Listen:
Key Points From This Episode:
- What Growth Teams is all about and how Kartik and Jonathan came to found it
- Kartik and Jonathan’s professional backgrounds
- The importance of structural growth and economic development
- Why the aforementioned issues are neglected by governments and policymakers
- Defining structural transformation
- The factors that make structural transformation difficult to facilitate
- Our guests’ advice for how governments can uphold their transformation reforms
- How labor mobility fits in
- Why government outreach programs have low skills retention, and how Growth Teams is fixing this
- A look at Growth Team’s involvement in government outreaches and how it evolves during the process
- The countries that Growth Teams is working with and the company’s plans for the future
Quotes:
“In a nutshell, what Growth Teams does is we help developing country’s governments to problem-solve for economic growth through a structural transformation.” — Kartik Akileswaran [0:01:07]
“Good institutions are a key determinant of long-term development.” — Kartik Akileswaran [0:03:44]
“We shouldn’t let perfect be the enemy of good. So, just because we can’t fix all those problems all in one go doesn’t mean that we shouldn’t try to incrementally figure out second-best solutions along the way.” — Kartik Akileswaran [0:19:53]
“We found, the best way to often start some of these engagements is to begin doing work side-by-side [with the locals].” — Jonathan Mazumdar [0:39:34]
Links Mentioned in Today’s Episode:
Kartik Akileswaran on LinkedIn
The perspective of growth-enhancing governance’
‘Which World Bank Reports Are Widely Read?’
Charter Cities Institute on Facebook
Transcript
[INTRODUCTION]
Kurtis Lockhart: Welcome to the Charter Cities Podcast. I’m Kurtis Lockhart. On each episode, we invite a leading expert to discuss key trends in global development in the world of cities, including the role of charter cities and innovative governance will play in humanity’s new urban age. For more information, please follow us on social media, or visit chartercitiesinstitute.org.
Jeffrey Mason: I’m Jeffrey Mason, head of research at the Charter Cities Institute. Joining me on the podcast today are Kartik Akileswaran and Jonathan Mazumdar, the cofounders of Growth Teams. We discuss both the importance and the difficulties of facilitating economic growth and structural transformation, what Growth Teams is doing differently from other development and inventions and we take an in-depth look at the work they’ve done so far to help Rwanda develop a business outsourcing sector. I hope you enjoy this episode; thank you for listening.
[INTERVIEW]
Jeffrey Mason: Hi Jonathan and Kartik, good to see you again; welcome to the show.
Kartik Akileswaran: Likewise, thanks for having us, Jeff.
Jonathan Mazumdar: Thanks for having us.
Jeffrey Mason: Of course. So, start out, what does Growth Teams do, and why did you guys found it?
Kartik Akileswaran: Yeah. So, in a nutshell, what Growth Teams does is we help developing country governments to problem solve for economic growth through structural transformation. So, more specifically, what we’re trying to do is support governments to translate the plethora of research, policy recommendations, strategy documents, et cetera, that they have, whether internally or from external parties that have produced those things for them into tangible actions on the ground that can meaningfully make a progress on their constraints that are holding them back from achieving faster growth.
The way we’re trying to do that is infuse the way in which they work with lean startup principles. So, you can think about being more action-oriented, monitoring more regularly, trying to take a more iterative approach to how they actually do the things that they do to attract investment or promote excellence for other things. Ultimately, our goal is that it’s for governments to be able to create their own flywheel as you could say, for promoting economic growth.
So, that’s what we do. In terms of why we found it, so we have a strong belief that economic growth really, really matters for human welfare generally, and we can talk about that later with some data points and whatnot. So, that’s one, that’s one motivation. I think, the second motivation comes from our experience and also, some of our understanding of the literature in the space.
So, from our experience, political leaders, policymakers in developing countries that we’ve seen, really have the goal of promoting inclusive growth and are sort of top priorities in many, many cases. They also know that their governments often struggle to actually sift through all of this policy advice that they’re getting, all the ideas they have on the shelf, et cetera, figure out what makes sense in their context, and then bring it down to a level that can actually translate it into concrete actions that they can take, and then, finally, to actually take those actions.
A lot of these people, they understand that this is a really difficult challenge, and in many cases, our perceptions that they feel that they’re not getting maybe the help that they need from external actors. So, this is the gap that we’re trying to fill in what we call the policy cycle or the ecosystem. I think maybe one last thing that I’ll mention here is that from the literature point of view, there’s sort of been, I don’t know if it’s quite a consensus.
