Diplomacy & Defense Think Tank News

Pascal Boniface · Le G7 à la loupe. Avec Bernard Guetta | Entretiens géopo

Utilizing an original data set, this paper demonstrates how protectionist industrial policy during the period of hybrid liberalisation has shaped the organizational structure of clothing firms in Egypt. It investigates determinants of vertical integration of clothing firms into fabric production. High-end market segments are a critical determinant of integration. Limited access to finance restricts the possibilities for many firms to undertake the investment required to integrate, whilst volatile and uncertain market conditions make firms more likely to rely on the market for their inputs. But there are nuances related to market segment. Producers of higher quality garments rely on imported textiles, so these producers do not integrate even if search and switch costs are high. But the opposite is true of producers relying on domestic suppliers. Foreign institutions are better able to ensure contract enforcement with respect to quality and timely delivery so that suppliers opportunistic behaviour is deterred, reducing the necessity of clothing firms to integrate. This may not be the case with respect to domestic suppliers, when domestic institutions do not guarantee the same level of enforcement. The adoption of the hybrid liberalisation model meant that the transition to a market economy was not preceded by the creation of the necessary regulatory framework. This model resulted in inefficient upstream production and in an institutional setting conducive to agency problems. It also meant that business suffers excessive and inefficient bureaucracy. It is thus not possible for firms to achieve the first best outcome of arm’s length relations based on frictionless market transactions. Given these structural constraints firms opt for the second best solution of make rather than buy, i.e. vertical integration. But only some firms are able to use the arbitrary and discretionary decision making system to their favour, negotiating government obstacles to successful business. Those linked to power, prospered, whilst the businesses of others foundered against the wall of patronage, bureaucracy and red tape.

Utilizing an original data set, this paper demonstrates how protectionist industrial policy during the period of hybrid liberalisation has shaped the organizational structure of clothing firms in Egypt. It investigates determinants of vertical integration of clothing firms into fabric production. High-end market segments are a critical determinant of integration. Limited access to finance restricts the possibilities for many firms to undertake the investment required to integrate, whilst volatile and uncertain market conditions make firms more likely to rely on the market for their inputs. But there are nuances related to market segment. Producers of higher quality garments rely on imported textiles, so these producers do not integrate even if search and switch costs are high. But the opposite is true of producers relying on domestic suppliers. Foreign institutions are better able to ensure contract enforcement with respect to quality and timely delivery so that suppliers opportunistic behaviour is deterred, reducing the necessity of clothing firms to integrate. This may not be the case with respect to domestic suppliers, when domestic institutions do not guarantee the same level of enforcement. The adoption of the hybrid liberalisation model meant that the transition to a market economy was not preceded by the creation of the necessary regulatory framework. This model resulted in inefficient upstream production and in an institutional setting conducive to agency problems. It also meant that business suffers excessive and inefficient bureaucracy. It is thus not possible for firms to achieve the first best outcome of arm’s length relations based on frictionless market transactions. Given these structural constraints firms opt for the second best solution of make rather than buy, i.e. vertical integration. But only some firms are able to use the arbitrary and discretionary decision making system to their favour, negotiating government obstacles to successful business. Those linked to power, prospered, whilst the businesses of others foundered against the wall of patronage, bureaucracy and red tape.

Utilizing an original data set, this paper demonstrates how protectionist industrial policy during the period of hybrid liberalisation has shaped the organizational structure of clothing firms in Egypt. It investigates determinants of vertical integration of clothing firms into fabric production. High-end market segments are a critical determinant of integration. Limited access to finance restricts the possibilities for many firms to undertake the investment required to integrate, whilst volatile and uncertain market conditions make firms more likely to rely on the market for their inputs. But there are nuances related to market segment. Producers of higher quality garments rely on imported textiles, so these producers do not integrate even if search and switch costs are high. But the opposite is true of producers relying on domestic suppliers. Foreign institutions are better able to ensure contract enforcement with respect to quality and timely delivery so that suppliers opportunistic behaviour is deterred, reducing the necessity of clothing firms to integrate. This may not be the case with respect to domestic suppliers, when domestic institutions do not guarantee the same level of enforcement. The adoption of the hybrid liberalisation model meant that the transition to a market economy was not preceded by the creation of the necessary regulatory framework. This model resulted in inefficient upstream production and in an institutional setting conducive to agency problems. It also meant that business suffers excessive and inefficient bureaucracy. It is thus not possible for firms to achieve the first best outcome of arm’s length relations based on frictionless market transactions. Given these structural constraints firms opt for the second best solution of make rather than buy, i.e. vertical integration. But only some firms are able to use the arbitrary and discretionary decision making system to their favour, negotiating government obstacles to successful business. Those linked to power, prospered, whilst the businesses of others foundered against the wall of patronage, bureaucracy and red tape.

