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Monday, December 6, 2010

Direct Distribution

Two weeks ago I wrapped up some vacation on the island of Lamu off the coast of Kenya. Friends from Kenya recommended it to see the traditional, Swahili culture of the coast and it was really quite different from the rest of Kenya. We ended up staying in a village close to Lamu called Shela where there were no cars (lots of donkeys) and enjoyed a really relaxing few days amidst one of Kenya's hidden gems. If you're considering going to Lamu, definitely call Gabe and Susan to arrange everything.

One of the reasons I made an effort to visit Lamu this past trip is that there is a major upcoming infrastructure project to build a deep water port which many, unfortunately, fear will fundamentally change the character and culture of the area. Kenya already has East Africa's major port in Mombasa, just down the coast, where imports and exports as far as eastern Congo flow through. The Lamu port is intended to manage imports and exports from Ethiopia and South Sudan who both have neighbors to the north they're not too fond of.

All of this got me thinking about South Sudan and the upcoming secession referendum on January 9th. Like nearly all commentary out there on the vote, I can't imagine the South voting for anything other than secession. If all goes as planned, and that is a serious "if" given the North's history of violence in the South, their reliance on southern oil for the economy, and some recent bombings near the border, Southern Sudan (aka South Sudan aka New Sudan) will be the world's newest country endowed with enormous oil reserves and a quasi-functioning government run by the former rebel SPLM/A.

Todd Moss and others at the Center for Global Development have been writing and talking about an interesting concept in which countries endowed with oil resources directly distribute some or all of the revenue directly to their citizens. It's an interesting idea to attack the oil curse, drain the pool of funds that politicians find nearly impossible not to take from and align the incentives for good and accountable governance. I am not aware if there are plans to do this in South Sudan but where government is least effective, the incentive to directly distribute seems to be highest.

Of the people, by the people, for the people?

Ok, all of that is actually the prelude to 2 questions I won't answer but am curious to hear others' thoughts on:
  1. Could/should we directly distribute most aid to the poor and let local NGOs, companies, and international players compete for the poor's business?
  2. Given health's information asymmetries, where might this work and where might it not? When the poor are not fully informed, is it more efficient to administer funds centrally or simply spend to market and educate the poor on good practices (e.g., using malaria nets for kids, etc.)?

1 comment:

  1. Regarding #2, the case for direct distribution is strongest in places with horrible governments that would not spend the money well regardless. So there's usually not a real tradeoff there. Due to the oil curse the tradeoff is even less of a concern: the decision is often between private spending which may be less than ideal and government spending which is known to be actively bad. The implication is that there is still scope for third-party intervention, e.g. by the WHO.


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