But somewhat of an understanding that good institutions are a key determinant of long-term development. That’s like the glue, Robinson-type work, and other work that’s out there. I think Vollrath had a nice piece that sort of summarizes this journey to the good institution’s hypothesis and Asterisk Magazine, relatively recently. Anyway, our view is that that’s great but that there’s also a growing literature that is pointed to what’s called, good enough governance or state capability as being enough to kickstart fast growth, right?
So, the fact that the same policy idea has hugely different effects across countries for example, especially on economic zones being an example that suggests that it’s not just the content of the policy idea itself. It’s also how that idea is translated into the real world in a specific place at a specific time, right? And so that’s where the sort of good enough governance idea comes into play.
Can you actually manage that special economy or get that special economic zone set up good enough, at least in the beginning, and manage it good enough at the beginning, such that you can attract investment, such that you can get enough firms operating at some level of competitiveness that then kickstart this virtual cycle, right?
So, that’s the point of view, the perspective that informs our work that we’re not trying to get developing country governments to go from their current state capability to like, world-class in one go. That’s not really imperially even possible. We’re trying to actually engage an iterative learning by doing processes with them such that they can, over time, get better and better at attracting investment, at unblocking constraints to job creation, to exports, et cetera. So, that was a little bit long-winded but I want to cover a couple of different points there.
Jeffrey Mason: Yeah, of course, thank you, and before we get more into, we’ll have a broader conversation to think about growth and structural transformation and some of the specific work that you guys have been doing. Just talk a little bit about your backgrounds and how you got to be in the position to be founding Growth Teams and working on these issues.
Kartik Akileswaran: Yeah, great. So, I’ll just kick off, and then Jonathan will come in and speak on himself. So, I’ve spent the last decade or so working on economic growth strategy in various organizations and roles. So, I’ve worked on the donor side with the Millennium Challenge Corporation, which is a donor agency in the US government. I’ve worked as an advisor with the Tony Blair Institute, sitting inside of governments in Sierra Leone and Ethiopia, and worked on a couple of other countries as well, working on industrial policy and business environment and sector-specific type performs.
More recently, I’ve worked with the Indian State Government on issues related to investment, SMEs, industrial parks. Both Jonathan and I started our careers actually in the impact evaluation world, managing our city projects. So, I was with Innovations for Poverty Action in Peru working for Dean Karlan in the late 2000s. After that, I joined J-PAL for a little while in headquarters before I went off to graduate school.
Another point of commonality that Jonathan and I have is that we both did the MPID program at the Harvard Kennedy School. We were a few years apart but I think that experience motivated us in similar ways to focus on economic growth strategy after school. So, as your listeners may see during this conversation, having studied with people like Dani Rodrik and Ricardo Hausmann, Lant Pritchett, and various others that really influenced the way we think about these issues around economic growth and the intersection of that and state capability. So, that’s a bit about me. I’ll hand it off to Jonathan.
Jonathan Mazumdar: I’m Jonathan. I’ve spent my career working to accelerate investment and economic growth across India and Africa. So, the earlier part of my career, for many years, I was an early-stage venture capital investor. So, at Acumen Fund and Sangam Ventures, investing in high-growth impact startups largely in India and then mostly in education and clean tech.
After that, I pivoted more to work through policy at government. So, with the Tony Blair Institute, I served as an advisor in Rwanda to the government there and investment innovation ecosystems and industrial policy and, yeah, as Kartik alluded to, way back when, at sort of the beginning of my career, I started in the RCT world and so, began working with The Poverty Action Lab for Esther Duflo up in Cheap Energy on a, one of these big impact evaluations in rural India.
Jeffrey Mason: it’s interesting that you both have this background and this partial background in working in RCTs and now you’re sort of in a very different space which leads me to my next question, and that’s to ask that do you think growth or economic or structural transformation, whatever you want to call it, is that a neglected topic within development, do you think?
Kartik Akileswaran: So, I think maybe first, it’s useful to dive a bit more into the importance of it because I think that maybe has some correlation to whether or not one thing sits neglected. So, we’re very much in influence, as I said earlier, by work from various experts including Glen Perchet, who have basically documented the importance of economic growth, right?
So, for example, in recent decades, economic growth accelerations in various countries have yielded welfare gains a thousand more times as large as the most effective way into poverty programs. That’s one empirical effect. It’s clear imperially that no country has high levels of GP per capital, low levels of basic welfare, and vice versa and so, growth is just like, really, really, really important, and perhaps, most people, even us, maybe if we underwrite it, I don’t know.
But I think, as a result of that, we do feel that it is, at least, somewhat neglected, if not, substantially so. So, if we can start maybe with say, take the philanthropic community. So, philanthropists in our experience typically focus on confined problem areas, and projects like reducing malaria incidents through the provision of bed nets, or improving school attendance, or increasing access to safe drinking water, and that’s all great.
