IDS Research on the Financial Crisis UNICEF 16 July 2009

The In Focus Policy Briefings www.ids.ac.uk/go/infocus7 Summary Evidence from previous crises Qualitative Impact in 5 countries Social Protection Responses Fiscal space China and LICs Global trade Trade Credit Narratives A New Development Paradigm

The Short Research Projects Trade Credit Global Trade and Prices China’s impact on developing countries Narratives about the Crisis Rapid Qualitative Assessment of impact in 5 countries

Trade Credit is not a problem for everyone The Real Problems Exchange rate changes but for exporters to the UK Sterling devaluation reduces income Local costs increase as currencies appreciate Many inputs prices in dollars Falling demand Slow renewals of orders for garment companies Falls in demand for flowers Food not so badly affected The Surprise Interviewed established garments and horticulture firms in SSA None of the firms interviewed has had problems with trade credit But big problems for some firms in Central America And perhaps for smaller, newer or less well established firms

Scenario: 5% Decline in GDP of OECD Countries Not everyone loses from an OECD recession Scenario: 5% Decline in GDP of OECD Countries 5

No indication that Chinese strategic investments in Africa will decline Demand for some inputs from China (e.g cobalt) has collapsed, leading to halting of production and loss of jobs e.g. in DRC Chinese state companies are pushing ahead with strategic energy sector investments and infrastructure projects, for example, stakes in Rio Tinto and OZ Minerals Ltd. Private companies such as the Shenzhen based company Huawei Technology are continuing to expand in technology areas in Africa. During early 2009 visits of government leaders to Africa, China has committed to further aid and development cooperation

The Food Crisis is far from over Effects of food and fuel price hikes still being felt Food prices still higher than 2007 Not dropping everywhere Uncertainty in agricultural markets Export sector job losses in Jakarta but not in Dhaka Diversification and adaptation Micro- and informal credit markets hit

How might Development be different Context sensitivity - or throwing the baby out with the bathwater? A new era for global economic governance? A new opportunity to protect the poor …and the planet