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Infrastructure Is Critical to Sustained Economic Development in the Global South – Here’s Why

Infrastructure Is Critical to Sustained Economic Development in the Global South – Here’s Why. Infrastructure Is a Force Multiplier for Foreign Direct Investment.

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It’s not overstating things to say that the world depends on infrastructure. Without ports, railways, roadways, airports, bridges, utilities, and the like, business doesn’t get done.

In much of the world, the infrastructure conversation revolves around maintaining or upgrading what’s already in place. The United States hasn’t built a major new commercial airport in nearly 30 years, and even ground-based transportation infrastructure is challenging to complete due to ballooning construction costs and onerous approval processes. (New York’s 1.8-mile Second Ave Subway is widely regarded as the most expensive rapid transit project ever constructed on a per-mile basis.)

Of course, high development costs and permitting issues aren’t unique to first-world countries like the United States. They affect infrastructure projects in the developing world as well. But, by definition, building new infrastructure is more critical in the underdeveloped economies that collectively make up the “Global South” than in Europe, the United States, and other high-income parts of the world.

Unfortunately, key stakeholders don’t always fund badly needed infrastructure in places like Africa, Latin America, and Central Asia. Here’s why they’d do well to remove barriers to innovative development.

1. Infrastructure Is a Force Multiplier for Foreign Direct Investment

Modern physical infrastructure is a vital precursor to local economic development. It’s also a force multiplier for foreign direct investment. To many international businesses and high-net-worth individuals, infrastructure quality is a make-or-break factor in developing-economy investment decisions.

Recent infrastructure development in places like the Southern African Development Community (SADC) confirms this thesis. From 2016 on, foreign direct investment in the SADC’s logistics infrastructure increased sharply, spurring private investment in related projects as the decade drew to a close.

“From warehousing and last-mile fulfillment to the road, rail, and port infrastructure, these investments underpin an increasingly stable and prosperous regional economy,” writes Christopher Roy Garland, a business advisor and economic development expert based in Botswana.

2. Infrastructure Improvements Brighten Prospects for Local Entrepreneurs

Infrastructure improvements don’t only redound to the benefit of foreign governments, grantmaking organizations, and international conglomerates. The biggest beneficiaries are often local entrepreneurs who secure contracts with these organizations and develop businesses downstream of their activities.

Vibrant entrepreneurial communities take decades to build. Once they’re present, however, they’re vital assets for their host countries. Their market activities support growing middle classes, which in turn help consumer economies that spur further local investment. And by employing unskilled and semi-skilled workers in their home countries, they provide an under-discussed but crucial political function, boosting economic morale and dampening potential sources of social instability.

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2. Infrastructure Investment Provides Sponsor Nations With Political Leverage

Initial investments in large-scale infrastructure projects in the developing world very often do require active outside stakeholders. China’s Belt and Road initiative is merely the highest-profile example of concerted developing-world infrastructure investment as a more prosperous nation’s foreign policy project. The United States has USAID; other advanced economies make an intentional foreign direct investment for political purposes.

Like it or not, this is the global state of affairs in the early 21st century. It’s the sincere hope of most global development stakeholders that policy-driven FDI will one day cease to be a driving factor in developing-world infrastructure investment. Still, that day remains well over the horizon.

4. Stable, Prosperous Economies Enable Geographic Diversification for Risk-Averse International Investors

As the saying goes, a rising tide lifts all boats. When the groundwork laid by targeted infrastructure investments succeeds in stabilizing a country’s politics and raising its ceiling for economic growth, a broader class of risk-averse global investors takes notice.

These investors, both retail and institutional, vote with their dollars. They place bets on the economic future and create virtuous feedback loops for developing economies.

They also pave the way for other investors for whom geographic diversification is essential only when achievable without undue risk. And that’s the point at which a country or region can say, “Yes, we are open for business.”

5. Better Infrastructure Means Shared Prosperity

The history of the past 200 years would likely have been very different for European and North American nations without sustained public and private infrastructure investment in those parts of the world.

When some future generation looks back at our moment in time, let’s hope they’ll have something similar to say about the trajectory of infrastructure investment in the developing world. Let’s hope they’ll see a sustained and fruitful campaign to unlock the economic potential of dozens of nations and billions of individual humans.

