerance of different opinions and appreciation of minorities. While recent nationalistic movements in democratic countries such as France, the United Kingdom, and the United States have tarnished the West’s reputation for openness and tolerance, these countries still have an extensive tradition of opening themselves to views and ideas from different parts of the world. Universities in the West receive students and academics from all nationalities, making them, in all likelihood, the most diverse in the world. By contrast, authoritarian regimes tend to be more inward-looking and appreciative of everything produced within their boundaries. 

Leaving aside human ingenuity, a more risk-loving society, willing to listen to different ideas, has a greater chance of creating new technologies, even if they only stumble upon them by chance. This brief discussion suggests that the Western worldview is better aligned with this behavior, even if only marginally. However, the attentive reader can notice that organizational and institutional factors play a prominent role in shaping attitudes and outcomes. Therefore, our attention now moves on to discuss these factors. 

Most important is the difference in how both worldviews regard the individual. Whereas liberal societies tend to view the individual as the main component of society, authoritarian societies tend to view the individual as part of a collective. This difference is essential as policies and incentives will be “tuned” to benefit the individual or the society, depending on the worldview. 

Institutions and property rights. As values help to define institutions, we move on to discuss institutional design. Liberal countries design their institutions to protect and uphold individual property rights. By doing so, countries like the United States or the United Kingdom incentivize technological innovation by allowing the inventor or innovator to extract fully the potential exploits of her creation. By contrast, institutions in countries like China or Russia are tuned to serve the state. By adjusting institutions and property rights to help the state, individual incentives for innovation are absent. As such, innovation in these countries must be driven or pushed by different forces. 

Politics and the state. The political process in free societies is driven by democratic competition. In theory, political competition will allow diversity and incentivize politicians and society to adopt the best ideas and practices. In practice, such competition is always constrained by different factors beyond this chapter’s scope. Nevertheless, allowing competition and the flow of ideas might ensure the best or better-positioned actors arrive at the institutions. It also constrains bad actors from staying in positions of power for an extended period. By contrast, politics in authoritarian societies are captured by an elite that controls the state and its institutions. Such capture allows elites to perpetuate themselves in power and discourages other actors from challenging them. 

Path dependency. As our brief comparison shows, most of the elements discussed are closely related; for example, values affect institutions, which are impacted by the political process. Furthermore, this dependency is not only among the factors discussed but also through time. Processes—like the fall into authoritarianism—tend to reinforce themselves, even if marginally, over time. As such, the factors discussed above that impact innovation for both worldviews tend to strengthen themselves. This rationale is not to say that change is impossible but to underscore the inertia of social processes in determining outcomes. 

Conclusion 

Our brief discussion of the factors determining innovation suggests the liberal order is better prepared to incubate and develop the next wave of technological innovations. Just after the “end of history” decade, and with the turn of the new millennium, pundits on both sides of the ideological worldview began to predict the decline of the West. Factors like the financial crises at the end of the 2000s and the rise of nationalism during the mid-2010s seemed to suggest that the liberal order could be waning, with rising powers led by authoritarian regimes in China and Russia positioned to upend the status quo. 

Technologically, a quote from futurist, technologist, and investor Peter Thiel reflects the declining status of the free world. Thiel stated in 2013: “We wanted flying cars, but all we got is 140 characters,” contrasting the vision of a future that was to be radically different against a reality in which the only difference was the rise of social media.⁶ However, the landscape had turned on its head by the end of the 2010s and the beginning of the 2020s. Innovations in almost every field—from chip design to artificial intelligence to new, seemingly unattainable developments such as those in nuclear fusion, or CRISPR and MRNA technologies—all developed in free societies, painting a radically different picture. 

It is essential to underscore that, regardless of the apparent edge liberal societies have in technological innovation, “Cardwell’s law” predicts that the technological dominance of the West will eventually end.⁷ This view is based on historical precedents: both the Arab world and China once held the edge regarding technology. And the dominance of both civilisations eventually came to an end. 

This raises the question: Is there an avenue to delay, if not avoid, such an outcome? We conclude with a short discussion of policy recommendations to sustain technological innovation. 

Policy recommendations 

The most straightforward recommendation is to reinforce institutions and property rights. The former precludes power-hungry elites from taking control of the state and distorting incentives. The latter protects the innovator’s rights to enjoy and exploit their innovation. Put together, these two elements cover the incentives for innovation. 

There might be other avenues to generate incentives for innovators. For example, the state might provide incentives for highly risky bets. However, fully exploiting such innovations requires a free market whose forces will find the right fit for a specific product and reward the inventor accordingly. In this way, policies promoting scientific innovation for risky bets and protecting the early stages of innovations, such as patent systems, are fundamental. However, a careful balance is required to avoid interfering with a free market, as competition in the later stages of creation develops a beneficial incentive ecosystem for innovators. This balancing act—protection of the initial stages of the market, and state intervention to incentivize risky bets versus avoiding interference with free markets—is no easy task. However, it is a task more easily undertaken in liberal societies, where elites are unable to interfere in institutions to extract rents, than in authoritarian ones. Thus, protecting the liberal order itself might be the best way to achieve innovation. 

Julio Amador Díaz López is a lecturer at Imperial College London. 

The post How prepared are conflicting world orders for the next wave of technological innovation? appeared first on Atlantic Council.

These cynical assertions completely miss the point. Signs of normality in today’s Ukraine are not proof that the war is somehow exaggerated or fake; they are evidence of the courage and resilience that are helping Ukrainians to handle the horror of Europe’s biggest conflict since World War II.

Ever since the Russian attack began in February 2022, Ukrainian resilience has been one of the defining features of the war. When Vladimir Putin took the decision to launch his invasion, he seems to have genuinely believed that any armed resistance would quickly melt away and fully expected the Ukrainian state to collapse within a couple of days. Instead, the Ukrainian military fought back with great skill and bravery, inflicting punishing losses on the Russian invaders and winning the admiration of the watching world.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Beyond the battlefield, Ukraine’s state structures have also proven surprisingly durable. Ukrainian President Volodymyr Zelenskyy set the tone during the initial hours of the war by declaring his intention to remain in the Ukrainian capital. Elected officials across the country soon followed suit, with parliament regularly convening in Kyiv and municipal authorities heavily involved in security and humanitarian responses to the Russian invasion.

The wartime performance of Ukraine’s public sector has been equally impressive. Despite the constant threat of Russian bombardment, Ukrainian trains have continued to run on time, playing a key role in the evacuation of the civilian population and serving as a lifeline for the blockaded Ukrainian economy. The Ukrainian postal service has often been among the first organizations to resume operations in newly liberated regions, and has even found time to launch a series of headline-grabbing postage stamps honoring the Ukrainian war effort. Meanwhile, shrewd management by the National Bank of Ukraine has prevented a currency collapse and maintained a significant degree of economic stability. The country’s power grid was able to withstand a six-month campaign of Russian airstrikes and even resumed energy exports in spring 2023.

Similar robustness has been on display throughout the private sector. Every single company active in Ukraine today has a unique story to tell of wartime strength and tenacity, but all are united by the common denominator of Ukrainian resilience. Countless Ukrainian factories, agribusinesses, office centers, shopping malls, restaurants, and hotels have each found creative ways to remain active while navigating wartime challenges including regular Russian air raids and energy blackouts, the blockade of Ukraine’s Black Sea ports, and the breakdown of established supply chains. In most other European countries, any one of these factors would have been enough to bring daily life to a standstill; Ukrainians have just shrugged it all off and carried on regardless.

Thanks to the miracles performed by Ukraine’s mobile operators and internet providers, Ukrainians have remained connected throughout the war. Incredibly, the country’s vibrant IT industry has actually grown since the onset of the invasion, with a rapidly expanding ecosystem of tech startups delivering drones and other innovative kit to the Ukrainian military. The Ukrainian banking system has also proven rock solid, with a high degree of prewar digitalization helping to minimize economic disruption amid the devastation of Russia’s onslaught.

None of this could prevent serious economic damage, of course. Ukraine’s GDP crashed by 29.1% in 2022, according to the country’s State Statistics Service. Nevertheless, at a time when Russia is actively pursuing the complete destruction of Ukrainian statehood, this year’s modest growth forecasts are little short of astounding. The past eighteen months have been the ultimate stress test, and the Ukrainian economy has passed with flying colors.

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Ukraine’s advance in Kursk: What’s next and implications

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Ukraine’s exceptional adaptability owes much to the country’s ample prior experience of coping with crisis conditions. After all, for the vast majority of Ukrainians, the entire 1990s was one long crisis. The country then went through extended periods of political turbulence sparked by the 2004 Orange Revolution and the 2014 Euromaidan Revolution, along with the Russian invasion of Crimea and eight years of simmering war in eastern Ukraine. For Ukrainians who have grown up and come of age since the Soviet collapse, instability has never been far away. This is not a legacy anyone would have actively pursued, but it has fostered a toughness and fortitude that are proving critical as the country fights for survival against Russia’s ongoing invasion.

These qualities will be much needed in the months ahead. The high costs and slow progress of Ukraine’s current counteroffensive are already testing the nation’s resolve, while the steady stream of Russian bombings and other atrocities weigh heavily on the deeply traumatized Ukrainian population. For now, the available data indicates a strong commitment to fight on, with recent polls consistently identifying overwhelming opposition to any kind of compromise with the Kremlin. This resolute mood reflects the existential nature of the conflict; Ukrainians are well aware of Russia’s genocidal agenda and recognize that if they stop fighting, their country will cease to exist.

All this is viewed with deep displeasure and mounting alarm in the Kremlin. With any lingering prospects of a decisive Russian military victory now long gone, Putin is pinning his hopes on outlasting the West and isolating Ukraine before eventually breaking the country’s will to fight. The Russian dictator is actively preparing for a long war and appears convinced that the democratic world will eventually tire of supporting Ukraine. Unfortunately for Putin, it is difficult to imagine any Western leader abandoning the Ukrainian people unless their determination to resist Russia begins to visibly wane.

This has been the case since the early days of Russia’s invasion, when the sheer audacity of Ukraine’s resistance profoundly impacted outside audiences and proved instrumental in winning over public opinion throughout the Western world. This popular support for Ukraine’s cause helped persuade Western leaders to provide the ever-expanding quantities of military aid that have transformed the course of the entire war. If millions of ordinary Ukrainians had not demonstrated such inspirational bravery, it is entirely possible that the West would have chosen to stand aside, much as it did during Russia’s 2008 invasion of Georgia and the 2014 occupation of Crimea. That did not happen in spring 2022, and it is unlikely to happen as long as Ukraine’s remarkable resilience remains intact.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

Further reading

UkraineAlert Aug 3, 2023

Russian Orthodox leader Patriarch Kirill’s unholy war against Ukraine

By Borys Gudziak

Russia’s Unholy War: Russian Orthodox Church leader Patriarch Kirill has provided the ideological justification for Vladimir Putin’s invasion of Ukraine and Russian efforts to eliminate Ukrainian national identity.

Civil Society Conflict

UkraineAlert Jul 31, 2023

Zelenskyy advisor: Defeat in Ukraine will spark collapse of Putin regime

By Peter Dickinson

Ukrainian presidential advisor Mykhailo Podolyak says the Wagner mutiny has exposed Russia’s internal weakness and predicts battlefield defeats in Ukraine will spark the collapse of the Putin regime, writes Peter Dickinson.

Conflict Defense Policy

UkraineAlert Aug 17, 2023

Putin must not be allowed to turn the Black Sea into a Russian lake

By Melinda Haring

Western countries must take urgent action to prevent Vladimir Putin from turning the Black Sea into a Russian lake, warns Melinda Haring.

Conflict European Union

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

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The post Ukraine’s remarkable resilience may prove decisive in long war with Russia appeared first on Atlantic Council.

In India, better living standards, changing lifestyles, and higher disposable incomes have translated into higher demand for consumer electronics, including “luxury” electronics such as smartphones. Electronics consumption in 2021 was valued at $64.5 billion and is growing at a compounded annual growth rate of 15.77 percent. Smartphones account for more than half of this market. This official market is accompanied by a shadow market of products sold outside manufacturer-approved distribution channels. In 2022, 1.2 million handsets were imported through this shadow route, valued at roughly $13 billion.

If unchecked, the world is projected to generate 111 million tons of e-waste annually by 2050, according to the United Nations University. This growth is and will be exacerbated by developed nations exports of e-waste to developing and least developed countries to avoid national reporting requirements. Eighty percent of e-waste is informally recycled, often under hazardous conditions, in developing nations such as India, Indonesia, Ghana, and Nigeria. If not properly disposed, e-waste leaks harmful chemicals into the soil and atmosphere, posing severe health risks for workers, often children, who scavenge and process this waste. The reported figures do not, however, fully capture the true scope of e-waste dumping, as the United Nations Institute for Training and Research noted in a 2022 report:

“Quantifying these shipments is difficult . . . due to a grey-zone in business when nonfunctional used electronics are shipped for reuse (with individuals claiming that the electronics can still be repaired) or even in illegal situations when non-repairable and non-reusable equipment is shipped, only to prevent recycling costs in countries with strict e-waste legislations.”

India and other developing nations are therefore experiencing the exponential growth of e-waste from both imported and domestic sources.

Right to repair gains steam

While one part of the solution is improved reporting of e-waste flows through multilateral instruments, such as the Basel Convention, the other part lies in reducing the creation of e-waste in the first place through the right to repair (R2R). In 2021, India began deliberating a R2R framework, joining a wave of countries that launched a right to repair framework for electronics. The United Kingdom enacted right to repair regulations in 2021. In March 2023, the European Commission, as part of the European Green Deal, adopted rules whereby “a new set of rights and tools will be available to consumers to make ‘repair’ an easy and accessible option.”

In the United States, New York’s Digital Fair Repair Act was signed into law in December 2022 and went into effect in July of this year. However, writ large, the United States’ current R2R framework is fractured, with varying levels of recourse depending on one’s state. US President Joe Biden did issue the Executive Order on Promoting Competition in the American Economy in 2021, directing the Federal Trade Commission (FTC) to act on “unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment.” This order was followed by a flurry of activity by the FTC, but with few concrete outcomes to date.

India’s Ministry of Consumer Affairs (MoCA) launched a R2R portal earlier this year. It is framed as part of Mission Lifestyle for Environment (LiFE), an initiative announced by Prime Minister Narendra Modi during the United Nations Framework Convention on Climate Change Conference of the Parties (COP26) in 2021. LiFE promotes mindful consumption, the adoption of circular economy practices, and an environmentally conscious lifestyle. R2R makes it mandatory for “manufacturers to share their product details with customers so that they can either repair them by self or by third parties, rather than only depending on original equipment manufacturers (OEMs).” Among the companies that have already registered are Samsung, Apple, Xiaomi, OPPO, Realme, and Nokia.

The end user experience, however, may not be an easy fix. A 2023 survey of Apple users in India, for instance, found that while one in four devices were in need of repair, 49 percent of respondents found the cost of repair through Apple or its authorized partners prohibitive. In response to the R2R framework, Apple will make repair kits available to users in India, but each component—battery, camera, screen—requires one to purchase a separate kit that, based on reports from the United States, would cost more than an in-store repair. India’s MoCA also claims that R2R will “boost business for small repair shops, which are an important part of local economies.” On face value, the cost of repair kits might make this a more sustainable proposition, but the experience of local repair shops in Australia gives cause for pause. In 2021, Australia’s Productivity Commission released a right to repair report that resulted in companies instituting an independent repair provider program. The program participants, however, are facing rising losses due to slow response times from the OEMs on requests for equipment and exorbitant costs for repair kits.

By situating R2R within LiFE, the Indian government will place the onus for e-waste on individuals rather than the companies that have made repair an inaccessible, costly, and cumbersome option. R2R as it is currently outlined will also not solve the problem of planned obsolescence, where the design or capabilities of the device may limit its useful life, or software updates prohibitively degrading device performance. In the 2023 survey of Apple users mentioned above, the issue most users cite for repair is rapid battery discharge, which has been linked in the past with iOS updates.

How India can lead

The Indian government should focus on building up the circular economy, as the world’s most populous nation grows more prosperous and consumes more. In addition, the Indian government must move beyond the LiFE framework and treat R2R as an issue of fair competition, not just consumer rights and duties. There is a precedent for this approach from the automotive sector: the Competition Commission of India in a 2014 verdict declared that the practice of OEMs denying spare parts to independent repairers was an abuse of dominance.

Finally, a plausible model for R2R needs to have buy-in beyond India’s shores, given the cross-border nature of the e-waste problem and the multi-regional footprint of OEMs. India has already injected this priority into the Group of Twenty (G20). While speculation looms as to whether G20 nations will pass a consensus declaration at the upcoming New Delhi summit following months of disagreement stemming from the crisis in Ukraine, India has already achieved a victory at the development ministers’ track. In June, the G20 development ministers adopted the G20 High Level Principles on Lifestyles for Sustainable Development. Principle four is on the need to “Promote sustainable production, including through sustainable value chains, technological transitions, innovations and investments in key areas.” Its focus on circular economy approaches will be of consequence in tackling the mounting e-waste challenge and could serve as a foundation for wider recognition of the right to repair.

R2R as a legal framework has its roots in the automobile sector in the 1990s. Unsurprisingly then, while it gains traction in the consumer electronics sector, it still faces growing pains. The market therefore finds itself in a global game of cat-and-mouse: Countries look to pass legislation that protects consumers and holds OEMs accountable for the entire lifecycle of a device, even as OEMs curb the accessibility of independent repair in increasingly creative ways, aided by new and emerging technologies. Amid this flux, India can learn from setbacks in other jurisdictions, including the importance of the cost of self-repair in the accessibility of right to repair solutions, the need to encode requirements against planned obsolescence for software, and the requirement of clear penalties for failure to provide timely responses to requests for repair. By taking these steps, India can build a right to repair framework that works for consumers.

Trisha Ray is a resident fellow at the Atlantic Council’s GeoTech Center. Her research interests lie in geopolitical and security trends in relation to emerging technologies. 

The post India’s embrace of ‘right to repair’ can transform the electronics sector appeared first on Atlantic Council.

Unsurprisingly, Ukraine’s current priority is the development of defense technologies that can help secure victory over Russia. This sector will likely remain at the heart of Ukraine’s tech ecosystem long after Russia is defeated, and has immense potential to shape the future growth of the country’s entire digital economy. With Ukraine currently serving as a testing ground for many of the world’s most advanced defense technologies, the country is already becoming an innovation hub and has every chance of establishing itself as a world leader in the defense tech sector.

Alongside this focus on defense technologies, Ukraine’s IT industry also continues to expand. Indeed, the IT sector is perhaps the only segment of the wartime Ukrainian economy that has remained on a growth trajectory since February 2022, creating new jobs, implementing new projects, and attracting investment. At Ukraine’s Ministry of Digital Transformation, we are seeking to do everything possible to help IT businesses not only survive but thrive, despite the unique challenges created by the Russian invasion. This includes the development of favorable tax and legal conditions via the Diia.City platform, the launch of free developer training opportunities, efforts to advance the reform of IT education, and enhanced backing for Ukrainian startups.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Launched just two weeks before the start of Russia’s full-scale invasion, Diia.City aims to offer some of the most attractive tax conditions in the world for companies operating in the IT and tech sectors. When we developed the architecture for the Diia.City platform, our goal was to demonstrate that lower tax rates can actually stimulate greater tax revenues for the state budget. This has now been confirmed by the most recent annual data from Ukraine’s State Tax Service. In 2022, Diia.City resident companies paid more than UAH 4.1 billion in taxes, which represents a 22.5% increase compared to the previous year. Today, more than 600 companies are residents of Diia.City. The list includes young Ukrainian companies and large international players such as Samsung, Visa, Nokia, Ajax Systems, and Global Logic.

Another current priority is support for Ukrainian startups. Even amid the horrors and upheavals of the Russian invasion, Ukrainians continue to innovate. Indeed, over the past eighteen months of war, there have been numerous examples of Ukrainians creating innovative new products that are helping the country defend itself. In order to encourage this trend, we are working to develop a dynamic venture capital investment ecosystem. Since December 2022, the Ministry of Digital Transformation has begun overseeing the Ukrainian Startup Fund, which has become the country’s largest angel investor. The fund has already supported over 350 startups and has now pivoted toward defense tech projects.

Ukraine’s flagship defense tech platform is the BRAVE1 initiative, a tech cluster for the development of the country’s defense tech industry. BRAVE1 was launched in spring 2023 by Ukraine’s Ministry of Digital Transformation, Ministry of Defense, Ministry of Economy, Ministry of Strategic Industries, the National Security and Defense Council, and the General Staff of the Armed Forces of Ukraine. The main goal of BRAVE1 is to create a fast track for innovation in the defense and security sectors. Any company or defense tech startup can find partners and gain assistance through the cluster. The overall objective is to build a system that will streamline the launch of defense tech projects. By midsummer 2023, BRAVE1 had registered approximately 400 projects, with almost 200 having also undergone military testing. The projects currently under development have been prioritized by Ukraine’s military leadership and include drones, robotic systems, electronic warfare, artifical intelligence tools, cybersecurity, communications, and information security management systems.

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Making the most of Ukraine’s tech potential requires international investment. While security concerns inevitably cast a long shadow over the Ukrainian investment climate, there are some tentative signs of progress amid rising awareness of Ukraine’s tech potential. The European Commission’s European Innovation Council announced in May 2023 that it would allocate €20 million toward the development of Ukrainian startups and innovative projects. Meanwhile, the Seeds of Bravery project, in collaboration with the Ukrainian Innovation Development Fund, has been selected as a key partner of the EU, creating opportunities for hundreds of domestic startups to receive financial assistance and growth opportunities. This will include mentoring programs with top tier figures from the international tech industry. The Ukrainian authorities are also actively supporting the participation of Ukrainian startups at international trade events such as London Tech Week, Viva Tech, TechCrunch Disrupt, and others. This already helped Ukrainian startups to raise more that $10 million in additional funding in 2022.

Consolidating Ukraine’s tech ecosystem will require greater direct international involvement in addition to investment. With this in mind, Ukraine plans to launch an e-residency initiative by the end of 2023. This will allow citizens of other countries to run their tech businesses in Ukraine and benefit from favorable conditions including attractive tax rates. At the pilot phase of the project, e-residency will be made available to citizens of Slovenia, India, Pakistan, and Thailand. This list will be expanded as the program is rolled out. The initiative aims to offer e-residents a fast, convenient, fully automized experience without the need to interact directly with any state officials. The first stage is expected to involve around 1000 e-residents, which could generate $1 million for the Ukrainian budget. More importantly, it will introduce Ukraine to a new generation of tech professionals from around the world and elevate the country’s profile as an emerging global tech hub.

The current war has served to underline the strategic importance of a strong tech sector. Luckily, Ukraine has been moving in this direction for some years and has therefore been able to adapt rapidly to wartime conditions. Beyond the existential challenge of defeating Russia and securing Ukrainian statehood, I am now more convinced than ever that the tech sector will be the main engine of Ukraine’s future GDP growth. The Ukrainian economy will become increasingly digital in the years ahead, and the country will bolster its reputation not only as an exporter of IT services but as home to a wide range of globally competitive tech brands. To help make this happen, we will continue to create favorable conditions for international tech companies to scale up their businesses and open offices in Ukraine, as both Palantir and SpaceX have done since the start of Russia’s full-scale invasion.

Over the past eighteen months, Ukraine has demonstrated that it has the capacity to implement new ideas in the tech sector with remarkable creativity and efficiency. Wartime conditions are accelerating evolutionary processes within the country’s tech sector that have been underway for more than a decade; this is propelling Ukraine toward the status of digital superpower. It is now clear that Ukraine has the potential to become one of the world’s top ten innovation-driven economies. This will play a key role in the country’s future prosperity and will also help keep Ukrainians safe.

Mykhailo Fedorov is Ukraine’s Vice Prime Minister for Innovations and Development of Education, Science, and Technologies, and Minister of Digital Transformation.

Further reading

UkraineAlert Aug 17, 2023

Putin must not be allowed to turn the Black Sea into a Russian lake

By Melinda Haring

Western countries must take urgent action to prevent Vladimir Putin from turning the Black Sea into a Russian lake, warns Melinda Haring.

Conflict European Union

UkraineAlert Jul 31, 2023

Zelenskyy advisor: Defeat in Ukraine will spark collapse of Putin regime

By Peter Dickinson

Ukrainian presidential advisor Mykhailo Podolyak says the Wagner mutiny has exposed Russia’s internal weakness and predicts battlefield defeats in Ukraine will spark the collapse of the Putin regime, writes Peter Dickinson.

Conflict Defense Policy

UkraineAlert Aug 3, 2023

Russian Orthodox leader Patriarch Kirill’s unholy war against Ukraine

By Borys Gudziak

Russia’s Unholy War: Russian Orthodox Church leader Patriarch Kirill has provided the ideological justification for Vladimir Putin’s invasion of Ukraine and Russian efforts to eliminate Ukrainian national identity.

Civil Society Conflict

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

Read more from UkraineAlert

UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.

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The post Ukraine’s vibrant tech ecosystem is a secret weapon in the war with Russia appeared first on Atlantic Council.

Digital tools like Uber and Booking have long since become part of our everyday lives, providing basic services with maximum convenience. Imagine if all your interactions with the state could be as efficient and unintrusive; imagine if you could pay taxes or register a business in a matter of seconds via your smartphone. In Ukraine, this is already reality.

Launched in September 2019, Ukraine’s Diia app is a core element of the country’s digital infrastructure that has dramatically enhanced Ukrainian society’s ability to withstand the Russian invasion. More than 19.2 million Ukrainians currently use Diia, which is installed on approximately 70% of the smartphones in the country. In regions of Ukraine under Russian occupation, it is often the only way for Ukrainians to receive assistance or access services provided by the Ukrainian government.

International audiences have already noticed the effectiveness of Diia. Estonia, which has long been a global leader in the field of digital government, is currently implementing a similar app based on Diia. Countries in Latin America and Africa are next in line to develop their own versions. This recognition for Ukraine’s innovative e-governance app should come as no surprise; after all, it has now proven itself in the toughest of wartime conditions.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Diia is not just a wartime success story, of course. In the almost four years since it was first launched, the app has managed to slowly but surely transform Ukrainian attitudes toward innovation while shaping perceptions regarding the role of digital technologies in daily life. Following the introduction of digital passport and driver’s license functions, Diia became a routine tool for millions of Ukrainians. The realities of the Russian invasion have now further embedded the app into the country’s everyday existence.

This familiarity has helped build growing levels of public trust in the digital state. Indeed, most Ukrainians have overcome any initial fears related to the pace of digitalization in the country and now openly embrace Ukraine’s digital revolution. People are no longer paranoid about the possibility of personal data leakages and have stopped worrying about how elderly relatives will cope with smartphone technologies.

It has also been some time since I last encountered by personal favorite: What will happen if the state has all my personal information? In reality, of course, the state has always had access to the information that is now digitally available via Diia. The only difference is users can finally access this information themselves in a highly convenient and transparent manner.

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Since 2019, Ukrainians have learned that digital tools can offer high levels of security in addition to efficiency. Indeed, security has always been at the heart of Ukraine’s digital transformation. A number of important decisions were made on the eve of Russia’s full-scale invasion that underlined this commitment to prioritizing the safety of users and their data, including steps to move the entire Diia infrastructure to cloud format.

We created our own in-house team of hackers to probe the Ukrainian government’s digital systems for weaknesses, and also worked with partners to engage hackers around world with the task of penetrating the Diia platform. They found no security vulnerabilities. Security has been further enhanced by the introduction of the Diia.Signature function, which provides an extra layer of protection for particularly sensitive e-services such as changing place of residence or registering a car.

One of the last remaining arguments against digitalization is the claim that an over-reliance on digital technologies will backfire in the event of restricted access to electricity or the internet. Ukrainians have now debunked this myth by maintaining high degrees of digital connectivity throughout the fall and winter months of the past year, despite the blackout conditions created by Russia’s large-scale bombing campaign against Ukraine’s civilian energy infrastructure. Businesses continued to operate and online services remained available as the nation adapted from October 2022 onward to the uncertainty of regular power cuts. Satellite internet, Starlink, and power generators all played crucial roles in this process, proving that digital solutions do not require perfect conditions in order to improve quality of life.

For the past eighteen months, Ukrainians have demonstrated that the digital state is both safe and convenient. They have done so in incredibly testing conditions amid the largest European war since World War II, which is also widely recognized as the world’s first full-scale cyberwar. This achievement should dispel any lingering doubts that governments across the world will all eventually go digital. As they embrace digitalization, other countries can look to Ukraine as a model and as a source of inspiration.

Mykhailo Fedorov is Ukraine’s Vice Prime Minister for Innovations and Development of Education, Science, and Technologies, and Minister of Digital Transformation.

Further reading

UkraineAlert Jul 13, 2023

After Wagner: Could the Russian army now turn against Putin?

By Mercedes Sapuppo

With dozens of senior Russian officers reportedly detained following the Wagner revolt and a senior commander dismissed this week for criticizing the conduct of the Ukraine invasion, could Putin face a mutiny within the Russian army?

Conflict Crisis Management

UkraineAlert Jun 12, 2023

Beyond the counteroffensive: 84% of Ukrainians are ready for a long war

By Peter Dickinson

84% of Ukrainians reject any compromise with Russia and are ready for a long war if necessary in order to fully de-occupy their country. Most simply see no middle ground between genocide and national survival, writes Peter Dickinson.

Civil Society Conflict

UkraineAlert Jun 21, 2023

Putin’s nuclear threats will escalate as Ukraine’s counteroffensive unfolds

By Diane Francis

As Ukraine’s long-awaited counteroffensive gets underway, there are fears that Russia’s deteriorating military predicament could lead to an escalation in Vladimir Putin’s nuclear threats, writes Diane Francis.

Conflict Disinformation

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

Read more from UkraineAlert

UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.

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The post Ukraine’s digital revolution is proving vital for the country’s war effort appeared first on Atlantic Council.

Since February 2022, Ukraine has been defending itself in a major war against an enemy that enjoys overwhelming superiority in both conventional weapons and manpower. But while Russia relies on the brute force of artillery bombardments and human wave tactics, Ukraine is waging an innovative form of warfare that utilizes a range of highly creative and often improvised tech solutions. This emphasis on defense tech has been instrumental in many of Ukraine’s most striking military successes of the past fifteen months. Given the right support, it can help secure victory over Russia.

The Ukrainian military has already demonstrated its ability to use everything from drone technologies to satellite communications to effectively manage the modern battlefield. These technologies help save the lives of Ukrainian soldiers and civilians while also dramatically enhancing the effectiveness of combat operations.

At the same time, it is important not to underestimate the enemy. Russian army commanders recognize the increasing importance of defense tech and are working hard to close the gap in areas where Ukraine has established a lead. To stay ahead, it is vital to constantly innovate. This requires a systematic approach to the development of Ukraine’s defense tech sector.

Ukraine’s immediate goal is to create a fast track for defense tech innovation that can make a powerful contribution to the defeat of Russia’s invasion. We must create an environment where startups flourish and innovative products can move rapidly toward mass production. Creativity must be tailored to the specific needs of the military, with the necessary expertise and state support readily available to turn great ideas into military advantages.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

This was the thinking behind the Brave1 defense tech cluster, which was launched by Ukraine in late April. A joint initiative of Ukraine’s Ministry of Digital Transformation, Defense Ministry, General Staff, National Security and Defense Council, Ministry of Strategic Industries, and Economy Ministry, Brave1 is designed to serve as a hub for the country’s defense tech industry. It is a platform to optimize cooperation between individual defense tech companies, the state, the Ukrainian military, investors, and other potential partners.

The scope of Brave1 is necessarily broad. Ukraine is seeking to promote new developments in a wide range of defense-related tech segments including supply and logistics, unmanned aerial vehicles, cybersecurity, navigation, and medical care. We have designed the initiative relying on international experience, though in the end, we have quite a unique Ukrainian story. Brave1 includes partner accelerators and incubators, investor engagement opportunities, and educational courses.

The Brave1 Defense Innovation Council is headed by Mark Lennon. Mr. Lennon has held senior leadership positions at Apple, Gartner, and in the US government, and has also served for 24 years as a US Naval Officer. His background and credibility will enable Brave1 to become a powerful platform capable of generating war-winning technologies.

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Ukraine’s advance in Kursk: What’s next and implications

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The long-term objective is clear: Ukraine must become one of the world’s leading defense tech countries. This is entirely realistic. After all, Ukraine is already acquiring unique wartime experience on a daily basis and boasts a very large number of highly skilled IT professionals and engineers. Moscow’s full-scale invasion has turned Ukraine into a testing ground for new military technologies. It is also transforming the country into a defense tech superpower.

This process has the potential to profoundly impact Ukraine’s national security and the country’s economy. I am confident that in the coming years, we will witness the emergence of powerful Ukrainian defense tech companies worth billions of dollars. The growth of this sector will play a critical role in Ukrainian defense policy for decades to come and will remain a top national priority.

All that lies ahead. The task now is to defeat Russia. The war unleashed by Vladimir Putin is unlikely to end soon. Instead, it should be viewed as a marathon. Ukrainians must be ready for a long fight. We must play to our strengths as a tech-savvy nation of innovators, and must do everything to maximize effective cooperation between creative minds, state bodies, and the military. Ukrainians have already demonstrated to global audiences that they are some the bravest fighters on the planet. They must now confirm that are also among the smartest.

Mykhailo Fedorov is Ukraine’s Vice Prime Minister for Innovations, Development of Education, Science and Technologies, and Minister of Digital Transformation.

Further reading

UkraineAlert Apr 8, 2023

Human wave tactics are demoralizing the Russian army in Ukraine

By Olivia Yanchik

Vladimir Putin’s invasion of Ukraine has not gone according to plan but he still hopes to win a long war of attrition. However, Russia’s reliance on human wave tactics risks undermining morale within his invading army, writes Olivia Yanchik.

Conflict Defense Policy

UkraineAlert Apr 6, 2023

NATO poses a threat to Russian imperialism not Russian security

By Peter Dickinson

Russia’s passive acceptance of neighboring Finland’s NATO membership raises serious questions over the Kremlin’s efforts to portray the invasion of Ukraine as a response to NATO expansion, writes Peter Dickinson.

Conflict Disinformation

UkraineAlert May 12, 2023

Andriy Yermak: Italy is defending common European values in Ukraine

By Andriy Yermak

Italian Prime Minister Giorgia Meloni is right to say that helping Ukraine defend itself against Russian invasion is about freedom, justice, and common values, writes the head of Ukraine’s Office of the President, Andriy Yermak.

Conflict Economy & Business

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.

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The post Ukraine’s growing defense tech prowess can help defeat Russia appeared first on Atlantic Council.

With a growing economy and a young population, entrepreneurship is a crucial solution to create much-needed jobs while bringing more women into the labor force.

A field study of women entrepreneurs in urban Pakistan, commissioned by the South Asia Center of the Atlantic Council in conjunction with the School of Advanced International Studies at Johns Hopkins University and the American Pakistan Foundation, explored how technology solutions can support women to jumpstart their entrepreneurial ventures, promote their businesses, and facilitate financial transactions. The full report can be viewed here.

Digital access is crucial for entrepreneurship, and its importance is only expected to grow with time. Social media and e-commerce enable entrepreneurs to reach new customers and maintain links with existing ones, build their brands, and expand their networks. Productivity tools for communicating with vendors and employees, bookkeeping, and inventory management are increasingly digitized as well. However, there is a significant gender gap in access, and it is compounded for poorer, less-educated, and rural women.