It’s fantastic, those are important problems. At the same time, there’s an emerging discussion in the philanthropic world about systems change philanthropy but given all this, there seems to be very little money that’s going towards promoting larger scale, economic transformation, or structural transformation, which I’ll define a bit later. On another hand, you have a handful of large organizations like the World Bank, working with developing countries to support growth.
So, much of their work in the space is informed by what you might call a traditional macroeconomics approach. So, they’ll advocate for things like macro stability, establishing the rule of law, making it easier to start a business and get permits, investing in human capital that now, I mean, it’s defunct now but doing business index as an example of how this approach was actually put into practice with respect to engaging with countries, right?
So, again, nothing too offensive there, I don’t think we would disagree that those things are valid but our view is that they presume that any given country has one business environment and that that business environment is determined largely, if not solely, by the law, by what is written down on paper passed by governments and then as a result, that structural transformation will happen as a matter of course if the overall business environment is sound.
And I guess, our perspective on this is that we don’t think this is true in many cases, especially in developing countries, where as I was referring to before, there’s often a gap between what’s written down on paper in terms of laws, policies and regulations, et cetera, and what actually happens in practice. So, as a result, there are actually investment microclimates.
So, there’s not one investment climate in a country or in place, there are investment microclimates that vary by sector and even by firm sometimes. So, this perspective is the one that we feel is somewhat neglected and governments can’t really turn a blind eye to this. We feel that actually, if they want to promote structural transformation, they have to be attuned to this and inevitably, they have to make choices about where to direct their resources.
And those choices impact different parts of the economy, different – and so, this sort of what you could call mesa-level or even micro-level view on structural transformation, where we have to really get granular, understand the intricacies of different parts of the economy even if we can only do so imperfectly, and identify concretely what is needed to enable the promising, the high-value parts of the economy to thrive.
This is what we feel doesn’t receive the attention that it deserves, even amongst researchers to some extent but certainly amongst practitioners. So, that’s sort of like the perspective that we take on this challenge and that’s the view that we’re trying to bring more to the center of the conversation.
Jeffrey Mason: I think this idea that you mentioned of a sort of micro-climate for investing in a particular industry or sector is really interesting because you mentioned doing business. I think those sort of modal example that they used for every country was like, what does it take to build and operate a warehouse in the principal business today, that was the use case, which maybe that’s accurate for some things but imagine for lots of sectors, maybe that data was medley useful, best for maybe it had been just completely inaccurate entirely, which I don’t think it validates the exercise but right, speaks to the sort of depth of this problem.
Kartik Akileswaran: That’s right, exactly.
Jeffrey Mason: That you guys are trying to do something about.
Kartik Akileswaran: Yup. So, take warehousing, right? There’s some sectors where warehousing is really not a major input to the production process so you need a warehouse if you produce goods and you need to store them somewhere and then get them to the port or whatever it is but you don’t need a warehouse necessarily if you are a call center and that can be a super high-value industry in lots of places, it has been.
So, it’s just this really small but concrete example of how really, when you get down to brass tax, there really is quite a lot of variation and the way in which different parts of the economy operate, and the things that they need.
Jeffrey Mason: So, let’s dig into some of the intricacies of this. Why is it that governments often struggle so much to facilitate structural transformation to develop particular industries or sectors? What is it about that problem that makes it so intransient?
Kartik Akileswaran: Yeah. So, maybe now is a good time to just quickly define for the audience what we mean by structural transformation, which is a really unfortunate jargony type thing but it’s quite intuitive to understand. So, what we mean is – which is basically arm setting is a lot of researchers and a lot of literature takes the same view is that structural transformation is a process whereby resources in the economy.
Oftentimes, we care especially about labor but also capital and technology, are shifted out of what you could call traditional low productivity primer activities, often agriculture is used as sort of the catch-all there, into what are called modern higher productivity sectors. So, think manufacturing and services as a shorthand. So, that’s what we mean by structural transformation, that shift of resources in the economy from low-productivity activities to higher-productivity activities.
That’s the simple – what I hope is an intuitive way to put it. So, get into your question, why do so many governments today struggle to facilitate that process? So, my first thought is, Jeff, if we knew the answer to that then we would be perhaps extremely high profile, rich, well-known people but we are not quite there. So, this is like the multi-trillion dollar question I suppose and there isn’t really one straightforward answer.
I think that’s a really important thing to recognize, that structural transformation itself is a complex process and that is affected by perhaps dozens and dozens of variables, dozens and dozens of factors. It’s hard to give a comprehensive answer but I’ll highlight a couple of different points and I think one way to maybe break it down conceptually is to think about the external contextual environment, and then what’s happening in a given country, right?