Let’s hope. And let’s work together to make it happen. Because better roads, bridges, ports, broadband — these are the raw ingredients for a more prosperous and productive future. We owe it to generations to come to invest today.

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Business

How small businesses can overcome their supply chain challenges

Here are six tips to help your small business overcome its supply chain woes. Staying in control with effective supply chain management.

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Increase Your Income Streams with These Three Remote Business Ideas

Managing a supply chain is difficult for every business. Small businesses may have fewer supply chain requirements, but they also don’t have the financial clout of big operations, which suppliers are understandably willing to move mountains for.

Smaller businesses need to use their size to their advantage when dealing with supply chain challenges. While big companies are locked into mega orders and negotiating long-term partnerships, small operations can be nimble in the face of a dynamic market.

Here are six tips to help your small business overcome its supply chain woes.

1. Always pay on time

It may be obvious, but the first tip is always to pay your vendors in full and on time. Small businesses have enough supply chain issues to deal with. You don’t need to make new ones for yourself.

Manage your cash flow efficiently and keep track of all your payments. This way, you’ll ensure you don’t come into conflict with suppliers and end up paying interest or even potentially ruining business relationships and reducing your options moving forward.

Plenty of payment methods are available for small businesses to better organize accounts payable, including Automated Clearing House (ACH) payments that completely remove the need for cash or checks. Other benefits of ACH payments for your small business include scheduling payment dates and recurring payments, effective cash management so you can hold onto funds for longer, and reduced transaction fees.

2. Identify risk areas

Supply chains are often complex, containing a series of components critical to business operations. Make sure your small business has a clear and comprehensive list of everything it needs, along with multiple suppliers capable of sourcing each piece. Identify any potential risks in your supply where you may only have one or two viable sources.

It’s easy for small businesses to fall into the trap of finding a single supplier that handles everything they need and leave it at that. Unfortunately, this puts the fate of your business in the hands of one vendor. Any problems they have delivering their products is now your problem. There is no reason to introduce this level of risk to your operations, and a much healthier way to run your business is to always give yourself multiple supply chain options.

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You never know if a specific product might become unavailable at short notice. However, as a smaller business needing lower quantities, you can use your agility and develop relationships with multiple suppliers. Try to find entirely separate vendors in different locations that do not work with the same manufacturers.

3. Stock management

Keeping track of your existing stock is critical regardless of the size of the business. You need precise numbers for everything you currently have in stock and estimates for current usage in order to restock in time and never is left short. Accurately forecasting demand is critical for businesses to effectively manage their stock and protect themselves from unplanned product shortages.

While it’s not always possible due to budgetary constraints or storage capacities, if you have a volatile supply chain, there are benefits in trying to increase your inventory levels. In particular, this applies to critical components that are harder to come by. You can do this by bulk buying when you have the opportunity or seeking financing options to invest more into your inventory.

4. Simplifying your supply chain

While it can help to offer a wide range of products, this places additional strain on your supply chain. More products mean expanding your supply chain, dealing with more vendors, and more complicated logistics. Where possible, remove or combine products to simplify your supply chain and save yourself time and headaches. Even larger companies are streamlining the products they offer, consolidating operations, and building supply chain resilience to limit future disruptions.

5. Managing logistics

Even once you source everything you need, you still have the logistical challenge and costs associated with getting it all delivered. With rising fuel prices, logistics costs are snowballing, and small businesses need to work hard to rein in the cost of moving their supply chain products. This may mean making larger orders from fewer suppliers to save money along the way.

6. Use supply chain tools

A range of supply chain tools can help businesses stay on top of their operations. While it may seem like overkill for your small business, Supply Chain Management (SCM) software can help you track inventory, manage logistics, and create a comprehensive real-time database of all your supply chain information.

Staying in control with effective supply chain management

Having steady, reliable, and fast access to everything your business needs is one of the most challenging parts of running a business. Unfortunately, even the biggest and most well-equipped companies in the world have supply chain struggles. But, by using your size to your advantage and identifying multiple sources for each type of inventory, you can remain in control even when inevitable supply chain mishaps occur.

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