Women entrepreneurs often lack business skills, education, experience, and access to networks in comparison to male peers. Women are also less likely to own bank accounts, take a business loan, and formally register their business, all of which hinder the business’ growth and success rate. The majority of women who do embark on entrepreneurial ventures rely on their own funds or borrow from a family member for startup capital. This naturally restricts access for women from lower-income socioeconomic strata.

In addition to these systemic barriers, women also face societal barriers, including limited agency in household decision-making, restrictions on mobility, and a disproportionate burden of household labor and unpaid care work.

A growing trend of “social media entrepreneurship” is leveling the playing field. Women are able to monetize their skills despite lacking access to business education and male-dominated professional networks. The study also revealed that the ability to run a business from home helps women to circumvent societal barriers and balance their household duties with work. However, in the long run, this increases the risk of entrenching the same regressive gender norms, thus serving as a potential barrier to further growth.

Nevertheless, increasing access to smartphones and the internet remains the most important lever to boost women’s engagement in entrepreneurship.

Making it easier for women to register for fintech products such as mobile wallets as well as promoting the adoption of mobile wallets can drive women’s entrepreneurship. Women who already have entrepreneurial ventures are found to be generally familiar with mobile wallets, which also indicates that these can be leveraged as an avenue to facilitate formal financial inclusion for these entrepreneurs. For instance, public sector banks can encourage women to use mobile wallet credit history to apply for a business loan.

In addition, most women entrepreneurs are unaware of business skill development and startup incubation programs currently being implemented in Pakistan. However, high penetration of social media indicates that these platforms are ideal channels for outreach and awareness generation. Direct linkages between social media platforms and women entrepreneurs can bring needed business skills where the women already are. One aspect of this linkage could also aim to encourage women from lower socioeconomic classes to diversify their presence on social media, encouraging them to take up platforms with wider reach and greater monetization potential.

In the long term, however, it is necessary to promote society-wide, gender-positive norms, and to gender-sensitize the business ecosystem as well as government and banking regulations.

All four authors are pursuing the Master of Arts in International Relations degree at the Johns Hopkins University School of Advanced International Studies. They took on this project as part of their final-year capstone requirements.

Fatimata Ndiaye is currently focusing on states, markets, and institutions, with a regional focus on Africa.

Ishani Srivastava is focusing on development, climate, and sustainability, with a regional focus on Asia.

Estelle Thomas has pursued numerous benevolent ventures as well as forefronted social justice student organizations, in parallel with her academic career.

Yiran Zhan is focusing on international economics and finance, as well as sustainable development.

This research was made possible by the generous support of Seema and Shuja Nawaz on behalf of the Pakistan Initiative of the South Asia Center and the American Pakistan Foundation, in partnership with the School of Advanced International Studies, Johns Hopkins University.

Shuja Nawaz is a distinguished fellow and the founding director of the South Asia Center of the Atlantic Council, Washington DC. His latest book is The Battle for Pakistan: The Bitter US Friendship and a Tough Neighbourhood. On Twitter: @ShujaNawaz

The South Asia Center is the hub for the Atlantic Council’s analysis of the political, social, geographical, and cultural diversity of the region. ​At the intersection of South Asia and its geopolitics, SAC cultivates dialogue to shape policy and forge ties between the region and the global community.

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A tightening global macro environment coupled with increasing domestic political instability is a cause of concern for the sector, especially the domestic startup economy.

Economy & Business Entrepreneurship

The post How Pakistani women use technology solutions to overcome barriers to entrepreneurship appeared first on Atlantic Council.

The local economy of the earthquake-affected provinces accounts for 9.8 percent of Turkey’s gross domestic product (GDP), 8.6 percent of exports, and 15 percent of agricultural products. With a lower GDP per capita and a higher unemployment rate than the national average even before the disaster, the region employs over 3.8 million people, primarily in the agriculture, trade, textile, and food sectors, almost 40 percent of whom are employed informally. The local private sector—made up of more than 538,000 enterprises—now needs wide-ranging support to recover from the earthquakes.

Recovery and rebuilding will require a multi-faceted approach prioritizing private-sector support for local development along with social impact. This approach will need to ensure that the region continues progressing toward United Nations Sustainable Development Goals (SDGs) and does not leave vulnerable communities behind, including the displaced. Of the 3.7 million Syrian refugees who fled to Turkey since the Syrian war began, half of them lived in this region, constituting over 11 percent of its overall population, and were affected by the earthquakes. Turkey is now home to over three million internally displaced people, who are looking for economic and social support after this disaster.

One of the essential tools at Turkey’s disposal to tackle these daunting challenges and to design a more sustainable, resilient recovery is impact investing. These are “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return,” according to the Global Impact Investing Network, targeting a spectrum of returns depending on the type of capital and instruments used. As Turkey’s Impact Investing Advisory Board stated in a report published shortly before the earthquakes, urban resilience—which will need to be a priority following this disaster—will benefit from “innovative, sustainable capital allocation and commercial value generation” with an impact focus. Thankfully, the local impact investing ecosystem has been taking root to enable this.

Impact investing can also aim to create self-reliance for refugees and internally displaced people through “refugee lens” investing, which is a framework to qualify and track investments developed by the Refugee Investment Network (RIN), where I work with enterprises and investors focused on impact.  

Forced displacement cuts across at least thirteen of the seventeen SDGs around the world, according to RIN. Actively investing in displaced populations leads to new and sustainable solutions. In the aftermath of the earthquakes, that could include supporting the thousands of refugee-owned small businesses in the earthquake region, providing microfinance to local farmers and artisans, or facilitating tech-based remote employment. The goal is to increase displaced people’s livelihoods, financial inclusion, and continued skills development (especially to respond to workforce losses due to the earthquake), thus leading to equitable economic and social revival. Funding the communities and employers around the country that welcome the displaced will also be important.

Having value chains focused on supplier diversity, economic inclusion, and job creation will also help this cause. The public and private sectors can strengthen community resilience by prioritizing local and displaced suppliers affected by the disaster, including social enterprises and cooperatives employing and supporting vulnerable communities through “social procurement.” For instance, Innovation for Development (i4D), a local economic development organization, aims to connect three hundred local producers from the earthquake-affected region with buyers to ensure business continuity and new contracts.

In international trade, proponents of a “Turkiye Compact” call for trade concessions from the European Union, United States, and Canada to incentivize the private sector to hire both Syrian refugees and locals in Turkey with the goal of boosting the local economy and improving social cohesion. According to a United Nations Development Programme feasibility study conducted prior to the earthquakes, such a policy could create 284,000 new jobs (including 57,000 jobs for refugees) and boost exports by 3 percent, primarily of labor-intensive agricultural, processed food, and textile products. Furthermore, local enterprises participating in the Turkiye Compact would become attractive investment opportunities given their tangible impact on displaced communities through employment and sourcing.

Finally, Turkey’s vibrant entrepreneurial ecosystem is more crucial than ever. Accelerators, specialized funds, and growing communities of practice can nurture innovative, impact-driven ventures for earthquake-affected communities and create inclusive solutions. Examples so far have included a waste management start-up facilitating food aid, e-commerce solutions enabling microentrepreneurs, online mental health platforms offering therapy to survivors, and tech innovations in rescue and relief, among many others. Additionally, catalyzing entrepreneurship by underserved communities, especially those experiencing intersectional disadvantages, such as the refugee women entrepreneurs featured in an Atlantic Council documentary last year, will create new pathways to self-reliance.

Bringing all of these solutions together and amplifying their impact through the resources of the global impact investing community, local partnerships, and blended financing—with guarantees, concessional loans, or grants to attract private investments, for instance—will yield tremendous, complementary results.

With such a comprehensive toolbox, it will be possible to rebuild better after this terrible disaster and create more inclusive economies and resilient communities.

Selen Ucak is a social impact professional working at the intersection of private sector and international development. She currently leads a global community of refugee-led and refugee-supporting businesses and social enterprises at the Refugee Investment Network, as well as serving as a consultant on additional projects.

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This report is part of an ongoing partnership on the Power of African Creative Industries between The Policy Center for the New South (PCNS) and the Atlantic Council’s Africa Center.

“Critical connectivity: Reducing the price of data in African markets,” by Africa Center Senior Fellow Aubrey Hruby, analyzes the current state of the digital transformation in Africa and outlines how affordable and accessible data is imperative for further development. Finally, it provides concrete recommendations to the key actors and facilitators of the transition outlined in the Digital Transformation with Africa; a new initiative the Biden administration announced at the 2022 US-Africa Leaders Summit, which emphasizes the importance of reducing data costs in Africa to spur growth and employment.

In outlining why data remains so costly and inaccessible across Africa, Hruby profiles four main detriments: infrastructure, competition, policy, and consumption patterns. Through case studies and success stories from other developing nations who struggled with high-priced data and implemented successful mitigation measures, Hruby develops a framework for reform and showcases how key changes can rapidly reduce data costs, spur development, and transform entire industries. Her recommendations directly address the current US administration, African governments seeking to build and benefit from a digital economy, and global development finance institutions (DFIs) that are already investing and making much needed transformative inroads into African markets.

Throughout the 21st century, African markets have unleashed the globe’s most significant digital revolution, and they are poised to continue doing so over the next few decades as the world’s youngest population reaches maturity. Currently, 40 percent of the continent’s total population is under the age of 15 and represents 27 percent of the entire world population. From 2000 to 2010, the African mobile phone market grew at a rate of 44 percent per year, bringing the number of subscriptions to around 700 million, more than in both the European Union and the United States combined. For African creative and mobile industries, which are emerging at the forefront of this digital revolution, infrastructure and technological systems are critical to the sector’s continued growth. The African Continental Free Trade Area connects 1.3 billion people across fifty-five countries with a combined GDP of over $3 trillion. Digital infrastructure is a vital economic opportunity and a crucial security issue for African nations and their partners.

The African vision is increasingly shaped by the digital tools and platforms African consumers use and the new opportunities that have emerged in a growing start-up ecosystem. According to the UN, the digital economy is set to expand in Africa by 57 percent between 2020 and 2025. With projections by the Alliance for Affordable Internet forecasting that the continent’s digital economy will grow six times over by 2050 to $712 billion and the fact that African startups raised more than $4 billion in venture capital in 2021, it is clear that this sector is booming. Undoubtedly the future is digital, and Africa must be able to access this future affordably if it is to share in the benefits of this global revolution.

The Atlantic Council is the only DC global think tank to have placed African creative industries at the center of its security and prosperity work. The Africa Center’s focus on the creative industries was launched by the Africa Creative Industries Summit of Washington in October 2021 at the Smithsonian National Museum of African Art and was opened by a message from Vice President Kamala Harris. The program is now fully supported by strong sponsors and partners, from ADS Group and Afreximbank to OSF and OCP, allowing the Atlantic Council to continue its leadership in the field by hosting events such as the Sports Business Forum, held in Dakar, and the financial engineering task force for African creative industries. This work was crowned by the Africa Center’s partnership with the US Department of State and its participation in the organization of the African and Young Leaders Diaspora Forum on the first official day of the US-Africa Leaders Summit of December 2022 at the African American Museum of History and Culture in Washington.

Report author

Fellow

Aubrey Hruby

Nonresident Senior Fellow

Africa Center

Economy & Business Future of Work

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

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My company, Nibulon, is one of Ukraine’s largest grain producers and exporters. We were enjoying some of the best years in our 30-year history before the start of Russia’s full-scale invasion in February 2022. In a matter of weeks, we went from being a healthy business with a bright future to one battling for survival.

Around 20% of Nibulon’s assets are currently inaccessible in temporarily occupied regions of Ukraine. Other assets including grain elevators, barges, silos, and terminals have been destroyed. In 2022, our exports collapsed because we could no longer access our main export route through the port of Mykolaiv. Thousands of other Ukrainian companies have had similarly grim wartime experiences.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The liberation of Kherson and the surrounding region in late 2022 revealed the scale of the effort that will be necessary to restore agricultural production in regions of Ukraine subjected to Russian occupation. These regions are now believed to be among the most heavily mined areas in the world. De-mining will add significant costs and delays before farming activities can resume. Experts say that one day of war means one month of de-mining. We are already investing in de-mining equipment and personnel. At present, we calculate that with 20-25 people working ten hours a day, it will take three years to clear our fields in the worst affected areas.

To a greater or lesser degree, these problems are affecting the entire agricultural industry in Ukraine. The UN estimates that this strategically crucial sector of the Ukrainian economy has already suffered damages and losses of over $30 billion. Prior to the full-scale Russian invasion of February 2022, Ukraine had been steadily expanding its global reach as a food exporter and was widely seen as an emerging agricultural superpower. There is now a very real danger that Putin will succeed in bankrupting the Ukrainian breadbasket.

Like so many other Ukrainian companies, we have been adapting our business model to wartime conditions. We have successfully re-routed exports via land and rail and have built a new grain terminal on the Danube close to the Romanian border. However, we need to invest more in order to increase our exports and reduce the much higher transportation costs that farmers are now having to pay.

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One of the key problems facing the entire private sector in wartime Ukraine is the lack of access to financing because of prohibitively high borrowing rates domestically and internationally. Not surprisingly, war creates a significant risk premium. As a result, international capital markets are effectively closed for Ukrainian companies. Alternative forms of financing are urgently needed.

The United Nations and Turkey have succeeded in establishing a grain corridor to allow limited exports of Ukrainian grain through the Black Sea. Now is the time to establish a “financing corridor.” Just as the grain corridor has been a lifeline for Ukraine’s agricultural sector, the Ukrainian economy needs a mechanism to help private businesses secure immediate survival and safeguard their futures by investing to become more resilient and competitive.

A financing corridor would help ensure private businesses are not forced to close and can instead go on to underpin Ukraine’s reconstruction and recovery. The requirements are simple. First, lenders should offer Ukrainian businesses a standstill on their existing liabilities. A standstill will provide much-needed flexibility to address some of the immediate challenges to their operations. Second, international institutions should provide fresh financing for urgent working capital needs or strategic investments. Third, G7 countries and international financial institutions should offer partial guarantees to enable Ukraine’s major exporters to issue new debt at acceptable cost levels.

In the agricultural sector, enhanced financial support is essential as businesses look to repair or replace damaged equipment and facilities. The World Bank estimates the sector will require $18.7 billion in new investment over the coming decade. The next agricultural planting season is just around the corner. Without increased access to capital, farmers will not be able to obtain the equipment and fertiliser they need to sow their crops as planned.

If this happens, the consequences will be felt not only in Ukraine but far beyond the country’s borders as well. Reduced yields in Ukraine will impact global food security. The UN World Food Program estimates that the ongoing Russian invasion of Ukraine could increase the number of people at risk of acute hunger by 47 million, with the greatest impact on Sub-Saharan Africa.

Agriculture is a slow-motion business. If producers cannot invest today, the negative effects will be felt for years to come. The survival of the country’s major agricultural exporters is essential for Ukraine’s long-term economic reconstruction and recovery. It is also important for global stability. Good business strategy requires looking to the risks and opportunities that lie ahead. Western governments need to think beyond the immediate challenges of the war today and also consider what will be needed to secure Ukraine’s future.

Andriy Vadaturskyy is the owner and CEO of Ukrainian agribusiness Nibulon.

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On the eve of the invasion, the Ukrainian economy was in relatively good shape. While Ukraine suffered a slight decline in 2020 due to the Covid pandemic, this had been preceded by four consecutive years of strong GDP growth. Small and medium-sized enterprises (SMEs) had played an important role in this progress, especially in the wholesale, retail, and IT sectors.

Over the past twelve months, Ukraine’s positive economic outlook has been shattered by the brutality and destruction of Russia’s invasion. The SME sector has been particularly hard hit. Wartime disruption and Russian attacks on critical infrastructure have caused a dramatic deterioration in the business environment. This is making it more and more difficult for Ukraine’s entrepreneurs to survive.

Kateryna Markevych, the lead expert on economic and social programs at the Razumkov Center think tank in Kyiv, told Reuters in late 2022 that SME activity in Ukraine had worsened considerably as a result of the Russian airstrike campaign against civilian infrastructure. In general, the war has led to higher costs throughout value chains while the volume of bank loans has decreased. This means SMEs are often not able to secure alternative financial resources. As a result, many have been forced to shut down. Other consequences of the conflict such as the closure of ports, disruption of trade routes, power shortages, and widespread material damage have added to the challenges facing Ukrainian business owners.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

It comes as no surprise that Ukraine’s GDP declined by around 35% during 2022, the largest annual drop since the country regained independence in 1991. The International Labor Organization (ILO) has estimated that 4.8 million people lost their jobs in the same time period, while UNDP officials have predicted that if the conflict continues, up to 90% of the Ukrainian population could face poverty.

For SME owners, getting through this crisis period requires resolve and creativity. “The war has dealt a heavy blow to the Ukrainian economy and businesses,” says Dr. Bohdan Ferens, founder of SD Platform, a social-democratic NGO in Ukraine, and SPARK’s liaison in Ukraine. “The losses of entrepreneurs as a result of the war, unfortunately, are growing every day. However, businesses are trying to adapt to new realities, or are looking for new directions and opportunities to work.”

Many Ukrainian SMEs are successfully navigating the new practicalities of doing business during wartime. For some, this means reacting directly to emerging military or humanitarian needs and incorporating them into their business model. A stark illustration of this trend is Yuriy Zakharchuk, who transitioned from manufacturing theatrical costumes to military apparel. Similarly, after closing their shop for a few months, employees of a ceramic studio in Mykolaiv decided to arrange workshops for children in exchange for donations.

For other SME owners, surviving has meant relocating to safer regions in western Ukraine or across the border in the European Union. For instance, dentists Oleksiy Vlasov and Olena Shestakova moved from Kramatorsk in eastern Ukraine to Chernivtsi close to the Romanian border, where they offer free treatment to internally displaced people. This was made possible thanks to a state-guaranteed loan which allowed them to move and helped cover initial rental payments. There are thousands of similar cases across Ukraine. More help is urgently needed in order to support the SME sector. This in turn will allow SMEs to make a meaningful contribution to the revival of the Ukrainian economy.

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Local authorities and the existing Ukrainian entrepreneurial ecosystem have long been essential to the development of the country’s SME sector. Support has included initiatives to help entrepreneurs and business owners access production premises, support services, and new technologies. One such example is the CSR Development Center, which promotes the principles of sustainable business and social responsibility in Ukraine. Realizing the need to adapt to the new wartime environment, the center has launched several initiatives to support entrepreneurs, such as the Mentoring Program for Ukrainians Abroad. These initiatives are a direct response to the challenges created by the Russian invasion.

One initiative features a program for women looking to set up an SME or expand their existing business. The program offers a combination of training, networking, and financing opportunities. “During the war, the role of women has changed. As there are currently a lot more men than women serving in the military, women now have more influence on the stability of the Ukrainian economy,” notes Oleksandra Hondiul, Project Manager at CSR Development Center. “At the same time, the demands on these women have increased, such as providing for the family, taking care of children, managing businesses, and so forth.”

At the international level, governments, philanthropists, and institutional donors have joined forces over the past twelve months to help meet Ukraine’s growing humanitarian needs. But while the world’s attention is understandably focused on relief efforts during the ongoing conflict, economic recovery and support for Ukraine’s businesses is also urgently needed.

In July 2022, the Ukrainian government launched its comprehensive National Recovery Plan detailing a pathway to rebuilding the economy once the war is over. Shortly after, Liesje Schreinemacher, Minister for Foreign Trade and Development Cooperation of the Netherlands, pledged significant funds to enable Ukrainian SMEs to invest in their businesses and to rebuild a number of Ukrainian cities.

It is vital that these efforts now continue with an emphasis on support for the SME sector. “It is worth thinking about restoration today, and the support of our Western partners, in particular the Dutch ones, is very important,” concludes Ferens.

Seba Salim is a Communications Associate at SPARK, an international NGO specializing in support for entrepreneurs and SMEs in fragile and conflict-affected regions throughout Eastern Europe, the Middle East, and Africa. Sarah Page is a Communications Manager at SPARK.

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Ukraine’s future prosperity is not just a matter of ending the war and moving toward membership of the European Union, however. Ahead lies the complex reconstruction of the country’s entire economy and national infrastructure. In order for this to succeed, there can be no return to pre-war conditions. Instead, Ukraine has a once-in-a-lifetime opportunity to reinvent itself as one of the most modern nations on the planet.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Thanks to the unprecedented support of Ukraine’s international partners, today’s ambitious visions for a new Ukrainian economy are entirely feasible. This will in all likelihood be a green economy at the cutting edge of the digital revolution.

President Zelenskyy had already set Ukraine on the road to a digital future long before the horrors of Russia’s full-scale invasion. In the early days of his presidency in spring 2019, Zelenskyy identified digitalization as a national priority and vowed to create “a country in a smartphone.”

On the eve of the Russian invasion, Ukraine had already made significant progress in this direction. More than 10 million Ukrainians, or around one-third of the entire adult population, had installed the Diia app, which offered a range of public services and documents in digital format. The impact of this digitalization has been evident during the war, with Ukrainians frequently using virtual documents to identify themselves and pass checkpoints. 

The tech sector had also established itself as a key engine of the economy in pre-war Ukraine. By the end of 2021, the IT industry was generating around $6.8 billion in annual export earnings, representing approximately 10% of Ukraine’s overall export revenues.

These developments are encouraging and indicate that Ukraine can seize the unique opportunities that may soon emerge. At the same time, the post-war transformation of the country will force the Ukrainian authorities and the domestic tech industry to think on a far larger scale than ever before. International investments alone will dwarf anything seen in Ukraine since the country regained independence in 1991.

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Ukraine’s IT industry certainly has the potential to rise to the coming challenges. On the eve of the invasion, there were more than 250,000 IT engineers in the country working for companies that developed advanced solutions for many of the world’s biggest brands. To harness this potential and position the country for future success, Ukraine’s Ministry of Digital Transformation must engage with the world’s leading experts to develop an effective digital transformation strategy.

This strategy must address a series of core issues such as mastering digital skills, engineering digital infrastructure, the digitalization of public services, and the digital transformation of Ukraine’s business environment. Ukraine must adapt its education system to make sure the emerging generation of young Ukrainians are equipped with the necessary English-language and tech skills to drive the country’s transformation forward. Teachers will need to have expert knowledge, while schools must have sufficient internet access and tech tools.

These innovations need to be applied evenly across the country to make sure progress is consistent and no regions are left behind. This is especially important for regions liberated from Russian occupation. Digitalization must also extend to every branch of public services including healthcare, housing, and municipal services.

Even this very brief overview highlights the vast proportions of the undertaking that lies ahead for Ukraine. The envisaged digital revolution will require the involvement of experts in a wide variety of fields including law, education, energy, medicine, and security as well as IT itself.

The experience of the past ten months leaves little room for doubt that the global community will be ready to support Ukraine’s post-war digital transformation. While the Ukrainian Ministry of Digital Transformation will have the task of coordinating the creation of a digital transformation strategy, the Ministry can call on the support of a range of national governments, international financial institutions such as the World Bank and the EBRD, global development agencies, and many of the world’s largest tech companies.    

Today, while Ukraine’s heroic defense against Russian aggression is still underway, it is time to create a broad coalition of allies and establish expert working groups to develop a strategy development fund. The platform for this coalition can be the Digital for Freedom initiative already put forward by the Ministry of Digital Transformation in mid-2022.

Ukraine has already demonstrated that with enough military support, it can win the war. The country’s international partners must also be ready to begin the massive task of reconstruction as soon as circumstances allow. A comprehensive and ambitious digital transformation strategy can serve as one of the foundational documents for the coordination of efforts to make the new Ukraine an example of progress for the entire world.

Anatoly Motkin is president of the StrategEast Center, an independent institution working to develop Eurasia’s digital economy in collaboration with international financial institutions, development agencies, global tech companies, and Eurasian governments.

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According to data from the National Bank of Ukraine, IT industry export revenues actually increased by 23% year-on-year during the first six months of 2022 to reach $3.74 billion. This remarkable performance is part of a far longer growth trend stretching back to the turn of the millennium that has seen the Ukrainian tech sector emerge as an engine of the national economy and an increasingly influential factor shaping the broader development of the country.

Ukraine’s tech potential first began to attract international attention around a decade ago with the emergence of Ukrainian-founded companies such as Grammarly, GitLab, airSlate, and Preply. These success stories sparked speculation over whether Ukraine was set to become the world’s next “unicorn factory.” By 2020, the Ukrainian IT sector accounted for 8.3% of total exports and was a key contributor to Ukrainian GDP.

The rise of the country’s tech sector is driving the digitization of Ukrainian society. In recent years, Ukraine has witnessed a dramatic increase in cashless payments and other FinTech innovations. Following his election in 2019, Ukrainian President Volodymyr Zelenskyy established the Ministry of Digital Transformation to facilitate what Zelenskyy has called the creation of “a state within a smartphone.”

Prior to this year’s Russian invasion, the ministry oversaw the launch of digital options to replace a range of bureaucratic processes and secured legal recognition for digital versions of state-issued documents such as passports and driving licenses. With the tech sector now demonstrating remarkable wartime resilience, many believe this ongoing digitalization holds the key to Ukraine’s future.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The IT industry has played a crucial role in expanding the Ukrainian middle class thanks to average salaries in the range of $3,000 per month compared to a national average of approximately $500. One continuing IT industry trend is the strong market share of IT outsourcing. At present, pure product development accounts for only 16% of the IT industry in Ukraine.

Efforts to find investors for new projects have long been complicated by security concerns related to Russian aggression. Eveline Buchatskiy, VP of Special Projects at Ukrainian IT company airSlate, recalls a time when investing in the next Ukrainian startup was a competitive affair. Unfortunately, she says, the venture capital investment climate deteriorated following the outbreak of hostilities with Russia in 2014. Today, airSlate focuses heavily on Ukrainian-based product development, with Buchatskiy confident that the appeal of Ukrainian tech creativity still outweighs the obvious threats created by Russia’s ongoing invasion.

DroneUA founder Valerii Iakovenko is a good example of this creativity. Iakovenko is a medical doctor, turned insurance banker, turned tech entrepreneur. Nine years ago, he and his business partner set out to create ecosystems that support the use of tech in the agricultural industry. According to his data, use of DroneUA’s agriculture drones helps farmers increase agricultural yield by 4% for corn and 2% for wheat. At scale, these percentages are significant, especially given Ukraine’s status as one of the world’s leading agricultural producers.

Last year, the DroneUA team set their sights on the task of providing additional reliable energy sources, with Iakovenko’s team working toward a sustainable marketplace for energy production. This is easier said than done. Not only are supply chains problematic, but increased production requires a growing network of installers and maintenance techs. Additionally, self-sufficient energy production systems are cost-prohibitive. Iakovenko sees the electric independence segment of the tech sector as ready for investment, “once we win the war.” In the meantime, he is focusing on his current priority of providing self-supporting power for Starlink systems.

In order to reach its true potential, Ukraine’s tech sector requires a suitable legal framework. Former US Ambassador to Ukraine Steven Pifer highlights the need for increased legislative stability moving forward. This is particularly salient in the IT sector where proprietary data protection is a key element of business success.

In 2020, Ukraine established the Ukrainian Intellectual Property Institute to address these concerns. The same year, Ukraine also launched the National Intellectual Property Authority (NIPA). More recently, the Ukraine IT Association formed an IT Law Committee to address IP protection concerns specifically in the tech space.

These efforts are needed for many reasons, but it is also important to acknowledge the risks they create in the current environment. Establishing extensive legal protections places potential limitations on innovation within the tech sector. This is particularly relevant for businesses that are trying to innovate and adapt rapidly to changing circumstances. Businesses are faced with the choice of holding on to the advantages of IP protections or sharing data to support Ukrainian innovation and accepting the risk therein.

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In recent years, there has been significant discussion over how to help the IT sector transition from IT outsourcing to IT service. Recommendations have centered on targeted taxation, sector integration, talent acquisition, and intellectual property protection. Ukraine looked to increase taxes on non-Ukrainian-owned companies in 2022 to promote local innovation. However, increasing taxes on foreign companies willing to accept the risk of operating in Ukraine could further stall progress. Meanwhile, the December 2021 launch of Ukrainian tech hub Diia City aims to offer further taxation incentives. Diia City significantly reduces the tax burden on IT sector businesses and employees. The project looks to create the largest innovation hub in Europe.

Sector integration continues to provide market growth opportunities. The drive for tech solutions is particularly palpable in the Ukrainian agriculture sector. According to Iakovenko, Ukrainian farmers are often young, eager for tech adoption, and unburdened by a bias for traditional practices. Ukrainian farmers are already utilizing satellite data to determine crop fertility and planting schedules. They also lead the world in terms of drone usage in agriculture.

One key problem facing Ukrainian IT companies is finding enough qualified recruits to maintain the tech sector’s robust growth rate. In order to overcome mounting personnel shortages, the sector has previously sought to attract international talent from nearby Poland, Romania, and elsewhere. However, this is currently unrealistic due to the ongoing Russian invasion.

The Ukrainian government can address shortages through scholarships, increased trade school-style education, and an expansion of the Ukrainian IT Creative Fund. These intermediate and long-term solutions make good sense but do not directly address the current situation. With the increase of Ukrainians moving abroad to escape the war, the government could offer tax waivers to Ukrainian workers outside the country continuing to work for Ukrainian companies remotely. While this will not grow the workforce, it will help diminish the talent drain.

The Ukrainian IT industry is moving forward while adapting to the extreme circumstances created by Russia’s invasion. Much still needs to be done in order to maximize the obvious potential of the country’s tech talent, but the mood within the sector remains overwhelmingly optimistic. This optimism is based on the many resourceful and committed people who are driving Ukraine’s digital progress and shaping the country’s future.

Dathan Duplichen is a graduate of the Ford Dorsey Master’s in International Policy program at Stanford University and a European Foreign Area Officer for the United States Department of Defense. Opinions expressed in this article are those of the author and do not represent the United States Department of Defense.

Further reading

UkraineAlert Oct 11, 2022

Russia’s terror tactics: Putin escalates attacks on Ukrainian civilian targets

By Peter Dickinson

Vladimir Putin has launched a new phase of his Ukraine invasion and ordered the destruction of the country’s civilian infrastructure. Ukraine’s Western partners must urgently provide air defense systems to avert disaster.

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UkraineAlert Oct 18, 2022

Bowing to Putin’s nuclear blackmail will make nuclear war more likely

By Andriy Zagorodnyuk

Giving in to Putin’s nuclear blackmail would not end the war in Ukraine. What it would do is set a disastrous precedent that makes a future nuclear war far more likely while encouraging uncontrolled nuclear proliferation.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.

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Pakistan’s startups and technology sector witnessed unprecedented growth during the COVID-19 pandemic. 2021 was a record-breaking year, with technology startups raising $350 million, while over $227 million was raised in the first half of 2022; Pakistani startups have raised $322 million in 2022 so far. Additionally, Pakistan’s information technology (IT) services sector has emerged as the largest net services exporter in the country, with IT exports more than doubling from $1.19 billion in fiscal year (FY) 2019 to $2.62 billion in FY 2022.

Another key component of the country’s technology sector is freelance work, where individuals provide technology services to global clients through platforms such as Upwork and Fiverr. This talent pool has experienced a tremendous increase in their earnings during the pandemic. While exact data for cumulative freelance earnings is not available, Pakistan is ranked as one of the largest freelance markets in the world. The national government has set a target of earning over $3 billion from this sector by 2024.

However, a tightening global macro environment coupled with increasing domestic political instability is a cause of concern for the sector, especially the domestic startup economy. To understand the risks and opportunities facing the technology ecosystem, the Atlantic Council’s Pakistan Initiative interviewed several experts within and outside Pakistan. The analysis below highlights the current state of the ecosystem and the impact of ongoing economic and political instability in Pakistan. It also outlines recommendations for key stakeholders including policymakers seeking to further globalize Pakistan’s technology sector to unlock both export earnings and foreign investment opportunities.

The South Asia Center is the hub for the Atlantic Council’s analysis of the political, social, geographical, and cultural diversity of the region. ​At the intersection of South Asia and its geopolitics, SAC cultivates dialogue to shape policy and forge ties between the region and the global community.

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The post Pakistan sees growing culture of innovation amid tech startup boom appeared first on Atlantic Council.

Balance of power: Promoting more women in leadership featured keynote welcome remarks by US Mission to the Kingdom of Saudi Arabia Chargé d’Affaires Martina Strong, welcome remarks by KPMG in Saudi Arabia and Levant Chairman and CEO Dr. Abdullah Al Fozan, and a panel moderated by Entrepreneur Middle East Managing Editor Tamara Pupic featuring PepsiCo Human Resources Director Rima Al Soraihi, Cisco Vice President for Middle East and Africa Reem Asaad, Boeing Executive Vice President and Senior Advisor Leanne Caret, and UPS President for International Public Affairs and Sustainability Penelope “Penny” Naas.

This was the first in a series of four events for the WIn (Women Innovators) Fellowship, led by the Atlantic Council’s empowerME Initiative in cooperation with Georgetown University’s McDonough School of Business and with support from US Embassy Riyadh, PepsiCo, and UPS.

The key points from the discussion are summarized below.

Challenges for aspiring and established women leaders:

• While celebrating the “amazing change” that has taken place over the past six years in Saudi Arabia, Abdullah Al Fozan stressed that “the women’s empowerment movement is new here in Saudi.” He added that Saudi women only entered the professional services industry in 2007, but after a “challenging journey” over three hundred women are now part of KPMG’s national workforce.
• Rima Al Soraihi identified “lack of mobility,” particularly due to caregiving obligations and family restrictions, as “one of the biggest challenges that women are facing” that limit their labor force participation in Saudi Arabia. Gender discrimination and exclusion of women from decision making processes are additional barriers; Al Soraihi advised women facing the latter to ask male colleagues to recap key conversations until eventually they are included.
• Reem Asaad argued that barriers to women in leadership “are not specifically a Saudi issue, but more of a global issue,” and Leanne Caret concurred that “more times than not, the conversations are identical” in Europe, the United States, and Saudi Arabia.
• Asaad pointed to three obstacles that can contribute to the disparity between the amount of women holding entry-level positions versus senior roles. First, age-old stereotypes about women’s leadership styles persist: women are perceived as “confrontational, aggressive, too emotional, or weak.” Second, unconscious bias can hinder women’s professional growth, especially since research indicates that “in many cases for career progression men are judged based on their potential, whereas women are judged on their past performance.” Third, women have a responsibility to “take a moment to look within” and identify ways they might hold themselves back, in order to challenge the limitations of societal and cultural conditioning.
• Caret emphasized the importance of top leadership representing the organization’s entire workforce and the community in which they work: “We can talk all day about how we believe in inclusivity, diversity, and equity, but if the leadership doesn’t reflect that type of a world, then you’re not going to believe that it exists for you.” Boeing’s work has yielded positive results, as minority representation has increased since the start of the pandemic, and 2021 was the first year in decades that women have not left the workforce at a higher rate than men.