So, on the first point about external environment, today, the global context does appear to be fairly different than perhaps it was in the second half of the 20th century for example and some people argue that it’s less conducive to structural transformation than it was. So, when -say the Japan’s or South Korea’s or Taiwan’s or Singapore’s were going through their process, right? So, some quick points on that front that the rise of China as the factory of the world has perhaps done a lot of good for the world in many ways.
But also perhaps it’s removed some opportunity or made it harder for a lot of countries to take advantage of, whatever opinions are there because China has become so dominant across so many different value chains, that’s one. Two is that, there’s been this sort of in the last couple of decades is, what’s called servicification of manufacturing. So, in the literature, a lot of people tend to believe that manufacturing has sort of special properties that enabled countries to really climb this development ladder, super-fast, within a matter of couple of decades.
And now, manufacturing is becoming more service-intensive, and perhaps, a lot of service sectors don’t have quite the same properties that enable this fast climbing of the ladder. You know, that’s up for debate, there are some mixed literature around that but time will tell I suppose. A third point is around automation. So, this is becoming more and more of a concern I think amongst lots of people which is that automation is making manufacturing more capital and technology-intensive than it once was and perhaps, even making it less labor-intensive.
So, maybe there’s some substitution going on or displacement going on by the capital against labor and so that delves the ability of manufacturing to perhaps, absorb workers, create jobs, that sort of thing, which was such a vital role that it played for lots and lots of countries. So, that’s a few points on like, the external side, that maybe is making it difficult for governments today.
On the internal side, there is a couple of ways to think about this. So, one is just sort of like the traditional approach, which is that there’s lots of distortions in the economy in any given economy. So, there are government failures, so think about things like there are factor market problems, regulations, frictions, et cetera. So, around land, utilization of land, acquisition of land around labor, so being able to hire and fire and being able to grow businesses, get more workers into the business, et cetera.
There could be distortions related to access to finance, capital. So, those are things that might be bucketed to government failures because they’re directly related to policy distortions or regulations or things like that. On the other hand, you have market failures, right? So, these are things like credit marketing profession, so firms struggle to get access to finance, maybe there’s problems around human capitals.
So maybe education and health are weak, so kids aren’t learning in school, or health indicators are improving so workers aren’t able to be as productive as they could be. Then you have things like coordination failures and investment, right? So, they’re a chicken and egg problems in the economy where investors don’t want to invest because it’s too risky and they don’t have all the other complimentary inputs that they need to be able to excel in a particular sector.
So, they’re not going to invest but at the same time, government can make those investments and those complimentary. Well, that’s because there’s no existing firms to utilize those inputs and so, you know, you have this chicken and egg situation where you get sub-optimal investment because of these sorts of problems, right? So, these are sort of like the typical things that economists think about.
These are things that are featured in things like growth diagnostics, frameworks, or other similar frameworks, right? So, that’s like the traditional view but just quickly, and this is the last point, going back to sort of what I was saying about growth thing, good enough governance or what some others like Mushtaq Khan call growth-enhancing governance, we shouldn’t let the perfect be an enemy of the good.
So, just because we can’t fix all those problems all in one go, it doesn’t mean that we shouldn’t try to incrementally figure out second-best solutions along the way, right? So, there’s some nice paper, so Glenn Perchet, Ricardo Hausmann, I don’t know if Dani Rodrik was a co-author on that but those two were authors on a paper some years back, maybe 20 years ago now, basically showing that like, just because you do all these reforms, doesn’t mean you’re going to get a growth acceleration.
In fact, I think, in their paper, they saw that only half the time after an economic reform of some of the issues I was talking about, get a growth acceleration happen as a consequence afterward, right? So, there’s no guarantee and then, there’s a nice paper by Terry Zian and I forgot the co-author’s name, that sort of shows something similar that’s – there are wide variations of outcomes, even if you do some of these reforms that I was talking about even if you do them, there’s a wide variation of outcomes in terms of growth after the fact.
So, there’s no guarantee, it’s really hard and then I guess on this point just to close, our angle on this problem is essentially that one way that you can try to basically get these reforms to stick better is to actually work on this implementation that we identify, which is that perhaps one of the reasons why the reforms don’t actually produce positive growth outcomes is because they’re not actually implemented properly.
If we can actually try to work on the implementation side of things, then maybe that can help us to get more in different types of investors in the door in various countries, whose presence can actually be catalytic for structural and transformation. So, again, long-winded, lots of points there, it’s a complex question but yeah, hopefully, gave some food for thought.