In light of the deflationary trends following the 2008/2009 financial crisis, as well as the return of inflation triggered by the COVID-19 pandemic and the war in Ukraine, this book offers insights into price stability issues in various East Asian countries.

Konnektivität, besonders im Transportbereich, ist mit Blick auf den Südkaukasus während der letzten Jahre zu einem allgegenwärtigen Thema avanciert. Auch in der EU-Politik vis-à-vis der Region spielt Transportkonnektivität eine zentrale Rolle. Im Rahmen ihrer Global-Gateway-Initiative hat sich die EU dabei einem Engagement verschrieben, das gleichzeitig werte­basiert und geostrategisch ist. Um diesem Anspruch gerecht zu werden, sollte die EU die verschiedenen Dimensionen von Transportkonnektivität und ihre Implikationen auf mehreren Ebenen integriert betrachten. Vor allem der Verknüpfung von Konnektivität mit machtpolitischen Fragen sollte die EU Rechnung tragen. Bei der Etablierung genuin inklusiver und transparenter Multi-Stake­holder-Prozesse sowie unabhängiger projektbegleitender Moni­torings könnte die EU Unterstützung leisten. Dies könnte die Richtung zu einem eher holistisch gedachten Konnektivitätsansatz weisen. Die EU sollte ihr Konnektivitätsengagement auch kritisch auf mögliche Zielkonflikte abklopfen. Die Policy-Debatten in Berlin und Brüssel würden dabei von einem intensiveren Austausch mit der kritischen Logistik-, Infrastruktur- und Konnektivitätsforschung profitieren. Deren Erkenntnisse könnten zu einer nuancierteren Betrachtung von Transportkonnektivität und der damit verbundenen Komplexitäten und Ambivalenzen beitragen.

Global challenges such as climate change, biodiversity loss, and the global debt crisis call for more cooperation among nations. Yet instead of well-coordinated, wise cooperation for the global common good, geopolitical tensions are rising and protectionism seems to have  become a “new normal”. As a consequence, the delivery of the United Nations Sustainable Development Agenda 2030 has been dramatically slow and the benefits of growth policies are imbalanced across high-, low-, and middle-income countries just as within them.

Global challenges such as climate change, biodiversity loss, and the global debt crisis call for more cooperation among nations. Yet instead of well-coordinated, wise cooperation for the global common good, geopolitical tensions are rising and protectionism seems to have  become a “new normal”. As a consequence, the delivery of the United Nations Sustainable Development Agenda 2030 has been dramatically slow and the benefits of growth policies are imbalanced across high-, low-, and middle-income countries just as within them.

Global challenges such as climate change, biodiversity loss, and the global debt crisis call for more cooperation among nations. Yet instead of well-coordinated, wise cooperation for the global common good, geopolitical tensions are rising and protectionism seems to have  become a “new normal”. As a consequence, the delivery of the United Nations Sustainable Development Agenda 2030 has been dramatically slow and the benefits of growth policies are imbalanced across high-, low-, and middle-income countries just as within them.

Die Abteilung Makroökonomie des Deutschen Instituts für Wirtschaftsforschung (DIW Berlin) sucht zum nächstmöglichen Zeitpunkt zwei studentische Hilfskräfte (m/w/div) für 10 Wochenstunden.

Mit der »Zeitenwende« in der internationalen Politik geht die Notwendigkeit einher, strategisches Denken zu stärken und sich für künftige Herausforderungen besser zu wappnen. Deutschland tut dies bereits, indem es strategische Dokumente zur natio­nalen Sicherheit und zu den Beziehungen mit China vorbereitet. In Bezug auf Russ­land drängt sich eine ähnliche Vorgehensweise auf: Erstens weil Russlands Aggression gegen die Ukraine die Situation in Europa und darüber hinaus für längere Zeit wesent­lich verschlechtert hat. Zweitens weil die Konzeption einer Russlandpolitik, die auf den seit 2022 deklarierten Leitlinien basiert, eine Möglichkeit bietet, frühere Fehler zu korrigieren und Maßnahmen, die aus einer Krisensituation hervorgegangen sind, in eine langfristige Politik zu verwandeln.