Role of the public and private sectors in driving change:

• Penny Naas explained that setting mandates on gender representation in countries like Saudi Arabia can be “really impactful in shifting cultural norms.” She commented that “the threat of quotas on boards has really moved the needle in a lot of countries,” and a similar government policy in Saudi Arabia “might be very helpful” for companies to realize it is in their best interest to have diverse boards. However, she cautioned that another focus must be structuring systems to attract “the best talent for the job” because women will struggle to feel a sense of belonging and to advance in their careers if they are not a good fit and have simply satisfied a quota.
• Asaad said that while the private sector “should hold itself to account” and provides expertise that shapes government policy, it is the public sector that “in many ways often sets the tone.” She highlighted how Saudi Arabia is “leading the way” with its Vision 2030 goal to increase women’s labor force participation from 22 percent to 30 percent. The private sector is following suit, including the Arab Institute for Women’s Empowerment, which recently announced its plan to invest in training Saudi women, which is expected to have a “return on investment of $400 billion by 2030.” Asaad also praised the UAE Gender Balance Council as “setting a great example of how businesses should work.”
• Al Fozan stressed the “power of legislation” when first established by the government and then applied to a company-specific context. From 2015 to 2020, he oversaw an internal version of the Nitaqat program, which resulted in a boost in nationalization from 20 percent to 42 percent. He also set a quota for women’s representation at KPMG; the firm now has ten female directors and three female partners.

Top leadership skills that women must develop:

• Noting the global period of transition and prime opportunity for innovation during the pandemic, Naas stressed that women should align with “the people who are ready for the change” and who will “help build your confidence and your career,” while purposefully disregarding the opinions of “the people you’re never going to be able to convince.” Naas also underlined that humor can be used to “disarm situations” that are potentially demeaning to women to “take back the power, elevate your status, and be seen as a leader.”
• In order to reach their full potential, Asaad advised aspiring women leaders to practice self-belief and “become your own champion”; “learn to ask for help” and as a byproduct, expand your professional network; and “continue learning at every stage of your career.”
• Al Soraihi highlighted the need to “own your career” by taking initiative to create and add value, asking for critical experiences and for support in developing new skills, and quickly adapting to change as multinational corporations continue to evolve.
• Caret shared the “Four G’s” that have been imperative throughout her career: grit (being known for delivering on your commitments); gumption (transcending imposter syndrome to put yourself out there); grace (giving yourself and others a break, which then dictates how others treat you); and gratitude (how you comport yourself and thank others).

Strategies to ensure more women reach leadership positions:

• Reflecting on the success of PepsiCo’s global Work That Works program, Al Soraihi advised companies to offer “greater flexibility on where or how work can happen,” so that women and mothers in particular have the option to telework. Caret added that organizations should give both men and women the option “to step away from their careers” and come back later without starting over completely.
• Asaad stressed that formal mentorship programs are “one of the underused and underrated resources” for aspiring women leaders, while Caret emphasized that informal, casual mentorship from colleagues outside of your traditional reporting structure can also have a profound impact. According to Naas, sponsorship is another key tool, and having more than one advocate at talent discussions can propel your career forward.
• Caret emphasized that it is crucial to have women in leadership “who can identify microaggressions and call them out” and women on hiring teams to ensure highly-educated women graduates—who are now the majority—join the workforce, especially in STEM fields.
• Pupic lauded the critical role that male allies play in championing women’s advancement to leadership roles, while Naas cautioned that “we need to bring men with us” so they see women’s empowerment as “expanding the pie as opposed to swapping out a piece of the pie.” Research reveals that across the G7 countries, the people who support female leadership the least are men between the ages of eighteen and thirty-five.
• Ultimately, empowering more women to reach positions of senior management and leadership is “a business imperative,” according to Caret, who cited that diverse boards lead more profitable companies. Asaad concurred that “it’s not just about moral duty or diversity and inclusion—it’s really about economic prosperity for a nation.”

Allison Holle is assistant director of the Atlantic Council’s empowerME Initiative. Follow her @AllisonHolle.

The post Promoting more women in leadership is “a business imperative” and key to unlocking economic prosperity, say top executives appeared first on Atlantic Council.

By the Freedom and Prosperity Center

The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

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Executive Summary

The Atlantic Council’s Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries—and to explore the nature
of the relationship between freedom and prosperity in both developing and developed nations.

To aid in this task, this report introduces the new Atlantic Council Freedom and Prosperity Indexes.

The Freedom Index measures economic, political, and legal freedoms for nearly every country in the world, using the latest available data when the index was constructed at the end of 2021. The Prosperity Index measures economic wellbeing and human flourishing for the same countries and time period. In addition, we collected historical data to allow us to track and analyze change over time. We constructed the same indexes going back in five-year increments for the years 2006, 2011, and 2016; 2006 is the earliest date for which data on our indicators are available.

To be sure, there are limits to any data-collection effort. The world changes quickly, and the data we collected at the end of 2021 may not still represent current realities in every case. Russia, for example, is less free today than when we collected the data, due to Vladimir Putin’s invasion of Ukraine and his related crackdowns at home. In addition, we needed to choose indicators that could be applied across all countries and over time, but these generalized measures may not always fit neatly with the unique circumstances in every country. Still, despite these limitations, we believe that these indexes provide new and valuable information on global freedom and prosperity.

Going forward, we plan to update the indexes annually. The methodology to produce the indexes is straightforward and transparent, and is described in detail in the appendix.

We have built on the work of several comparable country indexes. Many of these measure one aspect or another of freedom or prosperity. Some combine freedom and prosperity indicators and produce a single index. Our approach in designing the Atlantic Council Freedom and Prosperity Indexes was different in a few ways.

• We defined freedom comprehensively. Many existing indexes measure economic, political, and legal freedoms separately, whereas we combine all three in our Freedom Index.
• We defined prosperity comprehensively. We also take a broad view of what constitutes a prosperous country. We go beyond material measurements like income per capita and healthcare. We argue that a truly prosperous country should also score well on the quality of the environment, its treatment of minorities, and the general happiness of the population.
• We constructed separate indexes for freedom and prosperity. By creating two distinct indexes, we hope to give researchers a better opportunity to analyze the relationship between freedom and prosperity. We also offer policymakers and other thought leaders clearer benchmarks for reforms and tracking results over time.

The indexes demonstrate that there is a strong relationship between freedom and prosperity. This report draws on the trajectory of the results over time, and other historical evidence, to argue that freedom tends to result in prosperity. In other words, freer countries tend to be more prosperous, and we have reason to believe that improvements in freedom will, over time, lead to greater and more durable prosperity.

The report also shows that autocracies generally do not deliver prosperity for their people. All countries rated Prosperous in our index (except for Singapore and Israel) also rank as Free. All countries in our Free category fall in either the Prosperous category or in the upper half of the Mostly Prosperous category. Both China and Russia rank lower in the Prosperity Index than Free countries do.

These findings lead us to recommend that governments, international organizations, private-sector companies, philanthropic organizations, and others concerned with prosperity promote economic, political, and legal freedoms.

The center will use the indexes and supporting data for its own research, and will also make them available for other researchers. All the research and resources used to produce the indexes and this report are publicly available. The Freedom and Prosperity datasets are accessible on the center’s website. The indexes will be updated annually, allowing thinkers and doers to track progress over time. Through our work and the work of others, we hope to make the world freer and more prosperous.

Summary and key takeaways

We hope that scholars and practitioners can use these data to conduct a wide range of analyses and to forge practical recommendations. In this section, we present some of our own preliminary analysis to explore the central question of this project: what is the relationship between freedom and prosperity? To be sure, this has been the subject of enormous scholarly debate, and we will not be able to resolve this question in a single report. Still, this analysis brings new data to bear on this question. The data and analysis in this report indicate that freedom and prosperity are correlated, and provide further support for the thesis that freedom contributes to prosperity.

Prosperity is highly correlated with freedom

A central finding of this report is that prosperity and freedom are highly correlated. The correlation coefficient between the indexes is 0.81. High values of Freedom are associated with high values of Prosperity, and low values of Freedom are associated with low values of Prosperity. The R² statistic shows that 66 percent of the variation in prosperity around the world can be explained by freedom (Table 5).

The strong relationship between freedom and prosperity can also be seen in simple descriptive statistics. With the exception of Israel and Singapore, every country in the Prosperous category is also in the Free category. Israel and Singapore (due to the latter’s high levels of economic freedom) occupy the two highest positions in the Mostly Free category (Table 4).

Moreover, no Free countries in 2021 are Mostly Unprosperous or Unprosperous; they are either Prosperous or Mostly Prosperous. The forty-one countries that comprise the top category of the Freedom Index also all rank in the top fifty for the Prosperity Index, except for Romania (fifty-one in the Prosperity Index) and Cabo Verde (eighty-one).

In addition, all Unfree countries in our Freedom Index rank in the Mostly Unprosperous or Unprosperous categories in our Prosperity Index—except for Cuba, which scores above fifty on Minority Rights and Health.

Continuing with the descriptive statistics, we find that citizens in Free countries are five times richer in per capita income ($36,142) than citizens in Mostly Free countries ($7,246) (Table 3). They are six times richer than citizens in Mostly Unfree societies ($5,791).

Table 3: Descriptive statistics across Freedom Index categories

Category	Country counts	Freedom Index		Population covered		GNI per Capita (US$)		Health Score
		Mean	Median	Mean	Median	Mean	Median	Mean	Median
Global	174	56.7	55.7	7,686	100%	13,312	5,070	62.2	67.2
Free	41	83.2	82.3	1,131	15%	36.142	32,290	87.5	89.9
Mostly free	67	60.8	59.7	2,824	37%	7,246	7,246	60.6	65.9
Mostly unfree	55	39.7	40.5	3,570	46%	5,791	5,791	49.1	47.1
Unfree	11	18.3	18.9	157	2%	2,775	2,775	43.7	42

Table 3 Continued: Simple statistics across Freedom Index categories

Category	Country counts	Environment Score		Happiness Score		Minority Rights Score		Prosperity Index
		Mean	Median	Mean	Median	Mean	Median	Mean	Median
Global	174	45.4	46.1	62.2	56.1	79.1	87.6	51.2	49
Free	41	80.7	89.2	79.4	78.4	94.6	95.9	76.9	79.1
Mostly free	67	38.7	41.6	52.1	52.4	85.3	88.9	48.2	47.7
Mostly unfree	55	30.4	27.1	47.0	45.3	66.7	70.0	40.0	38.3
Unfree	11	29.4	29.5	27.5	22.6	47.6	45.6	30.5	31.3

The quality of life is also different in Free and Unfree societies. As can be seen in Table 3, Health, Environment, Happiness, and Minority Rights improve as a country moves toward greater freedom. The average Health score jumps from 60.6 to 87.5 when moving from the Mostly Free to the Free category. The average Environment score drops by more than 50 percent when moving from the Free group to the Mostly Free group. People in Free countries are almost three times happier than people in Unfree countries. For Minority Rights, the gap is smaller between the Mostly Free and Free groups (nine points), but the score drops significantly as freedom decreases, with gaps of almost twenty points between Mostly Free and Mostly Unfree, and again between Mostly Unfree and Unfree. These results suggest that more freedom is associated with a better life for the average person.

Table 4: Overlap between freedom and prosperity categories 

Evidence suggests that freedom contributes to prosperity

In this section, we examine whether freer countries tend to become more prosperous over time. Scholars have long debated the direction of the relationship between freedom and prosperity. The insight that freedom promotes prosperity goes back at least to Adam Smith’s The Wealth of Nations, which argues that laws and institutions that protect the liberty of individuals to pursue their own interests result in greater prosperity for the larger society.

Others argue the relationship goes in the opposite direction. Barrington Moore, for example, argues that a country cannot sustain democracy without a thriving middle class. People acquire property and material wealth first, and then demand a voice in government, including the freedoms to protect their wealth. This hypothesis goes all the way back to Aristotle, who posited that a large, prosperous middle class may mediate between rich and poor, creating the legal foundation upon which political freedom may function. A century ago, Max Weber extended this line of thought, proposing that the middle class defends its economic power by enshrining it in laws and institutions.

A third possibility is that there is a positive feedback loop; freedom begets prosperity, which, in turn, begets more freedom.

The idea that institutions are the key to long-run economic growth is well established in contemporary economic theory. Institutions provide the rules of the game. Rules that incentivize entrepreneurship, hard work, long-term planning, and broad access to economic opportunities tend to produce wealthier societies. Rules that stifle innovation, discriminate against certain segments of society, and do not guarantee that individuals will be able to enjoy the fruits of their labors and creations tend to produce poorer societies.

In theory, both democratic and autocratic countries could put in place sound economic institutions to produce long-run growth. But, in practice, democracies are much more likely to do so. Dictators often establish rules that maximize their political control and benefit themselves and their supporters, to the detriment of broader segments of society. On the other hand, because democratic leaders are drawn from, and represent, broader cross sections of society, they tend to put in place institutions that benefit wider swaths of that society.

We will not be able to definitively resolve this complex debate in a single report, but we do bring new data to bear on these questions. We believe that our data and associated analysis provide evidence that freer countries tend to become more prosperous.

In an effort to disentangle this relationship, we examined the strength of the correlations between freedom and prosperity over time. Using the same methodology, we re-created the 2021 Freedom and Prosperity Indexes for 2016, 2011, and 2006. We examined whether measures for freedom in prior years are associated with levels of prosperity in subsequent years. After all, changes in prosperity do not happen overnight. If freedom drives subsequent prosperity, then we should see the correlations between freedom in prior years more strongly associated with levels of prosperity in subsequent years.

This is what we found. Indeed, as one can see in Table 5 and Figure 6, the longer the time lapses between our measures of Freedom and Prosperity, the stronger the association. A country’s level of Prosperity today is better explained by its level of Freedom in 2006 than by its current Freedom. In this analysis we are concerned with the general trend over time, not the absolute differences from year to year. The correlation and R2 statistics are higher the further one goes back in time, indicating a stronger fit between past Freedom and future Prosperity. The 2006 Freedom Index, the earliest measure of Freedom calculated for this report, is most strongly associated with levels of Prosperity in 2021. While the relative differences may seem small, they are in a consistent direction. This rough test does not provide definitive proof that advances in freedom produce subsequent prosperity, but it is suggestive of such a dynamic and worthy of further investigation.

Table 5: Historical correlations

Prosperity 2021
Freedom Index Year	R2	Slope	Simple Correlation
2021	0.656	0.762	0.810
2016	0.662	0.771	0.814
2011	0.673	0.809	0.821
2006	0.677	0.834	0.823

Note: The table is based on the results of simple ordinary least squares regression, in which Prosperity Index 2021 is the dependent variable and time series of the Freedom Index are the explanatory variables.

We also tested the alternative hypothesis. Are past levels of Prosperity more strongly associated with current levels of Freedom? While there is a relationship, it is weaker than the link between Freedom and subsequent Prosperity. For example, the R2 statistic between Prosperity in 2006 and Freedom in 2021 is 0.613, while the same statistic for Freedom in 2006 and Prosperity in 2021 is 0.677. Freedom in a given year is more strongly associated with subsequent prosperity than the reverse. This simple test suggests that the relationship is driven more by a country’s level of freedom shaping its subsequent level of prosperity than by the reverse.

As we plan to update the data annually, we look forward to conducting further analysis on the direction and magnitude of the relationship between freedom and prosperity, and we encourage others to do the same.

We also analyzed the countries with the biggest score changes in the Freedom Index between 2006 and 2021. If our hypothesis is correct, we should expect big shifts in the independent variable (Freedom) to be associated with meaningful changes in Prosperity.

Two countries stand out for big changes in freedom over this period, and we found that their prosperity levels changed in the same direction.

Bhutan had the biggest jump in Freedom of any country between 2006 and 2021, and also showed an increase in Prosperity. In 2008, Bhutan experienced a transition from an absolute monarchy to a constitutional monarchy, including the establishment of an elected legislature. Bhutan’s Freedom Index score reflects these changes, with a 74-percent increase in Legal Freedom and a whopping 166-percent increase in Political Freedom between 2006 and 2021. Bhutan’s income score increased by 91 percent, and there was a 35-percent increase in its Environment score.

Venezuela, by contrast, is the country that lost the most freedom and prosperity between 2006 and 2021—a result with roots in Hugo Chávez’s increasing political repression and embrace of socialist and populist economic policies as he consolidated power. The country dropped more than 42 percent in its overall Freedom score. The fall in its Political Freedom score was most pronounced—a 68-percent drop. On the Prosperity Index, Venezuela’s score plummeted 24 percent from 2006 to 2021. The country was once among the wealthiest and most developed in Latin America, but now scores poorly on Health, Income, and Happiness.

Divergent development paths for formerly communist countries in Eastern Europe

As our next test, we look to the divergent paths of countries’ political and economic transitions after the end of the Cold War. The fall of communism in Central and Eastern Europe in the 1989–1990 period can be viewed as a kind of natural experiment. Before the fall, these countries had similar levels of freedom and prosperity. Some countries, like Estonia, Latvia, Lithuania, and Romania, chose democracy and free markets. Others, such as Belarus and Russia, came to be ruled by autocratic regimes over the following years. What was the result of these choices on the trajectories of their subsequent economic development?

These six countries had divergent economic paths between 1995 (the first year for which all countries had comparable data) and 2020. As we can see in Table 6, the countries that chose freedom are between seven and nine times wealthier today, while the countries that remained autocratic are only between three and five times richer.

Table 6: Increase of GDP per capita in selected former communist countries (1995–2020)

	GDP per capita (current US$)
	1995	2020	Multiplier
Estonia	3,134	23,027	7.3
Latvia	2,330	17,726	7.6
Lithuania	2,168	20,234	9.3
Romania	1,650	12,896	7.8
Belarus	1,323	6,424	4.9
Russia	2,666	10,127	3.8

The data from our Freedom and Prosperity Indexes show similar results, as can be seen in Table 7. Russia (ranked eighty-eighth) and Belarus (ranked eighty-second) underperform in the Prosperity Index relative to their freer neighbors.

Divergent development paths for people living under communist and democratic governments

Table 7: Scores of selected former communist countries

	Freedom 2021		Prosperity 2021
	Score	Rank	Score	Rank
Estonia	87.2	14	65.6	36
Latvia	81.7	25	62.6	42
Lithuania	81.8	24	63.9	39
Romania	76.3	36	59.8	51
Belarus	39.4	139	50.0	82
Russia	41.2	135	49.0	88

We can draw similar conclusions by looking at World War II as the starting point for a new development period. For decades after World War II, China, Germany, and Korea were divided. Some people lived in communist countries, while others lived in countries with free markets and with political regimes that either were democratic from the beginning (West Germany), evolved into a democracy (South Korea and Taiwan), or had a wide range of freedoms (Hong Kong).

This provides us with another natural experiment. Did people living in freedom become more prosperous over time?

We begin with Germany. According to Organisation for Economic Co-operation and Development (OECD) data, democratic West Germany’s gross domestic product (GDP) per capita in 1950 was only about 1.5 times larger than that of communist East Germany ($4,280 vs. $2,796). But, by the reunification of Germany in 1990, West Germany’s per capita income had grown to be 3.6 times larger ($19,441 vs. $5,403) than that of East Germany.

Let us now turn our attention to the Korean Peninsula. North and South Korea were both exceptionally poor in 1950. While both countries lacked political freedom from the end of the Korean War until 1980, they selected very different paths regarding economic freedom. South Korea’s dictators chose capitalism and secure property rights, while North Korea’s leaders selected a state-planned communist economy. By 1980, South Korea’s per capita income ($1,589) was more than double that of North Korea ($768).

Starting in the 1980s, South Korea transformed itself into a democracy, while North Korea remains a dictatorship. The addition of political freedoms in South Korea resulted in an even larger divergence in the economic paths of these two nations. United Nations data for 2021 show GDP per capita of $31,947 for South Korea and $639 for North Korea. Today, people living in the free South Korea are fifty times wealthier than those living in the unfree North Korea.

North Korea is not ranked in our indexes because it does not provide sufficient data. South Korea ranks thirty-fifth and Free in our Freedom Index and twenty-fifth and Prosperous in our Prosperity Index.

How does this story look when examining Chinese people living under different political and economic systems? The People’s Republic of China (PRC) has been under the control of the Chinese Communist Party (CCP) since 1949. China has never had political freedom, although it started instituting liberalizing economic reforms in the 1980s under Deng Xiaoping. Until its takeover by the PRC in 2020, Hong Kong was either under British control or an autonomous PRC region, enjoyed some democratic freedoms, and ranked among the freest markets in the world. Taiwan was established as a dictatorship at the end of World War II, but adopted free markets. It started transitioning to democracy after 1975. What were the results of these institutional choices?

The PRC, Taiwan, and Hong Kong were all poor in 1961, with GNI per capita of $76, $163, and $437, respectively. But, their different levels of freedom resulted in different levels of prosperity by 2020. Free Taiwan and Hong Kong were able to break out of the middle-income trap, while unfree China, at least to date, has not. The middle-income trap, a measure created by the World Bank in 2006, refers to a situation in which a developing country moves from the poor to the middle-income category, but gets stuck below the high-income threshold—currently calculated by the World Bank as $12,695 GNI per capita. In 2020, per capita income in China, Taiwan, and Hong Kong was $10,055, $25,055, and $46,324, respectively. These differences are also clear in our indexes. Taiwan ranks Free and Mostly Prosperous, while China ranks Mostly Unfree and Mostly Unprosperous. We have chosen not to rank Hong Kong because it is now under the control of the PRC.

Autocracies are generally not prosperous

Some might think that an autocratic ruler can guarantee stability and push through needed economic reforms. They might point to Singapore as an example of a prosperous non-democracy. But, such examples are few and far between.

Authoritarian leaders like to centralize power, and dislike strong economic institutions that may check their power. While authoritarian leaders may sometimes make good economic decisions, they frequently make catastrophically bad ones. For example, the collectivization of agriculture led to mass famine in Joseph Stalin’s Soviet Union, in Mao Zedong’s China, and in Kim Il-Sung’s North Korea. More recently, and less dramatically, bad financial decisions by Turkey’s leaders led to high inflation and currency collapse, while in Kazakhstan the long-lasting kleptocracy of former President Nursultan Nazarbayev and his family led to social unrest. Even if a country has a wise authoritarian leader who makes consistently good decisions, like Lee Kuan Yew of Singapore, there is no guarantee that his successor will be equally wise. Moreover, a model that might work for a small city-state like Singapore does not easily apply to larger countries.

Autocracies are also subject to rapid and dramatic reversals along the path toward greater prosperity. Venezuela, for example, a country rich in natural resources and with a democratic tradition, adopted authoritarian and socialist policies in the early 2000s. As a result, Venezuela lost two-thirds of its GDP from 2014 to 2019. This is comparable to the 60-percent drop in GDP Syria experienced during its civil war. Bad authoritarian leaders curtailing freedoms can devastate a country as much as a civil war.

Unfree societies do not depend on rules and institutions but, rather, on authoritarian decisions. These decisions may, at times, redirect capital and people toward more productive outlets and have a positive impact in the short term. But, over the long term, if these decisions are not accompanied by greater freedoms, these autocrats are likely to undermine any progress they achieve.

Likewise, the authoritarian tendency to accumulate power makes leaders reluctant to allow free markets, which, when properly regulated, reflect the decisions of numerous economic agents and are a sounder path to economic development than the decisions of an autocrat or central bureaucracy.

Figure 7: Comparative rankings in the components of the Prosperity Index

Note: We use the rankings of China and Russia and the average rankings of all countries included in the Free category. The five axes represent the five indicators forming the Prosperity Index. The center point represents a rank of one hundred and seventy-four, the worst possible performance. The outer line represents a rank of one, the best possible performance on each indicator.

China

China is often cited as a model of successful economic development, but our indexes do not bear this out. After seventy-three years of Communist Party leadership, China ranks one hundred and fortieth in the Freedom Index and one hundred and fourteenth in the Prosperity Index.

To be sure, China’s economic growth has been impressive in many ways, but it is still far from achieving broad-based prosperity. Looking at the components of the Prosperity Index, China ranks only fifty-seventh on the Income score, with a GNI per capita just over $10,000. This puts it squarely in the middle-income range, well below other Asian countries such as Japan, Taiwan, South Korea, and Singapore. While elites in China’s coastal cities are wealthy and there are far fewer Chinese living in poverty than in the past, the country’s interior remains largely poor.

China’s low position on the Prosperity Index is also explained by its Minority Rights rank of one hundred and sixty-seven out of one hundred and seventy-four (Figure 7). This score, part of our comprehensive view of prosperity, reflects China’s brutal policies in Tibet and genocide in Xinjiang.

There are also real questions about whether China’s state-led capitalist model can continue to deliver income growth. Xi Jinping prioritizes political control over economic growth, and has been backtracking on liberalizing reforms, as seen in his crackdowns on the Chinese tech sector. Moreover, China’s past path to growth was driven largely by exporting cheap manufactured goods and major infrastructure investments by the CCP.

To break out of the middle-income trap, however, China will need to become a true innovation leader and develop a consumer-based market. It is unclear whether it can make that transition without more freedom.

Furthermore, China has many other structural deficiencies, including high levels of pollution, massive corruption, a shrinking of the working-age population as a result of the failed one-child policy, excessively harsh yet ineffective COVID-fighting policies, and an international community that is becoming more fearful of economic dependence on China. The CCP announced in March 2022 that China’s GDP growth target for the year was “around 5.5 percent,” the lowest in thirty years. But, just a month later, the International Monetary Fund projected a 4.4 percent growth rate and some economists predict growth rates of under 4 percent. Even Xi Jinping has admitted that slow growth in China is “the new normal.”

Russia

Russia is a prototypical example of a Mostly Unfree and Mostly Unprosperous country. It ranks one hundred and thirty-fifth on the Freedom Index and eighty-eighth on the Prosperity Index. This is the result of more than seven decades of communism and two decades of authoritarianism after the fall of the Soviet Union in 1991 (with a brief period of experimentation with freer markets and political pluralism in the 1990s).

Russia enjoyed strong economic growth in the early years of the 2000s, thanks largely to high oil prices and more open markets. Russia, like China, is a middle-income country with a GNI per capita of approximately $10,000. Russia is similar to China on many metrics of Prosperity, with the exception of Minority Rights (one hundred and forty for Russia), where China ranks even worse. The data for our analysis were collected before Russia’s invasion of Ukraine. As Vladimir Putin clamps down on Russian society during the war, we expect Russia’s freedom and prosperity to decline further in the coming years.

Oil-extracting autocracies

The major exception to our finding that autocracies cannot produce prosperity comes from oil-rich states, like the Gulf monarchies. Oil revenues have allowed these autocracies to provide their citizens with some of the highest per capita incomes in the world.

Gulf monarchies

The Gulf monarchies, with the exception of the United Arab Emirates (UAE), all fall into the Mostly Unfree category.

Due to their ability to generate large revenues from oil extraction, however, these countries rank highly in one of the key prosperity indicators, GNI per capita. Their scores on our Prosperity Index, however, suffer because they rank poorly in other prosperity indicators like Environment and Minority Rights.

While Gulf monarchies have seen record income from high oil prices over the preceding decades, the world may be moving away from fossil fuels and toward cleaner forms of energy. To succeed in such an environment, oil-producing states will need to liberalize their economies and allow their people more freedoms.

Some Gulf monarchies are already taking limited steps in this direction. In Saudi Arabia, for example, the government has recently granted women greater rights and further opened to foreign investment.

United Arab Emirates

The UAE has been leading the way toward more freedom in the Gulf region. It outperforms all the other Gulf monarchies in both freedom and prosperity. While its Political Freedom measures are quite low, it does allow a wide range of Economic and Legal Freedoms. Indeed, taken together, these freedoms are sufficient to move the UAE into the Mostly Free category—the only country in the Gulf to receive this distinction. These greater freedoms have also resulted in superior economic performance. The UAE bests its neighbors to rank as the thirty-fourth most prosperous country globally in our index.

Singapore

Singapore is often mentioned as the leading example of how autocratic systems can provide economic prosperity. Our Freedom Index reveals, however, that the secret to Singapore’s success is quite straightforward. While Singapore ranks poorly on Political Freedom, it has among the highest levels of Economic and Legal Freedoms. Indeed, Singapore ranks as a Mostly Free country, and barely falls short of our threshold for fully Free.

Singapore demonstrates, therefore, that this model can work, but its example may be sui generis: Singapore is a small city-state. Indeed, there is much evidence that small countries open to international trade can prosper. But, it would not be easy to run a larger country in such a centralized manner.

In addition, Singapore has been governed, so far, by fairly wise autocrats who have continually prioritized economic and legal freedoms. Given that political power in the country is concentrated, however, there is always the risk that future leaders would choose to rein in these freedoms. While it may seem foolish to kill the goose that laid the golden egg, there are many examples of autocratic leaders doing just that if they feel that it is necessary to protect their political power. Allowing more political freedom in Singapore would provide guardrails against arbitrary changes to Singapore’s successful economic model, and better ensure its future prosperity.

Methodology and FAQ

2021 methodology

In depth Methodology

FAQs

Frequently Asked Questions

1. What are the Atlantic Council Freedom and Prosperity Indexes?
The Freedom Index measures economic, political, and legal freedoms for nearly every country in the world. The Prosperity Index measures economic wellbeing and human flourishing for the same countries. The indexes can be used to inform policymakers about real-world reform opportunities in developing countries.

2. What time period does the report cover?
The 2021 Freedom and Prosperity Indexes use the most recent data available. Most of these data are from 2021. Where data from 2021 are not available, data from the most recent year available are used instead.

In addition, we collected historical data to construct the indexes for the years 2006, 2011, and 2016. This allows us to track national trajectories over time, even in the first year of the indexes.  Going forward, we plan to update the indexes annually.

3. How are the data collected?
The Freedom Index and the Prosperity Index are constructed on a diversified data and analytical basis, comprising different databases produced by the American Economic Journal, the Center for Economic and Policy Research, the Credendo Group, the Fraser Institute, Freedom House, the Fund for Peace, the Heritage Foundation, NASA, Transparency International, the United Nations, the V-Dem Institute, the World Bank, and the World Justice Project.

4. What do the scores capture?
The Freedom Index and Prosperity Index are two separate indexes that rank 174 countries around the world according to their levels of freedom and prosperity. The Freedom Index measures Economic Freedom, Political Freedom, and Legal Freedoms. The Prosperity Index measures Income, Environment, Health, Minority Rights, and Happiness.

For more details on the construction of the indexes, please refer to the Methodology section.

5. How does the scoring system work?
All measurements in the indexes are weighted equally and the score for each index is the simple average of its parts. Scores range between zero and one-hundred, with higher values indicating more freedom or prosperity. Where appropriate, raw data are converted to a 0-100 scale.

6. What are the different scoring categories?
Countries on the Freedom Index are divided into four categories based on their overall score: those above a 75-point score (Free), those with scores between 50 and 74.9 (Mostly Free), those with scores between 25 and 49.9 (Mostly Unfree), and those with score from 0 to 24.9 (Unfree).

The same categorization is used for the Prosperity Index: those above a 75-point score (Prosperous), those with scores between 50 and 74.9 (Mostly Prosperous), those with score between 25 and 49.9 (Mostly Unprosperous), and those with scores from 0 to 24.9 (Unprosperous).

7. How is the ranking constructed?
We rank Freedom and Prosperity separately, and countries are ranked according to their score. Scores range between zero and one-hundred, with higher values indicating more freedom or prosperity.

8. Where can I view past years’ scores?
All the data are accessible on this website and can be downloaded.

9. Is there a link between Freedom and Prosperity?
We find that freedom and prosperity are highly correlated. The correlation coefficient between the indexes is 0.81. High values of Freedom are associated with high values of Prosperity, and low values of Freedom are associated with low values of Prosperity.

We find that the strength of this relationship increases the further one goes back in time. A country’s level of Prosperity today is better explained by its level of Freedom in 2006 than by its current Freedom, suggesting a relationship that is worthy of further investigation.

10. What makes the indexes different from other existing indexes?
There are several existing indexes that measure freedom and prosperity around the world, and our research built on these efforts. But the Atlantic Council Freedom and Prosperity Indexes are unique.

We define freedom comprehensively. Existing indexes measure economic freedom, political freedom, and legal freedoms separately, but no other index combines those measures to offer a comprehensive measure of freedom. It is our belief, supported by scholarship and historical evidence, that countries with all three types of freedom, working together in a manner that is mutually reinforcing, are best able to secure durable development.

We define prosperity comprehensively. We go beyond material measurements like income per capita and healthcare. We argue that a truly prosperous country should also score well on environmental performance, treatment of minorities, and the general happiness of the population.

We constructed separate indexes for freedom and prosperity. By creating two distinct indexes, we hope to give researchers a better opportunity to analyze the relationship between freedom and prosperity. We also offer policymakers and other thought leaders clearer benchmarks for implementing reforms and tracking results over time.

11. How do you prevent political bias?
The methodology used to produce the indexes is straightforward and transparent. We provide all the information to replicate them.

We did our best to collect the most reliable information available. The objective of these indexes is to provide standardized measures that can be applied to every country. One might argue that the methodology or the data collected is irrelevant to certain types of political situations or specific countries. That might be the case in some instances, but rarely so. Moreover, there is an inherent tension between generalizable and specific knowledge. We self-consciously opted for the former. We would encourage other researchers to explain how our indexes illuminate or obscure country-specific dynamics.

12. What are the limitations of the indexes?
Ensuring comparability of the data across a global set of countries was a central consideration. When selecting sources to be included in the indexes, coverage was the determining factor. In the rare case of missing data for a certain year, we have replaced the missing data with data from the closest available year. All these instances are described in the dataset.

Data were collected over the past year, using the most recent information available. They might not reflect the latest political or economic developments. These indexes should not necessarily be taken as an accurate reflection of the most recent current events. We will, however, update the indexes over time to capture real-world changes on an annual basis.

Authors

Fellow

Dan Negrea

Distinguished Fellow

Freedom and Prosperity Center

China Economy & Business

Staff

Matthew Kroenig

Vice President and Senior Director, Scowcroft Center for Strategy and Security

Scowcroft Center for Strategy and Security

China Defense Policy

Technical Advisers

Staff

Joseph Lemoine

Senior Director

Freedom and Prosperity Center

Africa Economy & Business

Former staff

Joel Kesselbrenner

Former Assistant Director

Freedom and Prosperity Center

Economy & Business Inclusive Growth

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The post Ahmad joins 966 to discuss Saudi Arabia’s rapidly growing startup ecosystem appeared first on Atlantic Council.

What is the opportunity?

Throughout US history, many American entrepreneurial heroes have been immigrants or the children of immigrants—from Alexander Graham Bell and Andrew Carnegie, both born in Scotland, to Intel’s Andy Grove and Google’s Sergey Brin, originally from Hungary and Russia, respectively. Indian immigrants comprise only about 1 percent of the US population but 6 percent of Silicon Valley’s workforce, and, as the appointment of Twitter Chief Executive Officer Parag Agrawal exemplifies, they disproportionately dominate the top echelons of tech corporate leadership. With increasing competition from China and elsewhere, immigrants are even more critical today to the future of US technology excellence. According to the nonpartisan National Foundation for American Policy (NFAP), “Immigrants have started more than half of America’s startup companies valued at $1 billion or more and are key members of management or product development teams in more than 80 percent of these companies.” 

The United States can maintain its competitive edge by revising its immigration laws. Ironically, there is no reliable way under current law for immigrants to start a business and remain in the country after founding a company. Successful immigrant entrepreneurs must be refugees who qualify for staying, or be sponsored by employers, or have family ties in the United States. A “startup” visa, for example, which would allow foreign nationals to start companies and create jobs, would be an important addition to the US immigration system. The long wait for employment-based green cards prevents many individuals in H-1B status from having the employment status that allows them to start a business.