Jeffrey Mason: Right, it’s a complex question but it requires a complex answer. I have one more questions, sort of thinking about growth and structural transformation from kind of this removed level and then we’ll transition to some questions about, more specifically, about what you guys are doing and this is something you touched on a little bit and kind of also brings up the sort of human capital – human capital of part of the question.
So, how should we think about the relationship between economic growth or structural transformation, whatever you’d like to call it, in low-income country to high-income country labor mobility? There’s arguments to be made about skills transfer, do people come back, do they stay, are we transmitting learnings, and then – or people maybe bringing back capital, are these things complimentary? They’re conflict, the sort of brain drain versus gain argument. How does labor and mobility fit into this story?
Jonathan Mazumdar: Yeah, this is a great question. My impression is that there are a lot of concerns around this phenomenon of higher skilled people leaving developing countries, going to high-income countries, and that causing this brain drain that you refer to, and that’s actually stunting the development prospects of low-income countries. So, I’ve seen that there’s a lot of concern about this.
I would say we have less concern about that. I think maybe to take that brain drain point head-on, our understanding of the literature is that that’s not really a well-documented empirical fact that this brain drain thing actually exists, number one and number two, that is people leaving actually has these big negative impacts on development directors. So, you then might ask why, so why did that big a case?
So, I think there’s at least a couple of reasons. So, one is remittances so I don’t know the exact figures but remittances I think now outweigh ODA, overseas official development assistance and I think it’s by I think it’s by a fairly wide margin at this stage. I am not exactly sure. As I said, I don’t know the exact numbers but that’s one thing. So, a lot of low-income countries are directly benefiting from remittances that people from their country earn higher wages in high-income countries and then send back some of that surplus to their home countries.
So, that’s one and then I think it is something it’s really not to be seems that given the volume and also given just sort of just the – it is almost like a cash transfer in a sense. So, the alert on cash registered is pretty positive in terms of providing some really useful support to household in developing countries. You could quibble about the types of households that are receiving those remittances because it actually tends to be higher income.
Not the highest income perhaps but a high-income household that actually able to send people abroad from their household but nonetheless, that’s one. Two, I think is perhaps a bit more subtle but it’s directly related to the conversation we’ve been having, which is around transfer of what you could call technology and know-how. So, one way to conceptualize why in low-income countries are low income is because they don’t actually have the technology and know-how to be more productive and thus, higher income.
So, they don’t know how to actually make stuff at an economy level, at a low enough cost with a high enough quality such that they can sell that stuff competitively to the world. So, you might ask how do they figure that out. Well, one way to figure that out is, go to places that know how to do that and then bring the technology or knowledge back, right? And so that’s a really important channel through which high-skilled immigration from low-income countries to high-income countries actually can help the development process in low-income countries, exactly through this process of technology and know-how transfer.
Jeffrey Mason: When you’re speaking there, it might have been Hong Kong and just across the water, right? To Shenzhen and the greater area is probably one of the most maybe unique but also most dynamic and focused examples of what you’re talking about.
Kartik Akileswaran: You got it and I think there is sort of an advantage in a way that a lot of low-income countries that send people abroad have, which is that their diaspora have sort of a deeper connection to their home country than any old person that might have that same knowhow, right? That they’re from the country and probably they had a family and cultural ties to that country so they want to help, right?
So, another great example of this is India, right? India’s IT industry hugely benefited from the know-how and technology that Indians who went to the US in the 70s and 80s accumulated and then brought back during that same time in 1980s into the 1990s, that’s a big part of the reason why India has become sort of the IT powerhouse that it has. So, I guess that’s our view, there is obviously a lot more to say there.
But I think the punchline is that we sort of think that a lot of the concerns around this are maybe over the loan.
Jonathan Mazumdar: Just to compliment that briefly, I mean, and then it’s actually one of our advisers, that Lant Pritchett has made this point. I know he’s been on the podcast that if you look at some of today’s rich countries, obviously, particularly in Europe, like many of them experience massive outward migration in a hundred years ago or sort of around that timeframe, right?
My family partially is from Italy, so those are kind of big facts that you have to grapple with and then I think the stories that Kartik is alluding to about know-how transfer of diaspora are just all over like these structural transformation journeys. The other one that comes to mind just because people all know it is the T.S. 7-Sea story in Taiwan, right? So, coming back actually having that time with TI and Texas Instruments and bringing that know-how.
And there’s other components to the story but these kinds of going, getting know-how in a business, and then coming and bringing it back to a country and just sort of you find that in so many cases.
