Making development more efficient

Foreign aid, despite its do-good image, is an industry. Every year, governments and charities spend $200 billion on projects in developing countries. Yet contrary to the world of corporations and financial markets the sector is intransparent and lacks information. But this is gradually changing – and the internet plays a decisive role in this transformation. Look for example at Developmentex, a website set up a few years ago by Raj Kumar, than student at the Kennedy School of Government. 

Online information shifts the balance of power

In an article in the Washington Post Sebastian Mallaby writes

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 in the Phillipines.

Also, when hiring professionals the website comes in handy: 

… 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.

Websites such as this contribute to a shift of power. Whereas until now the power, i.e. know how, is with the huge bureaucracies, soon much of this know how will be in online professional networks.

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