The relatively low cap on the number of annual H-1B temporary visas—65,000 plus 20,000 for those with advanced degrees—can make it difficult for startup companies to hire new personnel in their fast-growing businesses or for international students to remain in the United States. Moreover, restrictions on H-1B immigration have caused multinational companies eager for talent to hire US-educated foreign scientists and technologists at their foreign affiliates when these individuals cannot attain H-1B visas for employment in the United States. In these situations, the other countries where the affiliates are located reap the benefit. Many of the companies facing the most difficulty in obtaining H-1B visas for their employees are concentrated in highly H-1B-dependent and R&D-intensive sectors operating offshore tech service sectors. In most cases, the affiliates to which the new hires are sent are in Canada, India, or China.

Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy.

Distinct from nonimmigrant foreign workers with H-1B visas, another important avenue for immigrants coming to the United States has been as international students. A quarter of the “unicorn” founders in the NFAP study originally enrolled in top US universities. Like foreign jobseekers requiring a work visa, international students have faced hurdles in the past few years. In 2018, the Trump administration reduced the duration of student visas from five years to one. Even more harmful was President Donald Trump’s anti-immigrant rhetoric, which many experts believe dampened international students’ interest in studying in the United States (while raising parental fears for their children’s safety). “After years of phenomenal expansion starting in the mid-2000s, enrollment growth [of international students at US universities] slowed to less than 1 percent by 2019-2020.” Arguably, the pandemic—which led to a halting of immigration for a time—took a bigger toll on the number of international students coming to the United States than Trump’s anti-immigrant policies. Some 2 million fewer working-age immigrants are living in the United States today than in 2019. Pandemic restrictions also caused “a staggering 15-percent decline in international students in the 2020-21 academic year.” Fortunately, enrollment partially rebounded in fall 2021 with a 4-percent increase over last year’s earlier level. If enacted by Congress, proposals to reduce the number of Chinese students coming to US shores could substantially affect US universities because the Chinese comprise the largest group of foreign students in the United States, approximately 30 percent.

Going forward, the economic damage to universities from lowered enrollment could be substantial. International students represented nearly 60 percent of all student population growth in 2000–2018. Today, with a declining youth population in the United States, the concurrent drop in the number of international students studying at US universities will be an extra burden on academic budgets. Many science, technology, engineering, and math (STEM) PhD programs depend on international students for their survival. A pre-pandemic study found that 70.3 percent of all full-time graduate students in electrical engineering; 63.2 percent in computer science; 60.4 percent in industrial engineering; and more than 50 percent in chemical, materials, and mechanical engineering, as well as in economics, were international students. If US immigration law is not overhauled to attract more international talent to study in the United States, university funding will not only decrease, but US innovation will stall as well. A World Bank report warned that any reduction in the number of “foreign graduate students” could significantly reduce US innovative activities; conversely, the report assessed that a 10-percent increase in the number of foreign graduate students would raise patent applications by 4.7 percent, university patent grants by 5.3 percent, and non-university patent grants by 6.7 percent. Although the United States remains a top destination for international students, other countries are increasingly competing for such students, particularly those in the STEM field. In trying to recover from the COVID-19 pandemic, Canada has opened additional pathways for enticing older graduates with work experience and others who are French-speakers to apply for permanent residency. Australia—another popular destination for Indians and others—offers permanent residency possibilities for postgraduates, although the process is considered more complex than in Canada. Germany, which has an active program for attracting and retaining highly skilled workers in areas experiencing shortages, is providing a fast track to permanent residency for both international graduates (after two years) and those recruited for their skills (four years). With such competition, US complacency could spell a slow decline in attracting the best and brightest. 

Why now?

Trump cited the hardships suffered by American workers who lost their jobs because of the pandemic as justification for suspending new work visas. Today, unemployment is low, and companies are facing a new crisis in trying to fill vacancies: too few skilled workers for the number of jobs. Shortages exist at all levels: lower-skilled workers are in high demand in the agriculture, construction, hotel, restaurant, and hospitality sectors. 

Even before the pandemic, tech-skilled workers were scarce. A New American Economy report found that “computer-related jobs . . . made up 69.6 percent of all foreign labor requests in FY 2020, a slight increase from FY 2019 despite the COVID-19 pandemic.” Despite lingering criticism that foreign workers threaten to take jobs away from Americans, “The unemployment rate for computer- and mathematics-related occupations was 2.3 percent. By 2020, that had only increased by 0.7 percentage points, to 3.0 percent. By March 2021, the unemployment rate for workers in these occupations was 1.9 percent, lower than it was before the pandemic.” Computer and highly skilled mathematics-based jobs have traditionally been filled in high proportions by immigrants on H1-B and other temporary worker visas. Business groups, such as the US Chamber of Commerce, assess that the need to increase immigration is urgent. Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy. Angering many traditional Republican supporters, US Chamber of Commerce CEO Suzanne Clark, has, in fact, called for “doubling the number of legal immigrants.”

Despite sharp partisan differences, public views of immigrants have shifted toward greater acceptance, according to a mid-2021 Pew Research Center survey. The share of people who see being Christian and being born in the United States as critical for being “truly American,” Pew found, “has significantly decreased between 2016 and November 2020.” Moreover, this has been the case regardless of a respondent’s party leaning, although less so for Republicans.

How to make it happen

Most every immigration reform has been controversial and has required a modicum of bipartisanship to secure passage. While the post-COVID recovery, tight labor market, and growing worries about competitiveness with China on technology make today a propitious moment for reform, the sharp partisan divide in Congress, as well as the upcoming midterm elections, make even limited legislative efforts parlous. The Biden administration still has some means to address the tech-worker shortage and the declining number of international students coming to the United States and could lay the groundwork for more substantial immigration reform over the long term.

Short-Term Expedients: The Biden administration downplayed H-1B visas in its original Citizenship Act in favor of increasing the number of green cards from 140,000 to 170,000, exempting STEM doctoral candidates. Biden hoped to make H-1B visas less attractive to employers, while promoting the chance of permanent residency, which has traditionally been more appealing to students and workers. The Citizenship Act, which included these changes, has stalled, prompting the administration to expand the types of degrees qualifying for STEM recognition and to allow STEM graduates to remain in the country for up to 36 months. University officials have commended the executive measure, which will help them re-attract the world’s STEM talent.   

Under the House’s COMPETES Act, holders of doctorates in certain STEM fields would be exempt from numerical caps on green cards, regardless of whether they earned their degree in the United States or abroad. Whether those provisions will survive the reconciliation process is unclear: the bill’s Senate counterpart contains no analogous STEM immigration provisions and, to become law, at least 10 Republican senators would need to support it to avoid a filibuster.  

The Biden administration should consider asking Congress to raise the cap on the number of H1-B visas. The base number of 65,000 was set more than 30 years ago, in 1990, and the additional 20,000 visas for advanced-degree-holders from US universities was added in 2006. Last year’s (FY 2021’s) H1-B lottery attracted more than 300,000 candidates, representing a 12-percent increase from FY 2020. Raising the cap is not unprecedented: it was raised to 115,000 in 1999–2000 and to 195,000 in 2001-2003. Encouraging more temporary visas can help keep the channel open for needed skilled immigrants in case the provisions favoring STEM PhD candidature for green cards in the COMPETES Act fail. Even if those provisions were enacted, more technically skilled workers would be required than those with PhDs. Expanded H-1B visas would provide such an avenue for a wider spectrum of highly skilled workers to come to the United States.

Needed Long-Term Solution: Close observers of the immigration debates on Capitol Hill believe that Democrats should invest more in building a consensus because there have been potential opportunities to forge common ground with Republicans. In March 2021, the House passed two bipartisan immigration bills to legalize the so-called DREAMers (individuals living in the United States illegally, but who first came to the United States as minors) as well as farmworkers. Nine Republicans joined Democrats to pass the Dream and Promise Act by a vote of 228-197. The Farm Workforce Modernization Act also passed, by a vote of 247-174, backed by 30 Republicans.  

The need for immigration reform is more pressing than ever. During the past decade and a half, demographers, economists, and other experts have grown increasingly worried about the declining birth rate and accelerating aging in the United States. Many had believed that the United States, with its large number of immigrants—who typically have higher birth rates than native-born Americans—would not see its birth rate decline so precipitously. The United States’ birth rate is now more in line with the low birth rates found among US allies and partners in Europe and Asia. Meanwhile, since 2008 the birth rates for immigrant groups in the United States have also dropped. In 2020, according to the Centers for Disease Control (CDC), the general fertility rate in the United States was about 56 births per 1,000 women—the lowest rate on record and about half of what it was in the early 1960s. Moreover, the decline in birth rates is seen across all measured racial and ethnic groups. Births dropped by 4 percent among white, black, and Latina women; 9 percent for Asian women; 3 percent for Hawaiians and other Pacific Islanders; and 7 percent for Native American and Alaska native women. 

Beginning in 2030, immigration is projected to overtake natural increase as the principal driver of US population growth, according to the US Census Bureau. In the absence of any immigration, the US population would stagnate, if not decline starting in 2030. With no population growth, the United States could experience permanently lowered economic growth; this is already occurring in rural counties, whose populations are shrinking. Not only is there a strong argument to allow an increased number of immigrants, but there is also a need to attract immigrants with special skills that could help the United States sustain its competitive edge. Conservative Republicans have been particularly vociferous in calling for skills-based immigration, which could help form the basis for a compromise on other issues that Democrats support—and Republicans largely oppose—such as providing a pathway for the United States’ 11 million undocumented immigrants to obtain citizenship.

The question is: how long does Washington want to wait to reform US immigration policies? The year 2030—when the US population could begin to decline—is only eight years away, and the last major reform of US immigration law was in 1990. Congress needs to better understand the demographic implications of inaction and consider the effects of a shrinking population on the United States’ ability to compete globally. With public attitudes becoming more accepting of immigrants, the Biden administration should begin educating the public on the demographic and economic future awaiting the United States if its immigration policies are not reformed soon. 

Photo by Go Nakamura. Migrants seeking asylum in the US from India, walk to turn themselves in to the US border patrol after crossing the border from Mexico at Yuma, Arizona, US, January 23, 2022. REUTERS

Assumptions Testing Series

The New American Engagement Initiative’s Assumptions Testing series explores some of the foundational beliefs that guide US foreign policy. By questioning the conventional wisdom, and exposing these assumptions to close scrutiny, the series aims to open a new seam in the policy debate and generate a more lively, fruitful, and effective strategic dialogue – one that is capable of producing a sustainable, nonpartisan strategy for US global engagement.

Reality Check Series

The New American Engagement Initiative’s Reality Checks are short briefs dedicated to exploring a particular policy or set of policies, assessing their efficacy, and, where appropriate, proposing alternatives. Reality Checks are published regularly and tied to the news of the day or derive from NAEI’s Assumptions Testing series. All are succinct and straight-to-the-point. The briefs are designed for busy professionals anxious for pragmatic and timely policy options.

Engagement Reframed Series

The New American Engagement Initiative’s Engagement Reframed policy briefs reimagine and reframe the US approach to the world beyond traditional, narrow notions of US military dominance to fashion an achievable and sustainable form of US leadership in a world of many capable actors.

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The post Al Monitor covered empowerME’s entrepreneur tracker launch appeared first on Atlantic Council.

WASHINGTON, DC – February 7, 2022 – Today, the Atlantic Council’s empowerME Initiative at the Rafik Hariri Center for the Middle East launched the Middle East Entrepreneurship Program Tracker in partnership with Imagine Labs. The new interactive tracker maps out the organizations that regional governments have founded, funded, or partnered with to support entrepreneurs, startups, and small- and medium-sized enterprises (SMEs). The cutting-edge visualization allows users to explore networks nurturing innovation in Bahrain, Egypt, Jordan, Qatar, Saudi Arabia, and the United Arab Emirates (UAE), and features 312 programs and initiatives offered by 122 organizations across six ecosystems.

“Government support is a critical component of entrepreneurship ecosystem development. We will track how these programs develop over time to glean insight into which are the most impactful, and craft policy recommendations accordingly,” said Amjad Ahmad, Director and Resident Senior Fellow of the Atlantic Council’s empowerME Initiative.

This tool is geared towards aspiring and established entrepreneurs looking to take their business to the next level, startups and SMEs in need of targeted government services, policymakers aiming to spur innovation, and investors seeking a deeper understanding of these six ecosystems. Bahrain, Egypt, Jordan, Qatar, Saudi Arabia, and the UAE are seeking—to differing degrees—to create jobs for their rapidly growing youth populations and to diversify their economies due to the global shift away from fossil fuels. The tracker maps out each country’s strategic approach. The five content filters enable users to make inter-country and cross-country comparisons of program beneficiaries, sectors of interest, stages of investment, and available services.

Findings from the Tracker reveal that regional governments have identified two beneficiary groups in particular need of support: 18 organizations offer programming targeted at youth, and 14 organizations have designed initiatives for women. Opportunities offered to sector-specific startups and SMEs reflect the growing importance of digitization for Middle East businesses: 33 organizations aim to support technology startups, with an emphasis on Financial Services/Fintech (14), Healthcare/Healthtech (11), and Agriculture/Agritech (8). Other key findings show that seed funding is the most widely available stage of funding for entrepreneurs and business owners (offered by 15 organizations), who can also apply to participate in a wide array of incubators (17) and accelerators (29).

The empowerME Initiative will update the tracker on an ongoing basis as the six ecosystems develop and plans to add additional categories of analysis. Feedback on this project is encouraged and can be sent to Atlantic Council empowerME Assistant Director Allison Holle at aholle@atlanticcouncil.org.

About empowerME

The empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East is shaping solutions to empower entrepreneurs, women, and the private sector and building influential coalitions to drive regional economic integration, prosperity, and job creation.

The research team behind the Tracker includes Atlantic Council empowerME Assistant Director Allison Holle, Atlantic Council empowerME Project Assistant Hezha Barzani, and Atlantic Council Rafik Hariri Center and Middle East Programs Project Assistant Yaseen Rashed.

Follow their work on Twitter at @ACMideast and connect with them using #ACempowerME.

About Imagine Labs

Imagine Labs, a leading communications and technology agency, is helping brands across the world deliver value to their customers through insight driven creativity and technology innovations.

To know more about their work, please visit https://imaginelabs.me/ or follow them on LinkedIn.

The post Atlantic Council releases Middle East Entrepreneurship Program Tracker appeared first on Atlantic Council.

On February 1, Forward Defense senior advisor Stephen Rodriguez was quoted in a Dark Reading article titled “7 red flags that can stop your company from becoming a unicorn.” Rodriguez states that more cyber companies must build the capability to respond to cyberattacks rather than just analyzing them after the fact.

There are a ton of companies out there that monitor or assess or analyze, but very few that actually alert and then fix a cyber-risk or attack.

Stephen Rodriguez

Fellow

Stephen Rodriguez

Senior Advisor

Forward Defense Scowcroft Center for Strategy and Security

Defense Policy Defense Technologies

Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

Learn more

The post Rodriguez in Dark Reading on cybersecurity appeared first on Atlantic Council.

This workshop is part of the Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia program  led by the Atlantic Council’s empowerME Initiative in partnership with the US Mission to Saudi Arabia, the American Chamber of Commerce Saudi Arabia, and Quantum Leaps. The program brings US entrepreneurs, experts, and business leaders together with their Saudi counterparts to build relationships, share knowledge, and develop partnership opportunities via hybrid workshops and networking sessions.

Key takeaways:

Women’s inclusion in supply chains and business in Saudi Arabia

• Penny Naas noted that “the data is a bit mixed. In some places, women have been disproportionately impacted by COVID. We’ve had to balance home responsibilities with work responsibilities. In certain countries, women are doing better, but in most countries, women are facing more challenges.” She said UPS leverages its expertise and resources to help women-owned companies and female business leaders pivot to the new normal of business and build resilience across their operations and supply chain management. She added that “resilience goes hand-in-hand with diversity. When you think about the most dynamic ecosystems in nature, they are also the most diverse. As we think about supply chains and how we build back and re-design after the pandemic, it seems to me a fantastic time to think about how to diversify our supply chains.”
• Tamer Mosalam said: “I think Saudi Arabia is a great example of a vision that decision-makers are very vocal and disciplined about. Both the government and the private sector are engaged on this. Within the vision, women’s empowerment is happening fast. This gives confidence and creates an impact on society and the growth of economy. This is happening at the government level and spilling over to the private sector.” He mentioned the newly announced Saudi investment strategy, which has a goal of 60 percent GDP growth from the private sector. He said this emphasis on the private sector’s expansion would also help with gender equality.

Corporate programs to support women entrepreneurs

• Naas outlined UPS’s three-pronged approach to helping more women engage in to global trade and supply chains since the majority of small and medium enterprises (SMEs) don’t start out exporting. The first step is helping people understand the requirements to export their goods, followed by learning how to effectively market oneself as a woman-owned business, and the final step is ensuring that the laws and rules are not discriminatory.  She pointed to barriers to women’s access to digital tools for business opportunities and said the private sector should work to break them down.
• Naas praised steps governments are taking to ensure women are included in the workplace and can succeed as entrepreneurs. She mentioned that UPS partnered with Saudi Arabia’s General Authority for Small and Medium Enterprises (Monshaat) this month to launch the first women exporters e-commerce boot camp for fifty women-owned companies to learn skills and knowledge about exporting globally.
• Matras mentioned the challenges small and medium businesses have faced during the pandemic, pointing to the 2020 Global State of Small Business Report that revealed 70 percent of small businesses reduced sales in the Middle East and North Africa and 40 percent reduced employment. Matras pointed out that “the most resilient digitalized quickly,” and so the question is how to educate small businesses and upskill their workers, especially for business to consumer models and in terms of reaching the right consumers. She said that “marketing costs are the biggest expense, so they need to use these tools effectively, especially in the initial stages.” She noted that Facebook’s #LoveLocal campaign in the Middle East has trained more than ten thousands SMEs and given voice to them to tell their stories.
• Sidani explained that the Chalhoub Group tries to understand the pain points of their organization and the opportunities these offer. She said one point they identified is smaller brands, which lack adequate corporate support, accelerators, and incubators at the regional level. As she put it, “I could see [a] gap in how we handle those smaller brands—they were falling through the cracks. These brands needed support.” She explained that Chalhoub Group got some of these brands involved in “test quickly, scale quickly, or fail quickly” programs via their retail tech accelerator, and “then we used that methodology to say why not test smaller brands and give them market access, which is the biggest value proposition we can give them.” Part of the support they provide is earmarked funding for content creation and marketing, Sidani added. She mentioned the fashion lab Chalhoub Group launched in Saudi Arabia focused on designs coming from Saudi that will hopefully go global, and explained that they are also working with Facebook to support these smaller brands via content creation and marketing, including learning how to tell the right story and have the right content.

New digital opportunities and challenges

• Naas commented that these days a “physical presence is no longer sufficient” for a business. She added that the “omni channel world presents tremendous opportunities” and that she has been extremely impressed with social media usage in Saudi Arabia. Naas noticed that Instagram in particular is very helpful in sales because businesses can sell directly to consumers. She added that “as people pivot to new digital realities, thinking about how you use these new channels is something more companies have to think about and take advantage of.”
• Matras emphasized Saudi Arabia’s “highly connected and mobile population,” stating that “metrics show they are very engaged and have some of the highest consumption levels globally, especially video.” She argued that this situation presents a substantial opportunity to diversify businesses in the non-oil economy.
• Matras also discussed the messaging trend, saying that “consumers want to talk to businesses like talking to their friends. They don’t want to wait on a call center line or write emails. This trend is picking up in the Middle East. We call it conversational commerce.” She also described the future of “communication becoming much more immersive,” building on the text, photo, and video evolution online to what will soon become more immersive videos like augmented reality filters and then eventually virtual reality and the metaverse. Matras noted that “these experiences are changing the business and consumer relationship and offer exciting opportunities for businesses and talent.”

Business sectors to watch

• Matras highlighted numerous exciting business opportunities such as in e-commerce and the ed tech space as seen with the WhatsApp program for low-tech distance learning in Africa. In coming years, other sectors she expects to thrive include telemedicine, the FinTech industry, gaming, tourism, quick commerce in the food and beverage industry, ride-sharing models such as Careem, and real estate. She added that “the overarching opportunity in the region is remote work. Tech used to be clustered in a few places and access to talent is tough. Remote work showed us we can work online.” There is now a great opportunity to employ remote engineers, break down clusters, remove borders, and help talent in the region, Matras said, noting that “a tech giant in the United States can now recruit engineers in Saudi Arabia and Dubai.”
• Mosalam underscored the immense opportunities in the food and beverage sector, predicting that in the next two to three years, families in Saudi Arabia “will eat out once a day, not once a week or once a month” because the “younger generation is on the go.” He pointed to the success of the HungerStation app and how many consumers got registered. Mosalam also pointed out that childcare and education needs in the country will change as more women join the workforce, which will present business opportunities.
• Sidani emphasized the “massive opportunity in fashion in Saudi Arabia” because “as the kingdom opens up, people want to reflect their identity through art and fashion and going back to their roots.” She shared her view that “innovation doesn’t mean having a crystal ball. It’s having the right team and process in place to experiment and stay ahead of the game.” Sidani said she that is “seeing more entrepreneurs trying to be more local, and I love that we are starting to be more proud of where we come from.”

Advice for entrepreneurs and leaders

• Naas explained UPS’s approach to attracting and growing great women leaders, and she pointed out that UPS has a woman CEO, Carol B. Tomé, “There is no greater thing than to see leadership in action,” she said. Naas also discussed two critical elements for women to thrive in the workplace: mentorship and sponsorship. She defined mentoring as a practice to support women business leaders to develop new skills, and sponsorship as someone or a group of people who will talk about women in talent and personnel meetings when a woman isn’t in the room. She emphasized that women need to have allies – not just their boss – who will ask the company to invest in them. She advised women to work with a mentor to plan how to cultivate those sponsor relationships. She said that finding a great boss is really important for female talent and added: “If you don’t have a great boss, go be your own boss or find a new boss.”
• According to Naas, “finding niche markets is key.” She shared the story of a woman-owned honey business owner in Mexico that UPS works with. Shipping honey is expensive, and the company’s biggest market was in the Middle East, so the owner came to the region and found a distributor. Honey products are very valuable in the region, and her high-quality products exceeded expectations. Naas added that for Saudi Arabia, the Gulf Cooperation Council (GCC) is a phenomenal market opportunity because of the common language, although the GCC does needs to do more to make the customs union function better and improve the flow of goods to tap into the full economic potential. 
• Matras shared that the highest growth she sees comes from cross-border businesses that bring more language capabilities and better targeting capabilities. For example, she said, “a conservative fashion brand can target audiences in Germany and the United States” using optimized language and marketing tools.

Poll Results

At the workshop, attendees took a poll related to global supply chains and the results indicate that more programs and information about this topic are needed to ensure women can plug into regional and global business opportunities.

Stefanie H. Ali is deputy director of the Atlantic Council’s empowerME Initiative. Follow her @StefHausheer.

MENASource Sep 29, 2020

Absence of PhD programs contributes to weak research and development in the Gulf

By Omar Al-Ubaydli

The production of new knowledge is a very complex process and many factors contribute to the low levels of innovation exhibited by the Gulf countries. One factor that plays a role is the structure of tertiary education—particularly PhD programs.

Education Middle East

MENASource Sep 20, 2021

‘Investing in women is just good business’: Ways to increase funding for women-led ventures in the Middle East

By Stefanie Hausheer Ali

On September 14, 2021 the Atlantic Council’s empowerME Initiative held a workshop on “Venture Capital Financing: How to Increase Funding for Women-led Ventures.”

Middle East The Gulf

MENASource Sep 13, 2021

Defusing Saudi Arabia-UAE tensions through economic rebalancing

By Hani Findakly

By identifying the economic imbalances contributing to the breakdown, recalibration is possible to rebuild a more balanced relationship that circumvents the zero-sum game that has given rise to the Riyadh-Abu Dhabi dispute.

empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East is shaping solutions to empower entrepreneurs, women, and the private sector and building influential coalitions to drive regional economic integration, prosperity, and job creation.

Learn more

The post New opportunities for MENA women to plug into global commerce appeared first on Atlantic Council.

In Season 2, Episode 3 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with Pfizer Regional President for Africa and Middle East Patrick van der Loo about the COVID vaccine rollout in the region, prospects for machine learning and AI to revolutionize healthcare, policies that will promote innovation, and ways companies can nurture women leaders in the workplace.

Key Takeaways

0:00 Intro
1:30 Patrick talks about his observations of what is happening in Africa and Middle East regions after rolling out the vaccine and other initiatives and what they are focused on
5:33 Patrick talks about the significant areas specifically in the Middle East that they are present in in the 19 country portfolio
7:39 Patrick talks about how the pandemic has affected their strategy or way of operating in the region
11:11 Patrick talks about the current trends and the role that Pfizer is playing in the SME and entrepreneurship and what he would tell the entrepreneurs to focus more on
15:53 Patrick talks about some of the interesting models of distribution that he is seeing in the Middle East
17:48 Patrick talks about the establishment of a manufacturing hub for the vaccine and where he sees that playing out during the pandemic
22:48 Patrick also explains if there is a more important than the other in terms of regulations to drive change in the positive direction
23:59 Patrick talks about what he has found to be interesting managing Middle East and Africa region and he is from Asia
28:07 Patrick talks about what it is about Pfizer that made him the most attractive place for women in the Middle East to work for and why they actively encourage the exchange of talent
34:30 Patrick talks about policies that are instrumental in allowing for retention of women employees at Pfizer and what other leaders should do
37:55 Patrick talks about what he thinks the government needs to do to increase the talent base in the Middle East region and specifically in his sector
41:08 Patrick talks about what he is expecting to see in the near future with regards to new variants of the pandemic popping up and with the manufacturing of the vaccine

The empowerME Conversations podcast features conversations with business and government leaders shaping the Middle East. The podcast sheds light on key opportunities and challenges for companies and governments, and Season 2 will focus on CEOs in the region.

empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East is shaping solutions to empower entrepreneurs, women, and the private sector and building influential coalitions to drive regional economic integration, prosperity, and job creation.

Learn more

empowerME Conversations Oct 5, 2021

Democratizing commerce

By Atlantic Council

In Season 2, Episode 2 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with Facebook Managing Director for the Middle East and North Africa Ramez Shehadi on digitization, the future of e-commerce, supporting SMEs, and changes needed to improve the region’s entrepreneurial ecosystem.

Economy & Business Middle East

empowerME Conversations Sep 28, 2021

Transforming logistics

By Atlantic Council

In Season 2, Episode 1 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with UPS President for Indian Subcontinent, Middle East, and Africa Jean-Francois Condamine about the e-commerce boom in the Middle East, promoting sustainability in the logistics industry, and empowering small and medium enterprises to become regional and global exporters.

Economy & Business Middle East

empowerME Conversations Mar 2, 2021

Must see (Saudi) TV

By Atlantic Council

On episode 6 of empowerME Conversations podcast, host and Atlantic Council empowerME Director Amjad Ahmad speaks with Telfaz 11 and C3 Films CEO Alaa Fadan about his trailblazing efforts to produce TV and media content with Saudi talent, the recent Netflix deal, and the culture change that is boosting entrepreneurship and women’s economic empowerment in Saudi Arabia.

Economy & Business Middle East

The post The path to 25 healthcare breakthroughs by 2025 appeared first on Atlantic Council.

Former fellow

Andrew L. Peek

Former Nonresident Senior Fellow

Iraq Initiative Rafik Hariri Center & Middle East programs

Conflict Defense Policy

The post Peek quoted in Digital Journal on the launch of Delphia’s new alternative investment newsletter, “Alt Class” appeared first on Atlantic Council.

On a recent joint Georgetown and Atlantic Council masters’ class, GeoTech Director Dr. David Bray shared his insights on the seminar’s question: “Cybersecurity of Space-Based Assets and Why This Is Important.” This masters’ class also featured GeoTech Fellows and experts Dr. William Jeffrey, Chuck Brooks, and Dr. Divya Chander.

We invite you to watch the informative recording below:

Read more about our expert:

Former fellow

David Bray

Former Distinguished Fellow

GeoTech Center

Economy & Business Technology & Innovation

Former fellow

William Jeffrey

Action Council Member

GeoTech Center

Cybersecurity Defense Industry

Former fellow

Divya Chander

Former Nonresident Senior Fellow

GeoTech Center

Cybersecurity Digital Policy

Transcript Jun 23, 2021

Brian Deese on Biden’s vision for ‘a twenty-first-century American industrial strategy’

By Atlantic Council

National Economic Council Director Brian Deese spoke about how the Biden administration can strengthen US economic recovery by working with the private sector and global allies.

Economy & Business Future of Work

GeoTech Cues Aug 10, 2021

Contextualizing COVID-19 and its implications for the future of work

By Matthew Gavieta

As workers around the world adapted to a new normal amid a public health crisis, remote work took on a new meaning. However, questions about how to structure long-term telework arrangements remain. The current landscape of data reveals a tenuous relationship between well-being and telework. To secure a brighter future for our labor force, we must continue developing worker-centered technology policy and doing research on how to improve life at work.

Digital Policy Future of Work

Blog Post Jul 27, 2021

The time for US immigration reform is now

By Jeff Goldstein

The US is currently grappling with a multi-decade long trend of declining population rates leading to fewer and fewer workers. To meet the challenges of the future, US policymakers must manage declining population growth – and one of the best arrows in their economic policy quiver is comprehensive immigration reform.

Future of Work Macroeconomics

The post Cybersecurity of Space-Based Assets and Why this is Important appeared first on Atlantic Council.

The post Saudi Gazette covered empowerME’s Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia workshop appeared first on Atlantic Council.

This workshop was part of the Igniting Women’s Entrepreneurship and Innovation in Saudi Arabia program and was led by the Atlantic Council’s empowerME Initiative in partnership with the US Mission to Saudi Arabia, the American Chamber of Commerce Saudi Arabia, and Quantum Leaps. The program is bringing US entrepreneurs, experts, and business leaders together with their Saudi counterparts to build relationships, share knowledge, and develop partnership opportunities via hybrid workshops and networking sessions.

Key takeaways:

Saudi Arabia’s Changing Entrepreneurial Ecosystem

• Amjad Ahmad discussed the importance of more US-Saudi partnerships and knowledge sharing to bring entrepreneurs, business leaders, and experts from both countries together to promote economic prosperity, and added that “Saudi Arabia has embarked on an essential economic transition with a substantial rise in entrepreneurship and with women playing a greater role in the country’s economy.”
  
  
• Martina Strong emphasized the United States’ desire to see Saudi women equipped to take full advantage of the rapid pace of change: “In today’s Saudi economy, one can sense the dynamism, the creativity, new sectors and opportunities are being generated and expanded every single day…We want to see many more women take their rightful place of leadership in the economy and across Saudi society.”
  
  
• Her Royal Highness Princess Reema Bint Bandar Al Saud emphasized that: “Vision 2030 changed everything…today, when I look at these young female entrepreneurs, the challenge isn’t regulatory anymore. The challenge isn’t really even financial anymore because the opportunities are there for financial development and support and growth. Mentorship is available. The limitation today is your dream.” She added that Vision 2030 has unlocked so many opportunities for women to not just dream but bring their dreams to fruition. “That is the profound difference” from the past, she said, and it is a “fundamental shift.”
  
  
• Her Royal Highness Princess Reema Bint Bandar Al Saud also shared an anecdote illustrating the rapid pace of change in the Kingdom and the importance of timing for a business to be successful. In 2005 when she co-founded Yibreen, a women’s gym chain, she struggled to expand it because of the legal, regulatory, and cultural environment at that time. Then, a few years ago in her role working for the Saudi General Sports Authority, she was asked to deregulate that very same sector, which has enabled women’s gyms to flourish.
  
  
• Lateefa Alwaalan noted that “there is a rise of a subsector of women getting into their own businesses enabled by technology, delivery apps, and e-commerce solutions to put their innovative ideas out there and start sourcing.” She added that internet penetration and digital access is also helping.
  
  
• Amal Dokhan highlighted the positive funding trajectory in the MENA region and in Saudi Arabia, with the MENA region passing the $1 billion funding mark in 2020 even amidst the COVID-19 pandemic. She added that Saudi Arabia had $156 million in startup funding in 2020 and there was a 56 percent increase in startup funding in 2021 year-to-date. These trends are positive and demonstrate investor interest, Dokhan added.

Challenges for Women Entrepreneurs & Strategies to Address Them

• Her Royal Highness Princess Reema Bint Bandar Al Saud discussed an ongoing challenge for women entrepreneurs: access to funding. She noted that this is an issue not just in Saudi Arabia but worldwide, since there have been more men than women entrepreneurs historically, meaning that investors are more accustomed to funding men entrepreneurs. She urged women entrepreneurs to get advice and support on structuring and running their business to ensure their endeavors are competitive and viable.
  
  
• Her Royal Highness Princess Reema Bint Bandar Al Saud emphasized the importance of financial literacy and financial security for all women entrepreneurs to ensure that financial insecurity does not become a significant stress factor that derails a business endeavor.
  
  
• Lateefa Alwaalan noted that, while more and more women are launching businesses, scaling and turning them into a sustainable venture is a challenge. Courtney Geduldig expanded on this point, stating that there has been a 72 percent increase in companies founded by women in the past few years, but scaling is not happening at the same rate in part because more venture capital funding goes to men. According to Geduldig, getting more women into venture capital firms will help address this issue since gender diversity brings diversity of thought no matter the field.

• When asked about the percentage of women founders in the region, Amal Dokhan stated that approximately 14 percent of the MENA startups are women-led. She emphasized that there is not a lack of women entrepreneurs and that there are more and more every day, but there is a need for more women-led technology startups. According to a 2019 report, 16 percent of startup founders in Saudi Arabia are women.

• Courtney Geduldig shared findings from research for her book: Where the Jobs Are: Entrepreneurship and the Soul of the American Economy. Challenges she discovered for women entrepreneurs in particular include: lack of financial literacy, lack of confidence, difficulties finding access to funding and access to loans, and the heavy burden of caregiving responsibilities. Geduldig emphasized that these challenges are ongoing in the United States and it would be prudent for us all to learn lessons from other countries working to address these issues. She added that there is a need for more access, guidance, and support focused on opening doors and creating a more inclusive network for women business founders.

Programs to Support Women Entrepreneurs

• Her Royal Highness Princess Reema Bint Bandar Al Saud directed women entrepreneurs to visit the Saudi Ministry of Commerce and the General Authority for Small and Medium Enterprises (Monshaat) websites for further resources on funding opportunities for their businesses.
  
  
• Esther Ndichu pointed to corporate programs such as UPS’s work with the American Chamber of Commerce in Saudi Arabia, UPS’s recently signed memorandum of understanding with the Saudi General Authority for Small and Medium Enterprises (SME) (Monshaat) to promote and engage with SMEs in Saudi Arabia, and UPS’s partnership with the International Trade Center’s SheTrades Initiative, to provide channels for women entrepreneurs around the world to access global markets. She discussed UPS’s approach to promoting SME growth around the world through three focal areas: (1) capacity building to close the gap to ensure women entrepreneurs have the skills to access global markets, such as factoring in real costs, (2) market access to bring in private sector partners, and (3) providing logistics perspectives to governments to ensure that the MENA countries’ legal and regulatory frameworks encourage women to become entrepreneurs.