Socio-ecological transitions need to address the pressing challenges of our time, namely climate change mitigation and social development – including poverty and inequality reduction – in a complementary manner. The importance of achieving resilient and sustainable societies has been made more evident by recent shocks such as the Covid-19 pandemic and the war in Ukraine. As a consequence, national and international development policies need to foster links between social and environmental goals and policies.
One way to achieve such synergies is through environmental fiscal reforms, defined as the combination of carbon-pricing mechanisms and consequent revenue spending for environmental and socio-economic goals. Even though carbon pricing is just one of the instruments needed to achieve climate goals, it provides the complementary benefit of expanding revenues while incentivising a reduction in emissions though market signals. This paper discusses environmental fiscal reforms from the perspective of low- and middle-income countries and development cooperation, with a focus on how to improve the social outcomes of such reforms. While revenues can be recycled for different purposes – including compensating industries with high adaptation costs, further investments in environmental projects and research, and use for the general budget – the paper focusses on social spending. The revenue can be used to decrease poverty and inequality levels and to compensate the poorest for increases in prices by utilising social protection mechanisms. This is particularly important to garner broad societal support and to make environmental fiscal reforms and carbon pricing more socially acceptable and implementable at sufficient levels in more countries. The paper first presents the key features of different carbon-pricing policies and the revenues they can generate, especially for low- and middle-income countries that have limited fiscal space. It then shows how the revenue can be used to fund social protection mechanisms that can compensate the poorest and address distributional concerns. It underlines the gaps and limitations of current social protection programmes, especially in terms of low coverage of vulnerable populations. This also constrained the response to the war in Ukraine, as lower-income countries had to use price stabilisation mechanisms – which ultimately generated negative fiscal and environmental effects – to avoid inflicting greater burdens on the poor instead of providing targeted programmes. The paper also offers some design principles to best address distributional concerns, including sequencing and sectoral coverage. It then discusses the role that development cooperation can have in implementing environmental fiscal reforms in low- and middle-income countries. Overall, the paper suggests that environmental fiscal reforms can be used to achieve resilient societies and accelerate the fight against climate change, with the goal of building a more inclusive and sustainable future. Such reforms should become a priority of German development cooperation and a key lever for its strategic goals, instead of occupying a peripheral role, as it currently does. Most importantly, the analysis strongly underlines the case for environmental fiscal reforms rather than the current use of subsidies and price controls; this is true when considering both climate goals (as keeping prices low does not incentivise shifts in production and consumption) as well as social goals (e.g. cash transfers result in significantly greater levels of poverty and inequality reduction when compared to untargeted subsidies). Therefore, social protection investments are urgently needed, also in lower-income countries. The current energy crisis due to the war in Ukraine and the Covid-19 pandemic has made this clearer.

Socio-ecological transitions need to address the pressing challenges of our time, namely climate change mitigation and social development – including poverty and inequality reduction – in a complementary manner. The importance of achieving resilient and sustainable societies has been made more evident by recent shocks such as the Covid-19 pandemic and the war in Ukraine. As a consequence, national and international development policies need to foster links between social and environmental goals and policies.
One way to achieve such synergies is through environmental fiscal reforms, defined as the combination of carbon-pricing mechanisms and consequent revenue spending for environmental and socio-economic goals. Even though carbon pricing is just one of the instruments needed to achieve climate goals, it provides the complementary benefit of expanding revenues while incentivising a reduction in emissions though market signals. This paper discusses environmental fiscal reforms from the perspective of low- and middle-income countries and development cooperation, with a focus on how to improve the social outcomes of such reforms. While revenues can be recycled for different purposes – including compensating industries with high adaptation costs, further investments in environmental projects and research, and use for the general budget – the paper focusses on social spending. The revenue can be used to decrease poverty and inequality levels and to compensate the poorest for increases in prices by utilising social protection mechanisms. This is particularly important to garner broad societal support and to make environmental fiscal reforms and carbon pricing more socially acceptable and implementable at sufficient levels in more countries. The paper first presents the key features of different carbon-pricing policies and the revenues they can generate, especially for low- and middle-income countries that have limited fiscal space. It then shows how the revenue can be used to fund social protection mechanisms that can compensate the poorest and address distributional concerns. It underlines the gaps and limitations of current social protection programmes, especially in terms of low coverage of vulnerable populations. This also constrained the response to the war in Ukraine, as lower-income countries had to use price stabilisation mechanisms – which ultimately generated negative fiscal and environmental effects – to avoid inflicting greater burdens on the poor instead of providing targeted programmes. The paper also offers some design principles to best address distributional concerns, including sequencing and sectoral coverage. It then discusses the role that development cooperation can have in implementing environmental fiscal reforms in low- and middle-income countries. Overall, the paper suggests that environmental fiscal reforms can be used to achieve resilient societies and accelerate the fight against climate change, with the goal of building a more inclusive and sustainable future. Such reforms should become a priority of German development cooperation and a key lever for its strategic goals, instead of occupying a peripheral role, as it currently does. Most importantly, the analysis strongly underlines the case for environmental fiscal reforms rather than the current use of subsidies and price controls; this is true when considering both climate goals (as keeping prices low does not incentivise shifts in production and consumption) as well as social goals (e.g. cash transfers result in significantly greater levels of poverty and inequality reduction when compared to untargeted subsidies). Therefore, social protection investments are urgently needed, also in lower-income countries. The current energy crisis due to the war in Ukraine and the Covid-19 pandemic has made this clearer.