Jeffrey Mason: Yeah, absolutely. Now, I want to turn a little bit to what you guys are doing. So, right there’s obviously lots of technical assistance, consulting, lots of different projects going on in lots of different places on both these topics and others, yet the impact that that outside team seems to have on whatever unit, department, ministry, or whatever the focus of their effort is if there is an impact at all, it often seems to subside or even go negative sometime after they leave or disengage.
Why is there so little knowledge, skills, process, retention from these outreach efforts and what are you guys doing differently to try to prevent that?
Kartik Akileswaran: Yeah, I think this is a really important question. I think Jonathan will share a concrete example that sort of tries to illustrate what we’re trying to do that’s different. Just to set the scene a little bit on this question, so as you alluded to, there are various organizations including big ones like the World Bank that work in the space that spend a lot of resources and effort doing analysis, development strategies, making recommendations to essentially build up a pool of policy ideas for governments to even implement various projects, infrastructure projects and institutional reform-type projects, etcetera.
I think just for reference, we did some research a while back, the OSCD spends an estimated something like 18.4 billion dollars a year on technical assistance, all of that is not focused on growth issues but probably a large chunk of it is. On the bilateral side in 2016, the US, UK, and Germany all spend more than 800 million each in bilateral aid on experts and TA. So, that’s the size that we’re talking about. You know, many billions of dollars spent on this, right?
So, the approach that a lot of these organizations take reveals what they believe to be the core challenge, so you can sort of back out implicitly more problem they think they’re trying to solve, which that governments and countries just don’t have enough of or the right ideas or institutions perhaps to promote growth. So, then that standard solutions like, “Okay, let’s recommend best practice policy ideas and best practice reforms within government and in the policy environment.”
Based on experiences from other countries, sometimes rich countries, sometimes countries are not so similar to the country at hand, etcetera, right? So, I guess that’s the status quo, it is a bit of a simplification but that is oftentimes how a lot of these excellent support programs began to operate. So, our view is that this is like an incomplete theory of change that this approach doesn’t even intend to promote the knowledge transfer or the skills retention that you refer to in the question.
In fact, the third change is that, “Okay, if we give governments more information and ideas that will in and of itself translate into better outcomes and so what happens as a result and what you see if you work inside of governments like there’s no shortage of donor-funded slide decks produced by various sorts of organizations or consulting firms or whatever that frankly are just collecting dust on the shelves of government offices.
It’s a trope by now. If you talk to people at the department – we talk to many, many people in working with these Growth Teams idea, I don’t think anyone has disagreed with that observation. And even these big players themselves, they recognize this. So, there is a nice World Bank study in 2014 that indicates that nearly one-third of World Bank policy reports published between 2008 and 2012 were never downloaded.
So, that’s one-third and an additional 40% of reports that were considered in that study were downloaded no more than a hundred times. So, you’re talking about basically almost 80% of all the policy reports and things published on the World Bank website were downloaded less than a hundred times, many which were never downloaded. So, even they sort of acknowledged, they did a study on their own work, even they acknowledged that there seems to be a gap here, right?
This production of knowledge and ideas and all of this is there’s some missing link there getting into the hands of the users not only just in the hands of the users but in a way that they can actually use it. So, what we think is that this status quo approach just sidesteps the challenge of actually building governments’ capability to implement their own growth strategies that like it’s not even that traditional TA is not even trying to tackle that problem.
And to the extent that there are capacity building programs, those are often times classroom-styled lectures and workshops and those sorts of things, and those are not really rooted in any empirically-based view about like how people or organizations learn, how do they absorb new information and that implement that in the world. Like a classroom-styled lecture, I mean, educational institutions are questioning whether that’s the right approach, right?
So, if educational institutions, so it was businesses that help people to learn, they are questions their modus operandi, we should also be questioning that in the space.
Jeffrey Mason: We’ve all been in a classroom.
Kartik Akileswaran: Yeah, exactly, right. Yeah, like we all sat through boring lectures.
Jeffrey Mason: And may or may not have retained too much.
Kartik Akileswaran: Exactly, yeah. We both sat through dozens of boring lectures, right, exactly. So, that’s also not a way to actually build the capability of organizations, right? So, we sort of feel like we need to work more on the lines of an apprenticeship model. So, what we mean by that is like let’s actually learn by taking action in real life on the stuff that’s written down on paper and new strategy documents and policy recommendations and all that.
And let us actually put it into action such that we can learn through the process of actually doing that and that model is simply like not the standard model of external support to governments currently and so that’s like what we’re trying to change. So, maybe now like Jonathan can tell you about like a specific example of how we’ve tried to do that in the case of Rwanda.