Advice for Women Entrepreneurs

• Her Royal Highness Princess Reema Bint Bandar Al Saud encouraged women entrepreneurs to:
  • Take public speaking and debate classes and get advice from experts on core business competencies in areas where they are weak. She also challenged would-be entrepreneurs to make the case for why they are the best person to take the idea forward since having a great idea is not enough.
  • Move forward despite rejections and recognize that rejections and “nos” from funders help hone a business idea.
  • Get a job in the industry related to their business idea and learn from a person in the field and develop their concept from there.
    
    
• Amal Dokhan urged women entrepreneurs to look at the gaps and find a team that complements their capabilities and ask themselves if the market for their idea is big enough to scale and has enough customers. “It’s about finding the right formula,” she added.

• Amal Dokhan also underscored the importance of having the courage to speak in public and share success (and failure) stories: “I meet female entrepreneurs in different parts of the world, but something repeated in every culture is that we don’t want to be out there until we are absolutely perfect. If you get the chance, allocate maybe four times a year, every quarter, to get out there and share your story, or at least offer mentorship.” She added that storytelling is critical and makes you a role model for other would-be women and men entrepreneurs and mentoring is a great way to give back and help the next generation.  
  
  
• Lateefa Alwaalan emphasized the importance of surrounding yourself with the right networks because those can be enablers that help an entrepreneur find success faster. She added that it is wise to build a team of co-founders and co-investors rather than going it alone, saying: “You will face roadblocks and it is good to find people smarter than you or those who complement you to help you on this journey.”
  
  
• Courtney Geduldig shared that one learning from her research with women entrepreneurs and entrepreneurs in general is that they need to find opportunities for mentorship, relationship building, and insider knowledge in order to obtain not just access to finance and credit, but to leverage that access and build on it successfully.
  
  
• Esther Ndichu urged women entrepreneurs to check out UPS’s Women Exporter’s Program, which provides information and builds capacity for women-led SMEs. She added that UPS has found that, in the age of tech and ecommerce, businesses can leapfrog the normal process of distribution only in the local community and go straight to global product distribution.

Poll Results

At the workshops, we polled attendees on the following questions related to women’s entrepreneurship in Saudi Arabia. As the results below indicate, the environment for women entrepreneurs in Saudi Arabia is improving, but more access to support and training is still needed.

Stefanie H. Ali is deputy director of the Atlantic Council’s empowerME Initiative. Follow her @StefHausheer.

MENASource Mar 15, 2021

Here’s how Amman can boost women’s workforce participation

By Stefanie Hausheer Ali

Jordan must climb out of an economic pit exacerbated by the COVID-19 pandemic. One key to promoting long-term economic growth is achieving greater female labor force participation.

Economy & Business Education

MENASource Mar 8, 2021

Celebrating MENA women entrepreneurs and business leaders

By Atlantic Council

In honor of International Women’s Day, the Atlantic Council’s empowerME asked Middle East business leaders and government officials to share a “shout out” about a woman entrepreneur or business leader who inspires them

Economy & Business Middle East

MENASource Feb 26, 2021

Senior State Department official says US is committed to supporting entrepreneurship in the Middle East

By Allison Holle

The Biden Administration is committed to supporting entrepreneurship in the Middle East and deepening economic cooperation between the United States and the region

Economy & Business Middle East

The post Princess Reema tells Saudi women entrepreneurs to dream big appeared first on Atlantic Council.

Cook voiced her hope that this reengagement can also translate to US interest outside of just hotspots on the continent, recognizing countries where progress is being made as well as those “middle” countries where engagement has often been lacking. She affirmed that the US interest and role in Africa goes far beyond strategic competition with China, while noting that “There are natural ties between the US and Africa and. . . that by exploiting those opportunities, exploiting those strengths, that we are going to be able to compete with anyone in Africa.”

This starts with leveraging areas of US competitiveness, including ties to the African diaspora, trade and development linkages, ingenuity and innovation, and the creative industries. Admitting to a personal bias, Cook explained that she is most excited by opportunities in the creative industries, reflecting that she has “seen the potential of creative industries to transform economies here in the United States.” For example, the state of Georgia, and more specifically the city of Atlanta, have brought in significant investment and shifted the locus of the US film industry thanks to deliberate public policy decisions that support job creation. To Cook, there is no reason the same cannot be done in markets across Africa, and to African creative industries champion Ms. Laureen Kouassi-Olsson, founder and CEO of Birimian Ventures, the creative industries are also a vehicle to communicate African values, culture, heritage, and history firsthand.

Kouassi-Olsson went further by saying that, “The diaspora has a tremendous role to play in redefining the economic relationship with our continent,” to which Cook agreed. On broader business issues, Cook reiterated the administration’s full support for the African Continental Free Trade Area (AfCFTA) agreement. “One integrated market makes Africa a much more attractive place to do business,” and the United States is providing targeted technical support, including exchanges and workshops, to contribute to the AfCFTA’s success wherever possible.

Turning to democracy, Cook responded to a question from Senior Fellow Dr. Pierre Englebert on how the Biden administration will approach the erosion of democracy on the continent. She acknowledged that this is both a priority abroad and domestically, saying that “I think you’re going to see in this administration a real emphasis on working with our partners in a way that recognizes the leadership role the United States has played. . . with the humility of understanding that we’ve got our own challenges and we can work in partnership with African countries and countries around the world.” She made specific reference to Nigeria, noting that the recent “Twitter suspension was very concerning and remains a source of concern,” with any signs of the closing of political space or restrictions on free speech being “deeply concerning.”

Making reference to Pride Month and LGBTQI+ rights, she also noted that “human rights are universal, they are not cultural.” On this issue and others, the United States will “continue to stand tall as allies,” insisting that “all human beings have rights that have to be respected.”

Above all, speakers, including Atlantic Council Board Director Amb. Mary Carlin Yates, took the opportunity to echo Amb. Yade’s statement that Africa must be viewed as a land of opportunity and not of risk. Stay tuned for further conversations in this series as the Atlantic Council continues to shape this narrative.

Missed the event? Watch the webcast below and engage us @ACAfricaCenter with any questions, comments, or feedback.  

Further reading:

New Atlanticist May 25, 2021

Linda Thomas-Greenfield on Africa’s most overlooked crises and opportunities

By Katherine Walla

Thomas-Greenfield spoke about US President Joe Biden’s outlook on Africa with Ambassador Rama Yade, director of the Atlantic Council’s Africa Center, at an event celebrating Africa Day and introducing the Africa Center’s new team and mission.

Africa Crisis Management

Event Recap May 25, 2021

Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

By Africa Center

Speaking at the Atlantic Council’s Africa Day celebration, White House official Dana Banks responded to topical issues in African affairs, including the coup in Mali, calling for “the unconditional and immediate release of the president and the prime minister.”

Africa Democratic Transitions

Report Apr 19, 2021

Priorities for US-Africa commercial policy in the Biden Administration

By Aubrey Hruby

This new decade has created a unique moment for the Biden administration to reset US-Africa policy. A more multifaceted and nuanced engagement with African states will set a foundation for stronger US-Africa partnerships, support mutual economic growth, and contribute to strengthening US global leadership.

Africa Economy & Business

The post No longer neglected: DAS Cook forecasts more robust engagement with Africa under the Biden administration appeared first on Atlantic Council.

Below is a summary of the discussants’ key points.

AgriTech Innovation

• Wander initiated a conversation tying emerging data capabilities and technologies directly to agriculture and food production: “Data capabilities and new technologies will heavily impact geopolitics, global competition, and global opportunities. The GeoTech Center recently released a new report, which offers practical and implementable recommendations that will enable the world to peacefully employ data capabilities and new technologies for beneficial purposes, including transforming agriculture and food security.”

• Ahmad presented the current state of Agritech in the Middle East and North Africa (MENA): “Given the scarce arable land and water supply, the region’s food security is vulnerable with many highly dependent on imported agricultural products. Add climate changes and rapid urbanization to the mix, and the region represents a ripe environment for innovation.”

• Kurtz emphasized that the Middle East has the opportunity to create food cheaply because it is abundant in the essential resources at the core of food production: sun, CO2, nutrients, water, land, energy, taxation, and capital. In his view, “If you can solve for issues like climate, source capital, and collaborate across all sectors including government, there is an opportunity for MENA to be the cheapest food producer in the world.”

• Abdullah highlighted three areas where we must improve the efficiency of farming: seed technology, to consume less water and sustain plants in higher temperatures; watering technology, to plant with saltwater and reduce evaporation losses; and digital technology, to spotlight the best land areas for planting.

• Abdullah underscored the cross applicability of existing research and development institutions. Governments can incentivize R&D from farmers through payments and, if we connect well-funded local universities with farmers, we can integrate new technologies into the existing marketplace.

• According to Abdullah, “The waste of food in this region is still among the highest in the world. Governments have recognized that they need to mandate a shift in people’s minds about healthy food consumption as important and about food waste patterns. Culturally, our social occasions revolve around abundant food displays which end up being thrown, especially during the holy month of Ramadan. We can use new technologies to convert disposed food into animal feed and partially address this issue.”

• Food loses half of its shelf life before it reaches the supermarket, and supermarkets will not risk selling a product in the last few days, so they throw the food away. Taveau pointed out that inefficiencies at ports are the reason for much of the lost shelf life. Overhauling the ports and streamlining efficiency will be important to preserving the longevity of the food supply.

• To maximize the utility of data, we have to harness existing technology. We don’t need one specific piece of technology designed to capture data from farmers when we have phones that each farmer already possesses. Agromovil CEO and GeoTech Center Non-resident Senior Fellow Andrew Mack emphasized that distributing more technology or resources is not the key to capturing more data—we must maximize the existing technological infrastructure of small-scale farmers.

Investing in Domestic and Local Farming

• Abdullah noted that governments lack major budget services, especially post-pandemic, and cannot maintain exorbitant expenditures on importing food. Governments must create a sustainable agriculture system by supporting local farmers.

• Kurtz added that the private sector is also trending towards local farming. He believes market forces will move us towards a world with more locally produced food.

• Abdullah highlighted that we still have a lot to do to ensure local food production. Supermarkets make the most money because they are closest to the end customer, while the farmer takes on the greatest risk.

• Mack emphasized the importance of protecting local farmers in the marketplace. He pointed out that farmers are going out of business. The average age of a farmer in multiple countries is 58, and they are telling their kids to get a degree and look for a job in another field. There are 1.5 billion people in the farming sector around the world and 570 million of them are small farmers. Small farmers are too important politically and economically to ignore.

• Ahmad added that consumer behavior will drive the capability of agricultural technologies to be relevant, profitable, and investable. He questioned consumer trends and preferences, particularly for locally-sourced fresh products and the willingness of consumers to pay a premium for these products.

• Kurtz responded by pointing out that there has to be someone to sell and buy this stuff from the commercial side. Right now, this trend is highly relevant on socioeconomic disparity. For the middle and upper class, the calories of a product and the knowledge that their food is locally grown is becoming more important.

International and Regional Cooperation

• Taveau argued that we must accept that the MENA region will continue to receive a large amount of their food supply from neighboring countries like India, which is a close ally of many MENA countries and possesses sizeable amounts of arable land. Therefore, food security for the Middle East requires investments in other nations in addition to investing in the region itself.

• According to Taveau, “it is always important, as we are developing greater independence in supply chains, that we ensure independence in a way that is globally-minded. We cannot survive without one another and should resign ourselves to the fact that we will get the greatest food security when we work with our partners.”

• Kurtz emphasized that regional players should continue coordinating their efforts within and beyond the GCC to build a sustainable food market. Adopting technology and improving food production drives profitability, making this shared goal more appealing.

• When describing the importance of cooperation versus competition, Abu Dhabi Investment Office Director General H.E. Dr. Tariq Bin Hendi stressed how critical building partnerships is and how competition between nations is healthy, as it allows for more creative solutions to pressing issues in the AgriTech field.

Recommendations

1. Taveau strongly believes that we need long-term economic viability in order to combat food insecurities in the MENA region. Sustained attention is required to progress in tackling this persistent issue. Taveau cautioned that people can be reluctant to accept and adopt new technology. The Agritech industry needs a good, segmented marketing strategy to combat social issues that arise on the path to innovation.
   
2. Abdullah concluded that we must have a method of consumption changes equal to that of production changes.
   
3. From a capital perspective, an individual’s ability to access capital, especially risk capital, is key to developing solutions, commercializing them, and creating new companies that can create jobs and economic prosperity in these countries, said Kurtz.
   
4. Futurity CEO Jack Bobo defined efficiency as “reducing the friction in the system.” This can happen in terms of regulation and technology, as well as across the entire food chain. During the COVID-19 pandemic, efficiency means short-term arrivals when inventory is dwindling. He recommended a balance between slack and reducing friction in the system.
   
5. According to Zuaiter Capital Holdings Managing Member Abbas Zuaiter, long-term investments, such as a thirty-year green bond, could result in investors being more likely to commit and remain in the region.

Hezha Barzani is an intern with Middle East Programs. Matthew Goodman is a consultant with the GeoTech Center. Follow him @matt_goodman22.

MENASource Apr 5, 2021

US Mission to Saudi Arabia announces new women’s entrepreneurship program in partnership with Atlantic Council, AmCham Saudi Arabia, and Quantum Leaps

By Allison Holle

On March 31, the Atlantic Council’s empowerME initiative hosted an event in partnership with the US Mission to Saudi Arabia, AmCham Saudi Arabia’s Women in Business Committee, and Quantum Leaps to mark the launch of their new joint program: IGNITING Women’s Entrepreneurship and Innovation in Saudi Arabia.

Civil Society Education

MENASource Mar 25, 2021

‘It’s not a zero-sum game’: MENA officials agree that regional integration is key to growth

By Heba Malik

Atlantic Council’s empowerME initiative and the King Faisal Center for Research and Islamic Studies co-hosted an event that discussed strategies for building regional cooperation to create a more attractive investment landscape and productive entrepreneurial ecosystem. These are some key takeaways.

Economy & Business Middle East

MENASource May 10, 2021

Want resiliency in MENA? Invest in women-led startups

By Nadereh Chamlou

As MENA assesses how to rebuild better after the pandemic, women-led startups could be part of the solution.

Economy & Business Middle East

Building the GeoTech Decade ahead

The GeoTech Report

The GeoTech Center, in partnership with a bipartisan group of leaders from industry and government, has launched the Report of the Commission of Geopolitical Impacts of New Technologies and Data. This report provides an extensive set of recommendations for the U.S. and its allies to thrive in a decade defined by data and technology collaboration and competition. The report is premised on the arrival of the “GeoTech Decade,” in which new technologies and data capabilities will have an outsized impact on geopolitics, economics, and global governance.

Read the full report

Press Release May 26, 2021

Atlantic Council releases landmark recommendations on the geopolitical impacts of new technologies

Findings based on bipartisan study groups of U.S. government officials and senior figures in tech industry.

Read More

New Atlanticist May 27, 2021

New technologies will reshape the world in the next decade. What does that mean for the US?

By Katherine Walla

What can the United States do to reap the benefits of the GeoTech Decade and tame the era’s threats? Here are the key takeaways from the conversation.

Cybersecurity Disinformation

New Atlanticist May 27, 2021

How to solve today’s tech challenges: secure data, close the digital divide, boost leadership

By Rose Butchart

The decade to come will be the “GeoTech Decade,” in which the technology trends that began in previous years will become fixed in their impact on society. The Commission on the Geopolitical Impacts of New Technologies and Data launched its first report with recommendations to guide leaders as they make choices regarding technology and data.

Cybersecurity Disinformation

The post Can AgriTech entrepreneurs save the Middle East’s food supply? appeared first on Atlantic Council.

WASHINGTON, DC – MAY 26, 2021 – The Atlantic Council’s bipartisan Commission on the Geopolitical Impacts of New Technologies and Data today released a landmark report proposing recommendations for the US government and like-minded allies on global technology and data development policy.

The report’s recommendations are designed to maintain US and allied leadership in science and technology; ensure the trustworthiness and resilience of physical and IT supply chains, infrastructures, and the digital economy at large; improve global health protection; assure commercial space operations for public benefit; and create a digitally fluent and resilient workforce.

The report was developed over months of intensive study and debate by an esteemed panel of commissioners comprised of senior representatives from Congress, academia, industry, and former officials from recent administrations. Sens. Mark Warner (D-VA) and Rob Portman (R-OH) and Reps. Suzan DelBene (D-WA) and Michael McCaul (R-TX) served as honorary co-chairs of the commission. John Goodman, Chief Executive Officer of Accenture Federal Services, and Teresa Carlson, President and Chief Growth Officer of Splunk, served as co-chairs. The commission was housed within the Atlantic Council’s GeoTech Center, which was launched in 2020 to champion positive paths forward to ensure new technologies and data empower people, prosperity, and peace.

Today’s report comes amid the “GeoTech Decade,” in which new technologies and data capabilities will have an outsized impact on geopolitics, economics, and global governance. However, no nation or international organization has created the appropriate governance structures needed to grapple with the complex and destabilizing dynamics of emerging technologies. As a result, new approaches are required for developing and deploying critical technologies, cultivating human capital, rebuilding trust in domestic and global governance, and establishing norms for international cooperation.

Key recommendations from the report include:

• Global science and technology leadership: Develop a National & Economic Security Technology Strategy
• Secure data and communications: Strengthen the National Cyber Strategy Implementation Plan and accelerate quantum information science technologies operationalization
• Enhanced Trust and Confidence in the Digital Economy: Demonstrate AI improvements to delivery of public- and private-services
• Assured Supply Chains and System Resiliency: Broaden federal oversight of supply chain assurance
• Continuous Global Health Protection and Global Wellness: Launch a global pandemic surveillance and warning system
• Assured Space Operations for Public Benefit: Harden security of commercial space industry facilities and space assets
• Future of Work: Create the workforce for the GeoTech Decade and equitable access to opportunity

“The work of the bipartisan GeoTech Commission was 14 months in the making, representing the consensus of public and private sector leaders on practical steps forward for Congress, the White House, private industry, academia, and like-minded nations,” said Dr. David Bray, director of the Atlantic Council’s GeoTech Center. “The sophisticated, but potentially fragile, data and tech systems that now connect people and nations mean we must incorporate resiliency as a necessary foundational pillar of modern life. It is imperative that we promote strategic initiatives that employ data and tech to amplify the ingenuity of people, diversity of talent, strength of democratic values, innovation of companies, and reach of global partnerships.”

“The U.S. stands at a crossroads. New technologies and ready access to data offer exciting opportunities to tackle the world’s greatest challenges. Yet there are also risks that threaten to undermine peace and prosperity in unanticipated ways,” said John Goodman, CEO of Accenture Federal Services. “For the US and its partners to remain economically competitive and protect national security, we must work together to build trust in the digital fabric of the GeoTech decade. We must act now to invest in these new technologies, to develop and expand our skilled workforce, and to establish norms to ensure that technology emerges as a powerful force for good.”

“The GeoTech Decade impacts all countries, people, communities, and businesses from global safety to security and more,” said Teresa Carlson, President, and Chief Growth Officer at Splunk. “The recommendations in this independent report are necessary for innovation in the years to come. With bi-partisan buy-in from U.S. Congress and top industry leaders, executing on these seven areas will help us combine the data and technologies required for success in this new age.”

“We’re in the midst of a titanic technological shift, from IT modernization to artificial intelligence, as organizations from all industries look to harness the power of data to solve complex challenges,” said Max Peterson, Vice President, Worldwide Public Sector, Amazon Web Services. “Advanced computing systems, faster and higher-bandwidth communications networks, and increasingly sophisticated technologies are digitizing the information around us and transforming the way we live, learn, and do business. Together, government and the private sector should work to ensure we grasp the innovative opportunities before us in ways that promote security, trust, and inclusion.”

Commission on the Geopolitical Impacts of New Technologies and Data

Co-Chairs:
John Goodman, Chief Executive Officer, Accenture Federal Services
Teresa Carlson, President and Chief Growth Officer, Splunk

Honorary Co-Chairs:
Sen. Mark R. Warner (D-VA)
Sen. Rob Portman (R-OH)
Rep. Suzan DelBene (D-WA)
Rep. Michael T. McCaul (R-TX)

Commissioners:
Max R. Peterson II, Vice President, Worldwide Public Sector, Amazon Web Services
Paul Daugherty, Chief Executive – Technology & Chief Technology Officer, Accenture
Maurice Sonnenberg, Guggenheim Securities
Michael Chertoff, Former U.S. Secretary of Homeland Security
Michael J. Rogers, Former Chairman of the U.S. House Permanent Select Committee on Intelligence
Pascal Marmier, Head, Economy of Trust Foundation, SICPA
Ramayya Krishnan, PhD, Director, Block Center for Technology and Society, Carnegie Mellon University
Dr. Shirley Ann Jackson, President, Rensselaer Polytechnic Institute
Susan M. Gordon, Former Principal Deputy Director of National Intelligence
Vint Cerf, Internet Pioneer & “Father of the Internet”
Zia Khan, PhD, Vice President for Innovation, The Rockefeller Foundation
Anthony Scriffignano, PhD, Senior Vice President, Chief Data Scientist at Dun & Bradstreet Corporation
Frances F. Townsend, Executive Vice President, Activision Blizzard
Admiral James Stavridis, USN, Ret.

Executive Director:
David Bray, PhD, Director, GeoTech Center, The Atlantic Council

The Commission on the Geopolitical Impacts of New Technologies and Data was made possible by support from Accenture Federal Services and Amazon Web Services. The report’s full findings and recommendations can be found here.

For media inquiries, please contact press@atlanticcouncil.org.

The post Atlantic Council releases landmark recommendations on the geopolitical impacts of new technologies appeared first on Atlantic Council.

Banks told the director of the Atlantic Council’s Africa Center, Ambassador Rama Yade, that “Instability in Mali leads to greater instability in the Sahel. I think this makes the case for why we have to work together with like-minded partners in the region to ensure that stability is maintained.”

Banks highlighted Africa’s place in Biden administration foreign policy amid a broader strategy of global reengagement and relations rooted in mutual respect. She said that Africa’s importance goes well beyond strategic competition with China, and instead put forth a vision of “Africa not as a continent or as a problem to be solved, but rather a partner engaging in mutual respect.”

When asked about the pandemic and debt relief, Banks said “When you talk about economic recovery from the COVID-19 pandemic, we stand ready to partner with African countries to ensure that they are rebuilding their economies through various methods. One tool that we have in our toolbox is Prosper Africa,” referring to the United States’ existing flagship commercial policy. She went on to say that the administration is finding ways to give Prosper Africa “the teeth” it needs to succeed, while hinting at forthcoming US programs in support of Africa’s digital economy and the African Continental Free Trade Area.

Ambassador of the African Union to the United States Hilda Suka-Mafudze sounded similar notes of collaboration in her remarks, pointing to the US government’s strong bipartisan support for Africa. “I strongly believe that all the stars are aligned today to take US-Africa relations to a higher and strategic level of engagement for the best interests of both sides,” she said. Suka-Mafudze highlighted the African Union’s 2021 theme of “Arts, Culture, and Heritage,” affirming the creative industries’ ability to support sustainable job creation and social inclusion.  

Banks, too, underlined how “culture has always been a wonderful way to connect” and that cultural connections “will continue and have always been one of the bedrocks of our engagement with Africa.”

Atlantic Council Executive Chairman Emeritus Gen. James L. Jones Jr. opened the session by saying Africa Day—which commemorates the founding of the African Union’s predecessor in 1963—represents a moment of optimism as well as reflection. He added that, “We are reminded of the importance of multilateral institutions and the important role that the African Union has played in the continent’s political and economic development and its global relationships.” Also joining the conversation with Banks were Africa Center fellows Didier Acouetey, Abdoul Salam Bello, Cameron Hudson, and Aubrey Hruby, as well as Africa Center partner Admassu Tadesse, the group managing director and CEO of the Eastern and Southern African Trade and Development Bank.

The session closed with Yade bringing the conversation back to Banks’ personal ties to the continent, for a discussion of building bridges between cultures and diasporas. Reflecting on her connection and fascination with the continent, Banks said “I know that there are many other African Americans who feel the same and that’s who we would like to work with, the diaspora, to get them to become more engaged economically as well as culturally with the continent because it makes for stronger policy.”

Missed the event? Watch the webcast below and engage us @ACAfricaCenter with any questions, comments, or feedback.  

Further reading:

New Atlanticist May 25, 2021

Linda Thomas-Greenfield on Africa’s most overlooked crises and opportunities

By Katherine Walla

Thomas-Greenfield spoke about US President Joe Biden’s outlook on Africa with Ambassador Rama Yade, director of the Atlantic Council’s Africa Center, at an event celebrating Africa Day and introducing the Africa Center’s new team and mission.

Africa Crisis Management

Event Recap May 25, 2021

Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

By Africa Center

Speaking at the Atlantic Council’s Africa Day celebration, White House official Dana Banks responded to topical issues in African affairs, including the coup in Mali, calling for “the unconditional and immediate release of the president and the prime minister.”

Africa Democratic Transitions

Report Apr 19, 2021

Priorities for US-Africa commercial policy in the Biden Administration

By Aubrey Hruby

This new decade has created a unique moment for the Biden administration to reset US-Africa policy. A more multifaceted and nuanced engagement with African states will set a foundation for stronger US-Africa partnerships, support mutual economic growth, and contribute to strengthening US global leadership.

Africa Economy & Business

The post Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister appeared first on Atlantic Council.

To mark the occasion of Africa Day, Africa Center Director Amb. Rama Yade joined the US House Foreign Affairs Committee on Tuesday, May 25 for a roundtable on African entrepreneurship, innovation, and leadership and how to build stronger US-Africa ties. Panelists included H.E. Ellen Johnson Sirleaf, former president of Liberia; H.E. Dr. Ngozi Okonjo-Iweala, director general of the World Trade Organization; and Ms. Isis Nyong’o Madison, Kenyan-American media and tech entrepreneur.

View more Africa Day content

AfricaSource May 25, 2021

Africa is America’s greatest geopolitical opportunity. Does the US know it?

By Rama Yade

Biden can further build ties with Africa: He should do so not only because these countries have long been underrepresented within leading multilateral organizations, but also because they offer innovative solutions to global challenges including terrorism, climate change, migration, debt, and COVID-19.

Africa Economy & Business

New Atlanticist May 25, 2021

Linda Thomas-Greenfield on Africa’s most overlooked crises and opportunities

By Katherine Walla

Thomas-Greenfield spoke about US President Joe Biden’s outlook on Africa with Ambassador Rama Yade, director of the Atlantic Council’s Africa Center, at an event celebrating Africa Day and introducing the Africa Center’s new team and mission.

Africa Crisis Management

Event Recap May 25, 2021

Mali coup: White House official calls for ‘unconditional and immediate’ release of president and prime minister

By Africa Center

Speaking at the Atlantic Council’s Africa Day celebration, White House official Dana Banks responded to topical issues in African affairs, including the coup in Mali, calling for “the unconditional and immediate release of the president and the prime minister.”

Africa Democratic Transitions

The post Yade joins the House Foreign Affairs Committee to speak on African innovation and leadership appeared first on Atlantic Council.

Read all the expert opinions at the link below.

The post How does big tech impact U.S. national security? appeared first on Atlantic Council.

Introduction

As in every democratic country in the world, the private sector in Central America’s Northern Triangle (Guatemala, Honduras, and El Salvador) has a central role in generating employment, driving economic growth, and spurring innovation. But in a region plagued by one of the highest levels of economic informality, weak government institutions, and pervasive corruption, private enterprises—both decades-old industry behemoths and newer startups—can have a more positive influence in steering the Northern Triangle toward inclusive and sustainable economic development. This is not to say that business leaders in Guatemala, Honduras, and El Salvador have been absent in unlocking growth and innovation in the countries, especially since the end of the civil wars in the late 1990s. But in this unique moment of global crisis and renewed attention from the United States, the Northern Triangle’s private sector should seize the opportunity to further position itself as a committed, trusted partner and galvanizing force for positive change.

Seeking to address the root causes of unauthorized migration to the United States—including lack of quality economic opportunities, weak rule of law, and violence—the Biden administration’s four-year, $4-billion plan for the Northern Triangle seeks to implement a whole-of-society approach to improve the living conditions of Guatemalans, Hondurans, and Salvadorans. The plan comes at a time when Central America, already reeling from structural institutional challenges to its ability to govern and improve its economies, grapples with the effects of the COVID-19 pandemic and two back-to-back hurricanes. As conditions deteriorate on the ground and create additional push factors for would-be migrants, the US government should devote special energy and attention to laying the groundwork for strategic partnerships with private sector actors who are positioned—despite contending with pandemic-induced burdens of their own—to catalyze economic opportunities for their fellow citizens. The business community can be a pivotal player in long-term change that seeks to improve the rule of law, tackle corruption, and open new opportunities for inclusive economic growth.

This issue brief takes a deep dive to unpack why a lack of sustained and inclusive economic opportunities—among the three main drivers of unauthorized migration—have eluded the Northern Triangle and how the private sector can help reduce informality, invest in employment-generating sectors, resolve the human capital paradox, and catalyze greater infrastructure investment and digital connectivity.¹ While there is an emphasis on high levels of informality causing economic insecurity, it is also true that economic insecurity and lack of investment in economic development also drives informality.

This is the first of three issue briefs as part of the Adrienne Arsht Latin America Center’s latest Central America initiative, in partnership with the DT Institute, to inform and mobilize key stakeholders at the national, regional, and international levels behind new policy solutions to tackle the Northern Triangle’s most pressing issues. This issue brief is the outcome of a meeting with the Center’s Northern Triangle Advisory Group, which met in February 2021, and will meet regularly during the first six months of 2021 to help inform the three issue briefs.

Formalizing the Northern Triangle Economies: How Can the Private Sector Help?

The Challenge: According to official government data from Guatemala, Honduras, and El Salvador, the pre-pandemic average unemployment rate in the Northern Triangle was relatively low, at 3.9 percent in 2019, eight percentage points lower than that of Costa Rica.² So, why are sustainable economic opportunities lacking in the Northern Triangle when the unemployment rate is less than that of a soon-to-be Organisation for Economic Co-operation and Development (OECD) country? While more than eight million people of the total (active) labor force are calculated to be formally employed, around 60 percent—higher than the average across Latin America—have informal, low-quality jobs with no safety net.³ In Guatemala and Honduras alone, four in five people work as street vendors, as domestic workers, in unregistered microenterprises, in service sectors (mainly restaurants or hotels), and in agriculture.⁴ These low-paying jobs are insecure, inconsistent, often involve long hours in poor working conditions, and barely provide for basic family needs. As nontaxable employment, informal work cannot guarantee access to government pensions or credit from financial institutions.

Informal jobs in the Northern Triangle are also highly vulnerable to minor demand shocks, climate disasters, and, most recently, the health effects of a pandemic and the stringent measures used to combat it. Due to lockdowns, curfews, and restrictions on public gatherings, informal workers—most of whom cannot afford to work remotely—have been unable to generate income. One consequence: the skyrocketing rise in food insecurity across the region, which became even more dire with the destruction of one hundred thousand hectares of crops during the 2020 Atlantic hurricane season. In Guatemala, the number of households with insufficient food during the pandemic nearly doubled compared with pre-pandemic levels, and in Honduras, food insecurity increased by more than 50 percent.⁵

A swollen informal economy in the Northern Triangle has created a vicious cycle that is partly responsible for the lack of inclusive economic advancement, and for productivity levels among the lowest in the world.⁶ Guatemalan and Honduran informal sector jobs do not pay much-needed income taxes, thereby further cash-strapping national governments that were already struggling to provide quality public services before they had to mitigate the effects of the coronavirus pandemic and the hurricanes. Regional estimates from the United Nations Economic Commission for Latin America and the Caribbean indicate that the Northern Triangle loses billions of dollars in fiscal revenue due to the high levels of informality. In a region where the average poverty rate surpasses 30 percent,⁷ lack of quality public services and social protections for the most vulnerable populations increases social inequality and widens the wealth gap.

How the Private Sector Can Help: A more engaged private sector is not a panacea for eliminating informality in the Northern Triangle, but private businesses can apply lessons learned from other countries in Latin America and the OECD, and collaborate with the public sector to take low-cost, high-reward steps that can help pave the way for job formalization. Employers can take a more proactive approach and leadership role in the following three areas: working with governments to design and execute active labor market policies (i.e., workforce training, apprenticeships, employability courses, labor counseling, and job matching), helping the informally self-employed and jobseekers navigate through administrative costs and requirements for conducting formal work, and participating in civil society–led pledges that commit businesses to support formalization of their own supply chains and clients. To effectively promote private sector leadership in tackling informality, governments and civil society can provide the right mix of incentives, including through tax exemptions and benefits associated with corporate social responsibility.

Active labor market policies (the combined set of government programs to aid the unemployed and boost formal employment) have had limited success across Latin America, but case studies from formalization and vocational training programs in Argentina and Colombia offer lessons learned for similar policies implemented in the Northern Triangle.⁸ Despite the obvious country differences, both programs can offer best practices for implementing incentives that boost participation based on the specific labor and productivity needs of the Northern Triangle countries and establishing a framework for evaluating the programs’ impacts. Private companies in Guatemala, Honduras, and El Salvador—especially industry leaders in manufacturing, logistics, energy, agriculture, biomedical production, and information technologies—can cooperate with governments to provide buy-in for the design, implementation, and monitoring and evaluation of job training schemes and microenterprise entrepreneurship programs. To minimize the potential pitfalls of such programs, private sector participation can help identify gaps in the labor market for the unemployed or informally employed, ensure that a large portion of spending for the programs is directed to training for sectors that add to overall productivity, and guarantee that the programs meet specific objectives for increasing formal employment and building core skills rather than being used for one-off public sector projects. Private sector participation should be coupled with civil society initiatives and input to ensure that historically marginalized population groups in geographical areas known for would-be migrants, such as secondary cities, will benefit.

Employers—both existing and new businesses—can also be more proactive in guiding jobseekers and individuals running their own informal businesses through complex tax forms and extensive bureaucratic processes. But to do so, incentives for all parties must be aligned. Governments seeking to promote formalization can offer temporary tax benefits to new ventures or existing firms that will partner with fiscal agencies to promote formalization in their own supply chains and commit to delivering their products or services to clients who are formally registered or employed. To ensure sustainability and minimize reliance on government, civil society organizations such as think tanks and universities (both at the national and international levels) can organize pledging conferences that seek active participation from companies to formalize their business lines as part of a broader effort to promote stronger social responsibility reputations in the private sector. In Guatemala, local think tank Fundación para el Desarrollo’s “Cruzada por la Formalización”—Crusade against Informality—can offer early indicators of success and lessons learned for formalization efforts in the Northern Triangle.

Keeping up with Talent: How Can the Private Sector Help?

The Challenge: As identified in a previous Atlantic Council report, Central America’s demographic bonus represents a limited-time opportunity that the United Nations forecasts will disappear by 2050.⁹ While a young national population does not automatically translate into a young and skilled workforce, a young population that contributes to the economy is a prerequisite for creating a skilled workforce for decades to come. In each of the Northern Triangle countries, only about a quarter of the potential labor force has completed upper secondary school, and only about one in ten has completed any type of tertiary education.¹⁰ Thus, the region has limited time to double down on policies that will ensure a full capture of its human capital potential. But research by the World Bank shows that, over the last few years, the more-skilled labor has been most likely to migrate.¹¹ This trend puts key stakeholders in a difficult position: Why invest in workforce training for higher-quality jobs if workers will take those skills elsewhere?

