Rob Katz

The Business of Development

Aid organizations sometimes face a catch-22: donatemuch-needed medical or food supplies, addressing today’s need–but by doing so,aid poisons the market for future sales (people won?t pay for what they?vereceived free in the past). TheWashington Post recently published a controversial article on Niger?sfree market policies in the context of an ongoing famine; the Center for GlobalDevelopment released an excellent report on making markets for vaccines.

After reading these, I can?t help but thinkof A to Z, the Tanzanian company manufacturing long-lasting,insecticide-treated mosquito nets. Often, these kinds of nets are purchased by aid agencies and distributedfree–tending to poison the market for them down the road.I’m not saying that food and medical aid are bad, per se. By not sourcing locally, however, the aid community hurts local businesses. But what hurts them more is when consumers expect to receive these items free.

When it comes to vaccines, it’s more aboutcreating research and development incentives. Food aid is an even trickier question. For mosquito nets, however, the technology exists–but consumers won?tbuy them after receiving them for free. Who’s right, the aid agencies or the businesses? How do you balance short- and long-termneeds? Are aid agencies unwittingly facilitatinga cycle of poverty?

For more, you might check out the World Bank’s Private Sector Development blog