Jonathan Mazumdar: Yeah, maybe that’s like the best way to illustrate it and just make it concrete. So, we started, our first engagement in Rwanda, and perhaps for the audience, a little context is helpful, right? Rwanda is a small country, it is still heavily dependent on agriculture as are many in sort of East Africa and sub-Saharan Africa. It’s come a long way in its development journey since the 1990s, since the genocide ended.
It has a lot of big ambitions going forward, actually one of their state of goals is to become a high-income country by 2050 but to progress towards those ambitions, there are just a lot of economic challenges that need to be addressed. As Kartik referred to earlier, you could find distortions or market failures in many different places, right? So, the other thing to say is just as a small land, like country, they have fired transport cost.
That means in a relatively constrained market access, this traditional export-led manufacturing phase economic strategy, which is already there are questions about for various reasons Kartik mentioned, maybe it’s not as straightforward for Rwanda as it was for other countries. Obviously, all of this has been known to the government of Rwanda for many years, and for that reason, they have emphasize services in IT-enabled services in particular as a high potential area to circumvent these constraints.
Specifically – and one such sector is business process outsourcing and related activities. So, picture call centers and IT support, these things take slightly different forms now like more chat and all of that but that’s what you should have in your mind. That sector had featured in a lot of studies, government strategies, some of these dating back a decade but the country as of very recently still faced what we sort of called this cold start problem, right?
That, how do you enter into a globally competitive sector without an existing base of firms, without that industry know-how? I think that sets the scene a little bit, that’s the picture. So, what do we do? I mean, about 18 months ago we started working with the Rwanda Development Board, so that’s the lead investment agency in the country, and in particular, we were working at the key people that already be responsible for the outsourcing sector.
Not exactly the smoothest question, what do we do? I mean, in simple terms, we formed the team together and started working hand in hand, step by step on promoting investment on this area and what that means first was through some targeted research, this team created a compelling articulation for why a BPO firm might consider setting up in Rwanda, just kind of getting that level of information that’s relevant for a market sector.
And then the team took that investment case, you could call it and got it in front at first to build a pipeline of 80 plus, a hundred or so prospective investors reached out, got in touch with those investors that facilitate a country visits for another 10 or 12 and naturally, you can imagine through this whole process there’s a lot of back and forth with investors. There are innumerable follow-up questions to address.
There is additional data points to gather, there are policies from other ministries and agencies in the country that need to be clarified, all of that requires follow-up and consistent action. So far, this is the other thing promising result, so through this work already be – has already attracted two new global firms that are setting up operations in Rwanda, there is a few more we’re expecting soon.
These themselves are going to be on track to create several thousand good jobs in the sector in the next couple of years and by good jobs, we’re talking about jobs that are paying two to 400 dollars per month for entry-level positions, which is several times higher than the prevailing wages from other alternatives and some of them are much higher, up to the 1,500 dollars per month for higher skills or more the demands of IT expertise, in particular languages and things like that.
So, this is kind of overall like the story and the journey and I think some of these things maybe they sound simple and in some ways they are but the big difference is in actually doing them, right? So, it is important to emphasize the government did this work. Our approach was to help facilitate, provide some of the support structures for the magic so to speak is actually getting individuals on these teams on this virtuous cycle of learning by doing, such that they are pulling themselves up the learning curve and we’re not substituting.
Jeffrey Mason: It’s really interesting and actually I haven’t really thought of it in this way before but you can almost describe I think what you are talking about you did in Rwanda and what you’re planning to do elsewhere is almost like a micro implementation if you will. So, most are just maybe familiar with Erin McDonnell’s Pockets of Effectiveness. It’s kind of in a targeted way creating – she’s actually on our podcast, listeners should check that out.
Creating this sort of pocket of government that can execute on the mission. So, this process in Rwanda is currently been started you said, right? Two firms are investing and hopefully more soon. So, what now does your – now your sort of initial thrust has happened, at that point do you guys disengage or do you continue to be involved? What does your involvement look like and how does it change over time?
Jonathan Mazumdar: Yeah, so in Rwanda for example, we’ve already started basically working on another sector, another part of the economy. So last year, we initiated work with RDB, agro-processing, and food manufacturing, which is just yeah, another part of Rwanda’s economy that holds some promise for job creation and inclusive growth. So, that’s kind of one margin in which to like think about is that in any particular location, you’ll need sort of a variety of other sectors to really push a large structural transformation agenda just to absorb a number of people.
Jeffrey Mason: You know, I imagine with your case, right? There’s a trust that’s built up now with RDB as well from starting with one sector then moving on to something else.