If the countries and the private sector are unable to align job opportunities with a growing set of skilled workers—and are unable to attract country-wide (much less regional) large-scale and labor-intensive investments—there is little incentive for investment in the national workforce. In this vicious cycle the private sector lacks the tools and ability to increase productivity and improve the region’s competitiveness. This human capital paradox where worker skills are quickly outgrowing the job market continues to contribute to the region’s brain drain—a loss of much-needed skills and talent for Northern Triangle economies. Finding sustainable solutions to the misalignment of offer and demand in the labor market must be a shared priority across sectors and industries in the three countries.

How the Private Sector Can Help: In any growth-oriented and innovative economy, training (through active market labor policies mentioned in the previous section or directly from private businesses) and education must be accompanied with compatible and attractive opportunities in the job market. Jobs must evolve with the growing skills of workers, and the market must be nimble enough to adapt to an increasingly sophisticated workforce. Private sector alliances with the government and public universities or educational institutions can go a long way. Specifically, the private sector can commit to guaranteeing jobs for reskilled workers as it is in the best economic interest of businesses to retain employees. Government, educational institutions, and the private sector—including chambers of commerce and business councils—must all be at the table to determine the economy’s needs and gaps. In a context of weak labor demand, a low-skilled workforce, and high informality, labor force participation is especially low for women. Hence, any public-private partnership must include a gender lens. For example, support with childcare—on-site or through subsidies—could help more women seize these opportunities. Costa Rica’s CEN CINAI program is an example of this. Multilaterals and the international community may also play an important role in this alliance by providing technical assistance and loans and sharing best practices from around the globe.

Likewise, recent trends in supply chain reconfiguration may offer a window to disrupt and break away from conventional educational models that may be too lengthy and unrealistic for a region where many citizens are looking for a way to make a living as soon as possible. In this respect, governments at the national and local levels can work to offer vocational training earlier in life, with programs that prepare men and women for labor-intensive positions or help them create their own businesses. These institutions may have agreements in place with companies to churn out workers who reach different specialization levels for jobs in customer service, information technology, or other industries. If a harmonized regional framework existed, the region could build an extensive, large-scale value chain that could greatly foster the Northern Triangle’s competitiveness.

Preparing the Northern Triangle for the 21^st Century Economy: How Can the Private Sector Help?

The Challenge: National and international investors, the private sector, and multilaterals have long seen the infrastructure (energy and transport, specifically) and digital sectors in the Northern Triangle as having the largest potential for generating regional economic opportunities through increased connectivity, access to new and scalable markets, and improved overall competitiveness. The development of transport infrastructure is critical to connect isolated towns and provide them with access to the global market, especially in Guatemala –most recently ranked at the bottom of the World Bank’s 2018 Logistics Performance Index.¹² Given the existing bilateral trade agreements, increasing commercial integration, and close cultural ties among Northern Triangle countries, efforts that enhance regional connectivity are not beyond reach. But investment in large-scale infrastructure has been significantly limited in the Northern Triangle, both at the national and intraregional levels. In Guatemala alone, the International Monetary Fund calculated that the country must raise infrastructure expenditure to at least 15 percent to reduce poverty and increase economic opportunities.¹³ From politics and policy to mismanagement and corruption, there are many reasons infrastructure investment has been limited, including insufficient fiscal revenue due to tax evasion and informality. According to the World Bank’s Doing Business 2020 report, the three Northern Triangle countries rank lower than 90 of 190 countries studied worldwide.¹⁴ Among thirty-two of their Latin American neighbors, Guatemala, Honduras, and El Salvador received a significantly lower collective ranking on contract enforcement at 30, 27, and 21, respectively. Dealing with construction permits and protecting minority investors are also top challenges for the three countries, especially for Honduras, which performed the lowest overall among Northern Triangle countries. Taken together, these indicators reflect a business environment in need of improved regulatory frameworks, safeguards against graft, and stronger transparency requirements. By taking serious steps in generating a more business-friendly environment, the Northern Triangle will not only be more attractive for investment in infrastructure, but also ensure the full and efficient execution of critical projects in this sector.

How the Private Sector Can Help: The Northern Triangle private sector can position itself as an indispensable partner to the Biden administration for transformative infrastructure projects in the region. Leveraging existing projects in energy and infrastructure funded by the US International Development Finance Corporation in the three countries—including $1 billion commitments in Honduras and Guatemala—would be an important step in this process. But any new partnerships under the Biden administration’s regional strategy will require that capable partners not only demonstrate their commitment to abiding by the rule of law, but also take actions to implement anti-corruption measures, integrate climate-mitigating strategies beginning at project inception, and prioritize efforts that directly benefit Indigenous communities as well as rural populations most likely to migrate. One first step to consider for interested private sector companies in each Northern Triangle country is collectively organizing a road show (both virtual and in-person) to Washington, DC, to publicly demonstrate their commitments to guaranteeing transparency and fighting corruption in infrastructure projects. With increased visibility, this could, at the very least, pave the way to build confidence between US-based and international investors and in-region businesses operating in the infrastructure sector. A second step would be to identify regional infrastructure efforts with the best potential to impact the most people—and especially the most vulnerable populations in the three countries. One such ongoing initiative is the Central American Electrical Interconnection System, an ambitious program set out by Central American countries (including Panama) to develop their power infrastructure and create an energy-integrated market that could be more efficient and attractive for new investments. The project envisioned the creation of the Regional Electricity Market (MER in Spanish), which was completed in 2014. However, several deficiencies have emerged since, including a lack of clarity in the sector’s development strategy.¹⁵ The Biden administration’s regional plan intends to focus on large-scale energy projects, but private business leaders in this sector must work together toward a shared regional vision, overcome short-term political agendas, commit to the highest transparency standards, and develop dispute-resolving mechanisms that provide predictability and certainty to all parties involved.

The same applies for a regional digitization policy that has gained renewed urgency in the context of the coronavirus pandemic. The private sector is positioned to lead—with public sector and multilateral collaboration—in the development of an innovative digital agenda that promotes the region’s competitiveness and helps fight corruption.¹⁶ This is a challenge, since most rural areas in the Northern Triangle do not have access to information technologies or the internet. Digitization, however, would also help micro, small, and medium-sized businesses and the agricultural sector (which provides more than 60 percent of employment) by presenting them with commercial opportunities beyond their immediate markets through the use of e-commerce and online applications. Broad digitization can also broaden the access to loans and financing through financial technology (fintech) applications and blockchain technologies.¹⁷

In Summary: Working toward a Shared Vision for Sustainable Economic Opportunities in the Northern Triangle

Reducing informality, strengthening human capital, and generating confidence that can draw regional infrastructure investment are only three key areas where the Northern Triangle private sector can lead and—always in collaboration with governments and civil society—help create economic opportunities and improve living conditions in the region. To do so, the Biden administration can be a catalytic partner that can galvanize support from a broad spectrum of regional and international players, from multilateral regional institutions and international financial organisms to in-region civil society leaders and youth organizations. Below are two concluding opportunities for US government engagement with the Northern Triangle private sector:

• Develop a shared vision for economic advancement. This is not a new task for President Biden. This is as important today as it was back in 2014 when, as vice president, he led the Plan for the Alliance for Prosperity in the Northern Triangle. In this new global context, the Biden administration must apply lessons learned from that program, plan for contingencies, and ensure sustainability by building long-term trust with the regional private sector. Importantly, a shared vision must include a common understanding of what success looks like and how strategic engagement can work toward that goal. Beyond the business perspective, the administration must leverage its convening power to include voices and participation from civil society groups in the Northern Triangle, with a special focus on integrating the economic development visions of Indigenous peoples in the region (44 percent of Guatemalans self-identify as Indigenous).
• Establish clear anti-corruption and transparency standards for economic opportunity partnerships. Corruption manifested in all its forms has hindered progress in the region for too long; the fight to reduce it must include advancing on parallel efforts that can address US national security interests. The Biden administration should establish and clearly communicate the anti-graft standards that it will require from potential private sector partners in economic opportunity efforts. The administration’s Central America plan is rightfully prioritizing the fight against corruption transversely across its regional engagements. But to ensure viability and sustainability, the administration must ensure that this conversation includes buy-in, not only from the private sector, but also from civil society organizations that have been on the ground and have a more nuanced perspective for how to understand corruption in the region and how to fight it. Clear anti-corruption and transparency standards are an important consideration for potential foreign investors; without certainty or rules, it will be hard to attract any significant or transformative levels of foreign direct investment.

Acknowledgements

This issue brief is the first of three publications as part of the work of the Adrienne Arsht Latin America Center’s Northern Triangle Advisory Group (members listed below), a high-level group of policymakers, business leaders, and civil society from the Northern Triangle that seek to create a basis for consensus and galvanize support for strengthening the rule of law and mitigating corruption, increasing productivity and enabling sustainable economic development, and reducing conflict in Guatemala, Honduras, and El Salvador. Thank you to Jason Marczak, María Fernanda Bozmoski, Domingo Sadurní, and Eva Lardizábal at the Adrienne Arsht Latin America Center for leading this effort and to the Center’s in-region consultant Gina Kawas for her research support. This publication was produced with the generous financial support of DT Institute. Thank you to DT Institute for their insights and collaboration.

About the Authors

María Fernanda Bozmoski is deputy director, programs at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Mexico, USMCA, and Central America, and contributes to projects on regional trade integration as well as disinformation in Latin America. Bozmoski has co-led the Center’s Central America Task Force, managed the Center’s trade portfolio, and programmed events in Asia for US policymakers. She speaks native Spanish, English, and French, fluent Italian, and near fluent Portuguese.

Domingo Sadurní is assistant director at the Adrienne Arsht Latin America Center, where he covers Venezuela and Central America. Sadurní joined the Council as an intern in February 2018, previously working at J.P. Morgan’s private bank and Banco Popular de Puerto Rico. Sadurní earned a bachelor’s degree in finance and political science from Boston College. He speaks native English and Spanish.

Northern Triangle Advisory Group 

Northern Triangle Advisory Group members have provided critical insight and ideas as part of the drafting of this issue brief. Findings and recommendations of this brief, however, do not necessarily reflect the personal opinions of the individuals listed below or the organizations to which they are affiliated.

El Salvador 

María Eugenia Brizuela de Ávila 

Adrienne Arsht Latin America Center/Former Minister of Foreign Affairs, El Salvador 

Diego de Sola 

Grupo de Sola/Glasswing International

Roberto Rubio

Fundación Nacional para el Desarrollo (FUNDE)/Transparency International, El Salvador 

Javier Simán

Asociación Nacional de la Empresa Privada (ANEP)

Marjorie Trigueros

Fundación Salvadoreña para el Desarrollo Económico y Social (FUSADES) 

Claudia Umaña Araujo

Fundación Salvadoreña para el Desarrollo Económico y Social (FUSADES) 

Guatemala 

Marcos Antil

XumaK 

Ricardo Castaneda Ancheta 

Instituto Centroamericano de Estudios Fiscales (ICEFI) 

Víctor Juárez 

TuConsejería 

Salvador Paiz

PDC Capital/Fundación para el Desarrollo de Guatemala (FUNDESA)

María Tuyuc 

Global Network of Indigenous Entrepreneurs of Guatemala 

Edgar Villanueva 

US Guatemala Business Council 

Honduras 

Gabriela Castellanos

Consejo Nacional Anticorrupción (CNA)

Jacqueline Foglia

Consejo Nacional de Inversiones (CNI)

Carlos Hernández

Asociación para una Sociedad Más Justa/Transparency

International, Honduras

Guillermo Peña Panting 

Fundación Eléutera 

Juan Carlos Sikaffy 

Consejo Hondureño de la Empresa Privada (COHEP) 

United States 

Mari Carmen Aponte 

Former Assistant Secretary of State for Western Hemisphere Affairs 

David Holiday 

Open Society Foundations 

Irasema Infante 

Inter-American Development Bank 

Jason Marczak 

Atlantic Council 

Jenny Willier Murphy 

Centro de Estudios de Justicia de las Américas (CEJA) 

Enrique Roig 

Creative Associates 

Matthew M. Rooney 

George W. Bush Institute–SMU Economic Growth Initiative  

Santiago Sedaca 

DT Global 

Mary Ann Walker 

Adrienne Arsht Latin America Center Advisory Council 

Beyond the Northern Triangle 

Enrique Bolaños 

INCAE Business School 

Jaime Roberto Diaz 

Central American Bank of Economic Integration (CABEI) 

The Adrienne Arsht Latin America Center broadens understanding of regional transformations through high-impact work that shapes the conversation among policymakers, the business community, and civil society. The Center focuses on Latin America’s strategic role in a global context with a priority on pressing political, economic, and social issues that will define the trajectory of the region now and in the years ahead. Select lines of programming include: Venezuela’s crisis; Mexico-US and global ties; China in Latin America; Colombia’s future; a changing Brazil; Central America’s trajectory; Caribbean development; commercial patterns shifts; energy resources; and disinformation.

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The post The role of the private sector in catalyzing inclusive economic opportunities in the Northern Triangle appeared first on Atlantic Council.

On February 12, 2021, the Atlantic Council’s South Asia Center hosted an event on Pakistan’s economic and regional environment in a post-pandemic world. Mr. Shuja Nawaz — Distinguished Fellow of the South Asia Center – moderated the event and began by introducing the esteemed list of panelists that included Dr. Vali Nasr, Professor of International Affairs and Middle East Studies and former Dean at Johns Hopkins-SAIS and Non-resident Senior Fellow at the South Asia Center; Dr. Adil Najam, Inaugural Dean of the Frederick S. Pardee School of Global Studies, Boston University; and Dr. Huma Baqai, Associate Professor of Social Sciences & Liberal Arts, and former Associate Dean Institute of Business Administration.

Dr. Adil Najam began by talking about his endeavor of interviewing 100 prominent scholars, leaders and thinkers about what COVID means for the world. Based on this, his insight was that global politics was turbulent even before the pandemic, and the pandemic is going to shape political realities in Pakistan, especially in the sphere of International affairs. He said that the internal dynamics of Pakistani politics remain the same, but the one external factor–US-China rivalry–has become even more apparent. We would also see effects on Pakistani domestic society.

Mr. Nawaz then brought up the issue of employment increasing not only in India, but also in Pakistan. Based on this using a wider lens, he asked Dr. Vali Nasr to talk about the turbulence in the Middle East, possible changes in the region between the United States and Iran, and how that would influence the region, in particular Pakistan. Dr. Nasr responded that the US-China relationship is going to be even more prominent where Pakistan finds itself closely involved in the frontlines. COVID-19 has shown that terrorism or Muslims are no longer the moving factor of US foreign policy. The existential threat shaped by COVID-19 and its internal politics has propelled the United States to leave the Middle East and Afghanistan, which changes the parameters of how the Pakistan military operates. He also mentioned that the economic impact of the pandemic has led Saudi Arabia to look away from Pakistan and religion to look westwards, along with economic entrenchment in the UAE, which would result in the departure of Pakistani expatriates from those countries. The United States policy of leaving the Middle East would encourage it to end the war in Yemen, Libya and maybe Syria, which would mean that Pakistan will have to find a new direction to look to.

After this, Mr. Nawaz turned to Dr. Huma Baqai to talk about her new book on COVID. Dr. Baqai’s insights included Pakistan viewing China as a means of increasing its foreign policy options as opposed to the stringent conditions that Saudi Arabia had provided. Pakistan recognizes that there is a change in its relationship with Saudi Arabia, while also looking eastward at Iran. While it is still affected by India, there is a change in Pakistan wanting to shift from being a geopolitical state to a geoeconomic state, which has been influenced by its growing relationship with China. While hesitant to put Pakistan in camp politics, Dr. Baqai argued that at the end of the day, Pakistan is uneasy about growing ties between the US and India. Pakistan feels like it is being pushed into the camp of China, whereas it needs space to balance its relationship with the United States. 

Mr. Nawaz then turned to Ambassador Cameron Munter to inquire about the US-India-Pakistan relationship. Ambassador Munter emphasized that the context in which Pakistan’s foreign policy operates has transformed as the dynamics of its three patrons– the US, China, Saudi Arabia–have changed. It would be wise for Pakistan to get out of the trap of pitting one country against the other and deriving the most gains from where it can. Ambassador Munter voiced his concern that the issue is not whether the United States might pressure Pakistan to act in a particular way, but that it won’t care about what Pakistan does at all, which he believes to be “an enormous mistake. He advised Pakistan to use this time as an opportunity to invest in high-value industries and escape the stronghold of textile and low-value agricultural industry, thereby harnessing the US’s attention.

Mr. Nawaz then took up Dr. Rabia Aktar’s question on how Pakistan’s threat landscape is going to look in the aftermath of COVID-19 and against the backdrop of the Sino-US rivalry and US-India strategic partnership. Afterwards, Dr. Najam shifted the conversation from Pakistan to Pakistanis. He did not think that the US’s receding attention is necessarily a bad thing. He also mentioned that, while the pandemic shook up the global economy, because Pakistan’s economy was more insulated, Pakistan’s economy or unemployment numbers were not terribly impacted when compared to international labor statistics, and that it encouraged the e-commerce economy to grow in unprecedented ways. On the other hand, the drawback of this insulation has been that Pakistan was unable to take reins of some of the supply chains affected by COVID-19. 

Dr. Najam mentioned the importance of youth education during the pandemic, as 60% of Pakistan’s population is 30 years or less. Mr. Nawaz then highlighted the importance of the question of who is going to provide facilities for the growing youth in Pakistan. Ambassador Munter suggested that, if a possible US withdrawal from Afghanistan leaves Pakistan in a less needed position in the eyes of the United States, then Pakistan should be proactive in attempting to creatively engage with Iran and China in a way that builds diplomatic bridges between the United States and Iran, and even the United States and China. Dr. Baqai challenged the previous comment by bringing forth the Pakistani view that every conversation in the United States advocates for Pakistan to change its relationship with China while Washington consistently shows that Pakistan is a priority. She cautioned that this attitude, if continued, will only elevate camp politics further, and questions Pakistan’s ability to mend relations in the background of President Biden adopting a harsh policy toward China as some critics argue to be the case.

In conclusion, Mr. Nawaz pointed out the importance of continuing this very important topic, and thanked all the panelists for their attendance and valuable contributions. The post-pandemic world offers Pakistan the opportunity to reevaluate its foreign policy, diversify its economic investments, as well as figure out ways to effectively follow through on its desired shift from a geopolitical state to a geoeconomic one. 

The South Asia Center is the hub for the Atlantic Council’s analysis of the political, social, geographical, and cultural diversity of the region. ​At the intersection of South Asia and its geopolitics, SAC cultivates dialogue to shape policy and forge ties between the region and the global community.

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That recession certainly hasn’t hit Africa’s tech industry. In fact, as countries adapt to the expanding digital universe created by COVID-19, technology ecosystems across the continent are booming—and global investors have noticed. Africa-focused startup funding finally crossed the $1 billion dollar mark last year (at $1.3 billion), already a big increase from previous years (total investment in African startups was just under $200 million in 2015). The better news is that, eight months into 2020 and in the midst of the coronavirus pandemic, total funding had still increased by 8 percent compared to 2019, according to Africa-focused fund Partech, making the tech sector an undeniably lush spot in Africa’s parched economic landscape.

A string of recent investment milestones clearly indicates a sector on the rise. In April 2019, Jumia made history by becoming the first startup from Africa to list on the New York Stock Exchange. Two months ago, Stripe acquired Nigeria’s fintech darling Paystack for over $200 million: the largest exit for an African startup, ever. And just last month, Bezos Expeditions—the personal venture capital fund of Amazon CEO Jeff Bezos—participated in a $30 million Series B round investment for the fintech startup Chipper Cash, which offers cross-border payments in seven African countries. Many US investors once viewed Africa as too risky, but African tech—although still small compared to the global tech sector—is drawing increased attention from Silicon Valley executives and Fortune 500 CEOs.

It’s no surprise that Nigeria, Kenya, and Egypt—big economies home to the continent’s most vibrant startup hubs (Lagos, Nairobi, and Cairo)—have benefitted the most from this surge in investment activity. Because startups are universally recognized to be a vital engine of economic growth, fostering a vibrant innovation ecosystem is a chief goal of governments across the globe. And while countries like the United States, China, Israel, Sweden, and Singapore have taken slightly different approaches to nurturing a ‘startup culture’ (one that encourages risk-taking and rewards talent), these approaches have consistently included both heavy government investment in local ecosystem support organizations and startup legislation that simplifies business transactions. In Africa, successful startup ecosystems have also benefitted from government engagement, too, though there have been far fewer resources available and more red tape for entrepreneurs to wade through. There’s even an argument to be made that the emergence of Africa’s top startup ecosystems is more a function of size than anything else: Egypt, Kenya, and Nigeria have three of the top seven largest populations on the continent, replete with large diaspora talent networks and growing youth populations eager to adopt mobile technology.

Attempting to cash in on the growing global surge in investment, smaller African countries have tried to bolster their own innovation ecosystems through supportive legislation. Italy passed the world’s first-ever Startup Act—a law specifically designed to spur innovation demand and foster entrepreneurship—all the way back in 2012, and since then plenty of African governments have considered following suit. The passage of Startup Acts in Tunisia and Senegal, in 2018 and 2019 respectively, paved the way for multiple proposals in other African countries that reflect growing interest in improving the enabling environment for startups and investors. Rwanda and Ghana, home to two of Africa’s fastest growing economies, have both kickstarted discussions with key stakeholders in the last few months. Even larger economies, such as Kenya, Ethiopia, and Uganda, have jumped on the bandwagon and are in various stages of passing their own versions.

African entrepreneurs have long suffered from unfavorable regulatory environments that can make it harder to start, grow, and scale an innovative business. Endeavor Nigeria CEO Elohu Giban-Mbelu recently made this point in a TechCabal interview, saying that “…the lack of clarity and the time or cost spent on lobbying efforts around policy and regulation can take away from time and cost injected into growing the business instead.” For many entrepreneurs—especially in countries like Nigeria where elderly politicians rule over a young populace—tech-savvy individuals tend to view the government as out-of-touch with their demands. Changing this perception by reviving trust between lawmakers and entrepreneurs, an important first step, requires new policy formation with the interest of entrepreneurs, investors, and other stakeholders at heart.

Startup Acts could help do the trick. Designed to make it easier for startups to operate, Startup Acts include an amalgamation of policies intended to increase the incentives for young people to start a venture, investors to put their money into promising companies, and other ecosystem actors to lend their support where it’s needed. For Tunisia and Senegal—the two first movers in this arena—these policies are part of broader government strategies to position their countries as innovation hubs by leveraging an emerging tech scene to improve economic development.

Ideas put forth in the Tunisia and Senegal acts were developed through an innovative policy hackathon hosted by i4policy, a multi-stakeholder group promoting policy reforms in Africa’s startup space. Key elements of Tunisia’s Startup Act include state salaries for up to three founders per company during the first year of operations, generous tax breaks, and a one-year leave period for both public and private sector employees to start a company with the right to return to their old jobs. Additional incentives encourage potential entrepreneurs to launch new ventures, including available startup grants, fast-track licenses to obtain startup registration documents, and increased state support for covering patent licenses. Similar to Tunisia, Senegal’s version aims to help position the country as the Francophone leader in tech and entrepreneurship on the continent. The country’s policy includes three tax-free operational years for startups, training for youth and female entrepreneurs, and a startup registration platform easily accessible on a government website.

Two years after being passed, Tunisia’s Startup Act has paid off and the country’s digital economy has deepened. 2019 Q4 data obtained from Entrepreneurs of Tunisia (EOT)—a new organization formed after the Startup Act passed—shows that the country had over 165 new startups registered, twenty-four new co-working spaces opened, and $18.5 million fundraised in a one-year period. In an April 2020 profile by WeeTracker, some Tunisian entrepreneurs expressed concerns about how the pandemic will affect business, however they largely credit the Startup Act for solving the ecosystem’s main bottlenecks by making it easier to focus on growing their venture. This is a very promising indicator that undoubtedly influenced other countries to consider following suit and enacting their own version. If implemented more broadly across the continent, Startup Acts could further catalyze a positive change in the broader business environment by improving local support for entrepreneurs and signaling to global VC investors that African innovation is here to stay.

While it’s still too early to tell how Senegal’s Startup Act will impact its fledgling tech ecosystem, the increasing appetite among governments in signing pro-startup legislation is encouraging. Enacting this type of legislation to provide more support and runway for startups—a key engine for job growth in African economies—could prove even more important during economic downturns when businesses suffer and credit dries up. Perhaps this is a sign that governments recognize how intertwined growth in African tech ecosystems are with GDP; data from TechCabal found that, in Nigeria, the technology sector contributed more to the country’s overall GDP than the oil and gas sector did between 2010-2019. Put simply: growth in technology innovation can boost overall economic growth at a time when Africa faces its first continent-wide recession in over two decades. A key component to expanding startup ecosystems, keep an eye on the Startup Act trend to continue across Africa after Tunisia’s success, and expect more countries to sign similar pro-startup legislation to spur innovation, create jobs, and grow trust between governments and entrepreneurs.

Jordan Wolken is an intern with the Atlantic Council’s Africa Center. Follow him on Twitter @WolkenJordan.

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As a part of the GeoTech Center’s AgriTechAction 2020, Mr. Jeff Rowe, President of Global Seeds for Syngenta, was interviewed by Ms. Daniella Taveau, Nonresident Senior Fellow at the GeoTech Center and expert in developing global business and regulatory strategies.

Mr. Rowe first described the complexity of the seed industry and of the large chain that hides behind the production of a ‘simple’ bag of seeds. At the same time, he reinforced the importance of collaboration necessary within the industry, and the need to constantly explore potential partners as it innovates and develops new technologies.

The development of resilient seed is critical as the impact of climate change on the agriculture sector worsens, and farmers faces increasingly variable environmental conditions. These challenges put immense stress on local and global supply chains and threaten the global food supply, but developing seeds that can adapt to these more severe weather patterns is one necessary tool to mitigate these negative effects. Gene editing will be an important part of the effort to guarantee crops are not lost.

Mr. Rowe and Ms. Taveau also discussed the importance of data management innovation for crop growth sustainability. Mr. Rowe listed artificial intelligence, data science, and new algorithms as technologies with the potential to revolutionize farmers’ traditional decision-making process of deciding when, where, and what seed to plant.

The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

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The post Event recap | AI, gene editing and guaranteeing a stable seed supply appeared first on Atlantic Council.

REPORT RELEASE

New Report:

Unexpected Competition

A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition

By Col John W. Blocher, USAF

Reprioritizing American soft power

The United States has successfully identified China and Russia as major threats to the rules-based order in an era of great-power competition. However, it has failed to articulate and implement a comprehensive strategy on exactly how to counter these threats. Through its inaction and its disengagement with Central and Eastern European allies, the United States has left a gap for Russia and China to fill. Recent US behavior and policy, particularly that of rejecting allies to varying degrees, has been self-defeating and goes against the very ideals that it strives to fulfill. Regaining a strategic foothold in the Central and Eastern European region will be crucial to pushing against Chinese and Russian bellicosity worldwide.

Growing Chinese and Russian influence

In the face of growing Russian and Chinese influence across all domains, the United States must develop a strategy that efficiently and effectively strengthens its position as a partner of choice for Central and Eastern European countries. While the United States depends on the post-World War II and post-Cold War assumption that it is the most desirable ally, China and Russia are sprinting to take advantage of the lack of US engagement in a changing region. The United States has defined and acknowledged the effects of great-power competition, but it has yet to develop a strategy to reestablish connections with Central and Eastern European allies as a great-power competitor.

Case study: Hungary

Hungary provides a pressing and relevant case study to draw from as a model for US engagement in Central and Eastern Europe. US-Hungary relations have shifted drastically over the past thirty years, and Russia and China are exerting increasingly pressure on Hungary in all sectors. However, the United States can regain this crucial relationship by reengaging in strong diplomacy and economic cooperation with Hungary. It is no longer enough to simply rely on passive engagement; an active, deliberate approach to foreign policy is necessary to counter threats from the greatest US adversaries.

In Unexpected competition: A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition, Col John W. Blocher details how to effectively develop relationships, with the case study of Hungary, to maintain a competitive advantage against China and Russia. The report fills a critical gap by providing a strategy of how the United States can and needs to engage with its allies and partners in Central and Eastern Europe to counter China and Russia’s growing influence in those regions.

The strategy focuses on six elements that work together to provide lines of effort to ensure the success of the strategy as a whole:

• Bolstering foundations by renewing American commitments to NATO, open markets, information-sharing, and foresight.

• Tailoring engagement to cater to the individual diversity of each nation and the populations within each allied nation.

• Committing to patience and consistency by championing bipartisan agendas and pursuing civil-society engagement.

• Engaging and empowering the public by exposing disinformation in the native language of allied countries, thereby building internal resilience to Russian and Chinese influence.

• Providing alternatives to Chinese and Russian economic sources by investing in infrastructure and facilitating defense procurement with US allies in Central and Eastern Europe.

• Showing respect for allies by engaging in courteous diplomacy and supporting strategic equality with its partners.

READ THE REPORT to learn more.

A new report by:

Col John W. Blocher, USAF

2019-20 Senior US Air Force Fellow, Scowcroft Center for Strategy and Security

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Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

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The post Unexpected competition: A US strategy to keep its Central and Eastern European allies as allies in an era of great-power competition appeared first on Atlantic Council.

Find the full GeoTech Hour Series here.

Event description

The COVID-19 pandemic has drastically accelerated the trend democratization of technologies and of humans working remotely. Together, these trends are affecting markets, education, governments, and how human societies operate.

Developing new ways of operating in these environments is critical in order to balance digital and real-world interactions at scale. This episode of the GeoTech Hour, which takes place every Wednesday from 12:00 – 1:00 pm Eastern, will highlight the democratization of technologies and what it means for entrepreneurs and investors. This discussion addresses how more remote work affects communities, organizations, nations, and the planet and identifies the action steps to ensure these two trends are forces for good in the world.

Join us for another lively discussion to consider how the world is changing and how we each can be a part of the #GoodTechChoices needed to rebuild a better world together.

Speakers

Esther Dyson
Executive Founder
Wellville 

Brad Feld
Managing Director
Foundry Group

Derry Goberdhansingh
CEO
Harper Paige 

Christopher M. Schroeder
Co-Founder
Next Billion Ventures 

Daniella Taveau
Nonresident Senior Fellow, GeoTech Center
Atlantic Council

Previous episode

Event Recap

Oct 28, 2020

Event recap | Data, tech, and geopolitics in 2021 and beyond

By Hannah Biggs

In this episode of the GeoTech Hour, hosted Wednesday, October 28, 12:00 – 1:00 p.m. EST panelists examined data, tech, and geopolitics as we approach 2021 and beyond. The discussion considered actions that could uplift societies and populations as a whole. The world will, we hope, be more stable in this upcoming year, and as a result, it is the ideal time for governments to learn lessons from 2020 and adjust course accordingly.

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The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

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The post Event recap | The global impacts of democratized tech and remote work appeared first on Atlantic Council.

Find the full GeoTech Hour Series here.

Description

The United States’ Silicon Valley has long been associated with scrappy technology companies, eccentric founders, and a breakneck rate of change. The region is home to a vibrant startup ecosystem that boasts of more funding, companies, and prominence than any other geography. Startup ecosystems provide more than just cultural touchstones—they create economic resilience, develop cutting-edge technologies, project geopolitical soft power, hone competitive advantage, and foster growth. Join the GeoTech Center as it convenes an expert panel to discuss the benefits of developing this sector of the economy; the different tools and challenges for the public and private sector trying to grow it; and its role in geopolitics, protectionism, innovation, industry lifecycles, and the pandemic recovery. The discussion considers how venture capital and entrepreneurs can accelerate local start-up ecosystems globally to help the pandemic recovery, to rebuild economies, and work towards a future that is more prosperous and peaceful for us all. 

Speakers

Alexandre Lazarow
Investment Director
Cathay Innovation

Tobin Richardson
President and CEO
Zigbee Alliance

Tiffany Vora, PhD
Faculty and Vice Chair, Medicine and Digital Biology
Singularity University

Harry Wingo, JD
Faculty Member, Cybersecurity Studies
National Defense University

Hosted by

David Bray, PhD
Director, GeoTech Center
Atlantic Council

Previous episode

Event Recap

Oct 14, 2020

Event recap | Climate, tech, and security: Achieving greater power collaboration

By GeoTech Center

On Wednesday, October 14, the GeoTech Center convenes experts to discuss new technology opportunities regarding climate change and national security. What can we turn to or develop to help bring about the required changes in human behavior and consumption, and how can great powers around the world collaborate to create that change?

Climate Change & Climate Action Security & Defense

The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

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The post Event recap | Entrepreneurs and accelerating startup ecosystems amid the pandemic appeared first on Atlantic Council.

This scramble for Belarusian IT professionals should come as no surprise. In recent years, Belarus has earned a reputation as home to one of the most vibrant IT industries in Eastern Europe. With approximately 50,000 employees and a long client list of marquee names from the global tech industry, the sector is responsible for around 5% of Belarusian exports and accounted for almost 6% of GDP in 2018. The country’s Economy Minister Dzmitry Krutoi had earlier predicted that this GDP share could rise to as high as 10% within the next few years. However, expectations of further rapid expansion have been derailed in recent months by the biggest political crisis to hit Belarus since the collapse of the Soviet Union.

The current unrest began on August 9 in the immediate aftermath of a deeply flawed presidential election. Incumbent Alyaksandr Lukashenka had rigged numerous previous votes since taking power in 1994, but this time was to prove different. During the election campaign, it became increasingly apparent that large sections of Belarusian society were tired of the man often dubbed “Europe’s last dictator” and hungry for change. They took to the streets on the evening of the election, and have continued protesting ever since.

The Lukashenka regime has responded to this unprecedented nationwide protest movement by unleashing a heavy-handed crackdown. Over ten thousand people have been detained, with hundreds reportedly subjected to human rights abuses and torture. Opposition leaders have been targeted and either jailed or forced to flee the country, while protesters face the prospect of everything from losing their jobs to having their children taken into care.

This hard line approach has served to galvanize the protest movement, with weekly mass rallies calling for an end to the regime showing no signs of abating as they approach their third month. However, the crisis is taking its toll on the Belarusian economy, with the IT sector among the most vulnerable.

The most obvious and immediate threat to the Belarusian IT industry has come from the regular internet blackouts instigated by the authorities since August 9 as part of efforts to stifle opposition and limit the ability of protesters to mobilize. These unpredictable cutoffs have proved disastrous for an industry that depends heavily on international accessibility and connectivity. The reputational damage for companies operating in Belarus has been catastrophic.

The IT sector has also attracted considerable unwanted attention amid accusations from the authorities that it has provided protesters with technological and financial support. This has included online tools to help track detainees. As a result, numerous individual IT companies have been subjected to office searches and other forms of official harassment.

The industry made its position clear from the very start of the protests. Around 300 CEOs of IT companies based in Belarus issued a joint declaration on August 12 threatening to leave the country unless there were fresh elections and an end to police violence. Many are now looking to follow through on this threat. The CEO of global telecoms and messaging app Viber, Djamel Agaoua, captured the prevailing mood among IT industry leaders in an August 21 interview with the Russian edition of Forbes magazine. “We cannot invest in a country where people live in fear. It’s impossible,” he commented.

