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Aid Goes Online; The Development World Awaits Its Bloomberg

Author: Sebastian Mallaby, Paul A. Volcker Senior Fellow for International Economics
September 3, 2007
Washington Post

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Michael Bloomberg founded his financial information firm 26 years ago, after a hot career at Salomon Brothers. Raj Kumar founded his development information firm seven years ago, as a student project at the Kennedy School of Government. Bloomberg’s company has become a giant, employing 8,200 people. Kumar’s Development Executive Group (http://www.developmentex.com) so far employs 65, but his concept is similar.

Bloomberg gives financial markets what they need: instant and plentiful information. Before the company’s terminals became ubiquitous, the bond market was a backward place: If you wanted to buy bonds, you called a few brokers to see what might be available. Now, with Bloomberg, investors can see all their options on a screen. They get the best price, which means Wall Street middlemen don’t scalp money off each trade, which means more of the country’s capital reaches firms that need it.

Kumar’s aspiration is to do the same for the development business. Foreign assistance is an industry in itself: Every year, governments and charities spend some $200 billion on projects in poor countries. Some of those billions are wasted, because the development market hasn’t had its Bloomberg yet: It lacks information. There is plenty of talk about corruption siphoning off development dollars, but sheer inefficiency in aid is probably the bigger problem.

Consider the process of procurement. Development projects involve contracts in the millions of dollars for construction, engineering, information technology and so on. If you’re running one of these projects, you can place ads in the newspapers asking for, say, water engineers. But most of your potential suppliers probably won’t notice. As a result, there will be few bids for your tender, and you will pay an unnecessarily high price, just as bond buyers did in the pre-Bloomberg era.

Now comes Kumar’s Web site, which creates a clearinghouse for information on 30,000 development projects. With that much business in one place, suppliers congregate like bees, especially since the site is searchable. By typing in a key word, a water-engineering firm can find 1,675 water-engineering opportunities. Suddenly, buyers of water-engineering services have multiple suppliers to choose from. Costs fall by perhaps one-fifth, judging by experiments in competitive procurement in Brazil and the Philippines.

Next, consider the process of hiring development professionals. Again, the managers of development projects can advertise for people in the newspapers, but this is a haphazard method: By the nature of their work, the professionals you want are scattered. Kumar’s Web site provides employers with one-stop access to 62,000 aid workers. You want an Arabic-speaking water engineer with a master’s degree and a minimum of three years’ experience? A few clicks will introduce you to 141 of them. You want to avoid overpriced expatriates? For your project in Egypt, the site offers more than a dozen Egyptian water specialists.

Kumar is adding a networking option to his site— a sort of development workers’ MySpace. If a health worker in Nairobi is having difficulty setting up a vaccine supply chain, she can search Kumar’s site for fellow aidniks who have worked in Africa and understand the challenges of cold storage. (When I checked recently, there were 14 of them.) Then she can e-mail these colleagues and tap them for advice and sympathy.

Kumar’s Web site is part of a wider effort to take development online, and it promises broad benefits. Until now, the aid business has been dominated by large bureaucracies, because these were best at accumulating and disseminating development know-how. Today online professional networks provide an alternative. Until now, understaffed governments in poor countries have battled to coordinate dozens of donors. Today Tanzania’s planners can go to Kumar’s Web site and see the 97 water projects in their country that 11 different donors are financing.

And who knows about tomorrow? For the big aid bureaucracies of the rich world, monitoring results involves huge effort and expense, with high-priced consultants jetting out to inspect projects. Perhaps in the future, aid agencies will go online to find monitors who are already in the field. They will send someone over to the next village to evaluate their school-building project, and the main expense will be a tank of gas. They’ll get their feedback the next day: photographs, video clips or written comments, all uploaded on a Web site.

The Development Executive Group isn’t exactly Bloomberg yet, and perhaps some rival outfit will emerge to dominate the cyber-aid market. But whatever the future for Kumar’s firm, foreign assistance is ripe for a Bloomberg-style leap forward.

This article appears in full on CFR.org by permission of its original publisher. It was originally available here.

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