Jonathan Mazumdar: Yeah, exactly. I think that’s exactly right but it gives us a concrete place to start and then we have a lot more familiarity, there’s comforts sort of working with a team or relationship build up and some of that takes time. I had spent and lived in Rwanda for many years, so I was able to leverage some of those relationships and connections. In other places, we see sort these people at our networks and other connectors to help accelerate that.
But actually, we found the best way to often start some of these engagements is to begin doing work side by side and even through that process, reveal what are some of the gaps, what are things that we could work on together. So yeah, I think that’s exactly kind of the approach we’re hoping to take and basically a number of other places as well outside of Rwanda.
Jeffrey Mason: Yeah, so just to wrap up, if you’re able to share, are there any other countries you’re currently working in or that you planned to be soon and sort of what’s ultimately next for Growth Teams, would you like to see Growth Teams grow into?
Jonathan Mazumdar: Yeah. So, yeah, absolutely. We are expanding our work outside of Rwanda to places in other countries, in states in Africa, and then some states in India. So, I won’t go into all of the places I guess but maybe to highlight a few, in Tanzania for example, we are currently supporting the government’s effort to articulate its national growth vision and agenda for structural change and to prioritize what are the high potential sectors to enable that growth.
Actually, our colleague is there right now as we speak. In Malawi, we are going to be working with the national government to promote investment and address constraints around agricultural commercialization, which is really just a critical driver of inclusive growth in the country. And Malawi is still one of the world’s most agricultural-dependent economy and then in India, one example is we’re working in Meghalaya, a state in Northeast India.
And so we’re going to be supporting that statewide initiative centered around building government capability and this has a specific focus on youth employment and job creation. So yeah, those are a few examples. The other, I guess, main challenge for us and that is we are still in an early-stage startup nonprofit and so a big part of what we’re doing is in addition to initiating this kind of engagements, is just trying to raise the funding so that we can work with more of these government partners.
So yeah, we think about the big vision for Growth Teams at a few different levels. So, the first is through the direct impact of our work. We say our moon shot, what this is all about for us is to contribute to economic growth accelerations in 10 to 15 countries in Africa and South Asia. What we mean by that is moving from lower and middle-income status to high-income status and practice that’s going from something like one to 4,000 dollars of GDP per capita to 13,000 dollars and above.
The second, beyond that, what we’re aiming for is to be a field builder in the space. We really want to recenter economic growth through structural transformation in the international development discourse and to help build and ecosystem actors that are actually working on this challenge. So, apart from what we described earlier and demonstrating a different model through our work, we also want to engage in those public dialogues and debate through writing and partnerships with like-minded organizations and community-building activities, things like this.
We’ve already done some of this through articles that we published in Stanford Social Innovation Review and other outlets. One thing we’re actually working on is a knowledge product that collects and documents in one place. These past examples of sector transformation stories, to some of the things Kartik sort of mentioned earlier and referred to. Some are more well-known, garments in Bangladesh I think is more commonly known.
Others like the startup flowers in Kenya, the salmon in Chile, people are less familiar with these, even development experts. Worth of course mentioning we’re really excited to be collaborating with you all at the Charter Cities Institute on a growth conference later this year and the idea to bring together community actors focused on this issue and in parallel to that, we’re also thinking through what are the other vehicles through which we can get more funding, especially from philanthropy directly toward this area.
And I think our final thing to sort of say I guess is that we’re also working to crowd in or promote more exploration, more experimentation with different approaches to kind of a version of one of your earlier questions like what can we do to accelerate structural transformation, whether that’s government or on the private sector side. So, there are for example some ideas for promising private-sector interventions that haven’t yet been scaled.
For example, around improving the productivity of existing SMEs or accelerating the creation of high-impact so-called pioneer firms, the ones that really ignite new sectors, new clusters, and drive diversification. So yeah, a big part of this ultimately like we want to create the space for others to focus their attention on these big questions.
Jeffrey Mason: Great. I’m excited for all of this and there will be details forthcoming about the growth summit but it is something that we are really excited about since to be able to share within the next couple of months but yeah, your work is always great. It’s really interesting. I encourage people to check you out at growth-teams.org, especially once that sort of knowledge repository that you mentioned is up because that’s really interesting and that’s useful for us.
I’m sure it will be useful for many of our listeners as well. So, as always, it’s good to see you both, and yeah, thanks for coming on the show.
Jonathan Mazumdar: Yeah, likewise, thanks for having us.
Kartik Akileswaran: Thanks for having us Jeff, I appreciate it.
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Kurtis Lockhart: Thanks so much for listening. We love engaging with our listeners, so please always feel free to reach out. Contact information is listed in the show notes. To find out more about the work of the Charter Cities Institute, please follow us on social media, or visit chartercitiesinstitute.org.
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