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Ukraine’s advance in Kursk: What’s next and implications

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As more and more IT companies begin looking to leave Belarus or downsize their presence, individual specialists are also seeking alternatives.

The rise of the IT industry in recent years has helped create a new class of young Belarusians with a strikingly global outlook and significantly higher than average incomes. Unsurprisingly, these IT professionals have often been at the forefront of the current demands for greater democracy and an end to a post-Soviet dictatorship that has lasted for the past quarter of a century. “The protesters are generally very sweet, polite, and peaceful,” noted Atlantic Council non-resident fellow Vladislav Davidzon while in Minsk during the early weeks of the crisis. “Many are young, middle class Belarusians who work in the country’s booming IT industry and come to rallies dressed in form-fitting hipster ensembles.”

Inevitably, numerous IT company employees have been among the victims of police brutality. With no end in sight to the protests and little sign of compromise from the authorities, others have become pessimistic about their professional prospects. This is helping to fuel the current wave of departures and sparking a contest between rival countries seeking to benefit from Belarus’s brain drain.

Since the protests began in August, around 2,000 Belarusian IT professionals have relocated to neighboring Ukraine, according to Ukrainian Digital Transformation Minister Mykhailo Fedorov. The new measures confirmed by Ukrainian President Volodymyr Zelenskyy on October 4 will significantly simplify the bureaucratic process for Belarusian IT sector specialists looking to settle in the country. Meanwhile, Poland has established a 24-hour hotline and promised to fast-track visas. Other countries competing for Belarusian tech talent include the Baltic states and Kazakhstan.

This trend will have significant negative consequences for the Belarusian economy, but the impact could go far beyond a drop in GDP. The IT industry is a rare pocket of private industry and entrepreneurial endeavor in a Belarusian economy that remains remarkably faithful to the Soviet model and is still largely state-owned. The decline of the country’s IT sector will mean fewer opportunities for young Belarusians looking to build their futures at home. Unless the current crackdown comes to an end and the prospects for a democratic breakthrough improve, today’s IT exodus may come to represent the beginning of a much wider wave as a new generation of Belarusians loses hope in the country.

Peter Dickinson is the Editor of the Atlantic Council’s UkraineAlert Service.

Further reading

BelarusAlert Sep 17, 2020

Belarus national awakening offers hope for Ukraine as Soviet collapse continues

By Solomiia Bobrovska

Belarus has emerged from its post-Soviet slumber and has set out on the road to democracy. This is good news for the Belarusians themselves. It is also a welcome development for Ukraine but less so for Russia.

Belarus Democratic Transitions

BelarusAlert Sep 22, 2020

How post-election protests are creating a new Belarus

By Franak Viačorka

After almost three decades in the post-Soviet doldrums, historic change is finally underway in Belarus. Lukashenka and Putin can still delay this process, but they can no longer derail it entirely.

Belarus Democratic Transitions

BelarusAlert Sep 16, 2020

Putin risks turning Belarus from natural ally to enemy

By Hanna Liubakova

Vladimir Putin has successfully intervened in neighboring Belarus over the past month to prop up fellow post-Soviet dictator Alyaksandr Lukashenka, but the cost may be rising anti-Russian sentiment.

Belarus Crisis Management

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.

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The post Belarus protest crackdown sparks IT industry exodus appeared first on Atlantic Council.

Contributing authors: Enrique Bolaños and Salvador Paiz

Foreword

As the coronavirus pandemic rages on, countries around the world face an unprecedented test: concurrent public health and economic crises coupled with the resulting political and social reverberations. In Central America, the collective test of survival is no different—at least on its surface. But, as a region plagued by weak institutions, migration, violence, and lack of economic opportunities, Central America has to not only meet this unprecedented moment, but leapfrog beyond it.

COVID-19 is shining a spotlight on historic challenges and inequalities now accentuated by pandemic fallout. But, can the policy response to this public health and economic emergency also accelerate long-needed transformations in Central America? It must. Actions taken by countries today in response to COVID-19 will set the national development trajectory for perhaps the next decade. Bold, new actions and public-private cooperation can help to avoid another “lost decade.”¹

Consider two pre-pandemic variables in Central America: a highly favorable demographic trend that will continue to churn out a large and young labor force in the next decade, and advances toward greater regional economic integration. When the pandemic hit, a third external variable came into the mix: in an ever-disrupted global economy, companies in China are seeking to relocate supply chains closer to the US market. As free-trade partners of the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama have a unique opportunity to capture production and prominent roles in reconfigured global supply chains.

That is only possible through swift action to strengthen historically weak public institutions—long a roadblock to inclusive growth. Also, the rule of law must become the norm, not the exception. A 2017 Adrienne Arsht Latin America Center binational and bipartisan task force outlined a policy blueprint as to how Guatemala, Honduras, and El Salvador—in partnership with the United States—could improve the rule of law, provide sustainable economic opportunities, and address insecurity. While many task-force policy recommendations have been implemented, a renewed push is urgently needed to revisit other policy prescriptions that have yet to be addressed, but are fundamental for long-term recovery.

Since its founding, the Adrienne Arsht Latin America Center has advanced a different narrative on Central America—a narrative that does not see its entrenched problems as intractable. Rather, the Center promotes sustained, long-term, and multidimensional thinking that counts on the buy-in and collaboration of both the public and private sectors to help set a new direction for the region. This is not easy, but is necessary to set the region on a more prosperous path.

For all its ills, this publication argues that COVID-19, if addressed correctly, could be the catalyst to inspire long-needed policy reforms. The following pages highlight specific opportunities for Central America’s economic recovery at a time of increasing global uncertainty. Once travel opens up again, the Center looks forward to working hand in hand with Central American friends to advance the ideas presented in this paper; until then, it will work virtually to turn ideas into action.

Jason Marczak

Director, Adrienne Arsht Latin America Center

Atlantic Council

Introduction

When the coronavirus pandemic began to rattle developed nations in the West, experts warned it was only a matter of time before the virus reached emerging economies. By mid-September 2020, Latin America and the Caribbean—a region that accounts for only eight percent of the world’s population— reported more than a third of global COVID-19 deaths.² As Latin American countries begin to ease lockdown restrictions—even as the number of new infections continues to rise in some countries—a grim outlook remains for public health, fiscal solvency, and economic growth and stability. In 2020, the combination of a stalled informal economy, a drop in tourism, capital flight, and climate disruptions will cause the region’s largest-ever economic contraction, according to the International Monetary Fund (IMF).³ More worrisome, the United Nations World Food Program estimates that “severe food insecurity” in the region will quadruple, from 3.4 million to 13.7 million, during 2020.⁴ Perhaps one of the few silver linings is that remittance flows, after falling drastically in April, have since increased compared to 2019 despite the economic crisis.⁵ If Latin America is to successfully recover from this unprecedented crisis, leaders from across all sectors must work together to rethink how to shape a sustainable recovery that weaves short-term solutions with long-term strategies. Central America is uniquely positioned to be an integral part of a robust and sustainable recovery.

With a combined population of forty-nine million, Central America reported an average of 8,202 coronavirus cases per million residents in August 2020, compared to the global average of 3,500.⁶ As seen across Latin America, Central American countries—with the notorious exception of Nicaragua—have implemented a combination of measures to respond to the pandemic, including lockdowns and curfews, additional funding and equipment for public health services, direct payments to individuals and families, and stimulus packages for small and medium-sized businesses, all with varying degrees of success.⁷ While the risk of a second wave of infections is still high as the region begins partial or full reopenings of economic activity (with a patchwork of health protocols implemented in different countries), leaders are faced with a challenge that can very well determine the prosperity of their nations: how to sustain reactivation of their economies in a COVID-19 world, especially given the preexisting institutional vulnerabilities that have hindered inclusive growth for too long?

Amid a global crisis forcing countries and private enterprise to recalibrate how they do business and how they cooperate on issues of common interest, this unprecedented moment calls for national and regional action on how Costa Rica, El Salvador, Guatemala, Honduras, and Panama can seize existing opportunities and find new ones to generate economic reactivation while addressing citizens’ pressing health issues. The Adrienne Arsht Latin America Center of the Atlantic Council has identified three key areas of opportunity: a demographic bonus of a large working-age population; nearshoring of multinational firms to Central America; and a renewed push for regional economic integration. At the same time, a concerted effort to improve the rule of law in these countries and reduce corruption is imperative. The direct payoffs of properly executing on these opportunities include inclusive economic growth, foreign investment, job creation, and an overall improved rule of law and governance. Migration pressures and security concerns would also be ameliorated as living conditions improve over time, offering would-be cross-border migrants a better future in their own countries.

Central America must act now to pursue these opportunities and set forth an economic reactivation plan in a COVID-19 world. What policies should governments in Central America enact to create and effectively communicate the incentives to attract nearshoring opportunities? How can the public and private sectors work together to train and empower low-income youth in Central America? How has the pandemic triggered new momentum for regional integration? What is the role of the international community and partners of Central America in promoting the conditions to bolster economic growth and investment?

The Adrienne Arsht Latin America Center of the Atlantic Council has identified three key areas of opportunity: a demographic bonus of a large working-age population; nearshoring of multinational firms to Central America; and a renewed push for regional economic integration.

The Isthmian Ocelots: Mapping Central America’s Opportunities for Reactivation in a COVID-19 World

At a glance, the economic outlook does not bode well for Central America. The IMF anticipates a 3.5-percent average contraction for the region in 2020, albeit less than the projected drop for Latin America and Caribbean, which includes tourism-driven economies and larger countries such as Brazil, Mexico, and Peru that have been particularly hard hit by the coronavirus. The national recovery plans deployed by Central American countries to respond to the immediate and short-term effects of the pandemic, while necessary to mitigate unprecedented health and economic crises, are also demanding increasingly high levels of public expenditure. This poses a threat to fiscal stability, and could weaken the governments’ ability to address rising poverty and inequality. For the informal sector—which employs around 70 percent of the workforce in Central America—the impact is already catastrophic, as public resources are very limited for those outside of the formal economy. The pandemic has also produced external shocks as prices of commodities—the principal exports of Central America—have plunged. As Central American economies are net importers of refined petroleum, the low prices of oil are one of a handful of factors helping them stay afloat.

There are opportunities in the wreckage, though owing less to the nature of the crisis than the political capital for strong response. The severity of this moment should unite Central American leaders from all sectors to develop strategies that seize opportunities for growth, diversification, and integration that have been put aside due to lack of political will or long-term vision, and new ones arising from pandemic-induced global shifts.

Central America: A New Hub for Global Supply Chains?

The US-China trade war has forced companies with China-based supply chains to consider the risks of tariffs, and their effects on imports and exports, against the low costs of Chinese manufacturing. In 2020, the pandemic further accelerated momentum for US companies seeking to diversify their supply chains and potentially relocate closer to the US market to hedge against future global disruptions. According to a recent report analyzing trends in global manufacturing, a significant amount of US firms are moving their supply chains to other low-cost Asian countries or away from Asia entirely, with Mexico becoming a top destination in Latin America as businesses and investors seek the predictability and investment security granted in the recently ratified United States-Mexico-Canada Agreement (USMCA).⁸

As the Americas become an increasingly attractive alternative, Central America has an opportunity to position itself as the region of choice for nearshoring and foreign investment that can ramp up job creation in the formal sector, while offering companies supply-chain resilience at a competitive cost. To do so, Central America must strategically leverage existing trade relations as well as a large—and growing—young working-age population. Importantly, to become a global supply-chain hub and attract the capital inflow that requires, Central America must significantly improve the rule of law—possibly the largest deterrent for foreign investment in the region.

Central America has an opportunity to position itself as the region of choice for nearshoring and foreign investment that can ramp up job creation in the formal sector, while offering companies supply-chain resilience at a competitive cost.

The most salient value proposition for Central America to become a new center for global supply chains is its unique economic ties to two of the world’s largest economies. Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica—along with the Dominican Republic—are among the few countries in the world that are parties to regional trade agreements with both the United States and the European Union. Under the Central America-Dominican Republic (CAFTA-DR) free-trade agreement and the Association Agreement with the European Union (which also includes Panama), total two-way trade in 2019 was $59 billion and $14 billion, respectively.⁹ Both trade deals have helped to advance economic growth and create new jobs in Central America, while providing the United States and the European Union with a key export market and an opportunity to promote—though not without significant challenges—regional economic integration, cooperation on democratic values, and the rule of law.¹⁰

For US firms and other multinational corporations with operations in Central America’s signatory countries, the regional trade agreements (as well as Panama’s free-trade agreement with the United States) offer a well-established blueprint—unlike any other in the region—for exporting goods and services to two of the world’s largest consumer markets. The labor, customs, and rules-of-origin provisions provide the security and stability that firms are seeking, especially at a time of increasing global uncertainty. Specifically, nearshoring firms in the businesses of textiles, agriculture (foodstuffs), and electronics—the main exports under the agreements—have ample opportunity to expand and increase the volume of goods in these sectors using established transportation routes and logistics. Exports to the US market can benefit from even greater supply-chain resilience derived from advantages in strategic geographical proximity to the North American trading bloc. As well, services such as call centers can leverage young bilingual speakers, who will continue to grow in numbers as part of the region’s demographic window that closes around 2033 (see section on Central America’s demographic dividend).

While competitive wages, a young working-age population, and preferential trade access are strong magnets for nearshoring to Central America, they alone will not be enough to successfully attract and sustain the investment needed to fully capitalize on this opportunity. According to the World Bank’s Doing Business 2020 Rankings, Central American economies lag well behind their global peers in the following areas: starting a business, enforcing contracts, dealing with construction permits, registering property, getting electricity, protecting minority investors, and paying taxes.¹¹

Policymakers across the region must be intentional about fostering a more business-friendly climate for multinational firms. Reducing red tape as well as modernizing and decentralizing key government processes to ensure efficiency and accountability are relatively low-cost (both politically and financially) first steps with a high potential upside. Properly enforcing public contracting laws—a longstanding challenge in Central America and across Latin America—will be critical, especially at a time of increased fiscal and monetary challenges due to the pandemic. But, if Central America is to lock in foreign investment over the long term, leaders from across the public and private sectors must come together to implement integral and viable solutions to address deep-seated impediments for growth, including economic informality, politicization of justice, violent crime, and insecurity, and—in the particular case of Nicaragua—political instability and widespread social repression.

Costa Rica in Focus

The restructuring of value chains through nearshoring offers a distinct opportunity for Costa Rica. Companies are looking for certainty in today’s context. Shortening the supply chains is an option, but that alone does not necessarily improve resilience.¹² Instead, diversification of supply-chain location and suppliers can provide the best results. Costa Rica has a long-standing track record of a highly qualified and healthy workforce. According to the World Economic Forum, Costa Rica ranks as the top country in Latin America in human capital; the top country in innovation efficiency; the number-two country in the region in the Global Innovation Index (after Chile); and the top-ranked country in Latin America in university-industry collaboration in research and development (R&D).¹³ Costa Rica recently became a member of the Organisation for Economic Co-operation and Development (OECD)—the first one in Central America—which will mean more competitive laws and practices, better education policies, and improved governance.

Costa Rica’s free-trade-zone regimes—which currently include a total of seven manufacturing parks and twenty-five service parks—offer 100-percent tax exemption (with no expiration) on custom duties for imports and exports; interest income; withholding tax on royalties, fees, and dividends; sales tax on local purchases of goods and services; and stamp duty. For all sectors outside the greater metropolitan area, the benefits expand to a complete income-tax exemption for the first twelve-year period, followed by a 50-percent income-tax exemption for the subsequent six years.¹⁴

Transportation infrastructure and costs, as well as the country’s fiscal situation, are obstacles that companies looking to relocate will have to face. The 2018 World Economic Forum ranks Costa Rica’s road quality and infrastructure as second to last.¹⁵ The poor quality of Costa Rica’s road network also results in significant losses for companies, sometimes up to 12 percent of the value of exported goods.¹⁶ In 2020, Costa Rica will invest 1 percent of its gross domestic product (GDP) in transportation infrastructure; the investment should be at least three times that in order to help the country’s competitiveness.¹⁷ In addition to the high costs of transportation and low investments in infrastructure, Costa Rica’s long-term fiscal health is worrisome. The fiscal deficit for 2019 reached 7 percent of the country’s GDP, the highest in almost forty years. The precariousness of the situation has not gone unnoticed by Fitch and Standard & Poors, which have downgraded the country rating to B with a negative outlook, while Moody’s has downgraded its rating to B2 with negative outlook for 2020.¹⁸ The result: despite Costa Rica’s many advantages, heightened country risk may keep investors away.

Central America’s Demographic Bonus

For Central American countries, the second half of the twentieth century was marked by internal conflicts, natural disasters, and start-and-stop attempts to scale their economies by moving toward greater regional integration. During this time, countries relied mostly on agricultural and primary exports. But, important shifts in demographic patterns that have translated to visible economic and social progress in other industrialized countries and regions are now occurring in a non-armed conflict in Central America—where the working-age population, and therefore the workforce, grows more rapidly than the older and younger populations. The “economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population is larger than the non-working-age share of the population” is what the United Nations Population Fund has defined as the demographic dividend. An Atlantic Council report, Latin America and the Caribbean 2030: Future Scenarios, found that “the dependency ratio in Central America will peak in 2033.¹⁹ Other forecasts place the average year for Central America to reach this milestone around 2042, and the United Nations (UN) predicts the population pyramid in Central America will flatten by 2050.²⁰ With domestic product growing at a 3.5-percent average rate, Central America has experienced the strongest growth in Latin America for the past decade.²¹

On the other hand, the socioeconomic progress from the last few years—in large part, derived from the increased productivity that normally accompanies the demographic bonus—is at risk of evaporating as Central America grapples with the pandemic and economies are paralyzed over sanitary concerns. However, compared to its Latin American peers, Central America has both a distinct demographic opportunity and threat (varying by country), which it must address by putting people to work in the formal labor markets. Failure to employ and occupy a large young workforce can be a security and welfare risk, as young men and women may turn to illicit activities to create a livelihood, and will not contribute to the state’s coffers, which depend on tax revenue and social-security collections to support retirees and public services.

Seizing the Demographic Window

The rest of Latin America, for the most part, has already seen the demographic window of opportunity come and go, and the trend will not be reversed anytime soon. The fertility-rate average, meaning “the average number of children that would be born per woman if all women lived to the end of their childbearing years and bore children according to a given fertility rate at each age,” in Latin America is 2.05, below the replacement rate of 2.1 and the 2020 global fertility rate of 2.4.²² For 2035, the estimate is that Latin America’s fertility rate will drop to 1.81.²³ Fertility rates are an important and telling data point for the demographic bonus described in the previous section. As fertility rates decline, the first part of the pyramid to shrink is the base, which translates into fewer young dependents for a nation to support.²⁴ The middle section of the pyramid, comprising working-age citizens, budges out as this section of the population grows as a result of a country’s past fertility rates, as does the tip of the pyramid, although at a slower pace.

The current population forecasts and trends bode well for Central America’s future, but a robust young workforce does not necessarily translate into economic growth. If unoccupied, working-age men and women can turn to criminal activities and pose a security risk for the region and hemisphere. Likewise, if countries fail to think and invest in a long-term strategy with a focus on increasing productivity, they may end up with an aged and burdened population.

The experience of East Asia, including Japan, South Korea, Taiwan and Singapore, is considered one of the first and most successful examples of a region exploiting the demographic bonus, and offers best practices for how to capitalize on the demographic bonus. For example, at the beginning of the twenty-first century, the aforementioned countries focused on creating high-value jobs in “the service and manufacturing sectors of the economy.”²⁵ Central American countries, for the most part, have been incapable of keeping job creation and opportunities at pace with the growing workforce numbers. In 2017, the annual labor-force increase in Guatemala, El Salvador, and Honduras surpassed 350,000 people, with only 34,500 jobs created in the formal economy, and more than 290,000 in the informal economy.²⁶

Likewise, in the East Asian “tiger economies,” of Hong Kong, Singapore, South Korea and Taiwan which underwent rapid industrialization and maintained high growth rates of more than seven percent a year starting in the 1960s, reforms were introduced to attract women to the labor market.²⁷ These high-income economies took advantage of the growing taxpayer base and declining number of young dependents to invest in education, without having to increase taxes.²⁸

Migration

Economies need young workers to grow. As populations grow older, the state relies on each working-age person to pay taxes to cover social services for a growing number of older citizens, and to guarantee a functioning state and public services. Europe, for example, would be in trouble and the social welfare overburdened if the region was unable to attract immigrants. Currently, the European Union’s average fertility rate is 1.59, well below the global replacement rate of 2.1.²⁹ For the past decade, immigrants have accounted for more than 70 percent of Europe’s increase in workforce. In the United States, according to Census Bureau projections, immigrants are poised to “overtake natural increase (the excess of births over deaths) as the primary driver of population growth for the country” by 2030, though this is primarily due to the low birth rates from the US-born population and not necessarily because of increased immigration levels.³⁰ Already today, immigrants are responsible for more than 47 percent of the increase in workforce.³¹ A study by the OECD finds that “in most countries, except in those with a large share of older migrants, migrants contribute more in taxes and social contributions than they receive in individual benefits.”³² For this reason, seizing Central America’s demographic bonus and successfully employing its native young workforce at home, or within the region, is crucial.

In 2017, more than 4.4 million Central Americans emigrated, representing almost 10 percent of the region’s total population.³³ Currently, the working-age population in Central America (between twenty and thirty-nine years old) is among the most likely to emigrate—primarily to the United States.³⁴

Nicaraguans, however, mostly migrate to neighboring Costa Rica and are important contributors to their southern neighbor’s GDP. While they make up around 9 percent of Costa Rica’s total population, Nicaraguans contribute more than 11 percent of their southern neighbor’s GDP. These emigration patterns—driven by different factors in each of the countries, but mostly due to citizen insecurity, violence, and lack of economic opportunities—are preventing Central America from making the most of its demographic bonus. In addition, recent studies suggest that migration can be “self-reinforcing.”³⁵ In other words, as citizens leave and settle in a new country, they may encourage friends and family to migrate as well. This is especially true with the power and reach of social media today.³⁶ While the brain drain has proven detrimental to Central American countries, the remittances sent back home help offset some of the economic losses from a smaller workforce. Remittances sometimes make up one fifth of Central America’s individual economies.³⁷ Although remittances dropped sharply as a result of the COVID-19 pandemic in the first half of 2020—especially in April, when much of the United States, the main destination of Central American immigrants, was closed down—a recent analysis by the Pew Research Center shows that remittances are slowing picking up again, though they will probably not reach 2019’s record levels.³⁸

Guatemala in Focus

More than half of the population in Guatemala is in the productive age category, but almost six in ten people live in poverty. This is, in part, because of the high rate of informality, where more than 70 percent of the population that is active in the economy is in the informal sector, as street vendors or in domestic or non-remunerated labor, which hardly contribute to the country’s productivity.³⁹ For comparison, the Latin American average for labor informality is 53 percent.⁴⁰ The 2.8-percent official unemployment rate is low compared even to developed economies such as Spain (14-percent unemployment), but the real concern lies in the size of the country’s informal economy.⁴¹ Urgent reforms in Guatemala will translate into a transition into formal economic activities that will employ young men and women for the jobs of tomorrow—including in digital—and will pay dividends down the road. Currently, in Guatemala, the service sector represents the largest share of GDP (62.1 percent) and employs more than half of the formal working population in key sectors including tourism, customer-service (call centers), financial-services, banks, and retail. The table below shows the breakdown of economic activity by sector in Guatemala in 2019. As a matter of comparison, while almost one quarter of the country’s GDP is generated by the industrial sector, the number jumps to 40 percent for the United States.⁴²

The demographic window of opportunity for catalyzing economic growth and development will not remain open indefinitely—and, as discussed in this paper, is not enough to alleviate the impending economic recession and difficulties of the coming years, or to guarantee economic growth and development.

Now is the time for Central American nations to invest in policies, new sectors, and industries that will reduce educational and economic disparities, help train citizens for productive work in the changing economic landscape, create jobs for the growing labor force, attract women to the labor market, and prepare countries to care for an elderly population. Estimates from the Inter-America Development Bank show that an improvement in emerging human capital in the region could translate into a 33-percent increase in GDP per capita with respect to a base scenario, an especially important investment in a difficult COVID-era.⁴³

The Case of Nicaragua

By: Enrique Bolaños

The coronavirus pandemic in Nicaragua is amplifying an already-strained economy due to the political instability experienced in recent years. The United Nations Economic Commission for Latin America and the Caribbean estimates a GDP contraction of 8.3 percent in 2020, after it contracted by 4 and 3.9 percent in the previous two years.⁴⁴ The pandemic is aggravating existing tensions generated by the country’s traditional institutional and competitiveness challenges.

Nicaragua’s lag in development is largely explained by the historical instability of its democratic system. After more than forty years of the Somoza family dictatorship, the 1979 Sandinista revolution promised new hope. But, a decade of economic mismanagement from the Sandinista government caused the country’s GDP per capita to regress to the same level as twenty-five years earlier. Following three democratic governments from 1990 to 2006, the Sandinistas came back to power in 2007. Since then, democratic institutions and the rule of law have eroded, and Nicaragua is now considered an authoritarian regime. Meanwhile, the economic structure has remained relatively stagnant during this period, characterized by low levels of competitiveness and concentration on a few exports of primary products and apparel manufacturers, with little value added.

An economic recovery in the face of COVID-19 requires short- and medium-term interventions and, once the emergency is over, structural changes for sustainable development. The immediate priorities must be to protect employment and avoid company closures. In the short term, this involves strengthening the liquidity of companies and helping them prepare to operate under a “new normal,” in which there is no coronavirus vaccine widely available for the next twelve to eighteen months. Fiscal support and policies aimed at increasing financing for the productive sector, especially for small and medium-sized enterprises (SMEs), is crucial, as is technical support for companies to implement special operating protocols that guarantee the safety of workers and clients. Finally, adoption of basic digital capabilities into the operating model of companies is essential to recover lost sales and improve efficiency.

In the medium term, Nicaragua needs to stimulate engines of growth. Public investment and agri-food exports seem to be the most promising ones. The government should activate an investment plan in infrastructure that can catalyze productivity. First, it should focus on border crossings and better customs processes to facilitate trade. Second, it should invest in broadband infrastructure to improve access, cost, and quality of Internet connectivity. Third, it should prioritize investment in technology to streamline and digitize specific processes aimed at minimizing red tape. At the same time, the country should implement a development plan for the agri-food sector that encourages export growth and adoption of new technologies for precision agriculture.

In the long term, in addition to strengthening the democratic system, generating prosperity requires a transformation of the economic structure. This transformation must diversify the existing basket of exports and evolve toward activities with higher value added. The country must take advantage of the changes in globalization patterns in the post-COVID-19 era, its geographical position, and its preferential access to the main markets in the United States, Europe, and Asia. It is essential to implement programs in strategic sectors that allow for enhancing competitiveness and sophistication in production models, seeking synergies with world-class players. Policies and investments are also required to develop the human and physical capital to support this transformation.

A Renewed Push for Central American Economic Integration

The pandemic and its devastating economic effects have also given advocates of Central American integration a renewed opportunity for a project as old as the region’s independence. Despite clear benefits for economic growth and regional prosperity, integration has been stalled due to lack of coordinated political alignment and long-standing technical and practical hurdles. The unprecedented and unforgiving shock of COVID-19 can restart a serious, comprehensive, and strategic public debate on Central American economic integration, in spite of existing schisms among the countries.

The unprecedented and unforgiving shock of COVID-19 can restart a serious, comprehensive, and strategic public debate on Central American economic integration, in spite of existing schisms among the countries.

Central America integration has been talked about over the past sixty years. In 1960, Guatemala, Honduras, El Salvador, and Nicaragua (and later Costa Rica) signed a UN-backed agreement aimed at creating an EU-style single market. Following ratification of the General Treaty of Central American Economic Integration (GTCAEI), Central America saw its intraregional trade increase by seven times, and saw significant advances in industrialization and manufacturing.⁴⁵ But, the integration project saw a twenty-year hiatus due to the armed conflicts across the region. Integration discussions were picked up again during the early 1990s under the Tegucigalpa Protocol, which established the institutional framework—the Central America Integration System (SICA)—to carry forward integration based on a vision of “peace, democracy, and development.”⁴⁶ In 1993, under the Guatemala Protocol, parties to the 1960 GTACEI “committed themselves to achieve, on a voluntary, gradual, progressive and complementary way, the Economic Union of Central America.”⁴⁷ Since then, major wins toward Central American economic integration include a semi-completed customs union (Guatemala, Honduras, and El Salvador currently have one), a common external tariff, and some advances in the free movement of people, capital, and services.⁴⁸ Unfortunately, short-term vision and rivalries between Central American political leaders have not supported GTCAEI’s full implementation.

Full economic integration in Central America can better position the region for sustained economic growth and competitiveness in a global economy adapting to disruptions from the coronavirus pandemic. The region’s second-largest trading partner—after the United States—is Central America itself. Intraregional trade between Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica accounts for 27 percent of total exports and 13 percent of total imports. With a combined population of forty-five million producing $400 billion in GDP—ranking fourth in Latin America and nineteenth in the world, respectively—an integrated Central America can more efficiently allocate economic resources and investment, access new intraregional markets, boost foreign trade, improve commercial agreements and enter new ones with increased bargaining power, increase market diversification, attract foreign direct investment, and build supply-chain resilience. Economic integration is also an opportunity—especially at a time when countries in the region face the same external shocks, from global health and trade to climate change and geopolitics—to deepen political, security, social, cultural, and environmental ties. While advances on these fronts have been made through SICA, the coronavirus pandemic has alerted the region to the importance of forging stronger relations on public health, good governance, and economic resilience.⁴⁹

SICA and other regional forums at the presidential, ministerial, and central-bank levels have facilitated important integration discussions and helped to set the agenda for alignment and coordination on specific integration issues. But actual adoption and implementation remains a challenge. An integrated Central America will have increasead absorptive capacity to withstand the unprecedented global disruptions and unparalleled uncertainty in trade and supply chains. Can the coronavirus pandemic provide renewed momentum to advance the implementation of regional economic integration? Political leaders must put their differences aside, prioritize the integration agenda, and take collective action toward implementation. This means taking specific steps at the regional and country levels to advance implementation in policy, fiscal, and monetary coordination; tax harmonization; adoption of common standards and regulations; and financial sector integration. At the country level, leaders should prioritize investment in cross-border infrastructure for secure and reliable transportation and energy connectivity, with financial and technical assistance from regional and international banks, such as the Central American Bank for Economic Integration (CABEI) and the World Bank.

Central America Customs Union: A Requisite for Success?

By: Salvador Paiz

Individually, Central American countries are relatively small markets. In the past, as companies saturated a market in their respective industries, they looked to domestic diversification as a source for growth. The main competency was being able to thrive despite the nuances of their home country. Nevertheless, roughly forty years ago, companies began to expand differently: relying less on diversification, but growing the core business throughout Central America, where the size of the addressable market is more attractive, roughly equivalent to Chile in terms of GDP or Colombia in terms of population.

The private sector has been a longtime champion for Central American integration. Governments, on the other hand, have lacked leadership and vision for this ambitious project. Of course, there are a few initiatives that foster regionalization, such as the Secretariat for Central American Economic Integration (SIECA), which are important, but are also insufficient. What policy actions can Central American governments introduce in the short term to accelerate regional integration?

Customs offices in Central America are notoriously slow, and there is a lack of coordination between them. Digitalization of customs offices, including their integration into a common systems platform, would significantly speed up the transportation process and reduce waiting times at borders. Customs offices should have a list of “known shippers” and receive digital cargo documents ahead of time, akin to the US-Mexico Free and Secure Trade (FAST) Card program, “a commercial clearance program for known low-risk shipments entering the United States from Canada and Mexico.”⁵⁰ This would allow for contactless and uninterrupted flow through the borders, while enhancing traceability and collection of duties.

Companies have to pay, at each national border, taxes for services, transit, import duties, and value-added taxes—and they have to pay differently in each country. Of course, the optimal result would be achieved with a customs union in which goods can move freely and be exempt from heterogenous duties. At a minimum, a unified value-added tax code would reduce the complexities and economic distortions of having different rates and exempt goods. Lastly, there should be no retention of income tax or double taxation for services provided to other companies, or even among subsidiaries of the same company within a region.

Another idea is to centralize sanitary licenses and trademark registrations. Authorities should be able to create and centralize one—and only one—process when it comes to these types of records. A “single window” to register in all countries of Central America at the same time would be a great incentive for companies to relocate to the isthmus.

The size of Central America should, in theory, make it an attractive market. The lack of uniformity and consistency in conducting cross-border trade and business leads to multi-step bureaucracies that hinder economic integration, and therefore, diminish the prospects for economic development. If the countries of Central America act as one, they could finally become a market that offers the economies of scale that can lead to new market opportunities, job creation, and enhanced regional competitiveness.

Fostering the Minimum Conditions for Growth: Recommendations for Governments, the Private Sector, and the International Community

The pandemic has forced countries to look inward as they scramble to strike the right balance between saving lives and saving the economy. In Central America, countries have a unique opportunity to also look beyond their borders for dialogue and cooperation, especially on how to unite in the face of external forces impacting the entire region. Central American nations can take the following concrete steps—on a national and regional level—to embark on a united path toward recovery and growth.

Governments

• Convene multisectoral task forces to propose policy actions for kickstarting economic recovery. Central American countries must unite around the national cause of economic reactivation. This means convening multisectoral task forces—from current and past administrations, private-sector leaders, multilateral representatives, and other sectors—to jointly discuss how to best kickstart economic reactivation in their countries. National task forces should then filter into cross-border discussions on regional issues. Key agenda items could include lifting investment restrictions to effectively attract supply chains and potential new businesses, offering special visas for foreign nationals working remotely to incentivize and support tourism, enacting legislation to combat corruption in procurement and public contracting with innovative digital technologies and processes, and informing on best practices from economic-recovery strategies in other countries outside of the region. These task forces should also propose specific actions for longer term and sustained economic recovery such as bridging some of the political and policy gaps around implementation of regional economic integration.
• Tackle long-standing barriers to business investment to encourage nearshoring. Governments in the region should improve governance, increase transparency and public accountability, and promote business-friendly environments. If Central America is to have economic growth, especially in a post-pandemic world, it must continue the long-term work toward building public trust, respecting the rule of law, transparency, and strengthening institutions. The independence of the judiciary—a particular challenge in Guatemala—must be protected to ensure trust in the judicial system. At a time when emergency powers provide ground for executive overreach and loosened regulations and supervision around procurement, anti-corruption missions—especially those in Guatemala, El Salvador, and Honduras—must show they are serious about tackling graft. Federal prosecutors and judges require additional capacity building and technical assistance to effectively conduct and process corruption investigations. Reducing red tape and streamlining key bureaucratic processes related to business and investment—with the help of digital technologies—must also be at the top of the agenda. Tax and regulatory reform must be aimed at reducing informality, which accounts for more than 60 percent of the Latin American workforce and is a major impediment for sustained, inclusive growth.
• Invest in developing the human capital needed for a changing global economy. Governments should prioritize investment in workforce training and capacity building for jobs in the manufacturing and services sectors, in accordance with global demand, especially those tied to nearshoring opportunities. In the short term, governments must partner with the private sector and civil society, with the specific resources and know-how to maximize the impact and scale of workforce training and foster entrepreneurship and innovation. In the medium to long term, governments should promote and invest in education and vocational programs tailored to developing the knowledge and skills that meet the demands of the labor market and prepare workers for the jobs of the future. Developing human capital and increasing productivity in Central America are the most important variables for taking full advantage of the demographic dividend over the next decade.

Private Sector and Civil Society

• Invest in new workforce and on-the-job training programs that align with business demands. The Central American private sector must be a crucial player in rapidly developing human capital before the relatively narrow demographic window closes in 2033. Private-sector leaders have the capability to implement long-term strategies—as opposed to short-term government-led efforts—focused on workforce development, education for the jobs of tomorrow, and vocational and technical programs with real-life skill trainings (education-to-employment programs). The public sector must help these private-sector leaders in facilitating these opportunities, engaging in public-private partnerships, and removing red tape for private-sector-led capacity-building efforts. Support and buy-in from civil society groups is key here, especially in longer-term education in science, technology, engineering, and math (STEM). Civil society buy-in can help to ensure that education and capacity building efforts are gender and racially inclusive.
• Partner with governments on anti-corruption efforts. Weak rule of law continues to be a major impediment for investment in Central America. The private sector can be a crucial partner in helping to decentralize, modernize, and digitalize key procurement and public contracting processes that are most vulnerable to graft. A private sector that can drive growth and is committed to transparency and accountability is an important sign for foreign investors seeking business opportunities in Central America, especially now with multinational firms exploring supply-chain relocation.

International Community

• Provide financial and technical assistance amid pandemic response. As with other countries hard hit by the pandemic, Central American countries have seen weakened fiscal positions and strained public resources. Multilateral development banks and international financial institutions must play a critical role in providing necessary finaning to Central American economies. For example, the IMF can provide financial assistance, and support for debt restructuring processes. The World Bank (WB) and the Inter-American Development Bank (IDB) should expand their technical and financial support in various areas of the public and private sectors. This assistance will be necessary to keep Central American economies afloat and must be complemented by local economic recovery strategies by local leaders, but both external and internal plans must be tied to assurances in strengthening the rule of law.
• Enhance intraregional connectivity to attract investment and drive integration. To attract foreign investment and encourage regional integration and sustainable economic growth, the international community can be a key ally and help governments determine infrastructure and energy investments to enhance intraregional connectivity as well as transregional connectivity—for example, in northern Guatemala along Mexico’s southern border. Political leadership at the national level must support regional financial institutions such as the IDB and Development Bank of Latin America—with strategic advice and support from international organizations such as the World Bank—to deploy the required capital and the technical capabilities to lead infrastructure investments. CABEI must also be a key player in financing infrastructure and energy projects to improve regional economic integration. Fast and secure transportation routes and cheap, reliable energy are top requirements for foreign investment and economic integration.
• Deepen and expand foreign investment partnerships in Central America. The United States, as Central America’s most important trade and investment partner, must target investments aimed at generating new employment opportunities and supporting sectors crucial for inclusive economic growth and regional integration. Local leaders from the public and private sectors must provide buy-in and support for local and foreign investment efforts in infrastructure and energy projects accompanied by strategic investments to reduce insecurity and strengthen the rule of law, with clear benchmarks and metrics for measuring impact. These metrics must be effectively communicated to ensure full transparency and long-term support. Bilateral agencies must also play a critical role, such as the U.S. government’s development finance institution, the Development Finance Corporation (DFC). Beyond the United States, any international investment to Central America must further the rule of law, create job opportunities for local communities, and provide viable terms and conditions for loan repayments.

Central America’s much-needed reforms are not only relevant in today’s pandemic-shocked world, but also necessary for the region to effectively seize unique opportunities for long-term, sustained growth. The urgency of the moment and the magnitude of the multi-dimensional crisis from COVID-19 punctuates the need for Central America to address historic challenges and traditionally weak institutions from all angles and sectors—public, private, civil society, and the multilateral and international community. For Central America to emerge like a phoenix from its ashes, concerted action must happen now.

The post Central America Economic Reactivation in a COVID-19 World: Finding Sustainable Opportunities in Uncertain Times appeared first on Atlantic Council.

Today’s Ukraine faces a myriad of challenges hampering its progress. These include an active conflict with Russia in the east of the country, systemic corruption, weak rule of law, and an economy dominated by oligarchs. While there are no easy solutions to these complex issues, one of the most immediately obvious low-hanging fruits is support for Ukraine’s IT sector.

Potential backing for the IT sector could involve bringing together entrepreneurs, successful startups, small and medium enterprises (SMEs), and trade groups from Ukraine, the US, and partner countries with the goal of creating new opportunities for investment, jobs, partnership, and collaboration.

Ukraine’s IT industry is an ideal candidate for this type of engagement. Over the past decade, it has become a vital part of the country’s export service economy and a significant contributor to the global tech scene. With 26 percent annual growth, it remains the fastest-growing sector in Ukraine and far exceeds the average global growth rate for the industry. According to a recent poll conducted by the American Chamber of Commerce in Ukraine, IT is already the second most attractive Ukrainian industry for foreign investment.

The country’s IT sector workforce is dominated by progressive, young, business-orientated, and tech-savvy professionals who are collectively re-defining the future direction of the Ukrainian economy. From 2011 to 2016, the number of IT specialists in Ukraine increased by 144%.

Today, the industry employs over 200,000 highly educated professionals who form Ukraine’s new high-earning middle class. Ukraine’s IT professionals typically earn up to eight times the national average. Additionally, the expansion of this demographic is driving growth in other sectors of the Ukrainian economy including the real estate, retail, and leisure industries.

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While the ongoing conflict with Russia has had a major detrimental impact on the Ukrainian economy, the IT sector stands out. It has been somewhat insulated from the impact of the war and has rapidly expanded over the past six years. IT grew from 1.7 percent of Ukraine’s GDP in 2014 to four percent in 2019. It is expected to more than double and reach 10 percent of GDP in the coming years.

Unlike other sectors of Ukraine’s economy, oligarchic interests have not permeated the IT industry, with 80 percent of the sector consisting of SMEs. Additionally, COVID-19 has not significantly affected the industry due to its virtual ecosystem.

The US already has a significant interest in the Ukrainian IT industry. American customers are the largest consumers of Ukraine’s IT services, accounting for 50 percent of clients nationally. In total, Ukrainian IT firms do business with over one hundred Fortune 500 companies.

More than one hundred international R&D centers already operate in Ukraine including Boeing, Siemens, Oracle, Cisco, Apple, Samsung, Microsoft, Deutsche Bank, Skype, eBay, IBM, and Huawei. In 2019, Ukraine’s IT sector attracted over USD 544 million in investments, with US venture capital firms well-represented among investors.

Investing in Ukraine’s IT industry can help to unlock potential in other sectors of Ukraine’s economy. One good example is AgriTech, or the use of technological solutions in the agricultural sector.

Ukraine sits on between one-quarter and one-third of the world’s black soil reserves and its agriculture sector is highly attractive as a destination for foreign investments. However, productivity is only at around 50 percent of projected maximums in most spheres of the farming industry, while only 10 percent of Ukrainian agribusinesses use innovative technologies. Joint ventures between US partners and Ukraine’s agrarians, engineers, and IT experts could rapidly grow Ukraine’s AgriTech industry. These ventures could potentially create enormous returns for US investments and contribute to Ukraine’s economic prosperity.

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The further development of Ukraine’s IT ecosystem can also have a positive impact on US security objectives in the region. Innovative public-private partnerships and international investment can boost Ukrainian startups that focus on countering disinformation, improving cyber security, and developing defense technology solutions. This would enable Ukraine to better address Russian disinformation and cyber attack threats. Any gains could also be exported to other countries that also find themselves facing Kremlin-style hybrid aggression.

Greater US investments and focus on the IT industry in Ukraine would potentially boost the growth of SMEs in the Ukrainian economy and strengthen the position of an emerging middle class of high-earning and Western-oriented Ukrainians. These SMEs are the basis of a stable, vibrant, and competitive knowledge-based economy that would allow Ukraine to move beyond the current concentration of wealth in a limited number of oligarchic hands.

Ukrainian IT sector investment would boost modernization and help push the adoption of tech-based solutions. The use of digital instruments and modern technologies in the public sector, with the involvement of domestic IT companies, could provide prompt results and speed up the much-needed reform of what remains in many cases an archaic bureaucracy. This would also signal a shift towards greater compliance and transparency that would be welcomed by the international community.

Ukraine’s IT sector has already demonstrated its huge potential to transform the nation in ways that closely align with US interests. The industry also presents tremendous economic opportunities for future US investments. As the international community seeks ways to strengthen Ukraine’s Euro-Atlantic integration, private sector investment in the country’s attractive IT industry could have a significant and positive role to play.

Yuliya Rimsky was a Network 20/20 Ukraine Fellow in 2019. Filip Sasic is a Deputy Director at Network 20/20.

Further reading

UkraineAlert Jul 2, 2020

Analysis: Ukraine’s central bank governor quits post citing “political pressure”

By Peter Dickinson

National Bank of Ukraine (NBU) Governor Yakiv Smolii submitted his resignation on July 1 in what was widely seen as a major blow to Ukraine’s reform agenda. What does this mean for the country’s future direction?

Economy & Business Ukraine

UkraineAlert Apr 30, 2020

Broadening Ukraine’s foreign policy horizons in the post-coronavirus world

By Hanna Shelest

Ukraine’s foreign policy has traditionally focused on the choice between Russia and the West, but the country could benefit from a more global approach to diplomacy with clearly defined regional strategies.

Coronavirus Politics & Diplomacy

UkraineAlert Apr 16, 2020

Coronavirus pandemic: Ukraine flies to the rescue

By Alyona Getmanchuk

Ukrainian cargo planes are currently delivering vital anti-coronavirus medical supplies from China to NATO member countries, underlining Ukraine’s value as a strategic partner of the Euro-Atlantic community.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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The post Ukraine’s booming IT sector can drive positive change appeared first on Atlantic Council.

The United States has built strong relationships in the Middle East through security, economic, and political engagement over the past decades. In turn, most regional governments are reliable allies and their people have a fondness for American innovation, creativity, and ingenuity. If the United States disengages at the very moment that the region is on the cusp of a significant transformation, American investments made in blood and treasure will go to waste and we will miss a significant strategic opportunity. The decline in oil prices since 2014 and the economic devastation due to the pandemic is causing the region’s leadership to consider and take bold, transformational action to redefine and diversify their economies. It is in the United States’ best interest to work closely with regional partners not only for the latter’s prosperity and stability but for ours as well.

The United States government, US corporations, and US investors should consider the following factors as they look to the region: the region’s potential to rival Europe in terms of being a marketplace for goods and services, the role the region plays in terms of keeping energy prices stable and reasonable, counterbalancing steps international competitors such as China are taking to expand influence in the region, and the fact that security without economic prosperity is fragile.

A growing market for US goods and services

The Middle East is composed of many countries across the wealth spectrum, from the poorest such as Yemen to the richest like Qatar. It boasts one of the youngest and fastest-growing populations in the world that is expected to reach approximately 580 million people by 2030. It has the largest repository of oil and gas in the world. It has four of the ten most significant sovereign wealth funds in the world. It is one of the top ten holders of US treasuries. For all these reasons and more, the Middle East should be viewed through not only a security and energy prism, but an economic one as well.

Today, of course, the Middle East is nowhere near as important to the US economically as Europe is. But a transformation of the Middle East can eventually put it on par with Europe in terms of economic partnership with the United States. While Europe represents only 6.9 percent of the world population today, its GDP contribution to the world economy stands at 15.6 percent—over twice its population. On the other hand, the Middle East has 6 percent of the world’s population and accounts for only 4.6 percent of world GDP. There is a lot of room to grow.

As we have witnessed in China in the past two decades, accelerating population productivity can reap significant rewards. The young and growing population of the Middle East entering significant household formation in the next decade can be an economic powerhouse. These favorable demographics can lead to significant consumption-led economic growth only if coupled with appropriate job creation levels. A more pragmatic and targeted strategic investment approach is required through public and private partnerships to empower entrepreneurs, women, and youth.

Many companies have already made a bet on this investment thesis through substantial acquisitions, including Coca-Cola, Amazon, and Uber. Financial institutions such as Blackstone, Carlyle, Blackrock, Goldman Sachs, and a host of other investment banks and hedge funds have reaped billions from regional sovereign wealth funds, family offices, and high net-worth individuals. Luxury groups like Cartier, LVMH, Hermes, Richmond, and Rolex have invested heavily to reach well-heeled consumers in Middle East markets. Energy groups such as Total, ExxonMobil, Shell, and BP enjoy large contracts in the region. Boeing, Airbus, Lockheed Martin, Bechtel, Halliburton, and others have been doing a brisk business in aerospace, security systems, and infrastructure. Twitter, Facebook, Amazon, and Apple have seen significant market share gains and profits from the Middle East’s highly penetrated mobile markets.

Key corporations that have put in the effort to navigate and meaningfully enter these markets have reaped attractive returns. They went beyond the negative headlines to invest in the long term. Middle East markets are ripe for enduring economic growth if there is a willingness to invest in the people of the region.

Stable and fair oil prices are important for US economic health

The stability of global energy prices will continue to impact the US economy for the foreseeable future. Despite the rhetoric regarding renewable energy and energy conservation, demand has been relatively stable, and 80 percent of the world’s energy supply continues to come from fossil fuels. The US shale industry has been a strategic success from a supply perspective but not without high volatility. In a boom and bust cycle reminiscent of the airline industry, companies have gained and lost fortunes thanks to oil price fluctuations. The latest decline from the Saudi-Russia oil price standoff in April was a case in point. A wave of bankruptcies and bond downgrades have bogged down the industry, causing economic damage and increasing unemployment. Counter to the conventional wisdom that low prices are a boon for the US economy, they are a bust for the US energy industry.

While the Organization of Petroleum Exporting Countries (OPEC) may no longer be relevant in controlling prices, the institution still holds sway. It has expanded its influence through various cooperation agreements with non-OPEC countries, such as Russia and Mexico, known as OPEC+. In fact, during the OPEC+ meeting in April, the Group of Twenty joined with Brazil, Norway, and Canada in also agreeing to oil production cuts. The United States should join this informal group to ensure a balanced oil market.

In terms of US national energy policies, the Middle East will continue to be important. Given the outsized reserves and oil extraction costs of the oil-producing countries in the Middle East, the region plays a critical role in balancing global energy markets and helping maintain a stable and fair price.

Building a counterbalance to China is key to global stability

China is filling many vacuums created by US disengagement or neglect. From Pakistan to Iran to Nigeria, China is striking economic deals to bolster its international power. It has established itself in the Middle East and continues to expand its connections and power. China is already the UAE’s second-largest trading partner and the recent nuclear deal between China and Saudi Arabia is the tip of the iceberg. The complimentary large-scale initiatives of China’s Belt and Road Initiative and Saudi Vision 2030 are leading to further economic integration between the two nations.

China has not only dazzled countries with its mega infrastructure projects and loans, but has also made inroads through its technology companies such as Alibaba and Huawei. Alipay is as pervasive as Apple Pay in the Middle East while Huawei is winning the 5G network upgrade war in the Gulf and beyond. In addition to corporate activity, Chinese investors are beginning to invest in regional startups. While venture capital activity is still limited, Chinese investment firms are becoming increasingly active in key markets.

Concerning energy, China and other Asian countries make up a majority of OPEC exports. Given the projects and ties mentioned above, it is only natural that China is pursuing closer economic relations with Gulf Cooperation Council (GCC) countries. China will be the clear beneficiary should the United States continue to limit its engagement in the Middle East, adding to its sphere of influence. When China expands its economic relationships further, OPEC will likely keep Chinese interests in mind during the next oil crisis. US support to strengthen Middle Eastern economies can counterbalance the rising economic power of China that has already engulfed most of Asia and Africa and is knocking on the doors of Europe.

Security without economic prosperity is fragile

Hopelessness and youth are a dangerous combination. This explosive mixture combusted in the 2011 Arab Spring. While it may seem that the call for change has lost steam, it simmers in many corners of the Middle East. And, though most governments in the Middle East are authoritarian, there is increasing pressure to stay attuned to the people’s needs to maintain power. As the social contract between rulers and the citizenry continues to evolve, ensuring an engaged and productive populace will be critical to stability. While political reform is unlikely in the near term, reforming the economy to decrease unemployment and increase prosperity is high on the agenda.

Most countries in the Middle East are plagued with a large public sector and a weak private sector. This economic mix is unsustainable and will lead to failed states. Public sector finances are under extreme pressure even in the oil-exporting countries of the Gulf. Most of these economies require a significant transformation. Practically, this means more open and dynamic economies to drive private sector development and investment. Governments must start by changing antiquated laws and regulations and by investing in strategic growth sectors to drive economic diversification and job creation. In the meantime, unleashing the population’s power by empowering entrepreneurs, women, and youth will have a marked improvement on economic growth.

As the Middle East makes this delicate transition from public largess to private sector development, the United States should support efforts to drive economic prosperity. Entrepreneurship, regional economic integration, educational transformation, women’s economic participation, and fostering innovation are all worthwhile pursuits that will ultimately lead to economic growth and job creation.

Investing in security is necessary, but not at the expense of investing in economic prosperity. The lack of economic diversification is as dangerous as the security threats posed by certain non-state and state actors in the region. Indeed, the most significant threat for most Middle East countries is a disgruntled, young, and growing population more attuned to the world around them than any generation before and impatient for basic educational and employment opportunities.

A more hopeful future

By changing the terms of engagement with the Middle East and prioritizing investment in the economic and human prosperity of the region, US national interests will be better served. The pandemic has provided a unique opportunity to take unprecedented actions to build more dynamic and agile economies. In partnership with regional players, the United States, along with its allies, can shape a better future for the Middle East and its people.

Amjad Ahmad is director and resident senior fellow of empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East. Follow him on Twitter: @amjadahmadVC.

MENASource Sep 18, 2020

Liberalizing capital, trade, and labor markets are keys to accelerating post-pandemic recovery in Middle East

By Stefanie Hausheer Ali

At a private CEO Dialogue on post-pandemic challenges and opportunities in the Middle East, there was agreement among participants that the region presents appealing demographics for economic growth and that the pandemic has underscored the need to accelerate economic diversification.

Coronavirus Entrepreneurship

MENASource Sep 18, 2020

UAE-Israel accord will drive economic growth in the Middle East, says Emirati Minister of Economy

By Lucy Grathwohl

On September 16 empowerME Director Amjad Ahmad and Al Mari discussed how the historic signing of the Abraham Accords will facilitate the UAE and Israel to open their economies.

Economy & Business Israel

MENASource Sep 1, 2020

Energy cooperation in the Middle East is a necessary step toward regional security

By Ariel Ezrahi

Mutual energy dependencies can help mitigate political tensions, creating incentives to cooperate and possibly facilitating a positive momentum towards solving some of the MENA region’s thornier outstanding political conflicts

Middle East Politics & Diplomacy

The post The Middle East is a growing marketplace, not just a war zone appeared first on Atlantic Council.

The CEO Dialogue held on September 10 brought together a group of approximately forty senior private sector leaders with interests in the Middle East, as well as the United States and regional government officials. A key point made at the discussion is that the region has untapped potential that presents a substantial opportunity for entrepreneurial and innovative endeavors. Likewise, the Middle East has a sophisticated investor class and a rising entrepreneurial community. Many in attendance stressed that a fundamental shift is needed and that international investors should see the region as a market to deploy capital rather than simply as a place to extract it. In a poll conducted during the meeting, the majority of participants (58 percent) said that liberalizing capital, trade, and labor markets are the policy actions that would be most effective in accelerating the post-pandemic recovery. (The poll was conducted on September 10, 2020 with a sample size of 38 respondents.)

Key insights from the meeting included the need for regional economic integration to allow for companies to consolidate and scale effectively in order to compete on a global level. Sustainable commitments between nations in the Middle East would also enable them to reap the opportunities present in the region as a whole. Just as importantly, taking steps to more closely link regional economies and remove economic barriers would drive more entrepreneurship. These actions will lead to a more competitive and open market that will result in job creation. Indeed, a majority of participants polled at the event (40 percent) indicated that integrating regional economies would have the most significant impact on long-term regional job creation.

Private sector leaders in attendance highlighted the entrepreneurial set of opportunities the region presents, as well as the importance of investing not just financially in the Middle East, but also in terms of expertise, training, and upskilling. The importance of the digital transformation currently underway was also discussed and a majority of participants polled (65 percent) believe that artificial intelligence and machine learning have the potential to have the greatest impact on the region out of several major technological trends. Participants also emphasized that building digital infrastructures and capacity are essential for capitalizing on the region’s opportunities.

The importance of strengthening the private sector was also underscored. Government officials noted that governments cannot solve the region’s economic and human development challenges without a robust private sector and that more must be done to create ecosystems where the private sector can flourish. Participants also noted that harnessing the creative and productive power of the region’s youth is an area of untapped opportunity, especially since the region is blessed with favorable demographics. Participants agreed that more concerted efforts are needed to foster public-private partnerships that create pathways to entrepreneurship and employment opportunities for the young and tech-savvy population in the region.

The economic benefits of increasing women’s participation and leadership roles in workplaces throughout the region was another key theme. Some countries in the region are making significant progress on these efforts and private sector representatives stressed that investors increasingly want to know that their financing supports women’s economic empowerment, whether through employment, training, or leadership opportunities.

Similarly, the role of environmental, social, and corporate governance factors have become paramount in investment decisions. Private sector representatives noted that investors increasingly want to understand the sustainability credentials of investee companies; indeed, this is now a pre-requisite for investment allocation.

While the meeting identified numerous areas of opportunity in the region, a majority of participants (50 percent) indicated that they believe it will take between twenty-four and thirty-six months for regional economies to recover from the economic decline caused by the coronavirus pandemic. Government officials and private sector leaders affirmed the importance of economic diplomacy and multilateralism to address shared challenges that impact everyone due to the connectedness ushered in by globalization.

Stefanie H. Ali is deputy director of empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East. Follow her @StefHausheer.

MENASource Sep 1, 2020

Energy cooperation in the Middle East is a necessary step toward regional security

By Ariel Ezrahi

Mutual energy dependencies can help mitigate political tensions, creating incentives to cooperate and possibly facilitating a positive momentum towards solving some of the MENA region’s thornier outstanding political conflicts

Middle East Politics & Diplomacy

New Atlanticist Jul 14, 2020

COVID-19 could set back Mideast economies for years

By Larry Luxner

The coronavirus pandemic is causing widespread suffering throughout the Middle East, but its long-term impact on the region’s economy and its vulnerable populations will be felt for years to come.

Coronavirus Middle East

MENASource Jul 14, 2020

After the coronavirus and low oil prices, Oman’s future is more global

By Phillip Cornell

With the onset of COVID-19 and an economic crisis that is bound to accelerate history, Oman’s commitment to steady progress and political neutrality will face new tests and leverage the country’s wider global relationships.

Middle East Politics & Diplomacy

The post Liberalizing capital, trade, and labor markets are keys to accelerating post-pandemic recovery in Middle East appeared first on Atlantic Council.

While much of public discussion has focused solely on the debate of data privacy protection versus deregulation and economic productivity, data trusts (also known as data commons or data cooperatives) represent legal, technology-enabled constructs that allows for more equitable ways of sharing the profits among different stakeholders. In this structure, a relationship of fiduciary responsibility would exist not only with the shareholders, but also towards the data owners and producers, and where the data economy would happen “with people” instead of “to people”.

On Wednesday, August 12, 2020 at 12:00pm EDT, the Atlantic Council’s GeoTech Center hosted a panel of experts in the fields of data analytics, AI and data governance, neuroscience, engineering, and digital transformation that discussed practical steps to build and pilot data trusts. The panel included Michael Ingrassia, president and general counsel of Truata; Wally Trenholm, chief executive officer of Sightline Innovation; and Atlantic Council nonresident senior fellow Dr. Divya Chander, also neuroscience faculty chair at Singularity University. Dr. David Bray, Director of the GeoTech Center, and Mr. George Zarkadakis, Atlantic Council nonresident senior fellow and digital lead at Willis Towers Watson, moderated the discussion.

Full Event:

GeoTech Cues

Jul 1, 2020

We can increase public participation in data and avoid surveillance states: Here is how

By David Bray

The world needs a collective effort to gather and share data to steer society and nations back to full operations, and to provide early indicators and warnings of future pandemics. Current methods for accessing data owned by public and private institutions and private citizens today are not able to guide COVID-19 recovery. The new data access frameworks in this initiative can succeed while strengthening societal welfare, prosperity, and peace around the world.

Civil Society Coronavirus

Public Event Wed, August 12, 2020 • 12:00 pm ET

Practical steps societies can take to pilot data trusts

ONLINE EVENT – A live discussion on how societies can pilot Data Trusts for public good.

Cybersecurity Digital Policy Education Resilience

The post Digital crossroads: How to pilot data trusts for good appeared first on Atlantic Council.

The proposal that was posted is part of an analysis that concludes “Statutes and Regulatory Models Adopted for the Industrial Era are Insufficient for the Realities of the Internet Era”. Such a conclusion seems sound and appropriate for the challenges of the last five years that the U.S. and other countries have faced. However, the conclusion of creating a ‘Digital Platform Agency’ may not fit our global, networked world for three reasons:

• This is a nation-state focused proposal, potentially appropriate for the 20th century when the world was not as networked as it is now, instead of a networked-focused one. Specifically, other nations, such as Estonia where one can become an e-Resident of Estonia without having been born or residing in Estonia or the European Union’s General Data Protection Regulation (GDPR) where the EU expects other countries respect the data rights and choices of members of the EU regardless of where they are located in the world, already have pivoted to a networked world. Any solution that U.S. or other countries pursue in this space must be network-centric instead of nation-state specific.
  
• This is a government-led solution, which while not inherently inappropriately by itself, risks perpetuating challenges where solutions in this space are done *to* people instead of *with* people. By creating a government entity at the federal level, potentially removed from the local circumstances and different community needs of the U.S. public, this agency risks trying to find a one-size fits all for the different parts of the United States (much less the world). As readily apparent by the polarizing issues of the last five years, what communities in California want from digital platforms differ from what Texas want, both of which may differ from what New York wants, etc. In an era in which people were not connected as directly as they are now with their government — when news and information flowed at the essentially one-way speed of radio and newspapers — U.S. federal government agencies had the luxury of time to consider and work solutions that spanned the nation. Now, however, everyone is awash in a deluge of news, media, and information — and social media permits anyone (or any bot) to post news, media, and information of varying degrees of accuracy. This dramatic change in the media landscape calls into question any single-agency solution attempting to find a one-size fits all for the United States that does not involve regional and community differences.
  
• A Digital Platform Agency would appear to be platform-centered solution to the problems discussed in the aforementioned proposal, focused on regulation of said platforms even though it would appear data is at the root of these challenges. To its credit, the proposal notes “enormous power of data control in the hands of a limited few tech platforms, is further harming innovation” yet by focusing on the platforms, the proposal might be missing the metaphorical forest for the trees. Data sets ultimately are what give the platforms revenue, influence, and power. If the public were more involved in data activities, and had a locus of choice involving their data, then regulation of platforms might not be necessary. It could be the authors of the proposal intend for the agency to focus on data and approach solutions from a data lens, however by calling for a Digital Platform Agency it seems that the focus on Platforms vs. improving better practices, norms, and choice around data is not an adequate fit. The proposal also notes the volumes of data that would require sensemaking to inform any policy action, yet glosses over this saying “artificial intelligence” would resolve this — omitting what would be the appropriate training data sets to apply machine learning or other AI techniques.

New digital crossroads

Ultimately, when considering the reality that “Statutes and Regulatory Models Adopted for the Industrial Era are Insufficient for the Realities of the Internet Era”, any solutions must consider where the metaphoric puck is going vs. where the puck is. Any solutions must also consider how to achieve shared partnerships, shared outcomes, distributed implementations — which includes five key questions:

1. Should each nation have its own Digital Platform Agency? Does this make sense in a connected global world?
   
2. Should the networked platforms be allowed to be free to do whatever they want, without some community or national oversight? Does laissez faire make sense either?
   
3. Is anyone empowering the people to have a voice? How do we work to find solutions different, diverse communities while also avoiding a “one-size fits all” approach either for regions of the United States or other parts of the world wanting to work together?
   
4. How do we advance Internet availability, affordability, and digital accessibility recognizing that most of these services, in a free market, are done by transnational, private sector companies? Challenges of Internet availability and affordability for humans persist in the United States and globally — as do challenges of Internet accessibility for those who need the Internet to be accessible for those with different visual or auditory needs. This must be addressed in tandem with any solution involving the public, industry, and governance of digital platforms.
   
5. How can we *do* technology and policies *with* people and communities, vs. to people and communities in a timely fashion? We are now in an era requiring create public involvement in activities that used to be done “behind a curtain” in industry or government, recognizing that public involvement needs to avoid exploitation by different lobbying groups attempts to apply pressure by selective mobilization of a large group. Such involve would need to be done recognizing challenges of both scale and timing as well for public involvement too.

One unclear question about the Digital Policy Agency proposal is how would such an entity interact with private sector entities regarding the challenges of misinformation and disinformation? These challenges are inherently linked to the flows of finance and influence tied to media and politics as highlighted in this Financial Times article. Right now there is too much money to be made and political advantages afforded to misinformation online — and those who strive to point it out and counter misinformation have their voices lost to the more pervasive sentiments of anger, fear, and division. Effectively countering misinformation and disinformation requires taking a systemic look at shared partnerships, shared outcomes, distributed implementations tied to:

• Incentivizing a large community to work together and in so doing, create a set of shared desired outcomes and goals tackling misinformation and disinformation. This includes producing signals to which global markets will respond.
  
• Ensuring that the diverse interests are incorporated into digital products, services, and most importantly data. Development of such products, services, and data activities also must be distributed and engage the public.

We also need to recognize the challenges associated with an increasing number of automated bots, algorithms, and other digital “things” that can appear to be human, influence humans, and trigger human actions. Approximately 2014 marked the year that people became the minority for Internet-based traffic (41% people vs. 59% bots).

GeoTech Cues

Jul 1, 2020

We can increase public participation in data and avoid surveillance states: Here is how

By David Bray

The world needs a collective effort to gather and share data to steer society and nations back to full operations, and to provide early indicators and warnings of future pandemics. Current methods for accessing data owned by public and private institutions and private citizens today are not able to guide COVID-19 recovery. The new data access frameworks in this initiative can succeed while strengthening societal welfare, prosperity, and peace around the world.

Civil Society Coronavirus

Pragmatic next steps

Perhaps a better first step to address these issues is to start listening and learning tours with different parts of the United States and other countries as to what people want when it comes from digital platforms, digital choice, data rights, and data obligations.

A second, parallel step, would be to require existing digital platforms to clearly post their methods and ways the public can see how the platform’s services, algorithms, and data collection activities operate at a level to be sufficiently informed and exercise human choice. Either the government or a non-profit could assemble all these methods in one place — similar to the AnnualFreeCreditReport.com website that allows the public to “one stop shop” their credit reports from TransUnion, Experian, and Equifax — as an easy to view, easy to use service for the public.

Lastly a third step would be to pilot Data Trusts (also known as Data Commons or Data Cooperatives) with the public focused specifically on digital platform-related activities and positive social outcomes. A specific initiative would establish a Data Trust for Good to provide regional information associated with platform-related services and activities. The information contained within the trust would inform, for example, whether the services were increasing the polarization and distrust in societies or helping to inform societies and promote a net positive good? The pilot project would involve multiple stakeholders seeking to demonstrate a cross-sector, cross-country approach to creating and governing a Data Trust in partnership with the platforms themselves in a way that did not result in surveillance states nor less than agile, top-down solutions.

We must find ways in the United States and other open societies to do data *with* people instead of *to* people. The proposal that the authors linked with the Harvard Shorenstein Center on Media, Politics, and Public Policy proposed should be applauded for its focus, even if the target might need to be adjusted. Hopefully some of the suggestions here might better vector the cursor-on-target to address the geopolitical realities of our global, networked era.

Be Benevolent,
Be Bold, and
Be Brave in our challenging times. 

We all can lead. Positive “change agents” — individuals willing to work across sectors and nations to help illuminate better ways through the shared turbulence we are experiencing — are needed now more than ever.

The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

Learn more

The post Why a well-intended ‘Digital Platform Agency’ may not fit our global, networked world appeared first on Atlantic Council.

Below are images from the original 2010 “Trouble Ahead” set of predictions.

The concerns raised in 2010 opened with:

Worlds are colliding: Science + Technology + Business + National Security

Looking at the last decade, as well as current projected trends, these world continue to collide. The reason why the GeoTech Center exists is to explore how to ensure that data and tech efforts benefit people, prosperity, and peace and ideally do not harm.

The concerns and predictions continue with:

Science and technology advances + Greater global information sharing
= Cheaper commercial products + Challenges with maintaining national security

Which also proves to have been true for the last decade and what seems to be continued projected trends as well. The good news is data and technologies are becoming democratized and widespread. Yet this is also bad news because now such capabilities can be used for purposes that are less than benevolent in the world. This underscores even more the mission of the GeoTech Center to encourage what we call: #GoodTechChoices

The slides and predictions from 2010 continue with predictions for the next five years, to include:

Consumers increasingly will have their space-time movements tracked, and consumers will love the “ease” of the accessing the “free” things they get in return, not realizing privacy loss

Which also appears to have matched what happened, as well as recognizing that about the middle of the last decade there was a bit of a “techlash” where some become concerned about privacy loss and did not want to become a surveillance state. The question for 2020, especially given the current COVID-19 reality where so many people are working online, is whether people who are working remotely recognize the potential privacy concerns of such work? Do remote works prefer ease and free at the loss of agency over personal data?

At the GeoTech Center, we firmly believe that the United States and other open societies face data coordination challenges. This is why Data Trusts (also known as Data Cooperatives) need to be pursued. Without these we won’t find a way to involve people in data – to “do data with people” instead of to people. We must find a way for great public participation with the choices associated with data at community and larger population scales.

The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

Learn more

The post Potential trouble ahead: predictions from 2010 now are real in 2020 appeared first on Atlantic Council.

On Wednesday, July 29, the Atlantic Council’s GeoTech Center hosted Ms. Teresa Carlson, Vice President at AWS’s Worldwide Public Sector, and United States Representative Will Hurd of the 23rd District of Texas. Congressman Hurd spoke about his mission to make space relevant to his constituents, as the commercial space industry plays an increasingly important role in his community and the nation. With thousands of jobs created in Texas and nationwide by companies such as Blue Origin and SpaceX, Congressman Hurd emphasized that it’s time for governments to step out of the way, to ensure that outer space can become a secure and accessible arena for visionaries and pioneers. Ms. Carlson commented on the productive potential of private-public partnerships in space commercialization, as well as on the many innovative enterprises in the market and the need to invigorate the pipeline of talent feeding the scientific community.

Watch the video above to hear Representative Hurd’s full commentary on the future of space.

Henry Westerman joins the GeoTech Center as a Project Assistant, having served as an intern with the team this past summer. He is a member of the Class of 2021 in the Georgetown University School of Foreign Service studying Science, Technology, and International Affairs with a concentration in Security. Henry has previously interned with the Library of Congress Digital Strategy team, and at the Department of State Office of Science and Technology Cooperation. Henry’s primary academic interests include geospatial analysis, emerging technologies, and digital sensemaking; he also dabbles in Spanish and Philosophy.